Is Docusign's Strategy to Transform Into IAM Yielding Results?

Docusign DOCU made a pivotal change in its legacy business model, shifting from an e-signature product to an Intelligent Agreement Management (IAM) platform. This platform is made to capture the entire lifecycle of an agreement. An early sign of the success of this AI-fueled platform is translated by key financial metrics.DOCU recorded $800.6 million in its top line during the second quarter of fiscal 2026, a solid 9% year-over-year increase. Surprisingly, billings gained 13% from the year-ago fiscal quarter. This remarkable growth can be attributed to the increased customer demand for the AI-driven IAM platform, resulting in multi-year deals that build a future revenue pipeline. During the second quarter of the fiscal 2026 earnings call, management disclosed that at least one IAM deal was closed by more than 50% of its enterprise account reps during the quarter, despite the product being in its early days.Moreover, the dollar net retention climbed to 102% during the second quarter of fiscal 2026 from the preceding quarter’s 101%. Even more impressive is that the metric skyrocketed 99% year over year. This positive movement highlights that customers are inclined toward IAM, validating management’s claim that this product represented a greater share of direct deal volume and total gross booking than the first quarter of fiscal 2026.It is impressive how the company has managed to maintain financial efficiency while transforming its business model. During the second quarter of fiscal 2026, gross margin and operating margin increased by 40 basis points (bps) and 20 bps, respectively. Even free cash flow rose to $217.6 million, up from $197.9 million in the same quarter last year, highlighting the financial flexibility essential for investments in AI and machine learning, which are crucial for the IAM platform. All in all, the strong top-line cadence and operational efficacy were reflected in the striking early success of IAM during the second quarter of fiscal 2026.DOCU’s Price Performance, Valuation & EstimatesDocusign has declined 26% in the past six months compared with a 3.7% dip in its industry. The stock has underperformed Appian APPN and StoneCo’s STNE 27.6% and 8.6% growth, respectively, during the same time period.Six-Month Share Price Performance Image Source: Zacks Investment Research From a valuation standpoint, DOCU trades at a 12-month forward price-to-sales ratio of 3.83, cheaper than the industry’s 4.61. However, Docusign appears more expensive than Appian and StoneCo’s 3.77 and 1.49, respectively.Price/Sales F12M <Image Source: Zacks Investment Research Docusign has a Value Score of C. Appian and StoneCo carry Value Scores of F and A, respectively.The Zacks Consensus Estimate for DOCU’s fiscal 2026 EPS is pegged at $3.69, a marginal increase over the past 60 days. For fiscal 2027, the consensus mark is pinned at $4.06, rising marginally over the past 60 days. Image Source: Zacks Investment Research Docusign currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Appian Corporation (APPN): Free Stock Analysis Report Docusign Inc. (DOCU): Free Stock Analysis Report StoneCo Ltd. (STNE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks