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DOCUSIGN, INC. (DOCU)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered accelerating top-line and stable profitability: revenue $754.8M (+8% YoY), billings $752.3M (+9% YoY), and non-GAAP operating margin 29.6%; IAM (Intelligent Agreement Management) momentum “outpaced expectations,” with IAM deal count up >10x vs Q2 as rollout broadened beyond initial markets .
  • Guidance raised for FY25 across revenue ($2.959–$2.963B), subscription, billings, and non-GAAP operating margin (29.5–29.7%); Q4 guide calls for $758–$762M revenue and $870–$880M billings, setting a solid exit rate into FY26 .
  • Core trends improved: dollar net retention rose to 100% (from 99% in Q2 and 98% in Q4 FY24), envelopes sent up YoY for the fourth straight quarter, and large-customer cohort (> $300k) grew to 1,075; digital revenue growth accelerated vs Q2 .
  • Near-term trade-offs: non-GAAP gross margin eased to 82.5% (cloud migration costs), with a larger gross margin headwind expected in FY26 before easing in FY27; Q3 operating cash flow ($234.3M) and FCF ($210.7M) declined YoY on timing/compare, though FCF margin remained robust at ~28% .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based execution: revenue +8% YoY to $754.8M; billings +9% YoY to $752.3M; non-GAAP operating margin 29.6% (+~280 bps YoY) .
    • Core stabilization and scale advantages: dollar net retention improved to 100%; envelopes sent increased YoY for the fourth consecutive quarter; customers +11% YoY to 1.6M; large customers >$300k rose to 1,075 .
    • IAM momentum and ecosystem: “In Q3, we closed more than 10x as many IAM deals as we did in Q2,” with quick time-to-live and strong Navigator engagement; launched “Docusign for Developers” to extend IAM via APIs and App Center .

  • What Went Wrong

    • Gross margin pressure: non-GAAP gross margin slipped to 82.5% (vs 83.0% LY) due to cloud migration; CFO expects slightly larger impact in FY26 before normalizing in FY27+ .
    • YoY cash flow compare: net cash from operations ($234.3M) and FCF ($210.7M) declined vs LY ($264.2M and $240.3M), though levels remain strong and in-line with profitability .
    • Sequential margin step-down from Q2: Q3 operating margin declined vs Q2’s record (which benefited ~150 bps from one-time items) and incremental IAM launch investments, as pre-announced .

Financial Results

MetricQ1 FY2025Q2 FY2025Q3 FY2025
Total Revenue ($M)$709.6 $736.0 $754.8
Subscription Revenue ($M)$691.5 $717.4 $734.7
Professional Services & Other Revenue ($M)$18.2 $18.7 $20.1
Billings ($M)$709.5 $724.5 $752.3
GAAP Diluted EPS ($)$0.16 $4.26 (tax VA) $0.30
Non-GAAP Diluted EPS ($)$0.82 $0.97 $0.90
Non-GAAP Gross Margin (%)82.0% 82.2% 82.5%
Non-GAAP Operating Margin (%)28.5% 32.2% 29.6%
Net Cash from Operations ($M)$254.8 $220.2 $234.3
Free Cash Flow ($M)$232.1 $197.9 $210.7

Segment mix

Revenue MixQ1 FY2025Q2 FY2025Q3 FY2025
Subscription ($M)$691.5 $717.4 $734.7
Professional Services & Other ($M)$18.2 $18.7 $20.1

Key KPIs

KPIQ1 FY2025Q2 FY2025Q3 FY2025
Dollar Net Retention (%)99% 99% 100%
Total Customers (M)1.56 1.6 1.6
Customers >$300k (#)1,059 1,066 1,075
International Revenue (% of total)28% 28% 28%
Envelopes Sent (YoY)Up Up Up (4th straight qtr)
Digital Revenue vs TotalOutpaced >2x direct growth Accelerated vs Q2

Results vs S&P Global Consensus

  • Wall Street consensus (S&P Global) could not be retrieved due to access limits at this time; therefore, explicit vs-consensus comparisons are not included. We attempted to fetch estimates and will update when available.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY25$2.940B–$2.952B $2.959B–$2.963B Raised
Subscription RevenueFY25$2.864B–$2.876B $2.885B–$2.889B Raised
BillingsFY25$2.990B–$3.030B $3.056B–$3.066B Raised
Non-GAAP Gross MarginFY2581.0%–82.0% 81.9%–82.1% Raised
Non-GAAP Operating MarginFY2529.0%–29.5% 29.5%–29.7% Raised
Non-GAAP Diluted SharesFY25206–211 210–212 Slightly raised range
Total RevenueQ4 FY25N/A$758M–$762M New
Subscription RevenueQ4 FY25N/A$741M–$745M New
BillingsQ4 FY25N/A$870M–$880M New
Non-GAAP Gross MarginQ4 FY25N/A81.0%–82.0% New
Non-GAAP Operating MarginQ4 FY25N/A27.5%–28.5% New
Non-GAAP Diluted SharesQ4 FY25N/A209–214 New

