Docusign Inc (DOCU) Q3 2025 Earnings Call Transcript

Docusign Inc (NASDAQ: DOCU) Q3 2025 Earnings Call dated Dec. 04, 2025

Corporate Participants:

Matt Sonefeldt — Head of Investor Relations

Allan Thygesen — Chief Executive Officer

Blake Grayson — Chief Financial Officer

Analysts:

Jake Roberge — Analyst

Tyler Radke — Analyst

Mark Murphy — Analyst

Peter Burkly — Analyst

Brent Thill — Analyst

Scott Berg — Analyst

Brad Sills — Analyst

Lucas Cerisola — Analyst

Austin Cole — Analyst

Alex Zukin — Analyst

Presentation:

Operator

Good afternoon, ladies and gentlemen. Thank you for joining DocuSign’s Third Quarter Fiscal-Year 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. As a reminder, this call is being recorded and will be available for replay from the Investor Relations section of the website following the call. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I will now pass the call over to Matt, Head of Investor Relations. Please go-ahead.

Matt Sonefeldt — Head of Investor Relations

You. Thank you, operator. Good afternoon, and welcome to Q3 fiscal 2026 earnings call. Joining me on today’s call are CEO, Alan; and CFO, Blake Grayson. The press release announcing our 3rd-quarter fiscal 2026 results was issued earlier today and is posted on our Investor Relations website, along with the published version of our prepared remarks. Before we begin, let me remind everyone that some of our statements on today’s call are forward-looking, including any statements regarding future performance. We believe our assumptions and expectations related to these forward-looking statements are reasonable, but they are subject to known and unknown risks and uncertainties that may cause our actual results or performance to be materially different. In particular, our expectations regarding factors affecting customer demand and adoption are based on our best estimates at this time and are therefore subject to change.

Please read and consider the risk factors in our filings with the SEC, together with the content of this call. Any forward-looking statements are based on our assumptions and expectations to date and except as required by-law, we assume no obligation to update these statements in light of future events or new information. During this call, we will present GAAP and non-GAAP financial measures. In addition, we provide non-GAAP weighted-average share counts and information regarding free-cash flows and billings. These non-GAAP measures are not intended to be considered in isolation from, a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance. For information regarding our non-GAAP financial information, the most directly-comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today’s earnings press release, which can be found on our website at investor.docusign.com. I’d now like to turn the call over to Alan.

Allan Thygesen — Chief Executive Officer

Thank you. Thank you, Matt, and good afternoon, everyone. Q3 was a standout quarter for DocuSign. We delivered one of the higher-growth quarters over the past two years, driven by continued customer investment in core products and the Intelligent Agreement management or IM platform. Revenue was $818 million, up 8% year-over-year and billings were $829 million, up 10% year-over-year. Our ongoing commitment to operational efficiency once again delivered strong profitability with a non-GAAP operating margin of 31%. Free-cash flow grew 25% year-over-year to $263 million and a 32% margin, supporting $215 million in share repurchases, our largest quarterly buyback to date. We’re executing effectively across our three strategic pillars, meeting growing demand for DocuSign IAM and e-signature with an improving go-to-market motion, maintaining the rapid pace of platform evolution and AI innovation and driving greater operational efficiency.

We remain focused on our long-term goal to deliver sustainable, profitable double-digit growth. Let’s start with our go-to-market motion, which has been instrumental in driving IM’s growth across commercial and enterprise customer segments. By the end of Q3, more than 25,000 paying direct and digital customers had adopted IAM, up from more than 10,000 in April. We remain on pace for IM to represent a low double-digit percentage of recurring revenue at year end. We’re also encouraged by the early strong retention rates in our first IAM renewal cohorts, as well as the continued trend of IM customers increasing their e-signature usage after moving to the IM platform. I am is a system of record that enables customers of all sizes to ingest a vast complex body of agreements into a single repository, build agreement workflows that operate at-scale and take action on high accuracy insights from agreement data.

I am builts on a track-record of enterprise customers working with DocuSign to realize a 75% faster contracting cycle and an 81% improvement in document turnaround time. That value resonates with customers across all segments. One of Docusign’s top-10 customers became our second-largest this quarter through a multimillion dollar commitment to IM. In the commercial space, Perceptex, which provides an AI-powered employee experience platform, generates new documents in 99% less time, while the administrative offices in San Miguel County in Colorado have cut agreement finalization time by 96%. The broader e-signature business also performed well in Q3. Dollar net retention improved by 2 percentage points year-over-year to 102%, continuing to benefit from steady demand and sales-driven execution. E-signature customers continue to increase overall usage with utilization rates at multi-year highs and consistent positive growth in envelope scent.

New York Life, the largest mutual life insurance company in the US, streamlined critical end-to-end workflows for agents and millions of policyholders by integrating e-signature with Salesforce and now has 65% of all customer agreements signed within just a few hours. DocuSign CLM remains a top choice for enterprise customers with sophisticated workflows, and it will become even more valuable as we integrate CLM with Navigator, our intelligent repository and other IM features. In Q3, Docusign was also named a leader in the Quadrant for CLM for the sixth year in a row. Also, international revenue shows sustained growth and is now approximately 30% of our overall business for the first time. Our sales efforts continue to support international expansion and in Q3, we hosted Momentum events for customers and partners in Sydney, Singapore and Tokyo.

This year’s Momentum series drew three times as many attendees in 2024, reflecting growing interest in IM. Across all segments and geographies, we’re deepening our solution-selling motion. Greater engagement and stronger customer relationships help deliver the business resilience and consistency we’ve seen over the last two quarters. Turning to product innovation, we’re rapidly adding new features to IM as DocuSign matures from a single-product company into the category-leading platform in agreement management. Earlier this week, we launched Agreement Desk, an internal central workspace to keep teams aligned. So agreements are processed faster and our first AI contract agents now in beta. Agreement management is a $2 trillion global market problem and over the past 18 months, we’ve helped tens of thousands of customers begin to solve it.

