By Adam Clark

Docusign was diving after disappointing first-quarter results broke a streak of better numbers. Wall Street is split on whether to accept the e-signature company's view that the stumble will be limited to a single quarter.

Docusign shares were down 17% at $757.58 in early trading following its earnings, released after the market closed on Thursday. Billings grew 4% from a year earlier, which was lower than expected and compared with 11% growth for the same metric in the previous quarter.

The company had an explanation -- a change made to sales compensation led to fewer early renewals than anticipated, according to management -- and said it was a timing issue rather than anything more fundamental.

"Overall, we believe Docusign shares will likely be in the penalty box for now," wrote J.P. Morgan analyst Mark Murphy in a research note. "We may have underestimated the company's go-to-market changes made in the quarter as the Q1 miss does not appear to be macro related."

Murphy kept a Neutral rating on the stock but lowered his target price to $77 from $81.

Other analysts are still worried about whether weakness in the broader economy is affecting the software sector.

"The company is attributing the fall to deal renewal timing resulting from sales/go-to-market $(GTM)$ changes, but the question investors will likely ask is if anything else is at play," wrote UBS analyst Karl Keirstead in a research note. "We're < [less than] 100% confident in DocuSign's explanation and remain Neutral-rated."

Keirstead noted that customers often renew their deals with Docusign early because they are using the full volume of e-signatures the agreements allow for and want to expand the total. Factors beyond the marketing change that could explain their not doing so now could include uncertainty about the economic outlook, the company chasing larger deals, or poor sales execution, he said.

"Candidly, we're unsure of the root cause but conclude that a -17% correction more than adequately prices in the added...risk," wrote Keirstead. He lowered his target for the stock price to $80 from $85 and kept a Neutral rating on the stock.

Billings came in at $739.6 million, falling short of the projected $741 million-$751 million. For fiscal 2026, the company is now forecasting billings of around $3.3 billion. It had said they could be as high as $3.4 billion.

DocuSign's adjusted earnings for the quarter came to 90 cents a share. Analysts polled by FactSet expected 81 cents a share. Revenue rose 7.6% to $763.7 million, beating analysts' expectations of $748 million.

For the full year, Docusign now expects sales between $3.15 billion and $3.16 billion, up from its prior view of $3.13 billion to $3.14 billion. DocuSign's board also authorized up to an additional $1 billion for its share buyback program.

Write to Adam Clark at adam.clark@barrons.com

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June 06, 2025 10:29 ET (14:29 GMT)

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