Docusign, Inc. (DOCU Quick QuoteDOCU - Free Report) reported impressive second-quarter fiscal 2027 results, with both earnings and revenues beating the Zacks Consensus Estimate.

However, the better-than-expected results failed to impress the market, as the stock has edged down 2.3% since the earnings release on Sept. 3.

DOCU reported second-quarter fiscal 2027 adjusted earnings of $1.16 per share, which increased 26.1% year over year and surpassed the Zacks Consensus Estimate of $1.08. Revenues increased 9.4% to $875.7 million and beat the consensus mark of $867.6 million by 0.9%.

The quarter benefited from rising Intelligent Agreement Management (IAM) adoption and stronger operating leverage. IAM accounted for 15.1% of total annual recurring revenue (ARR), up from 12.6% in the first quarter.

DOCU Sees IAM Become a Bigger ARR Driver

IAM remained central to Docusign's growth strategy. Customers have ingested more than 300 million documents through Agreement Manager, while cumulative active accounts using the company's Model Context Protocol server more than quadrupled during the quarter.

Docusign also launched AI assistant and agentic capabilities for contract analysis, redlining and workflow automation. Management said the AI assistant cut the time needed in user testing to summarize, review and finalize agreements such as nondisclosure agreements by half. The company also expanded IAM integrations across Slack, Perplexity and Google Cloud's Gemini Enterprise for Legal.

Management said most IAM ARR is being generated from Docusign's existing installed base. Customers moving from e-signature to IAM are also providing meaningful expansion opportunities as the platform adds broader agreement-management capabilities.

Docusign Posts Broad Customer Momentum

Total customers increased nearly 10% year over year to more than 1.9 million, driven partly by the digital channel. Dollar net retention among direct customers was 103%, improving modestly from both the prior quarter and year-ago period as expansion contributed more to retention gains.

The number of customers spending more than $300,000 in annual contract value rose 14% to nearly 1,300. International operations accounted for 31% of revenues. Reported revenue growth included a 1.3-percentage-point foreign-exchange benefit. Excluding currency and the prior-year impact of digital add-ons, management said revenue growth accelerated by nearly 1 percentage point.

DOCU Expands Margins Through Cost Discipline

Non-GAAP operating income rose 15.9% year over year to $276.8 million. Non-GAAP operating margin expanded 180 basis points to 31.6%, exceeding the midpoint of management's guidance by 160 basis points. Roughly half of the outperformance came from stronger revenues, with the remainder reflecting operating-cost discipline and higher capitalized software costs.

Non-GAAP gross margin slipped 30 basis points to 81.7% as the ongoing cloud migration weighed on profitability. Docusign ended the quarter with 7,137 employees, up 3% year over year, with all year-over-year headcount growth coming from lower-cost locations. Stock-based compensation declined to 17% of revenues, down 3 percentage points.

Docusign Converts Profit Growth Into Cash

Net cash provided by operating activities increased to $334.5 million from $246.1 million a year ago. Free cash flow climbed 35.9% to $295.8 million, while free cash flow margin improved to 34% from 27%, supported by operating leverage and working-capital gains.

Cash, cash equivalents and investments totaled $973.1 million at quarter-end, and Docusign had no debt. The company repurchased $306.5 million of stock during the quarter, helping reduce diluted shares outstanding by 8% year over year to 193 million. It retained $2.1 billion under its share repurchase authorization.

DOCU Raises Fiscal 2027 Outlook

For the third quarter, Docusign expects revenues of $886-$890 million, representing 9% year-over-year growth at the midpoint and including a 1-percentage-point foreign-exchange tailwind. The current Zacks Consensus Estimate for revenues is pinned at $886.8 million.

Non-GAAP gross margin is projected to be in the range of 81.5-81.9%, while non-GAAP operating margin is expected to be between 31.3% and 31.7%.

For fiscal 2027, revenues are now expected to be between $3.499 billion and $3.507 billion, with 9% growth at the midpoint. The current consensus estimate for revenues is pegged at $3.5 billion.

ARR growth is projected to be in the range of 8.5-9% compared with 8% in fiscal 2026. Management expects IAM to account for 18-19% of total ARR exiting the fourth quarter. Full-year non-GAAP operating margin is forecast at 31-31.5%, while non-GAAP gross margin is expected at 81.5-82%.

Currently, Docusign carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Snapshot

Verisk (VRSK Quick QuoteVRSK - Free Report) reported second-quarter 2026 diluted adjusted earnings of $1.98 per share, beating the Zacks Consensus Estimate of $1.94 by 2.1%. The figure increased 5.3% from the year-ago quarter.

Revenues of $806.3 million topped the consensus mark of $802.4 million by 0.5% and rose 4.3% year over year.

Corpay, Inc. (CPAY Quick QuoteCPAY - Free Report) posted impressive second-quarter 2026 results.

CPAY reported adjusted earnings per share of $7, rising 36% year over year and surpassing the Zacks Consensus Estimate of $6.60 by 6.1%. Revenues increased 21% to $1.33 billion, beating the consensus mark by 2.6%.