Why Is DocuSign (DOCU) Down 4.2% Since Last Earnings Report?

A month has gone by since the last earnings report for DocuSign (DOCU). Shares have lost about 4.2% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is DocuSign due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Docusign's Q4 Earnings & Revenues Beat Estimates

Docusign, Inc. reported impressive fourth-quarter fiscal 2026 results, with both earnings and revenues beating their respective Zacks Consensus Estimate.

DOCU’s adjusted earnings (excluding 57 cents from non-recurring items) were $1.01 per share, which surpassed the Zacks Consensus Estimate by 6 cents and increased 17.4% from the year-ago quarter’s level. Total revenues were $836.9 million, which beat the consensus estimate by $8.7 million and improved 7.8% on a year-over-year basis.

DOCU’s Segmental Revenues

Subscription revenues totaled $819 million, increasing 8% year over year. The figure beat our estimate of $809.6 million. Professional services and other revenues of $17.9 million fell 3% from the year-ago quarter’s level, surpassing our expectation of $16.5 million. Billings amounted to $1 billion, up 10% year over year. The figure topped our estimate of $998.1 million.

The non-GAAP gross margin was 81.8% compared with 82.3% a year ago, beating our estimate of 81.2%. The non-GAAP gross profit of $684.1 million grew 7.1% year over year and outpaced our expectation of $671 million. The non-GAAP operating margin was 29.5%, up 70 basis points from the year-ago quarter’s level. The figure beat our estimate of 28.4%.

Balance Sheet & Cash Flow of Docusign

Docusign exited the fourth quarter of fiscal 2026 with cash and cash equivalents of $602.4 million compared with $648.6 million at the end of fiscal 2025. Net cash generated by operating activities was $377.2 million for the reported quarter. Free cash flow generation was $350.2 million.

DOCU’s Q1 & FY27 Guidance

For the first quarter of fiscal 2027, DOCU expects revenues to be between $822 million and $826 million.

The non-GAAP gross margin and the non-GAAP operating margin are expected to be in the range of 80.8-81.2% and 29-29.5%, respectively. Non-GAAP diluted weighted-average outstanding shares are expected to be in the range of 196-201 million.

For fiscal 2027, the company expects revenues to be between $3.484 billion and $3.496 billion.

DOCU anticipates the annual recurring revenue (ARR) growth rate to be between 8.25% and 8.75%. The non-GAAP gross margin and the non-GAAP operating margin are expected to be 81.5-82% and 30-30.5%, respectively. Non-GAAP diluted weighted-average outstanding shares are expected to be in the range of 190-195 million.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a upward trend in estimates revision.

The consensus estimate has shifted 18.3% due to these changes.

VGM Scores

At this time, DocuSign has a strong Growth Score of A, a score with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a score of B on the value side, putting it in the top 40% for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, DocuSign has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

DocuSign is part of the Zacks Internet - Software industry. Over the past month, Rigetti Computing, Inc. (RGTI), a stock from the same industry, has gained 22%. The company reported its results for the quarter ended December 2025 more than a month ago.

Rigetti Computing reported revenues of $1.87 million in the last reported quarter, representing a year-over-year change of -17.6%. EPS of -$0.03 for the same period compares with -$0.08 a year ago.

For the current quarter, Rigetti Computing is expected to post a loss of $0.05 per share, indicating a change of +37.5% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Rigetti Computing has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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