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Investing.com -- Shares of DocuSign Inc (NASDAQ:DOCU) soared more than 8% in premarket trading Friday after the company posted stronger-than-expected second-quarter earnings and unveiled an optimistic full-year (FY) forecast.
Investors rallied behind a combination of solid core performance and expanding adoption of DocuSign’s AI-enhanced Intelligent Agreement Management (IAM) platform.
For the fiscal second quarter ended July 31, DocuSign reported adjusted earnings of $0.92 per share, beating Wall Street’s consensus forecast by 7 cents. Revenue climbed 9% year-over-year to $800.6 million, also exceeding Street expectations for $779.78 million.
Billings, a key indicator of future revenue, rose to $818 million, up 13% from the year-ago period. Subscription revenue increased 9% to $784.4 million, while professional services revenue fell 13% to $16.2 million.
“Q2 was an outstanding quarter, with AI innovation launches and recent go-to-market changes leading to strong performance across the eSignature, CLM, and IAM businesses,” said DocuSign CEO Allan Thygesen. “Q2 business results outperformed, leading to one of DocuSign’s highest growth and profitability quarters in recent years.”
The company showcased continued momentum in its IAM platform, unveiling AI-powered tools like Agreement Preparation and Custom Extractions in Navigator to automate contract creation and data extraction. DocuSign also deepened integration with enterprise identity providers and launched Maestro Workflow Templates to drive faster implementation of agreement workflows.
DocuSign raised its full-year revenue guidance to a range of $3.19 billion to $3.20 billion, above analyst expectations of $3.16 billion. For the third quarter, it projects revenue between $804 million and $808 million, implying a year-over-year growth of roughly 7%.
The company also lifted its full-year billings guidance to $3.34 billion, which implies 7.4% year-over-year growth, up from 6.5% previously, and provided Q3 billings guidance of $790 million, implying 5% year-over-year growth.
"While renewal timing created quarterly billings growth volatility, we view the FY billings guidance raise positively as it is ahead of initial target and implies acceleration from last year, with mgmt passing through only half of the Q2 beat, embedding reasonable conservatism," Wolfe Research analysts said.
Separately, Bank of America analysts said DocuSign’s "Q2 results Q2 results suggest that DocuSign’s recovery story is very much back on track."
"We are bullish on the long term opportunity for IAM, as the solution brings Docusign into more strategic workflow and large deal sizes. However, the cycle is early and we believe that go to market efforts in both the direct and partner channel are a work in progress," they wrote.
At the current valuation, BofA believes that "much of the near-term upside is priced into the shares." The bank lifted its price target to $102 from $85.
Thygesen emphasized strategic additions to the board, including former Salesforce EVP Mike Rosenbaum and incoming Board Chair James Beer, as key to accelerating the company’s transformation. “Mike’s extensive experience in scaling platform SaaS businesses will be an immense resource for Docusign as we continue our transformation to an Intelligent Agreement Management company,” Thygesen noted.
Investors appear increasingly confident in the company’s ability to drive durable growth through innovation and operational efficiency. With a cash position of $1.1 billion and robust free cash flow of $217.6 million in the quarter, DocuSign is positioning itself for long-term competitiveness in a market rapidly shifting toward AI-driven workflows.
(Luke Juricic contributed to this report.)