DocuSign (DOCU +4%) saw a significant boost in trading following its impressive Q2 (Jul) earnings report. The e-signature and contract creation giant reported a substantial EPS beat, driven by strong margins. Revenue increased by 7.0% year-over-year to $736 million, surpassing analyst expectations. DOCU also provided optimistic revenue guidance for Q3 (Oct), citing stabilization in its core business with year-over-year improvements in usage, utilization, and customer growth.
- Billings, a key metric, rose just 2% year-over-year to $724.5 million, hitting the high end of prior guidance ($715-725 million). Although DOCU is known for conservative billings guidance, the Q2 growth rate was expected to be the lowest for FY25. The Q3 guidance of $710-720 million also wasn't stellar, but DOCU's conservative approach to billings guidance tempers concerns.
- DOCU achieved a major milestone in Q2 by launching the first version of its Intelligent Agreement Management (IAM) platform. This launch is considered the most important in recent history, integrating existing products (eSignature, CLM) with new services like Docusign Maestro, an agreement workflow builder that automates agreement creation without coding.
- The IAM platform addresses the $2 trillion in lost economic value organizations face annually in agreement management. Launched to small and mid-sized commercial customers in the US, Canada, and Australia, initial feedback has been promising. IAM has shown higher customer win rates, larger average deal sizes, and faster closing times.
- Non-GAAP operating margin hit a record 32.2%, exceeding prior guidance (27-28%) and last year's 24.7%. Although 150 basis points were due to one-time professional fees, the margins were still impressive, especially considering the IAM launch. These strong margins contributed significantly to the EPS beat.
Overall, the strong EPS, impressive margins, and optimistic revenue guidance are overshadowing the somewhat disappointing billings figures. Investors are responding positively to the promising IAM launch. However, DOCU's stock has been rangebound between $50-60 since early February, indicating a lack of strong conviction. Investors seem to be waiting for DOCU to not only stabilize but also return to a stronger growth trajectory.
