Pandemic stay-at-home orders have moved a lot of business online these days, and that's a sweet spot for digital documents leader DocuSign (NASDAQ:DOCU). A strong Q1 earnings report with better-than-expected revenue, plus confidence that the trend will continue through Q2, indicate that investors should consider signing the digital dotted line with the company that's leading a market expected to eclipse $6.1 billion by 2026.

Person using DocuSign on a laptop

Image Source: DocuSign

Digital transformation. It's kind of a big deal. 

COVID-19 has radically changed the business environment. The office has moved home and companies have been forced to adapt to digital technologies. Deals are made online and contracts are e-signed. DocuSign says it can accelerate that digital transformation process for its customers with its e-signature and digital documents solutions. 

Dominating the e-signature market is one thing, but DocuSign has its head in the clouds -- or at least, the cloud. Its Agreement Cloud is a suite of more than a dozen applications that allow businesses to manage contracts, including drafting and signing. The platform integrates with more than 350 existing systems like Salesforce, SAP, Workday, and more to cover the entire life cycle of the agreement process. Agreement Cloud has taken DocuSign from a commanding role in the e-signature market to untapped territory in business contracts, where it also plans to dominate — even on the other side of the pandemic. 

Remote work has been established as the normal during lockdown, and DocuSign is working in many sectors to help make socially distant workplaces run. For instance, in healthcare, it has helped hospitals and clinics physically distance the patient intake process.This cuts out the passing around of clipboards and pens, enabling patients to sign authorization, consent, and intake forms using its e-signature solutions. That process gets further expedited by the creation of document templates that patients can access on their mobile devices or desktop computers.

Companies are also still hiring and onboarding, and DocuSign makes it seamless for new hires to digitally fill out and sign paperwork with their smartphones. Digital solutions for universities, commercial insurance, lease management, and courts of law extend its reach. 

DocuSign's staying power — like a good stock portfolio — is diversification. That's what distinguishes it from narrower-focused rivals like HelloSign, owned by Dropbox, Inc. (NASDAQ: DBX). Having a mobile option at the least puts DocuSign ahead. 

Staying on top of the market

Launched in San Francisco in 2003 and publicly traded since 2018, DocuSign is the leader in the e-signature market. It boasted roughly 60% market share as of June 9, according to sales and marketing analytics firm Datanyze, ranking it at the top of 27 e-signature companies. Its closest rivals are private companies RightSignature (around 8.4%) and SignNow (roughly 7.6%), plus Adobe (NASDAQ:ADBE) and its 4.4% market share for Adobe Sign. 

In September 2019, DocuSign bought document generation and contract lifecycle management company SpringCM, instantly adding more than 600 customers across the financial services, technology, and public sector to its portfolio.

In Q1, DocuSign saw a 30% year-over-year rise in customers in Q1, from 508,000 to 661,000. Enterprise and commercial customers grew 49% over the same period, from 60,000 to 89,000. Total revenue for Q1 FY21 was $297.0 million, an increase of 39% year over year. That beat Wall Street projections of $281.1 million.

CFO Michael Sheridan said DocuSign added more than 10,000 new direct customers in the quarter as well as 58,000 self-service customers, an increase of 43% year-over-year.

What's ahead? 

Sheridan said the company anticipates that "total revenue will range between $316 million and $320 million in Q2 and $1.313 billion to $1.317 billion for fiscal '21."

DocuSign stock has roughly doubled since March 11, the day the World Health Organization declared the COVID-19 outbreak a pandemic.

"Even when the COVID-19 situation is behind us, we don't anticipate customers returning to paper or manual-based processes," CEO Dan Springer said.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.