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Doximity (DOCS) Q1 FY27 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q1 FY27)· Health Care· Aug 6, 2026

Source: earnings call transcript

Executive summary

Doximity Q1 FY27 — AI Usage and Commercialization Drive Reaccelerated Growth

Doximity delivered strong Q1 FY27 results, driven by reaccelerated revenue growth and robust adoption of its AI tools, particularly Doximity Ask, which demonstrated leading accuracy in independent studies. The company is strategically increasing AI investments to capitalize on significant long-term opportunities, focusing on enhancing its clinical AI suite and expanding commercialization efforts, despite near-term impacts on gross margin and FCF.

Highlights

5

  • Revenue reaccelerated to $157 million in Q1 FY27, up 7% year-over-year, beating the high end of guidance by 3%.

  • Adjusted EBITDA was $75 million, representing a 48% margin, outperforming guidance by 8%.

  • Doximity Ask led among U.S. models in the NOHARM study with the lowest clinical error rate of 4.8% and highest safety ratings.

  • Quarterly active workflow prescribers grew more than 30% year-over-year, with AI prompt volume up over 25% quarter-over-quarter.

  • Secured 165 signed health system AI clients, including 8 of the nation's top Honor Roll hospitals.

Concerns

4

  • Non-GAAP gross margin decreased to 88% in Q1 FY27 from 91% last year due to increased AI compute spend.

  • GAAP effective tax rate increased to 40% in Q1 FY27 compared to 17% in the prior year, driven by equity compensation.

  • Free cash flow decreased to $40 million in Q1 FY27 due to normal fluctuations in collections.

  • Q2 FY27 revenue growth is expected to be modest at 1% year-over-year at the midpoint due to a tough comparison against last year's elevated growth.

Guidance & targets

CategoryTargetConfidence
Q2 FY27 Revenue
$170M-$171M
high materiality
High
Full-year FY27 Revenue
$671M-$681M
high materiality
High
Q2 FY27 Adjusted EBITDA
$80.5M-$81.5M
medium materiality
High
Full-year FY27 Adjusted EBITDA
$309M-$329M
high materiality
High
Full-year FY27 Stock-Based Compensation (SBC)
low 20%
medium materiality
High
Full-year FY27 Gross Margin
mid- to high 80% range
medium materiality
High

Risks & headwinds

Increased AI Compute Spend Q1 FY27

Non-GAAP gross margin declined to 88% from 91% last year.

Mitigation:Intentional investment to scale AI, expecting gross margins to trend mid- to high 80% range throughout FY27.

Higher Operating Expenses Q1 FY27

Higher costs in other OpEx lines.

Mitigation:Driven by annual merit increases, greater internal AI usage, and brand marketing; managed within overall adjusted EBITDA margin guidance.

GAAP Effective Tax Rate Increase Q1 FY27

Increased to 40% from 17% in the prior year.

Mitigation:Driven by tax treatment of equity compensation; non-GAAP effective tax rate remained stable at 21%.

Free Cash Flow Decrease Q1 FY27

$40 million in Q1 FY27, decreased YoY.

Mitigation:Due to normal fluctuations in collections; expected to normalize throughout the remainder of the year.

Tough Q2 FY27 Growth Comparison Q2 FY27

Q2 FY27 revenue midpoint of 1% year-over-year growth.

Mitigation:Due to comparison against last year's elevated 23% growth; stronger YoY growth expected in Q3 FY27 as AI search revenue builds.

Tight Pharma Spending Environment Current

Overall pharma spending environment still feels tight.

Mitigation:More stable than before; Doximity is winning innovation budget with AI search, opening new opportunities.

AI Accountability and Liability Ongoing

Potential for lawsuits (e.g., OpenAI case) and liability for AI outputs.

Mitigation:Increased scrutiny from hospital AI steering committees; Doximity's focus on accuracy, safety, privacy, and enterprise-level agreements.

