The core subscription business continues to grow! DocuSign (DOCU.US) Q3 Revenue and Profit Exceed Expectations to Raise Full Year Results Guidelines

The Zhitong Finance App learned that thanks to the increase in subscription revenue, the electronic signature solution provider DocuSign (DOCU.US) announced third-quarter earnings that exceeded expectations and raised its full-year results guidance.

Financial reports show that in the third fiscal quarter ending October 31, DocuSign's adjusted earnings per share were 1.01 US dollars, and revenue increased 8.4% year over year to reach 818.3.5 million US dollars. Analysts generally expect adjusted earnings per share of $0.92 and revenue of $807.1 million.

Among them, as the core engine driving the DocuSign business, subscription revenue increased 9% year over year to US$801 million, higher than analysts' expectations of US$788 million, while professional services and other revenue increased 14% to US$17.4 million.

The company's Q3 operating cash flow soared 24% to $290.3 million, and free cash flow increased 25% to $262.9 million. DocuSign said that in the third quarter, the company returned US$215.1 million to shareholders through share repurchases. By the end of the period, the total amount of cash, cash equivalents and investments held by the company reached about US$1 billion.

On the operational side, DocuSign recently obtained FedRAMP and GovRAMP certifications, opening the way for developing government contracts. At the same time, the company has integrated AI functions with platforms such as ChatGPT, Microsoft Copilot, GitHub Copilot, Anthropic Claude, and Gemini. These collaborations help it grasp AI application trends in the enterprise software field.

Allan Thygesen, CEO of DocuSign, said in a statement: “The company performed strongly in the third quarter, and customer investment in the identity and access management (IAM) platform continued to increase. Currently, the platform has more than 25,000 users. Thanks to continued steady improvements in execution efficiency, this quarter achieved one of the strongest revenue growth and profitability performances in the past two years.”

Note, however, that its professional services revenue fell 14% to $17.4 million. Although the share of this business is limited, the downward trend may indicate that customers are taking on more implementation work on their own, or reflect the company's intention to shift to a software-only model. Meanwhile, gross margin fell 70 basis points year over year to 81.8%.

Looking ahead to the fourth quarter, DocuSign expects revenue to be between US$825 million and US$829 million, with a median value of US$827 million slightly lower than market expectations of US$827.4 million. Subscription revenue is expected to be between $808 million and $812 million, and billing amounts are expected to be in the range of $992 million to $1 billion. The adjusted gross margin for the quarter is expected to be 80.8% to 81.1%.

In addition, DocuSign raised its performance guidelines for the current fiscal year: the full-year revenue forecast was raised to US$3.208 billion to US$3.212 billion, compared to the previous forecast of US$3.19 billion to US$3.2 billion; the subscription revenue forecast was raised to US$3.14 billion to US$3.144 billion, compared to US$3.13 billion previously.

The annual bill amount is expected to be between $3.38 billion and $3.39 billion; adjusted gross margin is expected to be 81.7% to 81.8% (previously 81% to 82%); and the adjusted operating margin is expected to rise to 29.8% to 29.9% (previously 28.6% to 29.6%).

After the financial report was announced, the company's stock price rose more than 3% after the market, but then fell nearly 6%. Since this year, the stock has fallen by more than 20% cumulatively.