EPS of $0.39 increased by 215.4% from previous year
Gross margin of 79.4%
Net income of 83.49M
"IAM has quickly become the fastest-growing new product in DocuSign, Inc.'s history." - Allan Thygesen
DocuSign Inc (DOCU) QQ4 2025 Earnings Analysis: IAM Momentum, Margin Progress, and 2026 Outlook
Executive Summary
DocuSign’s QQ4 2025 results underscore a transitional year where IAM (Intelligent Agreement Management) has emerged as the primary growth engine while the core eSignature business remains the bedrock of recurring revenue. Q4 revenue reached $776.3 million, up 9% year over year, driving FY2025 revenue to $3.0 billion, an 8% YoY increase. The company also achieved a 101% dollar net retention (DNR) in Q4, marking a six-quarter high and signaling stronger expansion within the installed base. IAM has quickly evolved into DocuSign’s fastest-growing new product in history, with early enterprise traction and international adoption accelerating as IAM deploys globally. Management emphasized a three-pillar strategy (accelerate product innovation with AI, strengthen omnichannel go-to-market, and expand operating efficiency) to sustain growth while preserving profitability.
Profitability advanced meaningfully in FY2025: non-GAAP operating margin reached 29.8% for the year, and Q4 non-GAAP operating margin stood at 28.8%. Free cash flow reached $920 million for FY2025, equating to a 31% FCF margin, supported by robust cash generation and disciplined capital allocation (roughly 75% of annual FCF returned to shareholders via buybacks). DocuSign ended the quarter with about $1.1 billion of cash and investments and no debt, reinforcing a strong balance sheet and financial flexibility to fund IAM-related investments and potential acquisitions or partnerships.
For FY2026, the company guiding to ~5% revenue growth (midpoint), with billings expected to accelerate to a mid-to-high single-digit growth rate, aided by IAM upsell and expanded self-service adoption. The roadmap envisions continued margin stability (non-GAAP gross margin guidance around 80.5–81.5%; non-GAAP operating margin guidance 27.0–28.0% for Q1 and 27.8–28.8% for FY2026), albeit with initial gross-margin and SG&A headwinds from cloud migration and a one-point revenue/one-point billings headwind from FX and early-renewal dynamics. Investors should monitor IAM adoption in international markets, the pace of enterprise upsell, the continuity of gross retention improvements, and the cadence of billings-to-revenue conversion as the IAM framework scales.
Q4 2025 non-GAAP operating income: $224M; Q4 OI margin: 28.8%; FY2025 non-GAAP OI: $886M; FY2015 OI margin: 29.8%
Q4 2025 DNR: 101% (vs 100% in Q3; 98% in F4 2024)
Financial Highlights
- QQ4 2025 revenue: $776.3M, +9% YoY; FY2025 revenue: $3.00B, +8% YoY
- Q4 2025 subscription revenue: $758.0M; Q4 billings: $923.0M; FY2025 billings: $? (FY2025 billings +7% YoY)
- Q4 2025 non-GAAP gross margin: 82.3%; FY2025 non-GAAP gross margin: 82.2%; cloud migration pressure contributing to margin drag
- Q4 2025 non-GAAP operating income: $224M; Q4 OI margin: 28.8%; FY2025 non-GAAP OI: $886M; FY2015 OI margin: 29.8%
- Q4 2025 DNR: 101% (vs 100% in Q3; 98% in F4 2024)
- Customers: ~1.7 million total; large customers >$300k ACV: 1,131 in Q4
- Free cash flow (FCF): Q4’25 $280M; FY2025 FCF $920M (FCF margin 31%)
- Cash and equivalents: ~$1.1B; net debt: -$524M (net cash)
- Guidance: Q1’26 revenue $745–$749M; FY2026 revenue $3.129–$3.141B; subscription $729–$733M (Q1) and $3.062–$3.074B (FY2026); billings FY2026 $3.300–$3.354B
- Levers: IAM adoption, self-service/PLG, partner ecosystem (Microsoft, SAP, Salesforce) and expanding international IAM deployment
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
776.25M
8.97%
2.84%
Gross Profit
616.04M
9.13%
2.97%
Operating Income
60.47M
508.65%
2.44%
Net Income
83.49M
206.49%
33.75%
EPS
0.41
215.38%
32.26%
