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Why DocuSign Stock Crashed Today

What happened 

Shares of DocuSign (NASDAQ: DOCU) plunged nearly 25% on Friday after the electronic-signature leader’s profits fell well short of investors’ expectations.

So what 

DocuSign’s revenue jumped 25% year over year to $588.7 million in its fiscal 2023 first quarter, which ended on April 30. The company added almost 67,000 new customers, bringing its client base to more than 1.2 million at the end of the period.

However, DocuSign’s billings, a key indicator of future sales growth, increased by only 16%. That was a marked deceleration from the 25% growth it experienced in the fourth quarter of fiscal 2022 and the 54% increase it enjoyed in the prior-year quarter. 

Worse still, DocuSign continues to rack up losses. It generated a net loss of $27.4 million, or $0.14 per share, compared to $8.4 million, or $0.04 per share, in the year-ago quarter.

Moreover, DocuSign’s adjusted earnings per share declined 14% to $0.38. That was well below Wall Street’s estimates, which had called for adjusted per-share profits of $0.46. 

Now what 

DocuSign grew at a torrid pace during the early stages of the pandemic, as office closures drove many businesses to adopt cloud-based technology. Its e-signature software enables companies to prepare, sign, and manage contracts without needing to meet in person. But as more employees return to traditional work locations, demand for the company’s service is now growing at a far slower pace.

Still, CEO Dan Springer believes the digital agreement leader’s long-term future remains bright. “With over a billion users worldwide, the proven value of our products, and the significant opportunity we have ahead of us, we’re confident in our ability to successfully navigate the challenges of a dynamic global environment,” Springer said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DocuSign. The Motley Fool recommends the following options: long January 2024 $60 calls on DocuSign. The Motley Fool has a disclosure policy.

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