Doximity shares experienced a dramatic surge, more than doubling in overnight trading on Friday following the company's first-quarter fiscal 2027 earnings report and positive commentary about its new AI search tool's profitability. At one point, shares were up over 130% in premarket trading before settling to a 59% gain as the market opened officially [1]. CEO Jeffrey Tangney highlighted that the AI search product is generating more than 10 times in revenue per search compared to its operational cost, and he expects the overall AI cost to decrease as models become more efficient, which bodes well for the company's unit economics [1].
Doximity reported first-quarter revenues of $156.6 million and adjusted EBITDA of $74.8 million, both surpassing consensus estimates [1]. The company also raised its full-year revenue guidance by $6 million, or 5%, to a range between $671 million and $681 million [1]. However, analysts such as Jessica Tassan from Piper Sandler noted that the increased guidance does not yet reflect significant contributions from the expanding AI commercial pipeline, suggesting management is taking a conservative approach to AI search revenue in its fiscal 2027 outlook [1].
CEO Tangney also indicated that the AI search tool is expanding Doximity's total addressable market within the health and pharma sectors, which could lead to higher long-term margins as the market size grows [1]. Analyst Michael Cherney from Leerink Partnerships echoed this sentiment, stating that the AI investments are expected to support attractive long-term margins [1].
Prior to this earnings report, Doximity shares had been down 50% for the year, with a market value of $3.7 billion before Friday's surge [1]. Additionally, about 17% of the float was sold short ahead of the results, and the unwinding of these short positions likely contributed to the sharp increase in share price [1].
CONCLUSION
Doximity's strong earnings and the highly profitable AI search tool have triggered a significant rally in its shares, reversing a year-to-date decline. While the company raised its revenue guidance, analysts believe the full potential of its AI initiatives is not yet reflected in forecasts, suggesting further upside if these trends continue.