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The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $747 million, indicating 5.3% year-over-year growth. The consensus estimate for total earnings is pinned at 81 cents per share, suggesting a 1.2% fall from the year-ago quarter’s actual. One estimate for the quarter has moved south in the past 60 days versus no northward revision.
Image Source: Zacks Investment Research
DOCU has an impressive earnings surprise history. In the four trailing quarters, it surpassed the Zacks Consensus Estimate, with an average surprise of 8%.
DOCU Showcases Lower Chances of Posting Q1 Earnings Beat
Our proven model does not conclusively predict an earnings beat for Docusign this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
DOCU has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell) at present.
The consensus estimate for subscriptions is $730.8 million, suggesting an increase of 5.7% from the year-ago quarter’s actual. The surge in the use of existing features, adoption of Intelligent Agreement Management (“IAM”), and upgrading to higher-tier plans are likely to have boosted this segment’s revenue growth. The Zacks Consensus Estimate for professional services and other revenues is pegged at $16.1 million, indicating an 11.4% year-over-year decline.
Docusign Stock Soars
DOCU shares have gained 67.7% in a year, outperforming the 35.5% rise of its industry and the 13.2% rise of the Zacks S&P 500 composite. The company has performed better than its industry peers, BILL Holdings (BILL - Free Report) and BlackLine (BL - Free Report) . BILL has declined 13.7%, while BL has gained 17.5% for the same period.
1-Year Price Performance
Image Source: Zacks Investment Research
The DOCU stock is looking pricier than BILL Holdings but cheaper than BlackLine and the industry as a whole. DOCU is currently trading at a trailing 12-month price-to-earnings ratio of 24.96X, lower than the industry’s 37.6X. BILL Holdings and BlackLine have price-to-earnings ratios of 18.99X and 25.45X, respectively.
DOCU’s Investment Considerations
Docusign launched IAM in 2024, which utilizes AI to create, analyze, manage and automate agreements. With the launch of this product, DOCU aimed to reduce manual efforts and help organizations enhance visibility and control over agreement data.
Although the product has contributed more than 20% to direct sales in the fourth quarter of fiscal 2025 and is anticipated to have boosted the subscription segment in the to-be-quarter, investors should keep in mind that the product is still new in the market, increasing questions about the adoption at scale, mainly early monetization.
Considering that the company boosts monetization, adoption can take a toll, which will limit its growth potential. One should also consider that given the bumpy macroeconomic situation, if recession sets in, businesses may retract or ignore tech investments. This will cause DOCU to take a hit in its growth rate.
Docusign’s current ratio depicts a weak liquidity position, raising a red flag for investors. In the fourth quarter of fiscal 2025, the company’s current ratio hovered at 0.81, significantly lower than the industry average of 2.38. Moreover, the metric is lower than 1, indicating its inability to pay short-term obligations effectively.
Image Source: Zacks Investment Research
Final Verdict
Despite IAM delivering promising early sales, DOCU’s long-term growth prospects remain uncertain. Issues may arise if the product undergoes early monetization, particularly given a turbulent macroeconomic outlook wherein businesses are cutting tech spending, which can affect DOCU’s growth rate.
Additionally, Docusign’s liquidity position is concerning, and its projected earnings for the upcoming quarter appear dismal. A downward revision of the EPS estimate further signals a lack of analyst confidence. In light of this situation, we urge strategic investors in DOCU to consider selling their shares now to secure profits. Potential investors are advised against investing in Docusign stock at this time.
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Docusign Set to Report Q1 Earnings: Buy, Sell or Hold the Stock?
Key Takeaways
Docusign (DOCU - Free Report) will report first-quarter fiscal 2026 results on June 5, after market close.
The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $747 million, indicating 5.3% year-over-year growth. The consensus estimate for total earnings is pinned at 81 cents per share, suggesting a 1.2% fall from the year-ago quarter’s actual. One estimate for the quarter has moved south in the past 60 days versus no northward revision.
DOCU has an impressive earnings surprise history. In the four trailing quarters, it surpassed the Zacks Consensus Estimate, with an average surprise of 8%.
Docusign Inc. Price and EPS Surprise
Docusign Inc. price-eps-surprise | Docusign Inc. Quote
DOCU Showcases Lower Chances of Posting Q1 Earnings Beat
Our proven model does not conclusively predict an earnings beat for Docusign this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
DOCU has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell) at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
IAM Adoption to Have Been DOCU’s Driver in Q1
The consensus estimate for subscriptions is $730.8 million, suggesting an increase of 5.7% from the year-ago quarter’s actual. The surge in the use of existing features, adoption of Intelligent Agreement Management (“IAM”), and upgrading to higher-tier plans are likely to have boosted this segment’s revenue growth. The Zacks Consensus Estimate for professional services and other revenues is pegged at $16.1 million, indicating an 11.4% year-over-year decline.
Docusign Stock Soars
DOCU shares have gained 67.7% in a year, outperforming the 35.5% rise of its industry and the 13.2% rise of the Zacks S&P 500 composite. The company has performed better than its industry peers, BILL Holdings (BILL - Free Report) and BlackLine (BL - Free Report) . BILL has declined 13.7%, while BL has gained 17.5% for the same period.
1-Year Price Performance
The DOCU stock is looking pricier than BILL Holdings but cheaper than BlackLine and the industry as a whole. DOCU is currently trading at a trailing 12-month price-to-earnings ratio of 24.96X, lower than the industry’s 37.6X. BILL Holdings and BlackLine have price-to-earnings ratios of 18.99X and 25.45X, respectively.
DOCU’s Investment Considerations
Docusign launched IAM in 2024, which utilizes AI to create, analyze, manage and automate agreements. With the launch of this product, DOCU aimed to reduce manual efforts and help organizations enhance visibility and control over agreement data.
Although the product has contributed more than 20% to direct sales in the fourth quarter of fiscal 2025 and is anticipated to have boosted the subscription segment in the to-be-quarter, investors should keep in mind that the product is still new in the market, increasing questions about the adoption at scale, mainly early monetization.
Considering that the company boosts monetization, adoption can take a toll, which will limit its growth potential. One should also consider that given the bumpy macroeconomic situation, if recession sets in, businesses may retract or ignore tech investments. This will cause DOCU to take a hit in its growth rate.
Docusign’s current ratio depicts a weak liquidity position, raising a red flag for investors. In the fourth quarter of fiscal 2025, the company’s current ratio hovered at 0.81, significantly lower than the industry average of 2.38. Moreover, the metric is lower than 1, indicating its inability to pay short-term obligations effectively.
Final Verdict
Despite IAM delivering promising early sales, DOCU’s long-term growth prospects remain uncertain. Issues may arise if the product undergoes early monetization, particularly given a turbulent macroeconomic outlook wherein businesses are cutting tech spending, which can affect DOCU’s growth rate.
Additionally, Docusign’s liquidity position is concerning, and its projected earnings for the upcoming quarter appear dismal. A downward revision of the EPS estimate further signals a lack of analyst confidence. In light of this situation, we urge strategic investors in DOCU to consider selling their shares now to secure profits. Potential investors are advised against investing in Docusign stock at this time.