Doximity shares fall 7.45% as margins contract despite revenue beat

Key Facts

Doximity reported on November 5 revenue of $174.54 million for the second quarter of its fiscal 2027, topping analysts’ estimates of $170.82 million, while revenue rose 4% year over year. Adjusted earnings were 36 cents a share, above estimates of 35 cents. But the stock fell 7.45% in extended trading to $30.70 at the time Benzinga’s report was published, in a reaction that coincided with declines in annual profitability measures. The stock closed at $33.18 in the November 5 session, after closing at $34.67 on November 4. The results showed a contrast between the revenue and adjusted earnings beat on one hand and the year-over-year contraction in earnings and margins on the other.

The company reported net income of $34.7 million for the quarter, compared with $62.1 million in the same period a year earlier, while net income margin fell to 19.9% from 36.8%. Adjusted EBITDA declined 12% year over year to $88.9 million from $100.8 million. The margin on that measure fell to 50.9% from 59.8%, according to results Doximity published via Business Wire. Adjusted earnings per share fell to 36 cents from 45 cents a year earlier, while diluted GAAP earnings per share declined to 18 cents from 31 cents. The comparisons show that revenue growth did not prevent a decline in quarterly earnings and margins.

By contrast, operating cash flow remained close to its year-earlier level, at $93.3 million versus $93.9 million, while free cash flow was $91.3 million compared with $91.6 million. Chief Executive Jeff Tangney said the company delivered "another quarter of record engagement, while continuing to invest heavily in AI and maintaining an adjusted EBITDA margin of 51%." Tangney said the number of active prescribers in quarterly workflows, including users of AI tools, rose 34% year over year to a record. He added that about half of 1.8 million U.S. prescribers used the platform in their workflows during the quarter. These metrics show platform use expanding alongside the continued investment cited by the CEO.

The company said more than 190 health systems had purchased its AI bundle as of the November 5 results announcement. On October 29, management announced the launch of DoseCheck, a tool designed to detect dangerous medication dosing errors before they reach physicians. In its August first-quarter results announcement, the company said active prescribers in workflows grew more than 30% year over year and AI Search queries increased more than 25% quarter over quarter. These figures provide context for the recent expansion of the company’s AI-related products. The impact of this activity on financial results remains visible alongside the year-over-year declines in net income and adjusted earnings in the reported quarter.

Doximity raised its fiscal 2027 revenue outlook to a range of $678 million to $683 million, compared with previous guidance of $671 million to $681 million and average estimates of $677.56 million. In its August announcement, the company had forecast second-quarter revenue of $170 million to $171 million before later reporting revenue of $174.54 million. For the fiscal third quarter ending December 31, 2026, the company set a revenue range of $195 million to $196 million, compared with estimates of $195.14 million. It also set adjusted EBITDA guidance of $102.5 million to $103.5 million for the third quarter and $317 million to $325 million for fiscal 2027. The new annual revenue outlook is above the estimate cited by Benzinga’s report, while the next-quarter range is close to analysts’ estimate.

Management said the third quarter is the upfront contracting season, and that most marketing budget contracts for the following year are typically signed by the end of December. It said it would update investors on upfront contracting and AI Search progress on the February call. That puts the contracting season and AI Search results among the upcoming milestones the company identified for investors. Meanwhile, the stock fell in extended trading after the results, with Investing.com attributing the decline to investor focus on margin contraction. The report said the stock fell 6.6% in Thursday’s extended trading, while Benzinga’s report recorded a 7.45% drop to $30.70 at the time of publication on November 5.