Doximity, the leading digital platform for medical professionals, saw its shares explode in value, more than doubling at one point in frantic overnight trading on Friday. This seismic shift in its stock performance came on the heels of groundbreaking revelations regarding the extraordinary profitability of its nascent AI search tool.
During the company's first-quarter fiscal 2027 earnings call, CEO Jeffrey Tangney unveiled a staggering statistic: "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 further expressed confidence in the long-term unit economics, anticipating that "overall AI cost, if anything, [will] go down as models get more efficient."
The market reacted with ferocity, pushing Doximity shares up over 130% in premarket trading before they settled to a robust 33% gain by Friday's close. This dramatic surge caught the attention of Wall Street, especially given the company's prior performance, which saw its market value of $3.7 billion before the rally drop by 50% for the year.
Analysts See Untapped Potential
Despite Doximity's strong first-quarter performance—reporting revenues of $156.6 million and adjusted EBITDA of $74.8 million, both surpassing consensus estimates—analysts believe the full impact of the AI search tool's profitability is yet to be factored into the company's financial outlook. Doximity also raised its full-year revenue guidance by $6 million, setting a new range of $671 million to $681 million.
However, experts like Jessica Tassan of Piper Sandler noted, "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." Tassan suggested that management is likely adopting a "conservative approach" to incorporating AI search revenue into its forecasts, hinting at substantial upside potential.
The Short Squeeze Factor
Beyond the impressive unit economics, CEO Tangney highlighted another significant implication: the AI search tool is not just profitable, but also vastly expands Doximity's total addressable market within the health and pharmaceutical sectors. "Frankly, the [total addressable market] that this unlocks for us within health, within pharma has been a real surprise and upside for us," he stated.
This expansion, combined with the profitability, prompted analysts like Michael Cherney at Leerink Partnerships to conclude that the "elevated AI investments will ultimately support attractive long-term margins" for Doximity.
A crucial accelerator to Friday's monumental stock jump was a massive short squeeze. Prior to the earnings report, approximately 17% of Doximity's tradable shares were held short, according to FactSet. As the stock soared, short sellers were compelled to unwind their positions by buying back shares, creating a snowball effect that further propelled the stock's ascent, much to the detriment of those betting against the company.