From the beginning, a key part of our IM platform vision has involved combining a decade of in-house AI experience with leading third-party innovation. We believe IM excels in several key areas. First, unmatched proprietary data. Second, models trained on the best data deliver the best, most accurate results to customers. One of biggest differentiators is our enormous library of consented private agreements covering a wide variety of contract types, clauses, customer segments, languages and verticals. We estimate that by training IM on this rich body of private data, we can achieve a 15 percentage point improvement in precision and recall compared to our models trained on public contract data.

On 100 point scale, a 15 point jump-in accuracy is a game-changer, especially when managing business-critical workflows and legal contracts. When customers adopt IAM, their e-signature documents are automatically available in Navigator and they can include virtually any other agreements as well. To date, we have approximately 150 million opted-in customer agreements ingested into Navigator, including $20 million in October alone, which is up approximately 140% over the past two quarters. Our average new IM customer Has over 5,000 active contracts. Second, an unrivaled ecosystem. DocuSign has more than 1,000 third-party integrations and enterprise-ready APIs that connect the agreement process directly into the core business systems that customers already use. In Q3, we expanded our ecosystem by adding new AI tools and platforms. At our annual DocuSign Discover Developer Conference in October, we announced that IM will be available in ChatGPT and can also connect to Anthropic Quad, Gemini Enterprise, GitHub Copilot, Copilot Studio and Asian Force, all using the Model Context Protocol or MCP server that’s currently in beta. At Discover, we also launched APIs that enable customers to connect Navigator and Maestro to third-party systems and proprietary internal apps. In October at Dreamforce, we received a Salesforce Partner Innovation Award in the tech category for our DocuSign for Agent Force solution, which accelerates deal velocity by surfacing action and AI-powered agreement insights inside of Agent Force. The expansion of our ecosystem partnerships and native integrations reinforces our position as the essential agreement layer across the enterprise. And third, trustworthy AI at an enterprise scale. Our largest customers have millions of agreements in Navigator and our AI models are designed to handle hundreds of millions of agreements efficiently. In addition to scalability, customers tell us that trust is paramount when deploying AI to manage sensitive agreement information. In a recent DocuSign survey, 70% of professionals said they trust a dedicated enterprise contract AI solution over a general-purpose model for handling agreements. I am draws on Docusign’s year-long track-record of delivering highly secure solution for some of the world’s most security conscious companies and meeting stringent standards of compliance, data security and privacy protection. In Q3, IM achieved FedRAM moderate and Gov Ramp authorization and we expanded our identity portfolio by launching clear and risk-based verification. For two years in a row, Newsweek has named DocuSign the most trustworthy software company in the US. In closing, our innovation is turning into outcomes for our commercial and enterprise customers who are realizing IM’s growing value in boosting productivity, saving time and money and transforming their businesses. We’re honored that in Q3, DocuSign’s AI innovation garnered recognition on the 2025 Fortune Future 50 list, which celebrates companies with the greatest long-term growth prospects and the Inc. Power Partners Awards for companies that have proven track records, supporting entrepreneurs and helping startups grow. Thank you. I’d like to thank the entire DocuSign team for their commitment to putting our nearly 1.8 million customers first. As we drive the evolution of the category-leading intelligent agreement management platform.I am momentum continues to build and we are focused on pursuing the vast opportunity ahead. With that, let me turn it over to Blake.

Blake Grayson — Chief Financial Officer

Thank you. Thanks, Alan, and good afternoon, everyone. Q3 results demonstrated another quarter of resiliency with consistent overall growth and IM demand momentum. We also continued to generate strong operating profitability and cash-flow and translated that performance into our single largest quarterly dollar buyback in the company’s history. In Q3, total revenue was $818 million, up 8% year-over-year and subscription revenue was $801 million, up 9% year-over-year. Revenue outperformance was driven by modest sales-driven strength. Q3 billings were $829 million, up 10% year-over-year. Revenue and billings had small foreign currency benefits of approximately 50 basis-points year-over-year. Billings outperformance was primarily driven by two elements. The first was renewal timing and early renewal strength, which drove slightly more than half of the outperformance in Q3.

Similar to Q2, we saw slightly higher early renewals than forecasted. Importantly, the quality of those early renewals continued to improve year-over-year as the percentage of early renewals with expansion grew and the share of early renewals that were flat declined. The second element was a collection of smaller impacts, including a small shift in payment frequency to annual bookings performance and slight FX favorability. When removing the impact from timing relative to our forecast, billings growth for Q3 was approximately 8% year-over-year. As a reminder, we also saw elevated early renewal activity in the second-half of fiscal 2025, creating a more difficult year-over-year billings comparison in Q3 and Q4 of this year.

A consistent theme in our quarterly billings results has been that renewal timing can create significant variability in billings as a reporting metric. This quarter, we are previewing three future disclosure updates that will take effect in our Q4 2026 earnings call-in March. These updates reflect investor feedback and our primary goals are to provide better transparency in measuring both our long-term growth rate and role as a growth driver as well as to focus on the underlying dynamics of growth in our business rather than those affected by timing. Please see Slide 28 in our Q3 earnings deck for a full summary of the changes. First, at the end of every fiscal year, starting this Q4 2026, we will disclose annual recurring revenue or ARR, including historical data for recent years. We will also provide full-year ARR growth guidance for fiscal 2027, which we will update quarterly during our first, second and third quarters.