Key Financial Ratios
currentRatio
0.81
grossProfitMargin
79.4%
operatingProfitMargin
7.79%
netProfitMargin
10.8%
returnOnAssets
2.08%
returnOnEquity
4.17%
debtEquityRatio
0.06
operatingCashFlowPerShare
$1.52
freeCashFlowPerShare
$1.38
priceToBookRatio
9.82
priceEarningsRatio
58.88
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy/Innovation: Allan Thygesen emphasizes IAM as the “agreement system of record” and notes IAM’s rapid adoption, with “IAM rapidly becoming the fastest-growing new product in DocuSign’s history.” He highlights Navigator, Maestro, App Center, and Lexion integration as catalysts for broader usage and enterprise deployment. (Quote attributed to Allan)
- Market/Customer Impact: Blake Grayson notes that IAM contribution to IAM deals is visible in SMB/mid-market and is expected to scale into enterprise, driven by upsell opportunities and an expanding addressable market. The company targets a low double-digit IAM revenue share by FY2026 Q4. He emphasizes that “the cadence of billings will lag revenue,” and expects accelerated IAM-driven billings growth in FY2026.
- Operations/Macro: Management asserts no material macro-driven decline in envelope volumes yet; DocuSign remains diversified across sectors and geographies, implying resilience against near-term macro volatility. They cite improvement in gross retention and rising customer usage as ongoing tailwinds.
- Capital Allocation: The team highlights disciplined capital returns with ~$684M of stock repurchases in FY2025 and ~$608M remaining under authorization; they plan to maintain opportunistic buybacks while investing in IAM and product development.
IAM has quickly become the fastest-growing new product in DocuSign, Inc.'s history.
— Allan Thygesen
FY2026 guidance represents the first year we anticipate accelerated annual billings growth since fiscal year 2021.
— Blake Grayson
Forward Guidance
- Q1 2026 revenue target: $745–$749M (+5% YoY midpoint), with FX headwind (~0.7pp)
- FY2026 revenue target: $3.129–$3.141B (+5% YoY midpoint), FX headwinds (~0.7pp) and an additional one-point headwind from forecasted currency across international business
- Subscription revenue FY2026: $729–$733M in Q1; $3.062–$3.074B for FY2026 (+6% YoY midpoint)
- Billings FY2026: $3.300–$3.354B (+7% YoY midpoint); Q1 billings $741–$751M (+5% YoY midpoint); gross margin guidance 80.5–81.5% (FY2026) due to ongoing cloud data center migration, with expectations of margin normalization in 2027+
- Operating margins: Non-GAAP OPM guidance for Q1 2026: 27.0–28.0%; FY2026: 27.8–28.8%
- Diluted shares: Non-GAAP diluted weighted-average shares 210–215M for Q1 and FY2026
- Key factors investors should monitor: IAM adoption velocity and upsell rates (enterprise and SMB), international rollout of IAM, continued improvements in gross retention, FX exposure, cloud-migration-related margin headwinds, and the rate of billings-to-revenue conversion as IAM monetizes across more SKUs and geographies.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
DOCU Focus
79.36%
7.79%
4.17%
58.88%
TTD
81.70%
26.40%
6.18%
79.65%
NOW
78.70%
12.60%
4.00%
142.06%
TEAM
80.50%
-5.63%
-19.10%
-58.91%
SNOW
66.20%
-39.20%
-10.60%
-45.93%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
DocuSign is transitioning from a primarily SM-based eSignature vendor to a scale-driven enterprise software platform through IAM, which is positioned to lift revenue growth, expand ARPU, and improve retention. The Q4 2025 results demonstrate durable growth momentum with 101% DNR, ~1.7M customers, and a robust enterprise opportunity tied to IAM upsell and CLM integration. The company presented a credible path to accelerate billings in FY2026 (guidance midpoint +7% YoY) despite FX and cloud-migration headwinds, supported by an improving retention mix and a strategic emphasis on self-service motions to unlock higher-value sales opportunities.