PHI Leakage Risk Ongoing

Almost 30% of questions/prompts include PHI or patient identifiable information.

Mitigation:Health systems concerned about PHI exposure through unauthorized AI tools; Doximity offers privacy agreements and a secure platform.

What to watch in Q2 FY27

AI Search Revenue Recognition

Q3 FY27
Current No AI revenue recognized in Q1 FY27
Target Majority of contracted AI search revenue recognized

Why it matters

Indicates the successful commercialization and monetization of the new AI search product, crucial for future growth.

We expect the majority of AI search revenue contracted to date to be recognized during Q3.

Find out whether DOCS delivers this. Inve re-checks your case every morning.

Q&A highlights

What does the NOHARM study mean for Doximity's competitive position and its ability to influence physician trust and usage?

Doximity Ask's leading performance in the NOHARM study (lowest error rate, highest safety) validates its unique drug reference and physician PeerCheck editors. This is crucial for hospital AI steering committees concerned about liability and PHI leakage, positioning Doximity to win in enterprise clinical AI, similar to its telehealth success.

“Our Doximity Ask product led among U.S. models with the lowest clinical error rates and the highest safety ratings or as Fortune Magazine put it, 'Doximity Ask came out on top.'”

asked by Brian Peterson · answered by Jeffrey Tangney

2 min read 6 chapters

Detailed narrative

AI Study Validation and Enterprise Adoption

Doximity's AI Ask product demonstrated superior performance in the NOHARM study, an independent trial of 24 clinical AI models, achieving the lowest clinical error rate of 4.8%. This validation, coupled with unique built-in drug reference and 12,000 physician PeerCheck editors, positions Doximity strongly for enterprise adoption, securing 165 health system AI clients, including top-tier hospitals like Northwestern and Penn Medicine. The company anticipates a shift towards enterprise-level AI decisions in healthcare, driven by liability and PHI concerns.

Accelerated AI Usage and Scribe Growth

The company reported significant growth in AI usage, with quarterly active workflow prescribers increasing over 30% year-over-year and nearly half utilizing AI tools in Q1. AI prompt volume surged over 25% quarter-over-quarter, and AI Scribe note-taking users grew tenfold in July, establishing Doximity as a leader in both AI search and scribe markets. This rapid adoption underscores the strong engagement of its user base and the potential for further monetization.

Commercial AI Monetization and Market Expansion

AI search monetization is off to a strong start, driving higher client engagement and fueling new business across the broader pharma portfolio. While no AI revenue was recognized in Q1, the company has onboarded its first cohort of AI search customers across more than two dozen programs and expects the majority of contracted AI search revenue to be recognized in Q3 FY27. This expansion is opening up new budget opportunities within pharma, including innovation, insights/analytics, and search budgets.

Strategic AI Investment and Margin Impact

Doximity is intentionally increasing its AI investment in FY27, with over 90% of AI expenses focused on scaling the clinical AI suite and enhancing competitive advantages in safety and accuracy. This investment, driven by stronger-than-expected clinician usage, is expected to maintain gross margins in the mid- to high 80% range throughout the year. The company views this as a long-term strategic decision to capitalize on a significant technology shift in medicine.

Customer Growth and Retention

The company's largest customers continue to drive growth, with 127 pharma and hospital clients generating over $500,000 in annual subscription revenue, representing 7% growth year-over-year and contributing 83% of total revenue. Net revenue retention (NRR) for the top 20 customers was 112%, and overall NRR was 107% on a trailing 12-month basis, demonstrating strong customer loyalty and expansion within its key client base.

Balance Sheet Strength and Capital Allocation

Doximity maintains a strong financial position with $688 million in cash, cash equivalents, and marketable securities, remaining debt-free. The company repurchased $92 million worth of shares in Q1 FY27, with approximately $400 million remaining in its existing repurchase program as of June 30. This reflects management's confidence in the opportunistic use of capital and the company's robust cash flow generation capabilities.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.