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Docusign Inc. (DOCU) is getting some love from Wall Street after its fiscal second-quarter numbers showed the company is more than just an e-signature shop. The stock was up 3.54% to $68.30 on Friday, and analysts are buzzing about the accelerating growth in its Intelligent Agreement Management (IAM) business, better retention, and profits that came in stronger than expected.
Let's break down what the bulls and the cautious crowd are saying.
Citizens analyst Patrick Walravens is feeling good about Docusign. He kept a Market Outperform rating and an $86 price target. His enthusiasm is rooted in the numbers: revenue growth of 9.4%, improving net retention, and IAM annual recurring revenue (ARR) of about $529 million. That's a big deal because IAM now makes up 15.1% of total ARR, blowing past Citizens' own estimate of $474 million.
Walravens sees Docusign leveraging its dominant e-signature position to become the "agreement layer" for enterprises. He's projecting IAM ARR to top $650 million by the end of fiscal 2027, which would be roughly 18.5% of total ARR. He also points to Docusign's Iris AI engine, trained on over 300 million private, consented agreements, as a potential moat.
Citizens also bumped up its fiscal 2027 non-GAAP earnings estimate to $4.67 per share from $4.61, and raised its fiscal 2028 estimate to $5.22 from $5.12.
Over at RBC Capital Markets, analyst Rishi Jaluria is taking a more measured approach. He kept a Sector Perform rating but raised his price target to $70 from $55 after the results. Jaluria acknowledges the quarter was another solid step in Docusign's transition to IAM. Revenue hit $875.7 million, up 9% year over year, and non-GAAP earnings came in at $1.16 per share, both beating consensus.
RBC is also impressed by the improving retention and bigger deals. Customers with more than $300,000 in annual contract value grew 14% year over year to 1,296, marking the second straight quarter of double-digit growth. And there's a potential new growth avenue: Docusign's integrations with third-party AI platforms. Its connectors now span OpenAI, Anthropic, Microsoft Copilot, Google Cloud, and Perplexity. RBC thinks these could eventually become a distribution channel for Docusign.
But here's the rub: RBC believes the stock is already priced for a lot of this good news. Docusign trades at roughly nine times estimated calendar 2027 free cash flow, which limits the upside even as IAM adoption, retention, and deal sizes improve.
The differing ratings from these two firms highlight a common theme: Docusign's IAM strategy is clearly gaining traction, but the debate is shifting to how much of that improvement is already baked into the stock price. For investors, it's a classic question of growth versus valuation.
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