Docusign (NASDAQ:DOCU) reported second-quarter fiscal 2027 revenue of $876 million, up 9% from a year earlier, as adoption of its Intelligent Agreement Management, or IAM, platform increased and the company expanded its artificial intelligence capabilities and integrations.
Chief Executive Officer Allan Thygesen said IAM accounted for 15.1% of total annual recurring revenue, or ARR, at the end of the quarter, up from 12.6% in the first quarter. The company raised its full-year ARR growth outlook to a range of 8.5% to 9.0%, compared with 8.0% growth in fiscal 2026, and expects IAM to account for 18% to 19% of total ARR exiting the fourth quarter.
Financial Results and Capital Returns
Docusign’s second-quarter revenue included a 1.3 percentage-point benefit from foreign exchange rates. International revenue represented 31% of the total. Chief Financial Officer Blake Grayson said that, after adjusting for foreign exchange and the prior-year contribution from digital add-ons, revenue growth accelerated by nearly one percentage point year over year.
Non-GAAP operating income rose 16% year over year to $277 million. The company reported a non-GAAP operating margin of 31.6%, up 180 basis points from the prior-year period and above the midpoint of its guidance range. Non-GAAP diluted earnings per share increased 26% to $1.16, while GAAP diluted earnings per share rose 33% to $0.40.
Free cash flow was $296 million, up more than 35% from the prior-year quarter and equal to a 34% margin. Over the trailing 12 months, Docusign generated $1.2 billion in free cash flow, according to Grayson.
The company ended the quarter with just under $1 billion in cash equivalents and investments and no debt. It repurchased $307 million of stock during the quarter, reducing total diluted shares outstanding by 8% year over year to 193 million. Docusign had $2.1 billion remaining under its share-repurchase authorization.
Non-GAAP gross margin was 81.7%, slightly below the prior-year level due to the company’s cloud migration investments. Docusign said the migration remains on track to be largely completed by the end of fiscal 2027 and expects full-year gross margin to decline slightly year over year.
IAM Adoption and AI Product Expansion
Thygesen said customers had ingested more than 300 million documents through IAM Agreement Manager. He said the platform’s AI-native architecture allows Docusign to process workloads at lower marginal costs than products that route work to external large language models.
During August, the company introduced an AI assistant and agentic capabilities for contract analysis, redlining and workflow automation. The release included pre-built agents for document intake and vendor renewals, along with an Agent Studio intended to let customers develop and govern custom agents for uses such as compliance auditing, business playbooks and vendor-pricing evaluation.
In user testing, Thygesen said the AI assistant reduced the time required to summarize, review and finalize agreements such as nondisclosure agreements by roughly half.
Docusign also continued expanding IAM into third-party tools. The company announced general availability of a Docusign app for Slack in June, integrations with Perplexity and Google Cloud’s Gemini Enterprise for Legal, and existing connectors with Anthropic, Gemini, OpenAI and Microsoft Copilot. Cumulative active accounts using Docusign’s Model Context Protocol, or MCP, capabilities more than quadrupled during the quarter, Thygesen said. The company expects its MCP server to become generally available by the end of the month.
Thygesen told analysts that customers need an IAM license to use the connectors, with the company’s existing credit model applying to those calls. While he described the integrations as a potentially important future distribution and discovery channel, he said it remains early for customers to find Docusign through those platforms.
Customer Trends and Enterprise Activity
Docusign ended the quarter with more than 1.9 million customers, representing nearly 10% year-over-year growth. Grayson said digital-channel activity helped drive the increase, while envelope sending and contract utilization also increased year over year.
Dollar net retention among direct customers was 103% on a rounded basis, improving modestly from both the prior quarter and prior year. Grayson said retention gains had historically been the largest contributor to improvement, but expansion is beginning to play a larger role.
The number of customers with more than $300,000 in annual contract value rose 14% year over year to nearly 1,300. Thygesen said IAM was the main source of expansion and larger deal activity, though the company also continued to see large eSignature transactions. He said Docusign recorded its largest U.S. public-sector deal and its largest Latin America deal during the quarter.
Management cited deployments by Salesforce, Oppenheimer, SailPoint, Upstart, Optimizely and HydroCorp. HydroCorp, which integrated IAM for sales with Salesforce, reduced the time needed to prepare a new contract from two to three hours to 20 minutes, according to Thygesen.
Updated Outlook
For the third quarter, Docusign expects revenue of $886 million to $890 million, representing 9% year-over-year growth at the midpoint on an as-reported basis. It forecast non-GAAP gross margin of 81.5% to 81.9% and non-GAAP operating margin of 31.3% to 31.7%.
For fiscal 2027, the company expects revenue of $3.499 billion to $3.507 billion, or 9% growth at the midpoint. The outlook includes an approximately one percentage-point foreign-exchange tailwind, though management said incremental currency headwinds reduced the full-year revenue outlook by about $4 million.
Docusign forecast full-year non-GAAP operating margin of 31.0% to 31.5%. Grayson said the company will continue investing selectively in IAM while managing hiring and using lower-cost locations for its year-over-year headcount growth.
About Docusign (NASDAQ:DOCU)
DocuSign, Inc (NASDAQ: DOCU) is a leading provider of electronic signature and digital transaction management solutions. The company’s flagship offering, DocuSign eSignature, enables organizations to send, sign and manage legally binding electronic agreements securely in the cloud. Beyond eSignature, DocuSign’s Agreement Cloud combines contract lifecycle management, document generation, and workflow automation to streamline agreement processes from initiation through execution and storage.
DocuSign’s platform serves a diverse customer base spanning industries such as finance, real estate, healthcare, technology, and government.
