DocuSign tumbles 17% on lower billings guidance, Jefferies sees upside

Investing.com -- DocuSign, Inc.  (NASDAQ:DOCU) shares dropped more than 17% in pre-market trading Friday after the company reported weaker-than-expected billings and reduced its fiscal 2026 outlook, despite stronger revenue and margin performance. 

For the fiscal first quarter, DocuSign reported 4.2% year-over-year billings growth, falling short of the 5.2% consensus. 

The company guided second-quarter billings growth of 5.2%, also below the 6.9% expected. 

Full-year 2026 billings guidance was lowered by $15 million, bringing the mid-point growth estimate down to 6.5% from 7.0%. 

The company attributed half of the revision to early renewals in Q1, with the rest reflecting macroeconomic caution. A 70-basis-point foreign exchange tailwind partially offset the reduction.

Jefferies calculated constant currency billings growth of 4.9% to 6.7%, down 220 basis points from the previous 7.1% to 8.9% range.

Despite the billing shortfall, other financial metrics exceeded expectations. Subscription revenue rose 7.9% year-over-year, beating the 5.7% consensus, while total revenue increased 7.6%, topping the 5.4% forecast. The non-GAAP operating margin hit 29.5%, ahead of the 27.5% consensus.

The company’s Identity and Access Management (IAM) suite gained traction, with direct deal volume up from the prior quarter. 

A self-serve IAM option launched in April added roughly 1,000 new customers without marketing spend.

DocuSign raised its fiscal 2026 revenue guidance. Subscription revenue mid-point growth was revised upward to 6.5% from 5.7%, and total revenue growth to 6.1% from 5.3%.

The company also expanded its share repurchase program by $1 billion, raising total authorization to $1.4 billion. 

Buybacks totaled $183 million in the first quarter, up from $162 million in Q4, $173 million in Q3, and $149 million in the same period a year earlier.

Jefferies noted the billings decline reflected timing, not demand softness, and said no material macroeconomic impacts were observed. 

The brokerage called the stock’s 17% post-earnings drop an overreaction, particularly given that DocuSign has retraced roughly 70% of its rebound from an April 8 low of $70.35.

Valuation remains attractive, according to Jefferies. DocuSign trades at about 15 times projected 2026 enterprise value to free cash flow, approximately 25% below its peer group. 

The company’s core e-signature business continues to deliver mid-to-high single-digit growth with near 30% operating margins.