Second, we will also introduce IAM as a percentage of ARR as a quarterly reporting metric beginning in Q4 of 2026. Consistent with the approach in fiscal 2026, we will also provide guidance in fiscal 2027 for the approximate year-end IAM percentage of ARR to create greater transparency into IAM’s anticipated contribution to total growth. Finally, as previously discussed, we will no longer report billings in fiscal 2027. This quarter will be the last quarter we provide billings guidance and Q4 of 2026 will be the last quarter we report non-GAAP billings and reconciliations in earnings materials and SEC filings. We believe replacing billings as a reporting metric with AR metrics will improve investor understanding of how DocuSign is managing its long-term growth trajectory and minimize quarter-to-quarter timing volatility in our reporting.

One question we anticipate is why not report ARR on a quarterly basis. The reason is that our quarterly net-new ARR as it is relatively small compared to our book of business is subject to timing volatility similar or even more pronounced than quarterly billings and can be highly volatile on a year-over-year basis. For example, in fiscal 2026, we are forecasting to add approximately $240 million in net-new subscription revenue or around $60 million on average per quarter. With that small of an absolute figure, slight timing fluctuations on deals can have large growth rate impacts. Similar to billings, these timing fluctuations can detract from the insight that ARR provides, along with our aspiration to focus on accelerating our long-term growth.

Our goal through providing annual ARR guidance updated each quarter along with quarterly IAM disclosures is to provide a full transparent picture of that growth. In Q3, we continued to see a strong and resilient business. The dollar net retention rate or DNR was 102%, up from 100% in the prior year and consistent with 102% in Q2 of fiscal 2026. DNR stability is supported by improving consumption, a measure of envelope utilization, which is amongst the highest levels we have seen since early fiscal 2022. Also, the volume of envelope in Q3 continued to increase at a consistent year-over-year rate as compared to prior quarters. The fundamentals in our business remain solid.

For IAM, in Q3, we surpassed 25,000 direct and digital customers on our IAM platform, up from 10,000, which we shared in April. We continue to be encouraged by IAM customers’ financial profile with the first early renewal cohort showing a gross retention rate several percentage points higher than our corporate average. We remain on-track for IAM to contribute a low double-digit percentage share of the subscription book of business exiting Q4. For the first time, international revenue reached approximately 30% of total revenue and grew 14% year-over-year, accelerating slightly from the prior quarter. In Q3, total customers grew 9% year-over-year, ending the quarter at nearly $1.8 million. Growth in customers spending over $300,000 $300,000 annually accelerated to 8% year-over-year to 1,165 in Q3. This is the highest quarterly growth in over two years for this metric as the solution-selling motion with larger customers continues to improve following Q1’s go-to-market changes. Turning to our financials, our focus on operating efficiency continued to yield strong results this quarter. Non-GAAP gross margin for Q3 was 81.8%, down 70 basis-points versus the prior year due primarily to the cloud migration transition costs we’ve discussed throughout the year. We delivered non-GAAP operating income in Q3 of $257 million. Operating margin was 31.4%, up nearly 2 percentage points versus last year, mostly attributable to higher revenue, continued cost discipline and some savings from one-time expense items. We had approximately 1.5 percentage points of margin benefit from one-time and timing-related savings in Q3, without which our operating margin would have been approximately 30%. We ended Q3 with 6,940 employees, up modestly versus 6,838 in fiscal 2025 year-end. This reflects our measured approach to hiring in fiscal 2026 to support our strategic initiatives while maintaining efficiency. In Q3, we generated $263 million of free-cash flow, a 32% margin, up over 4 percentage points versus the prior year. This strength was better than we expected, driven primarily by higher-than-expected collections efficiency, higher in-quarter billings and lower expenses. Our balance sheet is strong. We ended the quarter with approximately $1 billion of cash, cash equivalents and investments. We have no debt on the balance sheet. In Q3, we increased the pace of our buyback activity and repurchased $215 million in shares. This is our single largest quarterly dollar buyback in the company’s history. As we redeployed the majority of our quarterly free-cash flow to shareholders. We will continue to opportunistically repurchase shares with over $1 billion in remaining buyback authorizations. While the pace of this activity may fluctuate quarter-to-quarter, share repurchases underscore our commitment to returning excess capital to shareholders. Non-GAAP diluted EPS for Q3 was $1.01, up from $0.90 last year. GAAP-diluted EPS was $0.40 versus $0.30 last year. With that, let me turn to guidance. For the 4th-quarter and fiscal year 2026, we expect total revenue of $825 million to $829 million in Q4 or a 7% year-over-year increase at the midpoint and $3.208 billion to $3.212 billion for fiscal 2026 or a 8% year-over-year increase at the midpoint. Of this, we expect subscription revenue of $808 million to $812 million in Q4 or a 7% year-over-year increase at the midpoint and $3.140 billion to $3.144 billion for fiscal 2026 or 8% year-over-year increase at the midpoint. For billings, we expect $992 million to $1.002 billion in Q4 or 8% growth rate year-over-year at the midpoint and $3.379 billion to $3.389 billion for fiscal 2026 or growth of 9% year-over-year at the midpoint. Our updated full-year top-line guidance reflects the following dynamics present in our business and the external environment. For full-year revenue, the annual guidance midpoint is increasing by $15 million from last quarter’s full-year guidance. The majority of the increase is driven by Q3 outperformance and the expectation that some of these trends will continue to the fiscal year end. You. For full-year billings, the annual guidance midpoint is increasing by $44 million from last quarter’s full-year guidance. This increase reflects a portion of the non-timing impact from Q3 business strength. As a reminder, both full-year revenue and buildings have hard year-over-year comparisons against last year’s higher-volume of early renewals, particularly in the second-half of the year. Revenue growth also has a hard year-over-year comparison against strength from last year’s PLG initiatives, including high volumes of digital customers adding envelope capacity as a result of improved self-service flows as described a year-ago. For profitability, we expect non-GAAP gross margin to be between 80.8% to 81.2% for Q4 and between 81.7% and 81.8% for fiscal 2026. We expect non-GAAP operating margin to reach 28.3% to 28.7% for Q4 and 29.8% to 29.9% for fiscal 2026. For the full-year, we included the following two considerations in our non-GAAP profitability guidance. For gross margin, we expect approximately 1 percentage point of headwind year-over-year from our ongoing cloud data center migration efforts in Q4. For full-year fiscal 2026, we expect our top-line strength and continued cost discipline to partially offset cloud migration costs and expect an approximately 50 basis-point year-over-year decline on margins. We continue to expect a gradual easing in-migration cost impacts in fiscal 2027 and beyond. For operating margins, we expect to achieve flat year-over-year operating margins for fiscal 2026, a strong reflection of our continued cost discipline. This strength offsets the margin pressures we’ve described throughout the year, including the impact of cloud migration, the shift of some roles to cash compensation from equity and the comp against one-time professional fee savings last year in Q2 of 2025. In Q4, we also have a small timing-related headwind from one-time costs pushed to Q4 from Q3. As a reminder, in Q3, we had approximately 1.5 percentage points of margin benefit from one-time and timing-related savings. We expect non-GAAP fully-diluted weighted-average shares outstanding of 203 million to 208 million for Q4 and $208 million to $211 million for fiscal 2026. Please see the modeling consideration slides in our Q3 earnings deck for a full summary of guidance context. In summary, this quarter highlighted Docusign’s commitment to our core strategic priorities and operational roadmap, driving product innovation, enhancing our go-to-market motions and continuously improving efficiencies across the business. Our focus on both consistent growth and financial discipline will remain the guidepost for maximizing customer, employee and shareholder value. That concludes our prepared remarks. With that, operator, let’s open the call for questions.

