Doximity's stock soared after management revealed that its AI Search product earns more than 10 times its operating cost per search, with AI prompt volume up over 25% quarter-on-quarter.
The company's AI assistant, Doximity Ask, ranked as the top-performing U.S.-based clinical AI model in an independent study, outperforming competitors like Anthropic's Fable 5, signaling strong validation of its AI strategy.
What happened
Doximity shares jumped 32.62% on Friday after CEO Jeff Tangney disclosed that the company's AI Search product generates more than 10 times the revenue per search compared to its operating cost. AI prompt volume grew over 25% quarter-on-quarter, and AI Scribe note-taking users grew 10x in July year-over-year.
Why it matters
Doximity's independent study ranked its AI assistant, Doximity Ask, as the top-performing U.S.-based clinical AI model with the lowest error rates and highest safety ratings — even outperforming Anthropic's Fable 5. This validates the company's heavy investment in AI tools for healthcare professionals, suggesting the spending could generate strong returns.
What to watch
Tangney signaled that the profit margins on AI offerings may expand further as AI models become more efficient over time, reducing the cost to operate Doximity's AI services.
Doximity reported fiscal 2027 first-quarter revenue of $156.6 million, up 7% year-over-year, for the three months ended June 30. However, adjusted EBITDA fell 6% to $74.8 million as the digital networking, news, and telehealth platform for healthcare professionals aggressively invested in AI tool development.
The turning point came when CEO Jeff Tangney revealed the returns on those investments during the earnings call. Doximity Ask, the company's clinical AI assistant, ranked as the top-performing U.S.-based model in an independent study of 24 clinical AI models, with the lowest clinical error rates and highest safety ratings. Notably, it significantly outperformed Anthropic's Fable 5. This validation directly supported Tangney's claims about usage momentum: AI prompt volume grew more than 25% quarter-on-quarter, while AI Scribe note-taking users grew 10x in July compared to the prior year.
The headline-grabbing detail, however, was Tangney's disclosure of AI Search economics. "In terms of the economics of the usage, 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 us to run that today," he said. Tangney added that investors should expect these margins to improve further: "Over time, we probably expect the overall AI cost, if anything, go down as models get more efficient." Tangney framed this as a "once-in-a-generation opportunity to build the new AI age of medicine." Investors responded by bidding up Doximity shares 32.62% on Friday.
Doximity's stock performance reflects investor enthusiasm for the company's AI monetization strategy. While the company reported modest top-line growth—revenue rose 7% year-over-year to $156.6 million in fiscal 2027 Q1—and declining adjusted EBITDA (down 6% to $74.8 million), the narrative shifted decisively when management detailed the economics of its AI products. The independent validation of Doximity Ask's clinical performance appears to have resolved investor concerns about whether the company's substantial AI spending would translate into tangible competitive advantages.
Tangney's disclosure that AI Search generates over 10x return on investment per query, combined with evidence of sharp usage growth (AI prompt volume up 25% quarter-on-quarter, Scribe users up 10x in July), paints a picture where near-term margin pressure may be offset by genuine unit economics. The CEO's comment that operating costs could decline further as models become more efficient suggests Doximity expects profitability to improve as the business scales, which may explain why investors rushed to bid up the stock despite the current quarter's EBITDA decline.
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