Digital Workflows Will Unlock New Global Opportunities

Key Takeaways

• Growing demand for AI-powered agreement solutions, international expansion, and new verticals is boosting recurring revenue, customer retention, and long-term earnings diversification.
  
• Operational efficiencies through automation and cloud migration are strengthening cash flow, enabling capital returns and margin expansion as upfront technology costs decline.
  
• Maturing core markets, margin pressures, uncertain new product adoption, and rising competition threaten long-term growth, profitability, and pricing power for DocuSign.

Catalysts

Provides electronic signature solution in the United States and internationally.

• Sustained adoption of digital workflows across global industries and increased prevalence of remote/hybrid work environments is driving persistent demand for eSignature, contract lifecycle management (CLM), and AI-powered agreement management (IAM) solutions; this is reflected in accelerating direct sales, healthy new bookings, and improving renewal rates, providing strong ongoing support for revenue and billings growth.
  
• Enhanced regulatory focus on data security and compliance continues to make Docusign's solutions a core component of organizational workflows, resulting in higher gross retention, increasing dollar net retention rates, and reduced customer churn, positively impacting recurring revenue and earnings stability.
  
• Rollout and ramp-up of the IAM platform, with AI-native features and deep enterprise system integrations, is unlocking significant upsell opportunities as customers migrate from core eSignature to broader agreement management, driving improved ARPU and supporting double-digit future topline growth.
  
• Expansion into underpenetrated international markets and new verticals (such as U.S. federal government via the GSA partnership) is outpacing domestic growth and is expected to further diversify revenue streams and contribute to higher long-term revenue and earnings.
  
• Operational efficiency initiatives-including automation, cloud migration, AI-driven R&D investment, and measured hiring-are sustaining strong free cash flow generation, supporting robust capital returns (e.g., buybacks) and setting the stage for net margin and EPS expansion as cloud migration costs ease in the coming fiscal year.

DocuSign Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming DocuSign's revenue will grow by 7.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.1% today to 9.4% in 3 years time.
• Analysts expect earnings to reach $359.8 million (and earnings per share of $2.15) by about September 2028, up from $281.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $409.4 million in earnings, and the most bearish expecting $229.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 64.3x on those 2028 earnings, up from 57.1x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
• Analysts expect the number of shares outstanding to decline by 0.91% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.41%, as per the Simply Wall St company report.

DocuSign Future Earnings Per Share Growth

Risks

• Docusign's guidance indicates slowing revenue and billings growth (7–8% year-over-year, down from the recent quarter's double-digit pace), suggesting possible maturation of the core eSignature market and reducing the likelihood of sustained high long-term growth, which could ultimately constrain future revenue and EPS expansion.
  
• The company continues to face persistent operating and gross margin headwinds due to ongoing migration to cloud infrastructure, higher hosting costs, and shifts from equity to cash compensation, limiting near-term and potentially longer-term improvements in net margins and earnings leverage.
  
• Despite efforts to expand internationally and in the enterprise, Docusign management repeatedly notes these are still early days, with federal and global opportunities not yet material revenue contributors, revealing execution risk and the possibility that international and enterprise expansion may take longer, or prove less profitable, than expected-pressuring long-term topline growth and margins.
  
• There are signs of intensifying competition and potential commoditization risk in the agreement management and e-signature space, with customers having alternatives and AI/LLM-enabled software vendors seeking to enter the market, which could erode Docusign's pricing power, lower renewal rates, and compress both revenue and net margins over time.
  
• The company's reliance on upselling its existing 1.7 million eSign customers to the new AI-native IAM platform is a key part of growth projections, but adoption rates and demonstrated economic uplift from IAM remain unclear and early-stage, creating risk that expectations for future ARPU expansion and revenue acceleration could fall short if customer transition is slower or less lucrative than modeled.

Valuation

• The analysts have a consensus price target of $93.162 for DocuSign based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $124.0, and the most bearish reporting a price target of just $77.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.8 billion, earnings will come to $359.8 million, and it would be trading on a PE ratio of 64.3x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of $79.8, the analyst price target of $93.16 is 14.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.