Questions and Answers:

Operator

Thank. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For any participants using speaker equipment, it may be necessary to pick-up your handset before pressing the star keys. Our first question comes from Jake Roberge with William Blair. You may proceed with your question.

Jake Roberge

Thank you. Yeah, thanks for taking the question and nice to see the billing strength and continued expectation for that to accelerate this year. As you start to transition to ARR, should we expect that ARR is seeing a fairly similar reacceleration that we’re seeing with billings on a full-year basis or would there be any puts or takes that we should be thinking about around that metric moving forward?

Allan Thygesen

Why don’t you take that one, Blake?

Blake Grayson

Sure. Yeah, thanks for the question, Jake. So we’re not disclosing ARR yet. We’ll do that when we get to the March call. I think that the way to think about it for us is what our trajectory is, as you heard us talk about billings growth excluding the beat from the from the earlys component as well, and that’s a good proxy for trajectory for our business. But I think for us, we’re really excited about the opportunity with both the combination of expansion opportunities with IM, but then also with gross retention improvements in our core business as well to really drive that ARR number forward for us into FY ’27 and into beyond. But you’ll — we’ll talk more about that when we get to March.

Jake Roberge

Okay. Yeah, maybe I’d add go-ahead.

Allan Thygesen

No, I was just going to say that I want to emphasize that we’re running the business on AR now. And so we wanted to move to a place where we’re sharing with you how we run the business. And so that’s the spirit of miss you to take this. I think it’s the right long-term metric for the company and we look-forward to sharing that with you as we go-forward.

Jake Roberge

That’s helpful. And then great to see I am crossing that 25,000 customer mark. Could you talk more about what you’re seeing with the early renewal cohorts. It sounds like retention has been strong, but for customers that may have initially started with only a portion of their base on IAM , are you starting to see those customers shift to broader and wider IAM deployments on renewal? Thanks.

Allan Thygesen

Yeah. Overall, I think we’re pleased with the early signs. As a reminder, we launched IM back-in June of last year to commercial customers in North-America and Australia. And so those are the cohorts that are renewing now and then we launched internationally in enterprise towards the latter end-of-the year — part of last year. The early signs are very promising. They renew at higher rates than our — than our traditional sign business. So yeah, we obviously will keep a close eye on that.

And in terms of the expansion, I don’t have anything beyond that to say, but as we — you’ll see that baked into our projections going-forward on AR. Obviously, we are we’re optimistic that the — that IM will progress very nicely in companies over-time. The smaller companies don’t have as much expansion opportunity. When you get to larger companies, you are deployed an individual department or division, then those expansion opportunities are larger. But overall, I think we feel really good both about the initial sale and about the adoption and the follow-on.

Operator

Our next question comes from Tyler Radke with Citi. You may proceed with your question.

Tyler Radke

Yes, hi, thanks for taking my question. Obviously, great momentum on the IAM side, 25,000 customers. The Navigator product in particular, great to see the volume of agreements there. I guess bigger-picture question for you, Alan, like how do you think about what the use cases and future monetization opportunity is? Is that volume of agreements continue to grow with within Navigator, like what — how are customers going to be using it a year or two from now? And what are the ways that can monetize over the long-run?

Allan Thygesen

Yeah. So a couple of points I’d say. First of all, Navigator is sort of a foundational capability for our M platform, right? So many things roll-off of having that intelligent repository. As an example, you can run things like obligation management and a variety of extractions on-top of that, you can have automated notifications. The agents can run-off that. And so it really is a foundational capability that’s embedded in the platform. It’s not like we monetize Navigator separately. It’s an integral part of IM. And we’re feeling, I think that is a significant and distinctive proprietary advantage for DocuSign.

