DocuSign (DOCU): Buy, Sell, or Hold Post Q4 Earnings?

DocuSign has gotten torched over the last six months - since November 2025, its stock price has dropped 22.7% to $49.50 per share. This may have investors wondering how to approach the situation.

Is now the time to buy DocuSign, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is DocuSign Not Exciting?

Despite the more favorable entry price, we don't have much confidence in DocuSign. Here are three reasons we avoid DOCU and a stock we'd rather own.

1. Weak ARR Points to Soft Demand

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.

DocuSign’s ARR came in at $3.27 billion in Q4, and over the last four quarters, its year-on-year growth averaged 8.5%. This performance was underwhelming and suggests that increasing competition is causing challenges in securing longer-term commitments.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect DocuSign’s revenue to rise by 8.4%, close to its 17.2% annualized growth for the past five years. This projection is underwhelming and indicates its newer products and services will not lead to better top-line performance yet.

3. Operating Margin Rising, Profits Up

Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.

Analyzing the trend in its profitability, DocuSign’s operating margin rose by 2.6 percentage points over the last two years, as its sales growth gave it operating leverage. Its operating margin for the trailing 12 months was 9.3%.

Final Judgment

DocuSign isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 2.9× forward price-to-sales (or $49.50 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

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