DOCS: Pharma Advertising Shift And AI Expansion Will Drive Measured Opportunity And Risks

Key Takeaways

• AI-powered workflow tools and high platform engagement drive deeper customer retention, higher revenue per user, and expanding long-term margins.
  
• Broad client demand and digital marketing trends position Doximity for sustained growth, improved sales efficiency, and earnings stability through diversified revenue streams.
  
• Heavy short-term investment in free AI features, dependence on pharma marketing, regulatory risks, and slowing user growth could constrain revenue, margin, and earnings expansion.

Catalysts

Operates as a digital platform for medical professionals in the United States.

• The expanded adoption of AI-powered workflow tools (Scribe, Doximity GPT, and Pathway AI) is expected to further entrench Doximity as a core clinician productivity suite, driving frequency of platform use, deeper customer retention, and ultimately higher average revenue per user (ARPU) over time-supporting long-term revenue and margin expansion.
  
• Strong, broad-based demand from pharmaceutical, SMB, and health system clients-fueled by a digital-first shift in pharma marketing strategies and expansion of self-service/commercial portals-positions Doximity for sustained top-line growth, particularly as digital advertising continues supplanting traditional outreach, bolstering both revenue growth and sales efficiency.
  
• The stickiness and daily-use nature of Doximity's telehealth, scheduling, and workflow tools-amplified by ongoing healthcare workforce shortages-reinforce Doximity's value proposition and increase switching costs, supporting resilient net revenue retention (>118%) and reducing future churn, which underpins stable earnings and improving EBITDA margins.
  
• Growing penetration and upsell to enterprise health systems (including 17 of the top 20 U.S. systems) and accelerated momentum in recruitment/curative products leverages the regulatory and industry push toward digital, efficient, value-based care solutions, expanding addressable market and diversifying revenue streams, contributing to greater earnings visibility and lower cyclicality.
  
• Internal and product-facing AI initiatives are driving meaningful productivity gains and operational leverage (headcount flat while revenue grows, AI-enabled client portal efficiency), which is likely to support further EBITDA margin expansion and robust free cash flow, even as the company invests heavily in new growth vectors.

Doximity Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Doximity's revenue will grow by 11.0% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 39.9% today to 34.8% in 3 years time.
• Analysts expect earnings to reach $280.5 million (and earnings per share of $1.38) by about September 2028, up from $235.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 57.3x on those 2028 earnings, up from 55.4x today. This future PE is greater than the current PE for the US Healthcare Services industry at 57.2x.
• Analysts expect the number of shares outstanding to grow by 0.33% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.81%, as per the Simply Wall St company report.

Doximity Future Earnings Per Share Growth

Risks

• While Doximity is successfully launching AI products like Scribe and integrating new acquisitions, management's decision to offer key advanced features (e.g., Scribe, Pathway corpus, DocsGPT) for free in the near-term could limit direct revenue growth and slow the monetization of its third act; this may delay the positive financial impact typically expected from new product launches, constraining revenue and earnings expansion in the medium term.
  
• Doximity's continued heavy reliance on pharmaceutical marketing spend as its primary revenue driver exposes it to risks from regulatory or policy changes such as potential direct-to-consumer (DTC) bans, industry consolidation, or reduced pharma budgets, which could materially impact top-line growth and profitability over the long run.
  
• The company is experiencing strong broad-based client and user engagement growth, but mentions of "policy uncertainty" and the need for "measured guidance" in the second half of the year highlight ongoing vulnerability to regulatory and healthcare budget fluctuations, introducing uncertainty into renewal rates, revenue predictability, and net margins.
  
• While user engagement metrics are hitting record highs, a significant portion of physician adoption may plateau in the coming years as the platform nears saturation among U.S. clinicians; this dynamic can limit future network effect-driven growth, constricting both revenue momentum and margin leverage opportunities over the longer term.
  
• Although management expects AI investments to drive long-term efficiency, current and upcoming stock-based compensation ("high teens" as a percentage of revenue through 2027) and ongoing OpEx increases for AI personnel and infrastructure may pressure net margins, dilute EPS, and offset some near-term gains from operational scale, particularly if new monetization from AI features lags expectations.

Valuation

• The analysts have a consensus price target of $67.889 for Doximity based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $80.0, and the most bearish reporting a price target of just $55.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $805.8 million, earnings will come to $280.5 million, and it would be trading on a PE ratio of 57.3x, assuming you use a discount rate of 7.8%.
• Given the current share price of $69.51, the analyst price target of $67.89 is 2.4% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.