So there’s a lot of noise in the ecosystem about LLM models. And we obviously have benefited tremendously from the enormous capex investment and capability enhancement that’s happened in the LM space over the last 2.5 years and very grateful to be leading Doxannet through that. But on-top of that, we get to train on proprietary consent to private agreements from companies that are not publicly available. And so we can achieve higher accuracy rates with that. So you take that compounded with our workflow advantage and our trust and reputation advantages. I think it all sets up really nicely for us and Navigator is foundational to that. But we don’t — we monetize it as part of the platform, not independently, if that makes sense.

Tyler Radke

Yeah, that’s helpful. And a follow-up for Blake. You know, good to see the billings upside this quarter, and I think trailing 12-month billings accelerated. As we look at the subscription revenue guide for Q4, the growth is a little bit below where you guided Q3. And I guess just given that you’re going to be transitioning to ARR next quarter, how would you sort of characterize the underlying growth of the business? Is it — has it been steady? Is it accelerating or maybe you’re just adding in a bit more prudence in Q4 because of macro go-to-market changes. Just help us understand kind of the puts and takes on that. Thank you.

Blake Grayson

Sure. Yeah. So our revenue, we’re obviously guiding to a Q4 revenue growth rate, which is a bit of a decel from Q3, two primary things that are driving that and neither of them, I think are that worrisome, which is one is Q3 we did have some extra early component hit us in Q3 in a good way and you get a little bit of revenue acceleration from that. And then the other thing to remember is, if you go back to Q4 of last year, we grew revenue at a pretty big clip. We grew revenue Q4 of ’25 at 9%.

And if you recall, there was a — we launched a number of new features, especially on the PLG side in digital for, Call-IT shorter-term envelope add-ons and things like that, which we got that boost because from Q3 to Q4 last year, our revenue accelerated by over 100 basis-points. And so I would just encourage you, make sure to look at that hard comp that we have on a year-over-year basis because that does explain a bit of it when you think about a decel like that from Q3 to Q4.

Operator

Our next question comes from Mark Murphy with J.P. Morgan. You may proceed with your question.

Mark Murphy

And thank you so much and congrats on a very nice performance. You had mentioned, I believe, consistent growth in envelop and that you called out utilization rates reaching multi-year highs. And I’m just wondering if there’s any way to help us conceptualize that, for instance, are the envelope scent growing mid-single digits or are they growing high-single-digits? And then or any sense of where the utilization rates stand? And as part of that, should — should we read into this that customers are basically using more of what they paid-for? And so it’s going to foreshadow pretty healthy upsell and expansion ARR opportunity in future periods or is there some other kind of takeaway from that? Thank you.

Blake Grayson

Sure. Let me take Stab and All and jump-in. So yeah, we don’t — we don’t break-out like the envelope scent growth by vertical and such that. But what I would say is it’s been very, very consistent for us. And I’ll talk about envelopes first and then we can talk about utilization after that. On the envelope scent, the past five quarters or so, we have seen very consistent growth year-over-year in, which is great. It goes to the point that we’ve seen what makes me so excited about the resiliency of this business. On the utilization side, so like consumption, it is higher than our prior year.

And I think for us, it’s a factor of timing, right? So if somebody is using — I’m not making these numbers up. But if they’re using 80% of their deal and it rises to 85%, that’s always a good sign for us. Now the timing of the billing opportunity and the new contract for them is subject to their business situation and their needs and all things like that. But I think all-in for us as a company, as those utilization rates grow, I think they’re only positive signs for us. And so I’m really excited about it, but the timing of it is always subject to each individual customer situation.

Allan Thygesen

Yeah. And I would just add, I know historically that’s obviously been a key performance for our sign business. We continue to keep a very close eye on it. Sales are certainly track it. But we now have a much broader portfolio of stuff to follow-up on. So as we build that momentum with more envelope volume and utilization, we don’t just go back to them and say, hey, would you like some more envelopes, will we go to them and say, would you like to deploy new agreement workflows? Would you like to consider this in other parts of the business? Would you like to learn what’s in your agreements and make that information conveniently available in the apps that you care about? And that’s just a much broader proposition and opportunity for Opsell than we historically had.

Mark Murphy

Okay. And then as a quick follow-up, I think you mentioned that the AI contract agents are in beta. Are you able to give any kind of sneak peek at what you’re engineering there? What kind of usage scenarios I mean you’re imagining. I think we’re trying to figure out if you’re going to target procurement or sales workloads or take it broader, then they would be review contracts or generate clauses or is there some other kind of automation they’re going to do? And if you’re not able to speak to that now, I think we understand that as well. But I thought I’d ask anyway.

Allan Thygesen

Yeah. Well, I mean, we are — we’re launching several. They tend to be, shall we say, relatively simple workflows, as you would expect. You — you don’t necessarily want to try to automate the most complex, highest variability workflows. And they exist across sales and HR and procurement use cases. So much like our IM platform and Signature platform do. So we are — I think that’s probably as much as I should say at this time, but it’s early days, right? We are we are just putting it out there. I think for all the — for all the noise, I think we’re Still in very early days of enterprise evaluations of these things. But we think it’s inevitable that a number of contractual workflows will ultimately be automated with agents and we want to be at the forefront of that. And so it’s why you’re seeing us lean-in. In the same mane, that’s of course also why we are leaning in with a number of the chat platforms that would often be triggers for action and why they’re so keen to partner with us. So we announced a partnership with an integration with OpenAI at our developer conference at the end of last month and basically everybody else that matters in the space since then has reached out to us because agreements are an essential data site that touches so many different workflows inside of companies and is incredibly well-positioned to provide that data to help with the automation agenda that many companies have. So look, it’s early days, but we are very excited about becoming a system of action for agreements.

Mark Murphy

Thank you.

Operator

Our next question comes from Kirk Materne with Evercore ISI. You may proceed with your question.

