Doximity's AI Search Gains Traction: A Long-Term Buy

Doximity reported fiscal 2027 second-quarter revenue of $175 million, driven by expanding AI adoption across its platform. The company's digital tools are deeply integrated into clinicians' daily workflows, creating a captive audience for pharmaceutical advertising.

Management highlighted three key developments: First, the new AI search commercial offering has been well-received, with 16 of the top 20 pharma companies already purchasing and three more in contracting. This opens access to a $14 billion annual digital pharma search market.

Second, quarterly active workflow prescribers grew 34% year-over-year to record highs, now surpassing half of all U.S. prescribers. This broad engagement reduces customer acquisition costs and strengthens the network effect.

Third, Doximity achieved AI cost leverage by prebuying compute capacity and optimizing infrastructure, keeping cost growth well behind prompt volume growth. This protects margins as AI usage scales.

Looking ahead, full-year revenue guidance was updated to $678-683 million, signaling steady demand and pricing discipline. The company also noted 190 health system AI clients and partnerships like dose check and UpToDate, reinforcing its competitive moat.

Doximity's ability to monetize AI search is a game-changer. By capturing a slice of the $14 billion digital pharma search market, the company expands its addressable market significantly. The fact that 16 of the top 20 pharma companies have already signed on validates the offering and provides a revenue tailwind.

The 34% growth in active prescribers is equally impressive. With over half of U.S. prescribers using Doximity's workflow tools, the platform's network effect strengthens, making it indispensable for pharma companies seeking to reach physicians. This should lead to higher ad spend and pricing power.

Efficient AI cost management is crucial for software margins. By achieving cost leverage, Doximity can invest in AI without sacrificing profitability, giving it a competitive edge over peers who may struggle with rising inference costs.

The updated revenue guidance of $678-683 million suggests mid-teens growth, which is solid for a profitable company. Operating efficiency and cash generation provide flexibility to invest in growth initiatives.

Overall, these factors position Doximity for sustainable long-term growth, making it an attractive stock for investors seeking exposure to healthcare digital transformation.