Doximity shares experienced a dramatic surge, rising more than 130% in premarket trading before paring some gains after the company delivered strong first-quarter results that exceeded Wall Street expectations. According to latest reports, CEO Jeffrey Tangney revealed that Doximity is generating more than 10 times the revenue per AI search than the cost of running it, fundamentally changing the economics of AI-powered search in the healthcare sector. The stock rally was further fueled by the company's decision to raise its revenue forecast for fiscal 2027, signaling strong confidence in its AI-driven growth trajectory and demonstrating the company's ability to execute on its growth strategy in the competitive healthcare AI market.
Tangney revealed that Doximity's clinical AI recorded a 4.8% error rate in physician-focused testing, significantly outperforming what he called Anthropic's best model, Fable 5, which achieved a 13.6% error rate. As reported by The Economic Times, Doximity had previously announced that its Doximity Ask clinical AI platform outperformed OpenEvidence, Claude Fable 5 and other frontier models in an independent Stanford-Harvard study on clinical AI safety. This performance comparison has positioned the company as a specialized healthcare AI player in the competitive AI landscape, with the CEO indicating that AI search technology has unexpectedly expanded the company's total addressable market (TAM) across the healthcare and pharmaceutical sectors.
The company reported strong financial results for the quarter, with first-quarter revenue of $156.6 million and adjusted EBITDA of $74.8 million, both figures exceeding consensus estimates. According to CNBC, 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, with Piper Sandler analyst Jessica Tassan describing the company's approach to forecasting AI search revenue as conservative. The economics are particularly notable because AI products typically require significant computing resources, making Doximity's profitability metrics particularly impressive in the competitive healthcare AI market.
The sharp move in Doximity shares may have been amplified by significant short positioning in the stock. According to FactSet, around 17% of Doximity's freely tradable shares were sold short heading into the earnings announcement. 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, creating what is commonly known as a short squeeze. Doximity had entered Friday's session under considerable pressure, with the stock down around 50% for the year before the latest earnings report, giving the company a valuation of 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 created a powerful catalyst for the stock.
