Reasons to Retain Doximity Stock in Your Portfolio for Now

Doximity DOCS is entering a pivotal phase as it accelerates investments in artificial intelligence to expand beyond its core physician engagement platform. While robust physician adoption, growing enterprise AI deployments and exceptional cash generation strengthen its long-term outlook, a sluggish pharma advertising market, rising AI investments and commercialization risks could temper near-term financial performance.

Shares of this Zacks Rank #3 (Hold) company have lost 42.8% year to date compared with the industry's 15.5% decline. The S&P 500 Index has risen 11.8% during this period.

Doximity, with a market capitalization of $4.51 billion, is a global specialty medical device company.

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DOCS’ bottom line is estimated to improve 1.7% over the next five years. Its earnings beat estimates in two of the trailing four quarters and missed twice, delivering an average surprise of 3.13%.

What's Driving DOCS’ Performance?

AI Search Is Opening a New Commercial Growth Avenue: Doximity's AI Search business is emerging as a potentially significant incremental revenue stream, with the company already onboarding its first cohort across more than two dozen programs. Management said new AI Search contracts are driving the increase in fiscal 2027 revenue guidance, with most contracted revenues expected to be recognized in the third quarter.

The product is helping Doximity access higher-level decision-makers and innovation budgets at pharmaceutical companies, expanding its commercial relationships beyond traditional digital marketing. Management also noted that AI Search currently generates more than 10 times the revenue per search relative to its cost, indicating attractive unit economics that could improve further as utilization scales.

Rapid Clinical AI Adoption Strengthens Competitive Position: Doximity is gaining meaningful traction in clinical AI, with quarterly active workflow prescribers increasing more than 30% year over year and nearly half of them using AI tools. AI prompt volume rose more than 25% sequentially, while AI Scribe users increased sharply. The company's Ask platform also ranked strongly in the independent NOHARM study, posting a 4.8% clinical error rate compared with 13.6% for Anthropic's best-performing model cited by management. The combination of physician engagement, drug-reference integration and more than 12,000 physician PeerCheck editors could strengthen trust among hospitals and clinicians, providing an important competitive advantage as healthcare AI adoption accelerates.

Expanding Health-System Adoption Creates Opportunity: Doximity's enterprise AI footprint is expanding rapidly, with 165 signed health-system AI clients, including eight top Honor Roll hospitals. Recent wins with major academic institutions demonstrate that Doximity is increasingly becoming part of institutional clinical workflows rather than simply serving as a physician networking platform.

Management believes the market is moving toward greater emphasis on privacy, risk management and clinical accuracy, areas where Doximity believes its physician-reviewed AI architecture provides differentiation. The growing adoption of AI Search, Ask and Scribe also creates opportunities to cross-sell multiple products within the same health system, potentially increasing customer lifetime value and reducing dependence on pharmaceutical advertising over time.

What’s Weighing on DOCS Stock

AI Investment is Compressing Margins: Doximity's transition toward AI is creating a meaningful near-term profitability trade-off. Adjusted gross margin declined 300 basis points year over year to 88% in the first quarter, primarily because of higher AI compute costs required to support stronger-than-expected clinician usage.

Management expects elevated AI spending to continue throughout fiscal 2027, with adjusted EBITDA guidance implying a 47% margin, below the 48% achieved in the first quarter. Approximately 90% of incremental AI expenses will support the clinical AI suite and be recognized in cost of revenues. Although management expects eventual efficiency improvements, the timing mismatch between investment and monetization could constrain earnings growth in the near term.

Pharmaceutical Advertising Budgets Remain Tight: Despite improving customer engagement, Doximity continues to operate in a relatively cautious pharmaceutical spending environment. Although management characterized the overall buying environment as stabilizing but pressure still remains. Management maintains expectations for mid-single-digit growth in the HCP digital marketing market.

Doximity's full-year revenue guidance of $671-$681 million represents only 5% growth at the midpoint, suggesting that the underlying core business remains relatively subdued. Although AI Search is helping the company access innovation and analytics budgets, traditional pharmaceutical marketing remains sensitive to budget cycles and shorter-term commitments. Consequently, slower recovery in pharma spending could limit growth while the company simultaneously increases AI-related expenses.

Customer Concentration and Contract Structure Create Uncertainty: Doximity's strong relationships with large customers also create concentration risk. The company’s 127 pharma and hospital customers generating more than $500,000 annually accounted for 83% of total revenues, while its top 20 customers achieved 112% net revenue retention. Although these figures demonstrate strong customer economics, reliance on a relatively concentrated group of large accounts makes revenues sensitive to changes in pharmaceutical budgets and individual customer spending decisions.

Management also noted that AI Search initially launched with conservative inventory caps and shorter three- to four-month commitments, highlighting that the new revenue stream is yet to establish long-duration contract visibility. Larger, longer contracts during the upcoming upfront season will be key to improving predictability.

Doximity, Inc. Price

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Estimate Trend

The Zacks Consensus Estimate for fiscal 2027 revenues is pegged at $675.7 million, implying growth of 4.8% from the year-ago reported figure. The consensus mark for adjusted EPS is pinned at $1.33, indicating a decline of 12.5% from the previous year’s recorded level.

In the past 30 days, DOCS’ earnings estimate for fiscal 2027 has declined 7 cents.

Stocks to Consider

Some better-ranked stocks from the broader medical space are Globus Medical GMED, Veracyte VCYT and West Pharmaceutical WST.

Globus Medical, currently sporting a Zacks Rank #1 (Strong Buy), reported a second-quarter 2026 adjusted earnings per share (EPS) of $1.34, which surpassed the Zacks Consensus Estimate by 19.6%. Revenues of $789.6 million beat the Zacks Consensus Estimate by 0.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

GMED has an estimated long-term earnings growth rate of 12.4%. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 27.9%.

Veracyte, currently flaunting a Zacks Rank #1, reported a second-quarter 2026 adjusted EPS of 54 cents, which surpassed the Zacks Consensus Estimate by 25.6%. Revenues of $150.3 million beat the Zacks Consensus Estimate by 4.1%.

VCYT has an estimated earnings growth rate of 8.4% for 2026. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 41.8%.

West Pharmaceutical, carrying a Zacks Rank #2 (Buy) at present, reported second-quarter 2026 adjusted EPS of $2.37, which beat the Zacks Consensus Estimate by 13.9%. Revenues of $872.3 million surpassed the Zacks Consensus Estimate by 4.2%.

WST has an estimated long-term earnings growth rate of 16%. WST’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.4%.

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This article originally published on Zacks Investment Research (zacks.com).

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