Doximity shares surge 81% as AI search lifts revenue outlook

Doximity reported Q1 revenue of $156.6 million, beating consensus by $4.9 million, and raised its full-year outlook on early AI search traction.

"We are leaning in as we see a once-in-a-generation opportunity to build the new AI age of medicine," Chief Executive Jeff Tangney said.

Adjusted earnings of $0.29 a share missed the $0.30 estimate, while adjusted EBITDA of $75 million, a 48 percent margin, beat the high end of guidance by 8 percentage points. Non-GAAP gross margin slipped to 88 percent from 91 percent a year earlier as the company raised AI compute spending.

Shares closed the regular session at $20.66, down 4.5 percent, then jumped 81 percent to $37.49 in after-hours trading. Management lifted full-year revenue guidance to $671 million to $681 million, up $6 million, and said most AI search revenue contracted to date will be recognized in the third quarter.

Metric	Actual	Consensus	Beat/Miss
Revenue	$156.6M	$151.7M	+3.2%
EPS	$0.29	$0.30	-$0.01
Adj. EBITDA	$75M	—	+8% vs high end

The San Francisco-based physician network said quarterly active workflow prescribers grew more than 30 percent year over year, with nearly half using its AI tools. AI prompt volume rose more than 25 percent from the prior quarter, while Scribe note-taking users grew tenfold in July from a year earlier. Net revenue retention held at 107 percent overall and 112 percent for the top 20 customers.

Doximity launched AI search in late April and recognized no revenue from the product in the quarter, yet the client conversations it generated drove the beat. The company has signed its first cohort of AI search customers across more than two dozen programs. Tangney said the company earns more than 10 times per search in revenue than it costs to run the product today. Chief Financial Officer Matt Sonnefeld said the company is "really starting to find a nice product market fit" with AI search.

The company pointed to an independent study by researchers from Stanford and Harvard that tested 24 clinical AI models on 1,100 real patient cases. Doximity's Ask product logged a 4.8 percent error rate, against 13.6 percent for Anthropic's best model, Fable 5. The company now counts 165 signed health system AI clients, including Northwestern, Penn Medicine and the University of Michigan.

For the second quarter, Doximity guided to revenue of $170 million to $171 million, a midpoint of 1 percent year-over-year growth against a tough comparison, and adjusted EBITDA of $80.5 million to $81.5 million. The company expects gross margins to trend in the mid-to-high 80 percent range through the year as it spends on AI compute.

The guidance raise signals management expects AI demand to accelerate. Investors will watch the third quarter, when most AI search revenue contracted to date is scheduled to be recognized.

This article is for informational purposes only and does not constitute investment advice.