Peter Burkly

Yeah, Hi guys, this is Peter on for Kirk. Appreciate you taking the question. A strong quarter in the large customer segment, that 300K plus ACV customer group. I think it was the strongest growth in eight or 10 quarters. Just curious if you could discuss how much of that’s being driven by IM adoption at the enterprise-level versus just more broadly a stronger go-to-motion at this point in time versus maybe a year-ago? Thanks.

Allan Thygesen

Yeah, it’s both. So we continue to see strength with customers who are just expanding their e-signature usage. And at the same time, we’re now starting to see some nice enterprise wins with IM and both contribute nicely to the momentum in the 300K segment.

Peter Burkly

Helpful. Maybe just a quick follow-up on IAM. I am has been in the enterprise market for a few quarters now. Just curious if there’s any learnings or any thoughts on the go-to-market playbook as you head into fiscal ’27.

Allan Thygesen

Yeah. Look, it’s still early days. And I want to emphasize that that’s a multiyear journey for us or indeed any company undertaking this transformation. We’ve made some really nice early wins and it’s nice to be able to see that continued progression. So we’ve got a significant work going on the innovation side in terms of scaling our enterprise feature set and access control extensibility. And then on the go-to-market side, as you asked. Our key focus areas for next year includes complementing our traditional land and expand motion across departments with more of a top-down platform executive else and we do that, but I think we can get better.

We want to lean into both our ISV partnerships where we’re already starting to see some nice progress and perhaps even more importantly, our system integrator partnerships. Historically with DocSend, that’s been predominantly a CLM activity, but now it’s literally the whole company is leaned in and we’re seeing a lot of inbound interest from the SI partners in partnering with us because we have such a unique and broad proposition. And then lastly, on the pricing and packaging side, we’ve gotten questions on past calls. You’ll not be surprised to learn that as we move-up from a lower friction model in the commercial space where simplicity is key to the enterprise, we are testing a more of a platform pricing model, the tokens is being very well-received. And so I think you should expect to see us move-in that direction more publicly and that gives us just a lot more flexibility as we continue to layer-in new capability and new value into IAM.

Peter Burkly

Very helpful. Thanks, Alan.

Operator

Our next question comes from Brent Thill with Jefferies. You may proceed with your question.

Brent Thill

Alan, I know your long-term aspiration is double-digit growth. You’re obviously knocking on the door, but what — what do you think it needs to take from here for you to continue to sustain or get to double-digit growth from your side? Are there a couple of ingredients that you think still have to trigger before you can hit that mark?

Allan Thygesen

Thanks we are making really good progress and I’m proud of the team. I think we — look, the two big levers are what you would expect. It’s retention and we, I think continue to make progress on that. I think there’s still more headroom for us there and it’s new expansion bookings. And I think we are making progress there, particularly driven by IM. And I’m pretty confident those two levers will get us — will get us there. So we’re working on it.

Brent Thill

Okay. Blake, good to see the record buyback, I guess may play devil’s advocate in the age of AI. But why not lean a little harder into M&A? And is there anything you need to do to kind of help Alan’s vision of that double-digit growth even if it’s inorganic

Blake Grayson

. Yeah, absolutely. It’s something we talk about actively at Docusign. It’s a subject that on the outside, it may not sound like because we don’t do an acquisition every quarter. But for us, it’s something we talk about actively. We’re looking for those companies and those assets that can help propel us forward, whether that’s through elements of retention or expansion, right, for us. And I think that, again, we’re super active about it. It is one of the reasons why we do keep the optionality on our balance sheet, right, for those opportunities as they present themselves to us. We look at a lot. We have a high bar for those acquisition conversations, but it is something that Alan and I and the team, I would say, actively talk about probably more than people think.

Allan Thygesen

Yeah, maybe just to add to that, first of all, I feel very good about our organic growth trajectory and the innovation — the scale and scope of the innovation that the teams are driving. So I think there’s enough there. With that said, we have the resources, we have the go-to-market model. I think we want to explore strategically places where we think we can be additive. The Alexon acquisition has been fantastic with DocuSign. It augmented our product roadmap, both from a workflow and AI perspective

In fact, the Agreement desk product that we just launched this week, was inspired by an earlier Lexeon product and was led by the Lexeon founders. And so it’s very — that’s been a fantastic deal in every way, product, technology, team and we inherited you know a good number of customers that have also performed very well. So overall, that was just excellent. If we can find more like that, we will and we’re looking. As you may know, it’s a — there are things that are a little frothy right now.

Brent Thill

So I guess the message is that you just keep leaning in the buyback until you find something you like and then you can balance and so you can do both.

Blake Grayson

Yeah. I mean, we take capital allocation here really seriously, which is when we generate excess capital, we have opportunities to redeploy that. For right now, the buyback, we think is a great opportunity with the kind of the forward-looking outcomes that we think we can go after. At the same point in time, if we find those opportunities to deploy that capital to an M&A opportunity that helps do that for us as well, we’ll absolutely consider it. So capital allocation for us is a topic that Alan and I talk about quite often.

Brent Thill

Great. Thanks.

Operator

Our next question comes from Scott with Needham. You may proceed with your question.

Scott Berg

Hi, everyone. Nice quarter. Just one question for me and maybe this is a question for Alan is on the AI contract agents, super interesting. I think legal contracts is one of the best use cases for these LLM technologies for all the probably inherent reasons we all know here on the call. But as we think about your customers and where they are and I guess, awareness for agents, I’m sure it’s new to that and how we think about maybe budget procurement. Is this something that you think can have a meaningful impact to some of your momentum in fiscal ’27 or is this more of a maybe a fiscal ’28 opportunity as a test and trial next year and probably try to get some budgets after that

Allan Thygesen

. I don’t think it’s a huge contributor to our financial momentum next year. But you know, enterprise software is a multiyear roadmap endeavor and people want to know there with somebody who can deliver for them, not just now, but years to come. And so it’s very important to provide visibility to what they can do when they are ready. And no doubt we’ll have a number of trials, but I don’t think it will be financially meaningful, but it’s certainly strategic.