Earnings Call Themes & Trends

TopicQ1 FY2025Q2 FY2025Q3 FY2025Trend
IAM rollout & demandGA announced; early GA to SMB/Commercial; strong customer feedback; Lexion acquisition to accelerate roadmap GA to North America SMB/commercial; enablement across sales; early bookings up MoM; higher win rates/faster closes IAM deal count >10x vs Q2; expanding to more geos; departmental-level enterprise deployments begun Accelerating adoption and geographic expansion
Retention/NRRDNR improved to 99% (from 98%) DNR steady at 99%, stabilize through FY25 DNR rose to 100% on gross retention/usage uptick Steady improvement
Gross margin/migrationNon-GAAP GM 82.0%; cloud migration impact noted 82.2% non-GAAP GM; Q2 op margin a record with one-time benefit 82.5% non-GAAP GM; larger migration impact in FY26 before easing FY27+ Temporary headwind intensifying then easing
Go-to-marketOmnichannel progress; self-serve investments New CRO Paula Hansen joined; sales enablement for IAM; partner momentum (MSFT/SAP/SFDC) Commercial traction; enterprise departmental entry; CRO driving ELA/IAM attach focus Scaling platform/solution selling
Digital/self-serveDigital outpaced total; enhancements to trial→paid Digital grew >2x direct; PLG focus continues Digital growth accelerated vs Q2; more add-ons online Strengthening PLG mix
International~28% of revenue; growth > overall ~28% of revenue; ~2x overall growth 28% of revenue; +14% YoY; IAM launched in select international SMBs Sustained outperformance
Ecosystem/AIIAM platform unveiled; Lexion acquired Co-sell with MSFT; CLM-Ariba; Dreamforce updates Docusign for Developers; Navigator/AI-assisted review; broader App Center Building platform flywheel

Management Commentary

  • “In Q3, early IAM momentum outpaced expectations, and we continued to drive improvement in our core business with strong revenue growth and operating profit.” – Allan Thygesen, CEO .
  • “IAM deal volume grew rapidly from Q2 into Q3… 80% of eligible reps closing at least 3 IAM deals in Q3.” – Blake Grayson, CFO .
  • “Non-GAAP gross margin… slightly lower than the prior year due to… cloud infrastructure migration… expect a slightly larger gross margin impact in fiscal year 2026 before easing in fiscal year 2027 and beyond.” – CFO .
  • “We closed more than 10x as many IAM deals as we did in Q2… time to live is remarkably quick, slightly faster than eSignature.” – CEO .

Q&A Highlights

  • Core vs IAM drivers: Q3 billings outperformance was ~1/3 early renewals, with the remainder from better retention, digital growth, and early IAM bookings (smallest driver given newness) .
  • IAM vs CLM positioning: IAM targets broader, faster-to-value department-level and mid-market use cases; CLM remains lead offering for complex enterprise workflows, while benefiting from IAM innovations (e.g., Navigator) .
  • Margin outlook levers: Focus on operating leverage via growth; FY26 will absorb larger cloud migration costs before easing; Q3 margin down vs Q2 due to one-time items in Q2 and IAM investments .
  • Retention improvements: Improved operational execution and scaled customer success hubs (Brazil/Egypt) drove gross retention gains; competitive landscape stable .
  • Capital allocation: $173M buybacks in Q3; ~$770M authorization remaining; opportunistic repurchases balanced with M&A and investments .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q3 FY25 (and prior quarters) but could not due to access limits at this time. As a result, explicit vs-consensus comparisons are not included. Once available, we will add revenue and EPS consensus and mark beats/misses accordingly.

Key Takeaways for Investors

  • Reacceleration underway: revenue (+8% YoY), billings (+9% YoY), DNR to 100%, and continued customer growth (1.6M, +11% YoY) indicate improving core momentum .
  • IAM as multi-year growth vector: >10x sequential increase in IAM deal count, rapid time-to-live, and expanding geo/segment availability point to durable adoption tailwinds into FY26+ .
  • Guidance raised again: FY25 outlook up across revenue, billings, and operating margin; Q4 guide supports sustained exit momentum .
  • Margin trade-off near term: Cloud migration will pressure gross margin more in FY26 before easing; management remains focused on operating leverage through growth and efficiency .
  • Cash returns and balance sheet strength: Robust FCF ($210.7M in Q3) and no debt support continued buybacks ($173M in Q3) while funding growth initiatives .
  • Ecosystem leverage: Docusign for Developers and App Center/API expansion should strengthen partner-led distribution and product extensibility, reinforcing the IAM platform strategy .
  • Watch list: FY26 gross margin inflection (post-migration), IAM departmental→enterprise conversions, DNR trajectory, and digital/PLG contribution as indicators of durable reacceleration .

Appendix: Prior Two Quarters (for trend)

  • Q2 FY2025: Revenue $736.0M (+7% YoY), billings $724.5M (+2% YoY), non-GAAP EPS $0.97, non-GAAP GM 82.2%, non-GAAP OM 32.2% (record, aided by ~150 bps one-time), DNR 99%, digital >2x direct growth .
  • Q1 FY2025: Revenue $709.6M (+7% YoY), billings $709.5M (+5% YoY), non-GAAP EPS $0.82, non-GAAP GM 82.0%, non-GAAP OM 28.5%, DNR improved to 99%; IAM announced and Lexion acquired to accelerate AI roadmap .

Additional context

  • CLM leadership reaffirmed (Gartner MQ Leader, 5th consecutive year), supporting enterprise credibility as IAM scales .