DocuSign Q2 Revenue Hits $801 Million

DocuSign(NASDAQ:DOCU) reported fiscal Q2 2026 results on September 4, 2025, with revenue of $801 million, up 9% year over year, and billings of $818 million, up 13% year over year, while achieving a non-GAAP operating margin of 30%. The quarter featured notable progress in AI-native Intelligent Agreement Management (IAM), expanded international and enterprise traction, and reinforced management’s focus on sustained profitable growth and capital returns to shareholders.

Billings acceleration boosts DocuSign’s enterprise momentum

While accelerating billings growth to 13% year over year, the company also achieved higher dollar net retention of 102% and an increase in average deal size, buoyed by improvements in gross retention and robust early renewals. International revenue represented 29% of total revenue, growing at 13% year over year.

"Q2 business results outperformed our expectations. Revenue was $801 million, up 9% year over year, and billings were $818 million, up 13% year over year. Q2 top-line performance accelerated and represented one of our strongest growth quarters over the past two years. With improved fundamentals across eSignature and CLM customers, and growing contribution from IAM demand. Beyond an individual quarter, we're excited to see billings begin to accelerate on a full-year basis and more so when we adjust for early renewals. Profitability benefited from top-line strength, combined with our ongoing commitment to driving efficiency. Non-GAAP operating margins were 30% as we continue to maintain strong profitability. Free cash flow margins improved modestly year over year to 27% which supported significant share repurchases with $200 million buybacks this quarter."
-- Allan C. Thygesen, CEO

This combination of revenue and profitability growth—along with disciplined capital return via share buybacks—demonstrates execution strength and signals enhanced investor returns, especially as stronger billings and net retention indicate improving customer health and sustainable expansion in higher-value segments.

IAM adoption accelerates mixed with enterprise and AI leadership

IAM is positioned to reach a low double-digit percentage of the company’s subscription book by year end, with over 50% of enterprise account representatives closing at least one IAM deal and Fortune 1000 clients such as Sensata Technologies and T-Mobile adopting advanced contract lifecycle management (CLM) and AI-driven analytics. The recent launch of AI-powered features such as DocuSign Navigator, agreement preparation, and SCIM user management reinforces product differentiation.

"customers. While still early days, more than 50% of our enterprise account reps closed at least one IAM deal. Notably, average overall deal size also increased in Q2 with IAM making inroads with large organizations like Sensata Technologies, a global sensor manufacturing leader, which has accelerated its workflows and is beginning to use the DocuSign Iris AI engine to surface insights from agreements. DocuSign CLM saw improved momentum in Q2, delivering one of the strongest quarters in year-over-year quarterly bookings growth in the last several years."
-- Allan C. Thygesen, CEO

IAM’s upmarket momentum and increasing penetration in enterprise accounts, coupled with advanced AI integration, create meaningful competitive differentiation, expand addressable opportunity, and reinforce the company’s thesis as an emerging leader in the digital agreement and contract analytics space.

Operational discipline sustains high margins amid cloud migration

Non-GAAP gross margin held steady at 82%, despite continuing cloud migration costs that represent a roughly 100-basis-point year-over-year headwind and a temporary dip in operating margin due to compensation mix shifts and prior-year one-off benefits. The company maintained a strong cash position with $1.1 billion of cash and no debt, continuing measured hiring and investing in go-to-market excellence and R&D for IAM scalability.

"As a reminder, we expected Q2 to have the most challenging year-over-year operating margin comparison of any quarter in fiscal 2026 due to several factors, including the timing and impact of our compensation programs, specifically the shift to cash from equity for some employees. As you may also recall, Q2 fiscal 2025 also had a onetime operating margin benefit of approximately 150 basis points associated with insurance reimbursements and the release of a litigation reserve. Our cloud computing migration also continues to provide a year-over-year headwind to margins."
-- Blake Jeffrey Grayson, CFO

Enduring high profitability even in the face of margin headwinds highlights the resilience of DocuSign’s business model, supporting further investments and capital returns while temporarily constraining incremental non-GAAP margin expansion until cloud migration cost pressures subside.

Looking Ahead

Management projects revenue of $804 million to $808 million for Q3 FY2026 (7% year-over-year growth midpoint) and full-year revenue of $3.189 billion to $3.201 billion for FY2026 (7% year-over-year growth midpoint), with billings anticipated at $3.325 billion to $3.355 billion for FY2026 (7% growth midpoint). Non-GAAP operating margin is guided to 28% to 29% for Q3 and 28.6% to 29.6% for the full year, while full-year non-GAAP gross margin faces a roughly one percentage point headwind from ongoing cloud migration, which is expected to ease beginning next fiscal year. The company reiterated that IAM customers are on track to contribute a low double-digit percentage of the subscription book by year end and emphasized continued focus on capital returns through opportunistic share repurchases.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Docusign. The Motley Fool has a disclosure policy.