Docebo Inc. (DCBO)

Executive Summary / Key Takeaways

• Partnership Wind-Downs as Strategic Catalyst: Docebo is deliberately shedding low-margin OEM revenue (Dayforce represented 9-10% of ARR at peak) and a large but non-core customer (AWS at 1.8% of ARR) to improve unit economics, with ARR growth ex-Dayforce holding at 14% and new logo ACV rising 8% quarter-over-quarter as higher-quality direct business fills the gap.

• AI-First Transformation with Measurable Traction: The launch of Harmony (0.5 million queries processed since July) and Creator (20,000+ minutes of AI-generated video) demonstrates tangible progress in differentiation, with new AI modules showing 15%+ attach rates and management requiring every product manager to think AI-first, creating a foundation for premium pricing and net retention expansion.

• FedRAMP Unlocking $2.7 Billion Government TAM: Achieving FedRAMP authorization five months ahead of schedule and securing two federal customers immediately validates the government vertical strategy, with meaningful revenue contributions expected in H2 2026 that are not factored into current guidance, creating potential upside asymmetry.

• Mid-Market Execution Offsetting Enterprise Drag: While macro-sensitive sectors (retail, manufacturing, automotive) elongate enterprise deals, Docebo's refined mid-market motion is delivering two consecutive quarters of outperformance, with 65% of new customers adopting multiple use cases and ACV expanding through better segmentation and digital marketing efficiency.

• Margin Inflection Demonstrating Operating Leverage: Achieving 20% EBITDA margin in Q3 2025—earlier than anticipated—while guiding toward 25% through G&A leverage (15% to 9-11% target) proves the business can scale profitably as high-margin subscription revenue displaces lower-quality partnership streams, supporting a more capital-efficient growth model.

Setting the Scene: From LMS Provider to AI-First Platform

Docebo Inc., founded in 2005 and headquartered in Toronto, Canada, spent its first fifteen years building a best-of-breed learning management system for enterprises. The company reached $225 million in ARR by 2024, serving over 40 million users worldwide, but its growth trajectory was materially shaped by a 2019 OEM partnership with Dayforce that white-labeled Docebo's LMS. This partnership, which peaked at 9-10% of total ARR, provided scale but came with a critical trade-off: Dayforce customers used Docebo for just 1-2 basic use cases (onboarding and compliance) at materially lower average contract values than direct customers.

The acquisition of eloomi in early 2024—an LMS provider focused on the European SMB market—created direct channel conflict and triggered the Dayforce wind-down, which accelerated faster than expected in Q3 2025. Simultaneously, AWS announced it would not renew its Skills Builder contract (1.8% of ARR, nearly 10 million users trained) when it expires December 31, 2025, opting to build internally rather than buy commercially. These partnership exits create a combined 10-12% ARR headwind over 18 months, forcing Docebo to replace low-quality, low-margin revenue with direct enterprise and mid-market business.

This transition occurs against a macro backdrop that is elongating enterprise sales cycles, particularly in retail, manufacturing, and automotive sectors where procurement teams remain conservative. Yet Docebo's strategic response—unveiled at its April 2025 Inspire conference—reveals a deliberate pivot from being "the single most appreciated enterprise LMS" to an AI-first learning platform and ecosystem. The company is betting that generative AI and agentic AI can transform learning from instructor-led, course-centric experiences into hyper-personalized, automated, and measurable skill development. This is not a feature upgrade; it is a fundamental re-architecting of the value proposition that could redefine how enterprises approach workforce transformation.

Technology, Products, and Strategic Differentiation: The AI Moat

Docebo's AI-first strategy centers on three pillars: Harmony (agentic platform), Creator (content engine), and a credit-based monetization model that embeds AI across the product suite. Harmony, launched in July 2025, has already processed 0.5 million queries and evolved from modern search into Copilot logic that automates administrative tasks and performs actions within the platform. Management envisions Harmony as an "agent of agents" that can create content, manage workflows, and deliver a learner-first experience where employees control their upskilling journey rather than passively consuming assigned courses.

Why does this matter? Traditional LMS platforms, including SAP SuccessFactors and Workday Learning , prioritize instructor-led models where administrators create courses and learners consume them. Docebo's AI-first approach flips this script, enabling learners to query an AI assistant for personalized learning paths, generate custom simulations for sales enablement or customer service scenarios, and receive AI-driven coaching. This differentiation addresses a critical gap: approximately 40% of the workforce will need skill transformation over the next five years, yet most organizations lack tools to identify and close these gaps at scale.

Creator, the engine behind experience creation, has generated over 20,000 minutes of AI video content, with approximately 2,000 customers producing AI assessments and 2,000 learning assets using the content builder as of Q2 2025. The AI Virtual Coach now addresses any custom role-play scenario beyond sales enablement, while AI Video Presenter converts text to narrated podcasts or videos in minutes. These capabilities are not just efficiency tools; they create measurable business impact by reducing content production costs and accelerating time-to-competency.

