DocuSign Inc (DOCU) Q1 2026 Earnings Report

Revenue: $763.654 million in Q1 FY2026, up 8% YoY; Billings: $740 million, up 4% YoY; Subscription revenue: $746 million, up 8% YoY; Non-GAAP gross margin: 82.3% (Q1); Non-GAAP operating margin: 29.5% (Q1); EBITDA: $104.637 million; Net income: $72.087 million; Diluted non-GAAP EPS: $0.90; GAAP EPS: $0.34; Free cash flow: $228 million (30% FCF margin); Cash, cash equivalents and investments: >$1.1 billion; Net cash position: negative net debt (-$524.5 million) due to strong cash and investments; Weighted-average diluted shares: 212.8 million; Total customers: >1.7 million; IAM customers: >10,000; Self-serve IAM customers added in Q1: ~1,000; International revenue: 28% of total, +10% YoY (≈+13% FX-adjusted); Dollar net retention rate: 101% (Q1); Large customers (> $300k/year): 1,123 (+6% YoY).

Key management themes from the earnings call:
- Strategy: IAM as the core growth engine. Allan Thygesen emphasized IAM as the fastest-growing offering in DocuSign's history, with AI-driven capabilities across Create, Commit and Manage, including Agreement Desk, AI-Assisted Review, Workspaces, and the upcoming Iris AI engine. The company intends to deliver industry-leading AI agents later in fiscal 2026 to accelerate workflows and reduce risk.
- Go-to-market transformation: The firm is transitioning to a self-serve first and IAM-centric model (direct, self-serve, and partner routes). IAM is projected to become a double-digit percentage of the subscription book by exiting Q4, with international IAM deals up >50% QoQ as the rollout expands.
- Digital and self-serve: Self-serve digital revenue is growing at more than twice the rate of overall revenue, aided by self-serve account management tools and a cohort migration to self-serve first experiences to improve efficiency.
- Financials and margins: Non-GAAP gross margin of 82.3% and non-GAAP operating margin of 29.5% reflect revenue upside and disciplined expense control, partially offset by cloud migration costs. Management expects roughly 1 percentage point gross margin headwind from data center migration in full year 2026 and a 1.5 percentage point operating margin headwind from migration, with a plan to ease in 2027+. Free cash flow remained robust at $228 million in Q1 (30% FCF margin).
- Guidance and timing: Revenue guidance for 2026 is $3.151–$3.163 billion (midpoint ~ +6% YoY), with billings guided to $3.285–$3.339 billion (midpoint ~ +6.5% YoY). Management called out a timing-driven shortfall in Q1 early renewals and pledged more conservative renewal timing in the remainder of fiscal 2026, while emphasizing that the underlying demand and IAM adoption remain solid.
- Capital allocation: DocuSign repurchased $183 million of stock in Q1; cumulative buybacks exceeded $700 million over the prior 12 months. A new $750 million revolver was secured post-quarter end, expanding liquidity headroom. The company reaffirmed a long-term objective to optimize capital return while investing in IAM growth.

DocuSign's QQ1 2026 results underscore a transitional period where IAM is delivering material growth while the company restructures its GTM to emphasize long-term, durable expansion. The 8% YoY revenue rise, 101% dollar net retention, and a 82.3% non-GAAP gross margin reflect a healthy foundation as IAM scales. The balance sheet remains exceptionally strong—cash and investments exceed $1.1B with no debt—providing ample liquidity for continued buybacks and strategic investments. The subscription book is expected to reach a low double-digit IAM contribution by exit of FY2026, with international IAM activity expanding meaningfully, suggesting expansion potential beyond the domestic market. Near-term risk centers on timing: the early renewals mix declined more quickly than anticipated due to compensational GTM changes, which modestly depressed billings in Q1, though management frames this as a timing issue rather than demand weakness. The company guided to a full-year billings growth of ~6.5% with a margin profile that contemplates ~1pp gross margin headwind from cloud migration and ~1.5pp operating margin headwind, indicating near-term profitability pressure before the expected margin uplift as IAM execution matures and migration stabilizes. Overall, the investment thesis rests on IAM-driven expansion, a robust self-serve digital growth trajectory, and strong free cash flow supporting capital returns. If IAM demonstrates continued enterprise penetration and international expansion, with a stable macro backdrop, DocuSign could achieve sustained double-digit growth in subscription revenue and a higher embedded value in its book of business. Investors should monitor IAM deal velocity and mix (upsell vs. new), renewal timing dynamics, cloud-migration cost trajectories, FX exposure, and the evolution of gross/net retention through the next two quarters as a read on the medium-term trajectory.