Doximity Q2 Earnings Call Highlights

Key Points

• Doximity beat its guidance with second-quarter revenue of $174.5 million, up 4%, and adjusted EBITDA of $89 million, a 51% margin. It raised fiscal 2027 revenue guidance to $678 million–$683 million.
• AI Search is gaining traction with pharmaceutical advertisers: 16 of the top 20 companies have purchased it, and bookings have reached eight figures. Management expects revenue to ramp gradually through calendar 2027.
• AI adoption and efficiency are improving, with more than 190 health systems using Doximity’s AI suite and AI prompt volume growing faster than cost of revenue. However, the company reported a 2.3% error rate in a study of AI drug-dose queries, with 40% of errors deemed serious or potentially lethal.

Doximity NYSE: DOCS reported fiscal second-quarter revenue growth of 4% and raised its full-year outlook, as expanding use of its artificial intelligence tools and improving AI cost efficiency helped the company exceed its guidance.

Revenue was $174.5 million for the quarter, while adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, reached $89 million, a margin of 51%. CFO Matt Sonefeldt said the profitability beat was driven equally by higher-than-expected revenue and better-than-anticipated AI efficiency.

The company said quarterly active prescribers using its workflow products rose 34% from a year earlier. Co-founder and CEO Jeff Tangney said approximately half of the 1.8 million U.S. prescribers used Doximity in their workflows during the quarter, citing telehealth, scheduling and AI as areas of growth.

AI Search attracts pharmaceutical customers

Doximity’s AI Search advertising product has been purchased by 16 of the top 20 pharmaceutical companies, with three more in contracting, Tangney said. Sonefeldt said AI Search has become an eight-figure bookings product, with revenue recognition beginning after its first program launched in July.

Pharmaceutical customers that purchased AI Search bought more than two programs each on average, Sonefeldt said. Customer interest also led Doximity to more than double the number of available medical conditions covered by the offering.

Tangney said he believes AI Search spending has been mostly incremental to the company’s existing business, although he could not say whether all of it was. Doximity plans to offer auction-based purchasing to a few pilot clients late this year or early next year, an approach he said could make the product more accessible to smaller accounts.

Sonefeldt said pharmaceutical advertising is the primary way Doximity expects to monetize AI. The company also sells AI agreements to health systems for a nominal amount as part of its broader workflow suite.

Management cautioned that AI Search revenue will ramp gradually through calendar 2027. Tangney said medical-legal reviews for new products can take months, and Sonefeldt said some early upfront contracts assume a gradual ramp.

Health system adoption and AI accuracy

Doximity’s health system client base for its AI suite grew to more than 190 from 165 in the prior quarter, Tangney said. The group includes 10 of the nation’s top 20 hospitals, according to the company.

NewYork-Presbyterian now provides access to Doximity AI from its electronic health record, while UC San Diego Health is among the early adopters of the company’s Patient Context feature. The feature can draw on information in a patient’s chart to provide patient-specific answers and guideline-based treatment plans.

Tangney said Patient Context clients have seen roughly double the usage, but cautioned that simply adding an AI button to an electronic health record does not necessarily produce immediate adoption without training.

The company also discussed DoseCheck, a medication-safety verifier, and the addition of Wolters Kluwer’s UpToDate clinical reference to its AI answers. Tangney said Doximity’s study of more than a quarter-million AI drug-dose queries across major models found a 2.3% error rate, with 40% of those errors classified as serious or potentially lethal.

Guidance raised as AI costs become more efficient

For fiscal 2027, Doximity raised its revenue guidance to $678 million to $683 million, representing 6% growth at the midpoint. Sonefeldt said the increase reflected the second-quarter beat and a modest additional raise tied to greater visibility into the commercial AI pipeline.

The company forecast third-quarter revenue of $195 million to $196 million and adjusted EBITDA of $102.5 million to $103.5 million. It expects full-year adjusted EBITDA of $317 million to $325 million, incorporating continued investment in clinician AI usage.

Non-GAAP gross margin fell to 88% from 92% in the previous quarter as Doximity scaled AI spending. Still, Sonefeldt said cost of revenue grew at less than half the rate of AI prompt volume in the second quarter, compared with similar growth rates for the two measures in the first quarter. He attributed efficiency gains in part to purchasing capacity in advance, using multiple models and improving the company’s proprietary AI harness.

GAAP diluted earnings per share were $0.18, while non-GAAP diluted earnings per share were $0.36. Doximity ended the quarter with $713 million in cash, cash equivalents and marketable securities, had no debt and generated $91 million in free cash flow.

Looking toward the pharmaceutical advertising upfront season, Sonefeldt described the business environment as more stable than a year earlier, but not one experiencing a dramatic macroeconomic acceleration. Most upfront contracts are typically signed by the end of December, and Doximity plans to provide an update on the season and AI Search in February.

About Doximity (NYSE:DOCS)

Doximity, Inc operates a digital platform designed for medical professionals in the United States. Its network connects physicians, nurse practitioners, physician assistants, pharmacists and other healthcare professionals, providing tools for professional communication, collaboration and career development.

The company offers services including secure messaging, telehealth, digital faxing, physician scheduling and professional networking. Doximity also provides medical news and educational content, as well as recruiting and job-search resources for healthcare professionals.

Doximity generates additional revenue through digital marketing and engagement solutions for pharmaceutical companies, healthcare organizations and health systems.

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