The monetization strategy reinforces this moat. Docebo introduced an AI credit-based system where customers purchase upfront packages and consume credits across modules like AI Virtual Coach and AI Video Presenter. New products launched in late 2024 show attach rates exceeding 15%, contributing to an impressive new logo ACV of $71,000 in Q3 2025. Management's thesis is clear: continuing to embed AI capabilities will provide a competitive edge that defends premium pricing and lifts net dollar retention over time. Every product manager is required to think AI-first when building new products or revising features, ensuring the entire organization aligns around this differentiation.

Financial Performance & Segment Dynamics: Evidence of Strategic Execution

Docebo's financial results in 2025 tell a story of deliberate transition and improving quality. Total ARR growth appears modest, but excluding the Dayforce wind-down, core growth held at 14% year-over-year in Q3 2025 and 13.9% in Q2 2025. This stability while losing a 9-10% revenue contributor demonstrates that direct sales are more than offsetting partnership losses. The Dayforce exit is improving unit economics: Dayforce customers had materially lower average tickets and used only 1-2 use cases, while direct customers adopt multiple modules and generate higher lifetime value.

Net dollar retention (NDRR) reflects this transition dynamic. NDRR fell to 100% in Q4 2024 from 104% due to a large customer downgrade (over 1% impact) and a 40% increase in renewal contracts, causing some customers to right-size their user tiers. Management expected improvement after Q1 2025, which materialized with two consecutive quarters of retention gains. However, Q4 2025 will see another dip from the AWS contract loss, a $4 million ARR hit that is fully reflected in guidance. The underlying trend is positive: customers with multiple use cases show higher retention, and 65% of new Q1 2025 customers adopted two or more use cases, albeit down from 70-80% in the prior year as Docebo optimizes for sales velocity by landing with fewer use cases and expanding over time.

Average contract value dynamics reveal the market segmentation strategy at work. New logo ACV was $71,000 in Q3 2025, flat year-over-year but up 8% quarter-over-quarter. This sequential improvement reflects strong mid-market execution, where success brings a larger concentration of customer accounts. In the enterprise segment, Docebo is winning deals with ACVs upwards of $500,000, including Veolia (VEOEY) (200,000+ employees) and Amazon's third department (Amazon Health) for a 5-year contract covering both customer/partner education and employee learning. The mid-market strength is intentional: better outbound segmentation, digital marketing efficiency, and vertical targeting in tech, healthcare, and financial services are driving consistent outperformance.

Margin performance validates the strategy shift. Docebo achieved a 20% EBITDA margin in Q3 2025, earlier than anticipated, driven by seasonal strength and operational efficiencies. Management targets 25% margins mid-to-long term through G&A leverage alone, with G&A currently at 15% of revenue and a goal of 9-11%. This 5-point improvement would lift margins without sacrificing R&D or sales and marketing investments. The company has $90 million in cash, generated $9 million in free cash flow in Q1 2025, and repurchased $9 million in shares, demonstrating disciplined capital allocation with low stock-based compensation.

Professional services revenue, while higher than expected in Q3 2025 due to mid-market onboarding complexity, is guided down year-over-year for 2025. This is strategic: Docebo prioritizes high-margin subscription revenue and partners with System Integrators like Deloitte and Accenture (ACN) for implementation, maintaining focus on scalable software economics.

Outlook, Management Guidance, and Execution Risk

Docebo's 2025 guidance reflects prudent assumptions in a challenging macro environment. The company reduced full-year guidance to account for deal elongation in macro-sensitive sectors and the accelerated Dayforce wind-down. Management explicitly states that while they remain "extremely focused on growth," the guide incorporates market dynamics "very much outside of our control." This conservatism creates potential upside if execution exceeds expectations.

The Q4 enterprise outlook is historically strong but faces continued deal elongation. Management believes "2026 will be the year of enterprise at Docebo," suggesting they expect macro headwinds to abate and their pipeline investments to convert. The enterprise segment shows positive signals: customer count over $100,000 increased sequentially in Q3 2025, and ACV for new customers grew from $70,000 to $83,000 in Q4 2024. However, procurement officers, GRC teams , and risk teams are not always aligned with AI-first buying intentions, creating a temporary disconnect that management expects to resolve as AI readiness matures.

The FedRAMP opportunity represents the most significant upside asymmetry. Achieving Authority to Operate in May 2025—five months ahead of schedule—unlocked a $2.7 billion TAM across U.S. federal, state, and local agencies. Docebo secured two federal customers immediately (Department of Energy expansion and Air Force Cyber Academy) and expects meaningful contributions in H2 2026. The 2025 guidance includes no material FedRAMP authorization revenue, positioning any wins as pure upside. The government team is fully staffed, and the company is confident in building relationships to win material contracts. The DOGE mandate requiring federal software modernization plays directly into Docebo's hands, as 60% of HCM software in government remains on-prem and "clunky."

AI monetization remains in early stages but shows promise. The credit-based model for AI modules is generating attach rates over 15%, and management believes continuing to embed AI capabilities will defend premium pricing and provide competitive edge. The risk is that AI readiness gaps among buyers could slow adoption, but this is framed as a temporary maturity curve issue rather than a structural barrier.