Investment thesis: Maintain a constructive view on DocuSign given IAM’s potential to unlock durable, multi-year growth, better monetization of the installed base, and international expansion. Key catalysts include enterprise IAM deployments, continued self-service adoption, SI/channel partnerships (Microsoft, SAP, Salesforce), and international IAM rollouts. The margin bridge is favorable in the medium term as growth investments ease and operating leverage improves with higher billings growth. Risks include FX exposure, cloud-migration margin headwinds, and the need for sustained IAM upsell momentum in enterprise accounts. Overall, the stock-based valuation should be anchored to the durable ARR growth, robust FCF generation, and the strategic transition toward an AI-powered agreement platform.
Key Investment Factors
Growth Potential
IAM is the primary growth lever, with early enterprise wins and a multi-year ramp expected. Management targets IAM to represent a low double-digit share of subscription revenue by FY2026 end and anticipates accelerated billings Growth in FY2026 driven by IAM upsell, broader self-service adoption, and international expansion.
Profitability Risk
FX headwinds (~0.7pp revenue headwind; ~1pp for billings in FY2026) and cloud-migration margin drag (~1pp gross margin headwind in FY2026). The enterprise sales cycle is longer; success hinges on executing a broader go-to-market and sustaining IAM uptake in large global customers. Potential macro slowdown could impact deal activity, despite broad diversification. Competitive dynamics in eSignature and CLM could pressure pricing or add-on adoption.
Financial Position
Robust balance sheet with $1.1B cash and investments and no debt; net debt of -$524M indicates solid liquidity. FY2025 free cash flow of $920M (FCF margin 31%) supports ongoing buybacks (~$608M remaining under authorization) and investment in IAM and product development. Steady cash generation supports capital allocation flexibility to pursue growth and shareholder value.
SWOT Analysis
Strengths
Strong IAM demand and early enterprise traction, with IAM representing a high single-digit percentage of Q4 direct deals and expanding internationally.
DNR of 101% in Q4 2025, highest in six quarters, driven by improved gross retention and robust product adoption.
Large and diversified customer base (~1.7M customers) across geographies and verticals; 1,131 customers spend >$300k annually.
Healthy balance sheet: $1.1B cash/investments and no debt; strong free cash flow generation (FY2025 FCF $920M, 31% FCF margin).
Market leadership in CLM and a clear path to embed IAM capabilities into CLM platform, expanding addressable usage.
Weaknesses
Gross margin pressure from cloud infrastructure migration (Q4 GM 82.3%; FY2025 GM 82.2% guidance 80.5–81.5% in FY2026).
Short-term macro sensitivity remains, with FX headwinds and potential demand shifts in macro scenarios.
Enterprise sales cycle longer; initial IAM adoption largely in SMB/mid-market, with enterprise ramp still early.
Opportunities
Accelerate IAM adoption in enterprise and international markets (Europe, LATAM, Japan) with a multi-channel GTM and SI partnerships.
Self-service/PLG expansion enabling more efficient upsell and incremental ARR growth.
Broad CLM integration on IAM platform, expanding usage across legal, procurement, HR, and sales functions.
Public sector/tactical government opportunities leveraging eSignature and IAM for procurement and citizen services.
Threats
Macro volatility impacting IT budgets and spending on software; potential price/competition pressure.
Execution risk in scaling IAM to enterprise with longer sales cycles and complex deployments.
Regulatory/compliance changes affecting eSignature and CLM requirements across geographies.