Over the past month, Doximity’s (DOCS Quick QuoteDOCS - Free Report) shares have lost approximately 4.4% despite the company reporting solid fourth-quarter fiscal 2025 results with $138.3 million in revenues and a 50% adjusted EBITDA margin. For fiscal 2025, revenues totaled $570.4 million, up 20% year over year, with adjusted EBITDA rising 36% to $313.8 million and margin expanding to 55%.

One-Month Price Performance

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As investors weigh this pullback, the broader context of Doximity’s strong free cash flow generation ($97 million in Q4), robust net revenue retention, and ongoing investments in integrated multi-module offerings and AI-driven workflow tools suggest the selloff may present a strategic entry point. This article explores how to play DOCS stock, identifying near and long-term growth drivers, potential headwinds and an actionable investment framework.

Factors Driving DOCS’ Prospect

Continued Revenue and Margin Expansion: In fourth-quarter 2025, Doximity’s top line beat the high end of the company’s guidance by 4% and sustained a 17% annual growth rate. Adjusted EBITDA of $69.7 million was 10% above the high end of DOCS’ guidance. This margin strength underscores the operating leverage in Doximity’s model. Free cash flow in the fourth quarter expanded 56% year over year, contributing to $916 million in total cash, cash equivalents, and marketable securities by the quarter’s end. The robust free cash flow supports share repurchases, with $26.8 million of buybacks executed in the fourth quarter at an average price of $33.73.

Raised Fiscal 2025 Guidance: Doximity raised full-year fiscal 2025 revenue guidance by $55-65 million to a range of $619-$631 million, suggesting 10% growth at the midpoint. Adjusted EBITDA guidance was raised $26-37 million to $333-$345 million, implying a 54% margin. These upward revisions were driven by stronger-than-expected pharma year-end upsells, new product traction and efficient January program launches.

EPS Estimates

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Robust Client Engagement and Retention: Net revenue retention in the fourth quarter reached 119% on a trailing 12-month basis, with top 20 clients achieving 123% retention. The cohort of customers generating more than $500,000 in annual subscription revenues grew to 116 (up 17%) from 99 a year ago, accounting for 84% of total revenues. Unique active prescribers leveraging Doximity’s newsfeed exceeded one million for the first time, and workflow tool usage surged — AI prompts has crossed 1.8 million— indicating strong engagement across products.

Doximity’s Premium Price Tag Signals Short-Term Caution

Valuation-wise, Doximity is overvalued, as suggested by the Zacks Value Score of D.

In terms of forward 12-month Price/Earnings (P/E), DOCS’ shares are trading at 36.05X, higher than the sector’s 14.26X.

5-Year Valuation

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Challenges Affecting DOCS’ Short-term Prospects

Macro and Policy Uncertainty: While Doximity has not yet observed a slowdown from policy changes or macro headwinds, management prudently assumed a pharmaceutical HCP digital market growth of 5-7% for fiscal 2026, which remained flat year over year. This conservative stance reflects potential impacts from drug pricing reforms or broader economic volatility. Healthcare systems and recruiting businesses are more susceptible to near-term policy shifts. Although subscription enterprise offerings have shown improvement, Doximity’s guidance does not assume sustained momentum in these segments, given their sensitivity to regulatory and macro dynamics.

Competition for Physician Attention: As digital health adoption accelerates, Doximity competes with established players like Veeva Systems (VEEV Quick QuoteVEEV - Free Report) , Teladoc Health (TDOC Quick QuoteTDOC - Free Report) and IQVIA Holdings (IQV Quick QuoteIQV - Free Report) for both marketing budgets and clinician engagement. Market share gains are subject to continued innovation and service differentiation. Technology incumbents (e.g., Microsoft, Zoom) and emerging startups also vie for telehealth and AI mindshare. Doximity must sustain product innovation in AI and workflow tools to mitigate potential adoption deferral by physicians fatigued by multiple platforms.

Monetization of AI Remains Low: While AI products like Doximity GPT have spurred 5-times year-on-year growth in prompts, monetization remains nascent. Management expects to ramp AI investments in fiscal 2026 but acknowledges that payback periods and long-term margin contributions are still uncertain. Balancing AI R&D with capital allocation toward high-margin core offerings will be critical to preserving the current 50%+ EBITDA margin trajectory.

Competitor Performance

Veeva Systems reported 17% revenue growth in first-quarter fiscal 2026, driven by its cloud-based life sciences CRM, underscoring strength in the healthcare technology sector.  VEEV continues to deepen its partnerships with top 20 pharma companies, reinforcing its competitive edge in life sciences CRM.

Teladoc Health saw a 7% increase in virtual care visits in the first quarter of 2025, yet operating margins remained pressured due to continued investment in platform expansion. TDOC is expanding its chronic care programs, aiming to boost recurring revenues, though profitability remains a challenge.

IQVIA Holdings achieved 1.1% year-over-year revenue growth at constant currency in the first quarter of 2025 as its data analytics and contract research services gained traction across pharmaceutical clients. IQV is leveraging AI and machine learning across its real-world data platforms to enhance clinical trial efficiency and scalability.

Hold DOCS at Present

Doximity’s fourth-quarter fiscal 2025 results demonstrate a profitable, high-growth business anchored by robust revenue expansion and margin strength. The company’s drivers include strong client engagement, as evident from strong net revenue retention, upgraded fiscal 2025 guidance and significant free cash flow generation. Key challenges include macro and regulatory uncertainty, intensified competition for physician attention, and the need to monetize emerging AI assets without sacrificing margins.

We caution investors against adding any new position in DOCS due to expensive valuation. However, for those who have already invested, holding the stock at present would be a prudent move. The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.