DocuSign's (DOCU) fiscal Q1 beat was largely offset by the billings missing Street consensus and lower fiscal 2026 billings guidance, Wedbush said Friday.

The company's Q1 billings missed the Street's estimates and its own guidance, mainly as it is focusing on improving its intelligent agreement management strategy while innovating rapidly at scale, the brokerage said.

Lower fiscal 2026 billings guidance is mainly due to early renewal considerations while remaining conservative on bookings outlook due to the macro uncertainties. However, the macro is partially mitigated by IAM deal volume driving up and foreign exchange rate tailwinds, the brokerage said.

Total revenue was above consensus and guidance due to an increase in customer base, with its "IAM platform being its fastest growing offering in history reaching 10k customers since its launch," Wedbush said. Net retention rate came stood at 101% due to steady customer contract utilization growth during the quarter.

As the company is keeping a balance between platform innovation and expense management, its non-GAAP gross margin and non-GAAP operating margin were above consensus and company guidance. Free cash flow was also above Street estimates.

"While the company's IAM strategy continues to pick up traction, we remain on the sidelines as it will take more time to regain Street confidence in the AI story developing front and center while navigating a more difficult macro backdrop," the brokerage added.

Wedbush maintained a neutral rating on the company, while lowering the price target to $85 from $100.

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