DocuSign's Q2 2026: Contradictions Emerge on eSignature Strength, IAM Expansion, and Macroeconomic Impact

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 4, 2025

Financials Results

• Revenue: $801M, up 9% YOY
• EPS: Non-GAAP diluted EPS $0.92 per share, down from $0.97 last year (~5% YOY); GAAP diluted EPS $0.30 vs $4.26 last year (prior year benefited from $838M tax allowance release)
• Gross Margin: 82.0% (non-GAAP), roughly flat YOY
• Operating Margin: 29.8% (non-GAAP), down 240 bps YOY

Guidance:

• Q3 revenue: $804–$808M (~7% YOY midpoint)
• FY26 revenue: $3.189–$3.201B (~7% YOY midpoint)
• Q3 subscription revenue: $786–$790M (~7% YOY midpoint)
• FY26 subscription revenue: $3.121–$3.133B (~8% YOY midpoint)
• Q3 billings: $785–$795M (~5% YOY midpoint), with renewal timing headwind similar to Q2 benefit
• FY26 billings: $3.325–$3.355B (~7% YOY midpoint)
• FY26 guidance raised vs last quarter: +$38M revenue, +$28M billings at midpoints
• Q3 non-GAAP GM: 80.3%–81.3%; FY26: 81.0%–82.0%
• Q3 non-GAAP Op margin: 28.0%–29.0%; FY26: 28.6%–29.6%
• ~1 pt GM headwind from cloud migration (eases in FY27+); ~1.5 pts Op margin headwind; expect lower FCF yield in Q3 vs Q2

Business Commentary:

* Strong Revenue and Billings Growth: - DocuSign reported revenue of $801 million for Q2, up 9% year-over-year, with billings at $818 million, up 13% year-over-year. - The growth was driven by improved fundamentals across eSignature and CLM customers, and increasing contribution from IAM demand.

• Improved Gross Retention Rates:
• DocuSign’s dollar net retention rate rose to 102%, from 101% in Q1, with better gross retention across customer segments.

• The improvement was attributed to operational execution and enhanced customer engagement, including proactive renewal management.

• Increased Demand for IAM:

• IAM customers represented a growing share of direct deal volume and total gross bookings, contributing a low double-digit percentage of the subscription book by year-end.

• Encouraging demand was driven by enterprise and commercial SMB customers adopting IAM for faster sales cycles and deeper agreement insights.

• Digital Revenue and International Expansion:

• Digital revenue continued to outpace the overall business, with international revenue representing 29% of total revenue and growing 13% year-over-year.
• Growth was supported by increased demand in the Asia Pacific region and strategic initiatives such as Momentum events in the region.

Sentiment Analysis:

• Revenue up 9% YOY to $801M; billings up 13% YOY to $818M. Dollar net retention rose to 102% (from 99% last year). Direct sales strength, improving retention, and IAM momentum noted; guidance raised for FY26 revenue and billings. Non-GAAP operating margin ~30% despite YOY headwinds; $200M in share repurchases. Management sees no significant macro weakness and highlights growing enterprise/IAM traction.

Q&A:

• Question from Robbie Owens (Piper Sandler): What's driving improved eSignature consumption and envelope volumes—macro, new use cases, or IAM attach?
  Response: Broad-based strength across verticals with steady consumption trends over the last year; no notable macro weakness.

• Question from Tyler Radke (Citi): CLM had a strong quarter with large deals (e.g., T-Mobile). Is this timing or the start of a sustained trend?
  Response: Very strong and encouraging quarter with large deals, but too early to call a sustained category breakout.

• Question from Jacob Roberge (William Blair): How is IAM rollout progressing in enterprise and international versus North American commercial, and is pricing uplift holding?
  Response: Seeing larger enterprise IAM deals and global adoption; customers moving from eSign to IAM show consistent, meaningful expansion.

• Question from Josh Baer (Morgan Stanley): Billings outperformance seemed eSign-driven; what are IAM economics—accretive to growth and by how much?
  Response: Beat was mainly eSign and timing; IAM slightly above plan with meaningful expansion on upgrade, but too early to quantify uplift.

• Question from Bill (Evercore ISI, for Kirk Materne): What drove improved gross retention and can it continue into 2H and next year?
  Response: Earlier, proactive renewal engagement improved DNR to 102%; more opportunity remains, but no specific forecast.

• Question from Bradley Sills (BofA): Impact of the GSA partnership on federal business and pipeline?
  Response: Facilitates federal purchasing; current federal revenue is modest with significant headroom—early days but a sizable opportunity.

• Question from Austin Cole (Citizens JMP): How have reps adapted to GTM changes; are they equipped and incentivized to sell IAM?
  Response: Reps have adapted well with new segments, quotas, and enablement; no major additional changes planned.

• Question from Mark Murphy (JPMorgan): Customer opt-in for Iris AI to ingest/index agreements and data scale—how common and impactful?
  Response: Nearly all customers consent; ~100M agreements ingested enable immediate AI value and rapid time-to-value.

• Question from Brent Thill (Jefferies): Margin progression vs investments—when does topline leverage drop through, and where are investments going?
  Response: Margins face ~150 bps headwinds (cloud migration, one-time comps, comp mix) partly offset; investing in R&D and GTM; leverage improves with topline acceleration.

• Question from Brent Thill (Jefferies): When does cloud migration stop being a margin headwind?
  Response: FY26 is peak pressure; headwind moderates in FY27 and beyond.

• Question from Aleksandr Zukin (Wolfe Research): Are early-renewal expansions increasingly driven by IAM attach?
  Response: IAM contributes and early cohorts show higher gross retention than eSign, but eSign remains the primary driver.

• Question from Aleksandr Zukin (Wolfe Research): Any impact from changing search/SEO on top-of-funnel dynamics?
  Response: No notable impact; focus remains upselling 1.7M eSign customers to IAM while maintaining healthy organic traffic.

• Question from Rishi Jaluria (RBC Capital Markets): With many AI vendors targeting contract analysis, what ensures Docusign’s differentiation in IAM?
  Response: Unique proprietary agreement corpus, deep workflow expertise, and broad enterprise integrations provide durable AI and go-to-market advantages.