Doximity (DOCS Quick QuoteDOCS - Free Report) is entering a pivotal phase as it accelerates investments in artificial intelligence (AI) 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 35.9% so far this year against the industry's 18.2% growth and the S&P 500 Index’s 12.4% rise.

Doximity, with a market capitalization of $4.98 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?

Clinical AI Adoption is Scaling Rapidly Across Physicians: Doximity is seeing substantial usage momentum across its clinical AI platform. Quarterly active workflow prescribers increased more than 30% year over year, with nearly half using Doximity’s AI tools in the first quarter. AI prompt volume increased more than 25% sequentially, while AI Scribe users grew approximately 10-fold in July from the prior-year period. This engagement is important because AI-search monetization depends on physician adoption and usage. Doximity also reported 165 signed health-system AI clients, including major institutions such as Northwestern, Penn Medicine and the University of Michigan. Rising usage strengthens the platform’s data, engagement and monetization potential.

Strong Clinical-AI Accuracy Could Strengthen Enterprise Adoption: Doximity’s positioning in clinical AI received an important validation from the independent NOHARM study, which evaluated 24 clinical AI models across 1,100 real-world patient cases. Doximity Ask recorded a 4.8% error rate versus 13.6% for Anthropic’s best-performing model cited by management, while also receiving the highest safety ratings among U.S. models. Doximity attributes the performance partly to its expert-verified drug reference and more than 12,000 physician PeerCheck editors. This differentiation matters commercially because hospitals are increasingly evaluating AI through privacy, safety and governance frameworks, potentially favoring vendors with stronger clinical controls and enterprise relationships.

AI is Expanding Doximity’s Addressable Customer Budgets: AI is allowing Doximity to participate in spending categories beyond traditional digital pharmaceutical marketing. Management said the company is increasingly engaging with AI innovation, insights and analytics and search budgets, creating multiple potential sources of incremental demand. This diversification is particularly relevant because the traditional pharma spending environment remains tight, although management described it as more stable. AI search is also creating higher-level discussions with pharmaceutical executives and generating opportunities to sell additional Doximity products. Meanwhile, the SMB pharma segment is expanding rapidly, with one agency-partnership team growing more than 100% in the quarter.

What’s Weighing on DOCS Stock?

Overall Revenue Growth Remains Relatively Modest: Despite strong AI engagement, Doximity’s first-quarter revenue increased only 7% year over year to $157 million, while fiscal 2027 guidance implies approximately 5% growth at the midpoint. Management characterized the underlying HCP market as growing in the mid-single digits, meaning the current outlook does not yet reflect substantial market share acceleration from AI monetization. Management also acknowledged that this year’s growth rate could be more of a timing-related “blip” because much of fiscal 2027 revenue was determined before AI monetization entered the upfront cycle. Therefore, investors still need evidence that AI can materially lift consolidated growth rather than simply offset slower legacy-platform expansion.

AI Investment is Pressuring Gross Margins: Doximity’s accelerated AI adoption is creating a near-term profitability trade-off. Adjusted gross margin declined to 88% in the first quarter from 91% a year earlier as the company increased AI-compute spending to support higher-than-expected usage. Management expects elevated AI investment throughout fiscal 2027, with gross margins projected to remain in the mid-to-high 80% range. Adjusted EBITDA margin is expected at approximately 47% for the full year, below the 48% achieved in the first quarter. Although management believes AI economics will improve as models become more efficient, the timing of revenue monetization versus infrastructure costs creates near-term margin pressure.

Pharma Customers Continue to Face Tight Budgets: Doximity remains exposed to a constrained pharmaceutical advertising environment despite signs of stabilization. Management described the overall buying environment as “still tight, but certainly more stable,” while noting that some customers only committed to shorter-term purchases during the previous upfront cycle. First quarter benefited partly from additional spending by several customers, including a large top-20 pharma account that had reduced spending previously. This indicates that some of the improvement may reflect normalization rather than a broad-based acceleration in pharmaceutical budgets. If pharma companies remain cautious with marketing expenditures, Doximity could face pressure converting its growing AI engagement and customer pipeline into sustained high-single-digit or double-digit revenue growth.

Doximity, Inc. Price

Doximity, Inc. price | Doximity, Inc. Quote

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 60 days, DOCS’ earnings estimate for fiscal 2027 has declined 9 cents.

Stocks to Consider

Some better-ranked stocks from the broader medical space are Globus Medical (GMED Quick QuoteGMED - Free Report) , West Pharmaceutical (WST Quick QuoteWST - Free Report) and KORU Medical Systems (KRMD Quick QuoteKRMD - Free Report) .

Globus Medical, currently carrying a Zacks Rank #1 (Strong Buy), reported a second-quarter 2026 adjusted 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%.

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 each of the trailing four quarters, the average surprise being 17.4%.

KORU Medical Systems, currently carrying a Zacks Rank of 2, reported a second-quarter 2026 adjusted EPS of 1 cent, which surpassed the Zacks Consensus Estimate by 150%. Revenues of $12 million beat the Zacks Consensus Estimate by 2.78%.

KRMD has an estimated earnings growth rate of 66.7% for 2026. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 58.33%.