Shares of the digital medical platform Doximity (DOCS) experienced an extraordinary surge in overnight trading Friday, at one point more than doubling, driven by robust first-quarter results and astonishing revelations about its new artificial intelligence (AI) search tool. The company's CEO, Jeffrey Tangney, revealed that the AI product is a financial powerhouse, bringing in ten times the revenue it costs to operate.
“It’s early days on our AI search product, but I can tell you we’re earning more than 10 times per search in revenue than it costs,” Tangney stated during the company's first-quarter fiscal 2027 earnings call on Thursday. He further expressed optimism about the future, adding, “Over time, we probably expect the overall AI cost, if anything, [to] go down as models get more efficient, so we feel good about the unit economics there.”
Doximity's stock initially soared over 130% in premarket trading before settling to finish Friday up a significant 33%. This dramatic increase comes after the stock had been down 50% for the year leading up to these results, with its market value standing at $3.7 billion prior to Friday’s explosion.
Analysts quickly noted that this immense AI profitability is likely not yet fully factored into Doximity's financial outlook. The company reported impressive first-quarter revenues of $156.6 million and adjusted EBITDA of $74.8 million, both exceeding consensus estimates. Furthermore, Doximity raised its full-year revenue guidance by $6 million, setting a new range between $671 million and $681 million.
Despite the raised guidance, experts like Jessica Tassan from Piper Sandler believe management is taking a "conservative approach" regarding AI search revenue in its FY27 outlook. Tassan wrote to clients, “The FY27 raise (which is mostly comprised of the F1Q27 beat) does not reflect a significant contribution from the expanding AI commercial pipeline described on the earning call and in callbacks.”
Beyond the impressive unit economics, CEO Tangney highlighted that the AI search tool is also significantly expanding Doximity's total addressable market. “Frankly, the [total addressable market] that this unlocks for us within health, within pharma has been a real surprise and upside for us,” he remarked.
Michael Cherney at Leerink Partnerships echoed this sentiment, noting that the AI advancements are “reinforcing confidence that [Doximity’s] elevated AI investments will ultimately support attractive long-term margins.”
Adding further fuel to the stock's meteoric rise was a substantial short squeeze. Approximately 17% of Doximity's shares available for trading were held short heading into the earnings report, according to FactSet. As the stock surged, short sellers were compelled to buy back shares to cover their positions, intensifying the upward pressure and contributing significantly to Friday’s incredible momentum. This event illustrates the dual impact of strong fundamentals and market dynamics in propelling a stock to new heights.
(Image Caption: Doximity at the New York Stock Exchange for its initial public offering on June 24, 2021. Source: NYSE)