Risks and Asymmetries: What Could Break the Thesis

Three material risks threaten Docebo's transition story. First, the partnership wind-downs could accelerate beyond management's model. Dayforce is now expected to represent 3.5-4.5% of revenue in 2026 and 1-2% in 2027, but Q3 2025 saw the wind-down accelerate "faster than expected." If Dayforce migrates customers more aggressively or competes directly, the revenue gap could exceed Docebo's ability to backfill with direct sales, particularly if macro conditions worsen.

Second, the AI readiness gap creates execution risk. As CEO Alessio Artuffo noted, "procurement officers, the GRC teams, the risk teams are not always aligned already... with this posture," causing disconnects in the buying journey. While management views this as temporary, it could elongate sales cycles further, especially in the enterprise segment where multi-stakeholder approval is required. If AI governance concerns delay deals, Docebo's growth reacceleration could push into 2027 rather than 2026.

Third, competitive pressure from bundled HCM providers could limit pricing power. SAP SuccessFactors and Workday Learning can offer LMS as part of integrated suites, creating pricing pressure and reducing switching costs for customers already embedded in those ecosystems. Docebo's differentiation is strongest in extended enterprise and AI capabilities, but if competitors close the AI feature gap, the premium pricing justification could weaken.

The primary upside asymmetry lies in FedRAMP execution. If Docebo can convert its early federal wins into a repeatable sales motion faster than the H2 2026 timeline, government revenue could materially exceed expectations. The $2.7 billion TAM is large relative to Docebo's $225 million ARR base, and success in federal could create a halo effect in SLED markets where State RAM requirements are addressed by FedRAMP certification. Additionally, if AI monetization proves more successful than the current credit model suggests, Docebo could layer high-margin AI revenue on top of subscription ARR, accelerating margin expansion beyond the 25% target.

Valuation Context: Positioning Relative to Opportunity

At $22.04 per share, Docebo trades at a market capitalization of $633.73 million and an enterprise value of $570.50 million, representing 2.41x TTM revenue and 22.02x TTM EBITDA. These multiples stand at a significant discount to direct competitors: SAP trades at 6.64x revenue and 22.39x EBITDA, while Workday trades at 6.16x revenue and 47.02x EBITDA. This valuation gap reflects Docebo's smaller scale and partnership transition headwinds, but also ignores its superior gross margin of 80.63% (vs. SAP's 73.83% and Workday's 75.64%) and higher operating margin of 13.38% (vs. Workday's 10.85%).

Docebo's balance sheet provides strategic flexibility with $90 million in cash, minimal debt (debt-to-equity of 0.06), and positive free cash flow generation ($9 million in Q1 2025). The company has demonstrated disciplined capital allocation through $9 million in share repurchases and maintains low stock-based compensation. This financial health supports investment in the AI platform and government go-to-market motion without diluting shareholders.

The valuation does not appear to reflect the FedRAMP opportunity, as management excluded material government revenue from 2025 guidance. If Docebo can capture even 1-2% of the $2.7 billion TAM over three years, this would represent $27-54 million in incremental ARR, or 12-24% growth on the current base. Similarly, the AI-first transformation could justify a re-rating toward software peers if attach rates and monetization scale as management expects. The key metrics to monitor are net dollar retention recovery above 110%, government ACV growth, and AI revenue contribution as a percentage of new business.

Conclusion: A Platform at an Inflection Point

Docebo is executing a deliberate reset from a partnership-dependent LMS provider to an AI-first, direct-sell platform, using near-term headwinds as catalysts for higher-quality growth. The accelerated wind-down of Dayforce and AWS (AMZN) contracts, while creating 10-12% ARR pressure, is improving unit economics and allowing sales resources to focus on higher-value direct customers. This transition is occurring simultaneously with a margin inflection to 20% EBITDA and a clear path to 25% through operational leverage, demonstrating that the business can scale profitably.

The central thesis hinges on two variables: the pace of FedRAMP-driven government wins and the success of AI monetization. Achieving FedRAMP five months early and securing immediate federal customers validates the $2.7 billion TAM opportunity, with meaningful contributions expected in H2 2026 that could reaccelerate growth. The AI-first strategy, anchored by Harmony and Creator, provides differentiation against bundled competitors and supports premium pricing, though AI readiness gaps among buyers could temper near-term adoption.

Competitively, Docebo's 80.6% gross margins and focused R&D investment enable faster innovation than SAP (SAP) and Workday's (WDAY) integrated suites, while its extended enterprise capabilities differentiate it from education-centric players like Instructure (INST). The valuation discount to peers appears misaligned with superior margins and the dual catalysts of government expansion and AI differentiation. For investors, the story is attractive if execution delivers on the 2026 enterprise rebound and government pipeline, but fragile if partnership losses outpace direct sales capacity or AI monetization stalls. The next four quarters will determine whether Docebo emerges as a leaner, more profitable platform or remains trapped in transition.