Medical professional network Doximity (NYSE: DOCS) reported calendar Q3 2026 (fiscal Q2 2027) results beating Wall Street’s revenue expectations, with sales up 3.6% year on year to $174.5 million. The company expects next quarter’s revenue to be around $195.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.36 per share was in line with analysts’ consensus estimates.

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StockStory’s take

Doximity’s latest quarter saw investors weigh continued growth in AI-powered healthcare solutions against a notable decline in operating margins. Management attributed the quarter’s revenue growth to broad adoption of AI-enabled workflow tools and new partnerships with leading health systems, highlighting a 34% year-on-year increase in active workflow prescribers and expansion of the company’s AI suite. CEO Jeff Tangney emphasized that "quarterly active workflow prescribers, which includes our AI users, grew 34% year-on-year to record highs, accelerating from last quarter," reflecting strong user engagement but also considerably higher AI-related costs.

Looking forward, Doximity’s guidance is underpinned by expectations that AI Search, partnerships like UpToDate, and integration with hospital systems will continue to drive clinician engagement and open new revenue streams. Management acknowledged that ramping up new products will involve gradual adoption cycles, especially due to extended medical-legal review processes at large pharmaceutical clients. CFO Matt Sonefeldt noted that "most of the AI Search demand in particular will ramp throughout the year," with a cautious approach to revenue recognition due to the complexity of client onboarding.

Key insights from management’s remarks

Management pointed to robust demand for its clinical AI products, especially among top hospitals and pharmaceutical clients, while highlighting the tradeoff between accelerated AI investment and margin pressure.

• AI product adoption surges: The quarter was marked by record engagement, as nearly half of all U.S. prescribers used Doximity’s workflow suite. Uptake was driven by telehealth, scheduling, and AI-powered Patient Context features, which streamline the clinical decision process for doctors.
• AI Search expands pharma reach: AI Search has achieved rapid adoption, with 16 of the top 20 pharmaceutical companies purchasing programs and three more in contracting. Management sees this as entry into the much larger paid search market, traditionally dominated by companies like Google.
• UpToDate partnership integration: Doximity launched a partnership with UpToDate, a widely used clinical reference, to strengthen the reliability and accuracy of its AI-generated answers. Management highlighted strong early feedback and significant overlap in health system clients, which could facilitate broader adoption.
• AI cost efficiency improvements: While AI-driven costs increased significantly, management noted that cost of revenue grew at less than half the rate of AI prompt volume. This was attributed to better compute purchasing, multi-model deployments, and ongoing infrastructure optimization.
• Health system enterprise momentum: Doximity added 25 new AI hospital clients during the quarter, including top-ranked institutions such as NewYork-Presbyterian and UCSD Health. The company’s Patient Context feature, now embedded in electronic health records, led to a measurable increase in usage and workflow integration.

Drivers of future performance

Management expects future performance to hinge on scaling AI product adoption, increasing pharma client participation, and maintaining cost discipline amid ongoing investment.

• AI Search revenue ramp: Doximity anticipates a gradual increase in AI Search revenue as new pharmaceutical clients move through lengthy medical-legal review and onboarding, with significant contributions expected in the second half of next year. Management described this transition as central to long-term growth and market expansion.
• Expansion into paid search budgets: The company is positioning AI Search as a direct alternative to traditional paid search advertising, targeting a $14 billion market. Early client demand signals suggest the majority of spend is incremental rather than cannibalizing existing Doximity contracts, but management acknowledged that adoption among smaller pharma clients will depend on launching a new auction-based buying model.
• Margin discipline and investment: While Doximity continues to invest heavily in AI capabilities, improvements in cost efficiency—such as pre-buying compute and optimizing infrastructure—are expected to help offset margin compression. Management believes that as AI usage scales, incremental margins could improve, but near-term profitability may remain under pressure.

Catalysts in upcoming quarters

In the coming quarters, key areas to monitor will be (1) the pace of AI Search adoption among both large and smaller pharmaceutical clients, (2) further progress in integrating UpToDate and other clinical references into the workflow suite, and (3) improvements in AI cost efficiency and resulting margin stabilization. Additional attention will be given to client feedback on new auction-based buying models and the impact of expanded health system partnerships on clinician engagement.

Doximity currently trades at $29.50, down from $33.18 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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