DocuSign (NASDAQ:DOCU) shares fell nearly 7% as conservative guidance for the upcoming quarter weighed on better-than-expected earnings.
For the October quarter, DocuSign reported revenue of $818.4 million, surpassing Wall Street estimates of roughly $807 million, marking an 8% year-over-year increase.
Subscription revenue rose 9% to $801 million, while professional services and other revenue declined 14% to $17.4 million.
Billings reached $829.5 million, up 10% from the prior year and above both the Street’s estimate of $790 million and the company’s guidance range of $785 million to $795 million.
On the profitability front, DocuSign reported adjusted earnings per share (EPS) of $1.01, above the consensus estimate range of $0.91 and up from $0.90 in the same period last year.
For Q4, DocuSign expects total revenue of $825 million to $829 million and adjusted EPS of approximately $0.95. Subscription revenue is projected at $808 million to $812 million, with billings of $992 million to $1.002 billion.
Non-GAAP gross margin is forecasted at 80.8% to 81.2%, and non-GAAP operating margin at 28.3% to 28.7%.
For fiscal 2026, DocuSign raised its guidance, expecting total billings of $3.379 billion to $3.389 billion and total revenue of $3.208 billion to $3.212 billion, both above prior guidance and Street estimates.
Subscription revenue is projected at $3.140 billion to $3.144 billion, with expected gross margins of 81.7% to 81.8% and operating margins of 29.8% to 29.9%, reflecting continued operational discipline.
Wedbush analysts repeated their ‘Neutral’ rating on DocuSign following the report, highlighting its conservative guidance.
"DOCU reported its Q3 2026 results featuring beats across the board as the company saw strong demand for IAM and eSignature, but the performance will be overshadowed by the relatively conservative outlook,” they wrote.
They highlighted strong billings and continued investments in core products and the IAM platform, but emphasized that "while the company produced a relatively solid quarter, we believe the raised outlook remains conservative."
Wedbush adjusted its 12-month price target to $75, down from $85, to reflect a lower multiple.