Doximity shares surged more than 100% in premarket trading after CEO Jeffrey Tangney revealed the company's AI search tool earns more than 10 times its cost per search, while first-quarter revenues of $156.6 million topped consensus estimates.
Shares of medical networking platform Doximity more than doubled in premarket trading Friday after CEO Jeffrey Tangney disclosed striking unit economics for the company's new AI search product, triggering a sharp rally and a short squeeze that amplified the move.
"It's early days on our AI search product, but I can tell you we're earning more than 10 times per search in revenue than it costs," Tangney said Thursday evening during the company's first-quarter fiscal 2027 earnings call. He added that AI model costs are expected to decline over time, reinforcing confidence in the product's long-term economics.
Shares were up more than 130% in premarket trading before settling as regular-session trading opened. By mid-morning, the stock was still up approximately 55%, underscoring the weight investors placed on Tangney's remarks.
Doximity reported first-quarter revenues of $156.6 million and adjusted EBITDA of $74.8 million, both above consensus estimates. The company also raised its full-year revenue guidance range by $6 million, or 5%, to between $671 million and $681 million.
Analysts, however, believe the raised forecast significantly understates the AI opportunity. Jessica Tassan at Piper Sandler wrote in a Friday note to clients that the fiscal 2027 guidance raise "does not reflect a significant contribution from the expanding AI commercial pipeline described on the earnings call and in callbacks," characterizing management's approach to AI search revenue in the outlook as "conservative."
Tangney went further on the call, suggesting that the AI search capability is expanding the company's addressable market in ways that caught even management off guard. "Frankly, the [total addressable market] that this unlocks for us within health, within pharma has been a real surprise and upside for us," he said.
Michael Cherney at Leerink Partnerships wrote Thursday that AI search is "reinforcing confidence that Doximity's elevated AI investments will ultimately support attractive long-term margins."
The stock's surge was compounded by a short squeeze. About 17% of shares available for trading had been sold short heading into the earnings release, according to FactSet. As those short sellers were forced to cover their positions, their buying activity added further upward pressure to the stock.
The reversal is notable given the stock's trajectory entering the week. Doximity, which carried a market capitalization of $3.7 billion before Friday's move, had been down 50% for the year prior to the results.
Whether the AI search contribution scales into a durable revenue driver remains an open question — Tangney himself described it as "early days." But analysts who spoke with the company after the call appear broadly convinced that the fiscal 2027 guidance range does not yet capture the full commercial potential of the product, leaving room for further upward revisions as the pipeline matures.
Sara Montes de Oca is the Editor in Chief of TechEchelon. Previously a correspondent and producer in Washington, D.C., covering business, finance, and politics.
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