Scott Berg

Super helpful. Thanks for taking my questions.

Operator

Thanks. Our next question comes from Brad Sills with Bank of America. You may proceed with your question.

Brad Sills

Oh, great. Thanks so much. Maybe a go-to-market question with regards to IAM. Alan, you talked about how you’re seeing progress With HR and procurement departments. Is that the primary land on the departmental sale-in those two legal? I’m just curious if the sales audience and the large enterprise really kind of centers around those three departments and curious how well-prepared you feel the go-to-market is to address those?

Allan Thygesen

Yeah. I would — I would change the statement a little bit. I would say the four main use cases for us, sales, procurement, HR and customer experience. We should think of that as sort of business-to-consumer type flows on banking, onboarding that kind of stuff. And we’re seeing demand across all of those. I would say from a maturity perspective, you know we’ve had a very strong position for a long-time in I would say sales and customer experience type applications. But there is a lot of interest now in procurement and in HR. On the procurement side, these tend to be high-dollar, low headcount complex, poorly supported and I think that they’re so eager to find solutions to achieve more efficiency and procurement processes and unlock value that’s in agreements they’ve already negotiated

. And on the HR side, that’s of course essentially those are business-to-consumer flows just on the hiring side as opposed to the selling side. And those are quite poorly integrated categories. And so a lot of the HR departments are very eager to see those processes streamlined. And we have a number of ISV partnerships that we’ve announced here even this quarter, something with Dayforce, we’ve. We’ve done stuff with smart recruiters. We’ve done stuff with a lot of folks in the HR space that integrate in to make the entire, let’s say, Canada onboarding process, for example, more efficient. So those are the four big ones that you — you will see us talking about and you will see us highlight at our conference in the spring.

So one-way maybe to take a step-back to think about the ongoing maturing of IM. When we first launched, we launched as a set of horizontal platform capabilities, right? Navigator being the most obvious example is the intelligent repository. This year, we sort of completed that suite of agreement-related workflows with things like agreement desk. And next year, where we’re going is fully-integrated end-to-end functional workflow suites that are polished and integrated with all the pieces and it will be those four. And so you can look-forward to that. We’re obviously already packaging that to some extent, but it will — that will get tighter and better. And I think that’s really — those are the use cases that will — in the departments and use cases that will empower the IM growth.

Brad Sills

That’s great. That’s great. Thanks, Alan. And maybe, Blake, one for you, if I could, please. Any observations on the macro, any changes to the backdrop, whether it’s regards to envelope volumes or signings? There’s some moving parts in the SMB right now. So just curious if you’ve seen any difference there between SMB commercial and enterprise in your envelope and signing activity. Thank you.

Blake Grayson

Sure. I would say there’s nothing material that we’ve seen in the business in Q3 and that’s been pretty consistent for us over the past, gosh, four or five quarters, I would say. I mean, consumption usage trends are consistent — are consistent for us. We’re seeing pretty strong year-over-year growth across most verticals. Now that said, companies are still scrutinizing spend and people sitting in my position at various companies want to make sure they’re getting the most value they can for things. But you know, that’s I think one of the big benefits of this — the breadth of our customer-base that we have is that just the consistent resiliency that we’ve seen is something that I’ve been really excited about and we’ll see how the macro evolves over-time. But to date, nothing really of any angst or concern out there that we’ve seen to date.

Brad Sills

Great. Thank you, Blake thank you.

Operator

Our next question comes from Josh Baer with Morgan Stanley. You may proceed with your question.

Lucas Cerisola

Hey, guys. This is Luca Sara on for Josh Baer. Thanks for the time and congrats on a great quarter. Could you give us some more color on the 25,000 IM customers, specifically how many are new to DocuSign versus existing eSign customers?

Allan Thygesen

Yeah. Yeah. So it’s over 25,000 across our direct-to-digital business. It’s predominantly direct and they are — the vast majority of them are existing eSign customers that upgrade to IM. But we do onboard quite a few new customers directly onto IM as well, but the vast majority is the installed-base. And of course, that’s — and that’s the incredible advantage that we have. We have now almost 1.8 million customers that pay us monthly.

Let’s take the — if we just look at the direct customer-base, I think we’re in the 270,000 or so active customers that are serviced by our sales teams. We are — we have so much headroom and yet come in with this huge advantage that we are already an approved vendor generally well-liked and trusted, often have many of their agreements. And so the step-up to engage with us at I am is just far less than if we’re a new vendor. So lot of headroom left, but definitely driven predominantly by the installed-base in-part because frankly, most companies are already our customers.

Lucas Cerisola

Got it. That’s super helpful. And then one more, could you talk about hiring expectations for the year ahead, what should headcount growth look like? And what areas are you investing in aside from IM? And then within IM? Thank you.

Allan Thygesen

Yeah, I’ll go and then Blake, you should jump-in as well. Yeah, look, we project quite modest headcount growth. We want to — while we are very bullish on our growth opportunity, we also feel like we — look, we’ve got a lot of hard-fought efficiency gains in the company and we want to hold-on to those. Now you may see some reallocation within the company. There are areas, including product and security, where I think we want to continue investing disproportionately but I don’t anticipate our overall headcount to grow significantly we’re just being judicious, investing carefully in the places that we think give us the most leverage over-time.

