What They Do
DocuSign is the market-leading digital agreement platform that eliminates paper contracts through electronic signatures and document management. The company serves 1.8M customers ranging from small businesses to large enterprises who need to sign, send, and manage contracts digitally. They generate revenue through subscription-based software with their core eSignature product and newer Identity and Access Management (IAM) platform.
Investment Thesis
**Expanding beyond eSignature with IAM success** — IAM platform reached $350M+ in ARR (11% of total) just 18 months post-launch, with early renewal cohorts showing better retention than company average**Profitability milestone achieved** — First year generating $1B+ in free cash flow with 30%+ operating margins while growing revenue 8% and expanding $2.6B share buyback program**Growth reacceleration ahead** — Management guiding for ARR growth of 8.25%-8.75% in FY27 vs. 8% in FY26, with IAM expected to reach ~18% of total ARR by year-endKey Risks
**Revenue growth deceleration** — FY26 revenue estimate of $3.42B implies flat growth from current $3.46B, suggesting core eSignature market may be maturing**Competitive pressure in IAM** — Expanding into crowded identity management space against established players like Okta and Microsoft, requiring significant investment in new capabilitiesGrowth Story
DocuSign is transitioning from pure-play eSignature to comprehensive agreement management platform, with total ARR of $3.3B growing 8% annually. The company expects growth acceleration in FY27 driven by IAM expansion (targeting $600M+ ARR) and improved customer retention metrics. International markets represent 30%+ of revenue and are growing 15% year-over-year, providing additional runway.
Profitability Profile
DocuSign has achieved impressive profitability scale with 79.4% gross margins and 30%+ operating margins while generating over $1B in annual free cash flow (33% margin). The company successfully balanced growth investments with margin expansion, achieving first-time 30%+ operating margins in FY26. Management expects to maintain 81.5%-82% gross margins and 30%-30.5% operating margins going forward.
Competitive Position
DocuSign dominates the eSignature market with strong network effects from its 1.8M customer base and 200M+ agreements in its Navigator platform. The company's moat stems from workflow integrations, compliance certifications, and switching costs, though it faces competition from Adobe Sign and Microsoft. The newer IAM business competes in a more fragmented market where DocuSign leverages its existing customer relationships for cross-selling.
Recent Momentum
Q4 results showed solid execution with $837M revenue (+8% YoY) and first-time $1B+ quarterly billings, beating estimates on both revenue and EPS for the fourth consecutive quarter. The company's dollar net retention improved to 102% from 101%, suggesting stabilizing customer trends. Stock buybacks accelerated significantly with expanded $2.6B authorization reflecting management confidence.
What Wall Street Thinks
Analysts appear cautiously optimistic given consistent earnings beats and improving profitability metrics, though revenue growth remains a key focus area. The Street is likely monitoring IAM adoption rates and overall customer retention as leading indicators of future growth acceleration. Consensus expects modest revenue growth with continued margin expansion and strong cash generation.
The Bottom Line
DocuSign has successfully evolved from a growth story to a profitable, cash-generative business while building its next growth driver in IAM—the key question is whether the IAM platform can drive meaningful growth reacceleration beyond 2027.
