DocuSign's AI Pivot: Is the Numbers Game Actually Working?

DocuSign just made one of those “bet the company” moves that either looks genius or desperate in hindsight. They’re ditching the e-signature grind and pivoting hard into Intelligent Agreement Management (IAM)—basically an AI platform that handles the entire agreement lifecycle.

Here’s what’s catching eyes: the numbers are actually holding up.

The Numbers That Matter

Q2 FY2026 threw up some solid metrics. Revenue hit $800.6M (9% YoY growth), but billings are the real story—up 13% YoY. That’s the kind of gap that suggests customers are locking in multi-year deals, which means future revenue is getting locked down right now.

Even wilder: dollar net retention climbed to 102% (up from 101% last quarter and 99% YoY). Translation—existing customers are spending more. Over 50% of enterprise account reps closed at least one IAM deal last quarter, despite the product still being in early innings. That’s adoption velocity.

Operationally, they’re not bleeding cash either. Gross margin and operating margin both expanded (40 bps and 20 bps respectively), while free cash flow jumped to $217.6M from $197.9M YoY. That’s the flexibility needed to keep funding AI/ML development without torching the balance sheet.

The Stock Reality Check

Here’s the catch: DOCU dropped 26% over the past six months, underperforming its industry peers. The stock’s trading at 3.83x forward P/S—cheaper than the industry average (4.61x) but pricier than competitors like Appian (3.77x) or StoneCo (1.49x).

Zacks pegs EPS at $3.69 for FY2026, with FY2027 consensus at $4.06. The stock currently holds a Rank #2 (Buy) rating.

The Real Question

So is the pivot actually working? The IAM platform is gaining traction—that much the data backs up. But here’s the tension: strong fundamentals aren’t translating to stock performance yet. Either the market’s pricing in more skepticism, or it’s waiting to see if this AI-powered IAM story can sustain beyond early wins.

The company has the cash runway and the early customer validation. What matters next is whether this becomes a repeatable, scalable motion or a one-quarter spike.