Why Docusign Stock Got Devastated Today
Docusign doubled its GAAP profits and beat earnings last night -- but free cash flow delined.
Growth is slowing at the e-signatures stock, and investors are nervous.
10 stocks we like better than Docusign ›
Docusign (NASDAQ: DOCU) stock plunged 19.3% through 11:11 a.m. ET this morning despite "beating earnings" on both top and bottom lines last night.
Heading into the company's fiscal Q1 2026, analysts forecast the e-signatures company would earn $0.81 per share on just under $750 million in sales. In fact, Docusign earned $0.90 per share, "adjusted," on sales of nearly $764 million.
Sales grew 8% year over year, but billings were up only 4% -- which may foreshadow a slowdown in growth ahead.
Gross profit margins, on the other hand, improved 50 basis points to 79.4%. And diluted earnings as calculated according to generally accepted accounting principles (GAAP) more than doubled to $0.34 per share. Not quite as good as "$0.90," but still a big improvement.
All this being said, Docusign's free cash flow belied the growth in both sales and earnings. FCF for the quarter was only $227.8 million in Q1, versus $232.1 million a year ago. It didn't double. It didn't grow even 8%. It... went down.
Should this worry investors? Perhaps.
Docusign's Q2 guidance sees sales growth slowing to 6%, $779 million in revenue or thereabouts. Growth for the full year is likewise forecast at about 6%, $3.15 billion or $3.16 billion in annual sales. That's not a lot of growth for a supposed growth stock, and reinforces the impression we get from slow billings growth.
That said, Docusign stock sells for an unchallenging valuation of only 16.6 times trailing FCF -- cheaper than that when you factor in net cash on the balance sheet. If Docusign can just find a way to goose its growth rate again, this stock could still be a buy.
Before you buy stock in Docusign, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Docusign wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $674,395!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $858,011!*
Now, it's worth noting Stock Advisor's total average return is 997% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join .
See the 10 stocks »
*Stock Advisor returns as of June 2, 2025
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Docusign. The Motley Fool has a disclosure policy.
Why Docusign Stock Got Devastated Today was originally published by The Motley Fool
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