Digital Transformation Will Drive Secure e-Signature Expansion Despite Rival Risks

Key Takeaways

• Rapid AI-powered platform adoption and workflow integrations are expected to boost upselling, customer value, and margin expansion while strengthening customer retention.
  
• Global rollout, regulatory acceptance, and deeper partnerships position DocuSign for major international growth and increased enterprise market penetration.
  
• Intensifying competition, regulatory challenges, and economic headwinds threaten DocuSign’s pricing power, revenue growth, and profitability while driving up compliance and operational costs.

Catalysts

Provides electronic signature solution in the United States and internationally.

• The rapid adoption of DocuSign’s new Intelligent Agreement Management (IAM) platform, powered by advanced AI, is expected to create significant upsell opportunities within the existing customer base, driving accelerated billings growth and ultimately higher subscription revenue and improved net retention rates over the next several years.
  
• The broad rollout of IAM globally, combined with rising regulatory acceptance for e-signatures and agreement platforms in international markets, positions DocuSign to significantly expand its customer base outside North America, increasing international revenue growth, total addressable market, and long-term earnings.
  
• Increased integration of AI-driven agreement analytics, automation, and workflow tools within DocuSign’s offerings is anticipated to enhance customer value, support higher average contract values, and support margin expansion by reducing manual processes and lowering operational costs.
  
• Deepening partnerships and platform integrations with major CRM, ERP, and workflow providers, together with investments in partner-led channels—especially in underpenetrated international regions—are expected to boost enterprise penetration, drive new high-margin recurring revenue streams, and improve customer stickiness, supporting both top-line growth and long-term profitability.
  
• The ongoing digital transformation trend, coupled with more remote and hybrid work models across industries, continues to drive sustained demand for secure, cloud-based agreement solutions—these dynamics set the stage for recurring revenue growth and provide a secular tailwind for DocuSign’s long-term earnings power and operating leverage.

DocuSign Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on DocuSign compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming DocuSign's revenue will grow by 9.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 35.9% today to 10.0% in 3 years time.
• The bullish analysts expect earnings to reach $386.0 million (and earnings per share of $1.89) by about April 2028, down from $1.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 75.1x on those 2028 earnings, up from 14.3x today. This future PE is greater than the current PE for the US Software industry at 30.0x.
• Analysts expect the number of shares outstanding to decline by 1.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.6%, as per the Simply Wall St company report.

DocuSign Future Earnings Per Share Growth

Risks

• DocuSign faces increasing competition from well-funded tech giants and workflow platform providers like Adobe and Microsoft, which could trigger price pressure and erode margins, ultimately constraining future revenue and earnings growth.
  
• The commoditization of electronic signature technology and the emergence of integrated solutions within larger software platforms may reduce DocuSign’s differentiation, threatening pricing power and risking contraction in both revenue and net margins over time.
  
• As more stringent global privacy laws and digital signature regulations are enacted, DocuSign will need to invest heavily in compliance and data protection, potentially inflating operating costs and suppressing profit margins.
  
• Slowing digital agreement innovation, together with longer enterprise sales cycles and the need for significant go-to-market investment to move upmarket, could stifle new customer acquisition and limit the pace of revenue growth, especially if existing customers are slow to expand usage.
  
• Economic uncertainty globally, including shrinking IT budgets and the risk of recession in key markets, exposes DocuSign to slower subscription growth and possible customer downgrades or churn, directly dampening revenue reliability and long-term earnings power.

Valuation

• The assumed bullish price target for DocuSign is $119.27, which represents two standard deviations above the consensus price target of $92.95. This valuation is based on what can be assumed as the expectations of DocuSign's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• 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 $70.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $3.9 billion, earnings will come to $386.0 million, and it would be trading on a PE ratio of 75.1x, assuming you use a discount rate of 7.6%.
  
• Given the current share price of $75.42, the bullish analyst price target of $119.27 is 36.8% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• 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.