Shares of Doximity Inc. surged in premarket trading on Friday after the digital medical platform's management revealed strong economics for its new AI-powered search product, with the stock gaining more than 130% at one point before paring some of those gains after the US market opened.
The rally followed comments from CEO Jeffrey Tangney, who said Doximity is generating more than 10 times the revenue per AI search than the cost of running it. The comments have fuelled expectations that the company's AI investments could open a significantly larger market while supporting stronger long-term margins.
“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 during Doximity's first-quarter fiscal 2027 earnings call on Thursday, as per CNBC.
He added that AI costs could decline further as models become more efficient, potentially improving the economics of the product over time.
Doximity Raises Revenue Outlook
The AI opportunity comes on top of an already strong quarterly performance. Doximity reported first-quarter revenue of $156.6 million and adjusted EBITDA of $74.8 million, with both figures exceeding consensus estimates.
The company also raised its full-year fiscal 2027 revenue guidance by $6 million, or about 5%, to a range of $671 million-$681 million. However, analysts believe the upgraded guidance may not fully reflect the potential contribution from Doximity's expanding AI business.
Piper Sandler analyst Jessica Tassan said the fiscal 2027 guidance increase was largely driven by the first-quarter beat and did not include a significant contribution from the growing AI commercial pipeline discussed by management, CNBC reports. She described the company's approach to forecasting AI search revenue as conservative.
That leaves room for the AI product to become an additional growth driver if adoption accelerates.
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AI Search Could Expand Doximity's Market
Tangney also indicated that the impact of AI search could extend beyond improving the economics of Doximity's existing business.
The CEO said the technology had unexpectedly expanded the company's total addressable market (TAM) across the healthcare and pharmaceutical sectors.
That potential has attracted attention from analysts. Michael Cherney of Leerink Partners said the AI search product is strengthening confidence that Doximity's increased investment in artificial intelligence could ultimately support attractive long-term margins.
The economics are particularly notable because AI products typically require significant computing resources. If Doximity can generate substantially more revenue from each search than the cost of operating it, rising usage could potentially translate into meaningful incremental profitability.
Tangney also expects the cost side of the equation to improve as AI models become more efficient.
Short Sellers Add Fuel To Doximity Rally
The sharp move in Doximity shares may also have been amplified by positioning in the stock.
Around 17% of Doximity's freely tradable shares were sold short heading into the earnings announcement, according to FactSet.
The stronger-than-expected financial results and bullish comments around AI could have forced some short sellers to buy back shares to close their positions. Such buying can accelerate a stock's rise, creating what is commonly known as a short squeeze.
Doximity had entered Friday's session under considerable pressure. The stock was down around 50% for the year before the latest earnings report, with the company valued at about $3.7 billion before the surge.
The combination of heavy short interest, strong quarterly numbers and the unexpectedly high profitability of its AI search product therefore created a powerful catalyst for the stock.
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Doximity Stock Performance
Doximity shares rose more than 130% in premarket trading at their peak on Friday before giving up part of the gain after the regular session began. The stock was last reported up around 55% in the supplied market update.
As of 7 August 2026, 12:06 p.m. GMT-4, Doximity was trading at $27.79, up 34.51%, or $7.13, from the previous close of $20.66.
The stock opened at $38.86 and touched an intraday high of $40, before falling to an intraday low of $27.75. Its 52-week range stood at $17.15-$76.51.
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