Doximity experienced a dramatic increase in its stock price, driven by CEO Jeffrey Tangney's comments during the company's first-quarter fiscal 2027 earnings call. He stated that the new AI search tool is generating revenue that is ten times its operational costs, suggesting a highly profitable product.
The company's first-quarter revenues of $156.6 million and adjusted EBITDA of $74.8 million exceeded analyst expectations, prompting a revision of the full-year revenue guidance upwards by 5% to between $671 million and $681 million.
However, analysts, including Jessica Tassan from Piper Sandler, noted that this guidance does not fully account for the potential revenue from the AI search tool, indicating a conservative outlook from management. The market's reaction was significant, with Doximity's shares initially rising over 130% before settling at a 78% increase, reflecting a market capitalization of $3.7 billion.
The surge also poses challenges for short sellers, as approximately 17% of shares were sold short prior to the earnings announcement. Tangney highlighted that the AI search tool not only enhances profitability but also expands the company's addressable market within healthcare and pharmaceuticals, potentially leading to improved long-term margins.
This optimistic outlook on AI investments is supported by analysts like Michael Cherney from Leerink Partnerships, who believe it will bolster Doximity's margins in the future