Is This the Key to Turning Docusign's Business Around?

Docusign (NASDAQ: DOCU) stock has crashed by 80% in the past three years. The company's business model is in doubt amid a return to normal in the post-pandemic world. It also faces a growing number of competing services. E-signatures just aren't the exciting growth opportunity they seemed to be a few years ago.

Management has been pivoting the company's operations to widen Docusign's scope and diversify its revenue options. It now focuses more on helping companies manage contracts. It's not only a good way to grow sales but also potentially make its business more sustainable and safer in the long run.

Could this rebranding be the game changer Docusign management needs it to be?

A new AI-powered platform

Just about every tech company is turning to artificial intelligence (AI) these days to transform itself, and Docusign is definitely no exception to that. The company launched an intelligent agreement management (IAM) platform that promises to help businesses free up time by offering more efficient agreement processes. The platform targets companies that get stuck in "agreement traps" that waste time. The platform develops agreements that can be more collaborative and lead to faster commitments. In April, Docusign launched IAM and rechristened itself as "the Intelligent Agreement Management Company."

Docusign also recently acquired AI company Lexion, which it says will help accelerate the platform's capabilities. On the recent earnings call, Docusign CEO Allan Thygesen said, "Lexion is a proven leader in AI-based agreement technology" and it has a strong presence in the legal community.

The launch of IAM gives Docusign a much broader scope and reach -- there's no question about that. It gives it an opportunity to upsell customers on other services and process improvements to provide a more comprehensive solution for businesses.

Docusign desperately needs a catalyst

Looking at its financial performance, it's easy to see why a rebranding and the launch of a new platform may appear to be a necessity. Docusign is struggling with profitability, and its growth rate has also been falling sharply in recent years. While business was booming amid lockdowns and people doing a lot more work remotely, following a return to normal and with more competition now out there, business has slowed significantly.

DOCU Revenue (Quarterly YoY Growth) Chart
DOCU Revenue (Quarterly YoY Growth) Chart

DOCU Revenue (Quarterly YoY Growth) data by YCharts

The launch of IAM can potentially give Docusign's business a much-needed jolt and unlock a new growth opportunity. For the current fiscal year (which ends in January 2025), Docusign projects its revenue will come in at around $2.9 billion, which would equal around a 6% increase in the top line.

Why investors should be skeptical

IAM is an exciting new platform for Docusign, but investors should be careful not to assume that it will lead to an influx of sales -- at least not right away. There are all sorts of AI-powered services available these days that promise to improve process flow for businesses. Microsoft's Copilot even builds AI capabilities right within its Office suite of products, where it can help draft letters -- and yes, agreements, too.

The big test will be whether IAM is nuanced enough and provides features to the legal community with respect to contracts that they can't get with other services. My concern is that even if it does offer value, there may not be enough potential customers who can justify it and see a need for it amid so many other AI services and platforms, especially at a time when many businesses may be scaling back on spending due to fears of a potential slowdown in the economy.

Should you invest in Docusign stock today?

Docusign's new strategy is in its early stages and the proof will be in its results, and whether the company sees enough demand that it upgrades its guidance for the fiscal year. That's the first real sign investors will get to see how excited prospective customers are about the new platform. That's also why the safe option for now is to wait and see how Docusign performs over the next few quarters.

Investors have been burned badly by Docusign's stock in recent years, and without some concrete proof that the business is turning things around, it may be too early to take a chance on what's still a bit of a risky stock.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Docusign and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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