Docusign Inc Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
DocuSign's Q3 Fiscal Year 2026 earnings call highlighted strong financial performance, driven by growth in core products and the Intelligent Agreement Management (IAM) platform, along with operational efficiency and strategic capital allocation through share repurchases. The company discussed its go-to-market motion, product innovation, and focus on long-term sustainable growth. They also announced upcoming changes to their financial disclosures, including reporting Annual Recurring Revenue (ARR) and IAM as a percentage of ARR, while discontinuing billings reporting.
Key Financial Results
Revenue was $818 million, up 8% year-over-year.
Subscription revenue was $801 million, up 9% year-over-year.
Billings were $829 million, up 10% year-over-year.
Non-GAAP operating margin of 31%.
Free cash flow grew 25% year-over-year to $263 million, a 32% margin.
$215 million in share repurchases.
Non-GAAP diluted EPS was $1.01, up from $0.90 last year.
GAAP diluted EPS was $0.40 versus $0.30 last year.
Business Segment Results
More than 25,000 paying direct and digital customers had adopted IAM, up from more than 10,000 in April.
IAM is on pace to represent a low double-digit percentage of recurring revenue at year end.
eSignature dollar net retention improved by 2 percentage points year-over-year to 102%.
International revenue reached approximately 30% of total revenue, growing 14% year-over-year.
Total customers grew 9% year-over-year, ending the quarter at nearly 1.8 million.
Customers spending over $300,000 annually accelerated to 8% year-over-year to 1,165 in Q3.
Capital Allocation
$215 million in share repurchases, the largest quarterly buyback to date.
Opportunistic share repurchases will continue with over $1 billion in remaining buyback authorization.
Ended the quarter with approximately $1 billion of cash, cash equivalents, and investments.
No debt on the balance sheet.
Industry Trends and Dynamics
Agreement management is a $2 trillion global market problem.
Growing interest in IAM, reflected in increased attendance at Momentum events.
Customers are seeking solutions to achieve more efficiency in procurement processes and unlock value that's in agreements they've already negotiated.
Competitive Landscape
Docusign CLM was named a leader in the Gartner Magic Quadrant for CLM for the sixth year in a row.
Docusign has more than 1000 third-party integrations and enterprise ready APIs.
IAM achieved FedRAMP Moderate and GovRAMP authorization.
For two years in a row, Newsweek has named Docusign the most trustworthy software company in the US.
Macroeconomic Environment
Companies are still scrutinizing spend.
No material changes observed in the business environment in Q3.
Growth Opportunities and Strategies
Executing across three strategic pillars: improving go-to-market motion, platform evolution and AI innovation, and driving greater operational efficiency.
Focused on long-term goal to deliver sustainable, profitable, double-digit growth.
Deepening solution selling motion and strengthening customer relationships.
Rapidly adding new features to IAM.
Expanding ecosystem with new AI tools and platforms.
Transitioning from a single product company into a category leading platform in agreement management.
Pursuing the vast opportunity ahead with IAM.
Becoming a system of action for agreements.
Financial Guidance and Outlook
For Q4 2026, total revenue is expected to be $825 million to $829 million, or a 7% year-over-year increase at the midpoint.
For fiscal year 2026, total revenue is expected to be $3.208 billion to $3.212 billion, or an 8% year-over-year increase at the midpoint.
For Q4 2026, subscription revenue is expected to be $808 million to $812 million, or a 7% year-over-year increase at the midpoint.
For fiscal year 2026, subscription revenue is expected to be $3.140 billion to $3.144 billion, or an 8% year-over-year increase at the midpoint.
For Q4 2026, billings are expected to be $992 million to $1.002 billion, or an 8% growth rate year-over-year at the midpoint.
For fiscal year 2026, billings are expected to be $3.379 billion to $3.389 billion, or growth of 9% year-over-year at the midpoint.
Non-GAAP gross margin is expected to be between 80.8% to 81.2% for Q4, and between 81.7% and 81.8% for fiscal 2026.
Non-GAAP operating margin is expected to reach 28.3% to 28.7% for Q4, and 29.8% to 29.9% for fiscal 2026.
Non-GAAP fully diluted weighted average shares outstanding of 203 million to 208 million for Q4, and 208 million to 211 million for fiscal 2026.
At the end of every fiscal year, starting this Q4 2026, the company will disclose annual recurring revenue or ARR, including historical data for recent years.
The company will also provide full-year ARR growth guidance for fiscal 2027, which will be updated quarterly during the first, second and third quarters.
The company will also introduce IAM as a percentage of ARR as a quarterly reporting metric beginning in Q4 of 2026.
The company will also provide guidance in fiscal 2027 for the approximate yearend IAM percentage of ARR to create greater transparency into IAM's anticipated contribution to total growth.
The company will no longer report billings in fiscal 2027.