Blake Grayson

Thank you. Yeah, I’d just say we’re quite thoughtful about it. I think we’ve added over the past year, just over 200 net kind of headcount to DocuSign. So we’re hiring across all of our locations. Vast majority of those folks, we tended to add-in a little bit more in our lower-cost locations as well. So like Alan said, we’re trying to be very methodical and very thoughtful about our hiring needs to make sure that we can support this business, but also we made a lot of hard choices to get to the efficiency gains that we’ve done over the past few years, and we’re not just going to give those up either. And so I think that it’s that balanced view that I’m — that I think is the right path for us.

Lucas Cerisola

Thanks, guys.

Operator

Our next question comes from Patrick Walravens with Citizens. You may proceed with your question.

Austin Cole

Great. I appreciate you guys taking the questions here. This is Austin Cole on for Pat. Alan, you called out one of the Docusign’s top-10 customers becoming second-largest customer this quarter through IM. I just wanted to give the opportunity if there’s anything to call-out on that expansion sounded pretty significant. What do they see in IAM? And is it kind of navigator where they’re getting most of the unlock or anything else there that would be helpful?

Allan Thygesen

Yeah. Yes, it is Navigator, but it’s Navigator Plus. We — they are powering a lot of their pre-signature workflows with our milestone agreement capabilities. And that by the way, I think that is a more-and-more robust part of the offering. I mentioned agreement desk, we launched Agreement Prep, which is a whole-system for creating templates and standard agreements that you can then deploy, which of course is a very common use-case in the, let’s say, a B2B sales context, for example, or a vendor management context.

And so I’m I’m feeling very bullish about the opportunity for expansion from our eSign base into — and there’s so many paths we can take with and that was just a great win. But there’s a number of them. And I think some customers really go wall-to-wall. We mentioned, I think on the last call and they’re deploying us across a very broad set of functions and of course, we love that. Ultimately, we love to be deployed across every function. I think that’s our ultimate destiny as we fulfill our platform strategy.

Operator

Our next question comes from Alex Zukin with Wolfe Research. You may proceed with your question.

Alex Zukin

Hey, guys. Thanks for taking my question. Maybe just two quick ones. If we think about the early renewal dynamic that you saw impact billings this quarter, kind of how much of that do you feel like was — like how much of IAM included in those early renewal conversations around the upsell dynamics specifically? And is that now kind of shifting more towards the installed-base picking-up that SKU rather than just new customers. And I have a quick follow-up.

Blake Grayson

Sure. Let me take a stab at this. So the vast majority of our early renewals are still our core business, our core product. We’ve got a very large book of business that renews. Now I am does play a role in some of those early renewals. And overall, what I really care about the most is that we’re on those early renewals that we’re spending the time with the folks that are expanding. Now expansion can come from IM, obviously, but also can come from Design, and we see that.

And so I’m super-excited about just the definition of expansion in general. Now, of course, I think that there’s a lot of value that can come from IM and I think the customers over-time are going to see that value and want to adopt it over-time as well. But — and then also from an IM perspective, and Alan mentioned this earlier, our installed-base is our primary target, right, for this. Like we’re signing-up new customers, no doubt, right, for IM, but we have relationships with customers. They understand DocuSign, they trust DocuSign, they have their agreements with DocuSign. So it creates that opportunity for us. I think that is a huge advantage for us that we can try to take it take leverage to be able to grow that business.

Alex Zukin

Perfect. And then maybe, I guess, Blake, just-for-you a follow-up, and this is a little bit more nuanced on the billings. But if I look at the delta between the implied Q4 billings guide from kind of last quarter to this quarter, it looks like it went up from 7.5% to the new to 8%. So that 0.5 point, how much of that raise is truly operational outperformance versus kind of core FX and maybe other one-time non-core factors? And how should we think about the underlying kind of run-rate billings growth excluding early renewal timing or duration in FX for Q4?

Blake Grayson

Yeah. So relative to the full-year guide, I think we raised the full-year guide on billings by about $44 million. So that’s about $5 million more than the outperformance we had versus the midpoint in Q3. So we’ve taken some of that operational performance and flowed it through into Q4 and raised it off of what you’re calling the implied subtracting fiscal — the full-year versus Q3 from our last quarter. So we are seeing improvements in the core side of the business. I think to your point about trying to manage around, okay, what is that underlying growth rate of billings, excluding early renewals and such as one of the reasons we’re making these adjustments in FY ’27 that we’re talking about.

I think one of the ways to think about it is, if you look at Q3, like we just said, about a 10% growth in billings, more like 8% excluding that early renewal component outperformance. So I think that’s the nature of it. I mean in billings, early renewals will always be a part of our billings number. They will always represent a percentage of our billings. The question for us or as a team is what we think about and what is the health of the business is, are we expanding those other renewals. And there’s cases sometimes where you might do a flat one, but you want to make sure that you’re spending your time in-quarter for us on those. If you’re going to do with early, it’s like, wow, this customer needs, they have more demand, they’re seeking that demand.

How can we help them? Should we consider them for an IM upgrade and we have those discussions. But hopefully, that just helps level-set it. But again, timing of early renewals, it can be very volatile and we’ve seen that and it happens every single quarter. So to try to get into that impact on a Q4 basis in a guide gets a little trickier. So hopefully, that Q3 description gives you some of the directional kind of look that I think you’re looking for.

Alex Zukin

Perfect. Thank you guys.

Operator

This now concludes our question-and-answer session. I would like to turn the call-back over to Alan for closing comments.

Allan Thygesen

Thank you, operator. Thank you to all who joined today’s call. So in closing, I want to thank the entire DocuSign team for their commitment to putting our customers first and delivering on-demand for better solutions to the agreement management problem. Business is both resilient and at the leading-edge of AI development, and we’ll continue to manage the company to realize our long-term potential. Thanks for your time, and we look-forward to engaging with you next quarter.

Operator

Thank you ladies and gentlemen, thank you for your participation. This concludes today’s conference. Please disconnect your lines and have a wonderful day