Why DocuSign Could Be a SaaS Value Play After Q2 Earnings

Key Points

• DocuSign beat Q2 earnings and revenue expectations, with strong adoption of its new IAM platform.
• The company’s SaaS model delivers 98% recurring revenue and gross margins above 80%.
• At just 14x earnings, DOCU looks undervalued compared to other cloud software peers.

Heading into its second-quarter earnings report for its 2026 fiscal year (FY), DocuSign Inc. NASDAQ: DOCU was showing signs of being a value play in an overvalued technology sector. DOCU stock was up 1.1% since mid-August, and many investors were hoping that its earnings report would be the catalyst the stock needed.

So far, so good. DOCU stock was up more than 6% in after-hours trading on September 4 after posting a beat on the top and bottom line and announcing strong initial adoption for its IAM (Intelligent Agreement Management) platform.

It’s worth noting that the stock was up more than 10% at one point after earnings, so it’s clear that some traders may believe the stock got too far ahead of itself before the August jobs report, which sparked a volatile move in stocks.

However, DocuSign’s low valuation multiple, durable SaaS economics, and expanding market footprint may make DOCU stock an attractive choice for investors seeking growth at a reasonable price. The key will be whether the company’s platform innovation will allow DocuSign to outperform the broader sector.

A Strong Beat Could Still Leave Investors Wanting More

DocuSign’s headline numbers were encouraging. Revenue of $801 million beat expectations for $780.35 million and was 13% higher year-over-year (YOY). Earnings per share of 92 cents beat estimates for 84 cents and were 16% higher YOY.

The results confirm that the company’s pivot is gaining traction. DocuSign gained meme stock status in 2020 and 2021 as remote work necessitated the growth of its e-signature business. However, competition from other cloud providers necessitated that the company find new revenue streams.

That’s where IAM comes in. This AI-powered agreement management software puts DocuSign into the software-as-a-service (SaaS) category. Much of the company’s recent growth is attributed to IAM, which the company expects to represent a double-digit percentage of its subscription revenue by the end of its 2026 fiscal year.

However, with so much after-hours trading being done by high-speed trading platforms, it’s fair to ask if investors who look at the stock feel that a 6% gain is probably good enough. That could mean that traders may want to find a more desirable entry point.

The Long-Term Value Case

DocuSign benefits from high recurring subscription revenue, which accounts for 98% of the company’s revenue and comes with a gross margin of over 80%. With over 10,000 IAM customers already and a debt-to-equity ratio near zero, the company has strong balance sheet flexibility to invest in product and global expansion.

Plus, at 14x earnings, DocuSign is attractively valued among other SaaS names and comparable cloud software stocks, which are known for having bloated valuations. In FY2025, DocuSign generated nearly $3 billion in revenue, an 8% YOY increase. That revenue increase came with robust profitability and a net margin that exceeded 35%.

Moving forward with the value case will depend on the company’s continued ability to identify and win new customers for its IAM platform. This could include expanding the adoption of its products among existing accounts.

The IAM opportunity also positions DocuSign in the broader workflow automation market, drawing comparisons to higher-multiple SaaS leaders like ServiceNow and Workday. That expanded total addressable market gives the company more room to grow beyond e-signatures. Still, it will also mean facing off against well-capitalized rivals such as Adobe and Microsoft.

DOCU Stock Faces Critical Technical Test

At the market close on September 4, DOCU stock was trading right around its 50-day simple moving average (SMA).

The post-earnings rally pushed the stock close to its 200-day SMA.

This was a point of resistance in July and could set the stock for a push to around $93.50.

It would also push the stock into positive territory in 2025.

However, investors will want to verify this price movement with strong volume in the coming days and bullish analyst sentiment.

Immediately after earnings, Citigroup upgraded its already bullish price target for DocuSign from $110 to $115.

That’s above the consensus of $90.15.