DOCS – Doximity Analysis

Revenue — Quarterly Breakdown (FY ending Mar 31)

Period	Rev YoY	Subscription Mix	Sub YoY	Op Margin	Net Margin	OCF Margin
FY2025 (Mar 31, 2025)	+20%	95%	+21%	40%	39%	48%
Q1 FY2026 (Jun 2025)	+15%	95%	+15%	37%	+36%	42%
Q2 FY2026 (Sep 2025)	+23%	95%	+23%	38%	+37%	—
Q3 FY2026 (Dec 2025)	+9%	95%	+8%	39%	33%	—

⚠ Q3 revenue growth slowed sharply to +9% and operating income fell 17% YoY — pharma budget delays hitting bookings. Q4 guided at +4% growth only.

Margin Trend

Operating Margin

40% FY2537% Q138% Q239% Q3*

Net Margin

39% FY2536% Q137% Q233% Q3

* Op. Income fell 17% YoY in Q3 despite revenue growth

Valuation vs. 47 Peers

P/E

21.01

#2 / 47

Fwd P/E

15.39

#10 / 47

P/FCF

15.04

#12 / 47

P/S

7.25

#39 / 47

PEG

1.80

#15 / 47

ROIC

24.23%

#1 / 47

ROA

20.56%

#1 / 47

ROE

23.82%

#2 / 47

P/E 22 vs industry 54 — trades at 59% discount to sector despite #1 ROIC and ROA rankings.

Key Events — click to expand

HeadwindPharma MFN agreements freezing marketing budgets

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16 of the 20 largest pharma companies signed Most-Favored-Nation pricing agreements, resulting in delayed bookings with Doximity as they waited for regulatory clarity. Pharma marketing spend — Doximity's primary revenue source — is being deferred, not cancelled. Management did not include AI revenue in guidance, making near-term numbers look worse than the underlying trend.

GuidanceQ4 guided at only +4% growth — stock dropped sharply

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Despite Q3 sales and EPS exceeding expectations, management guided Q4 revenue growth at just 4%. Full-year FY2026 revenue guidance narrowed to $642.5M–$643.5M (vs prior $640M–$646M). The market reacted negatively to the soft forward guidance, pricing in continued pharma budget pressure into H2.

AI100+ top health systems using Doximity AI — not yet in guidance

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Over 100 of the top US health systems started using Doximity's AI products, including over 300,000 prescribers in Q3. Management confirmed the AI adoption rates are promising but deliberately excluded any AI revenue from its forward guidance. This creates a scenario where the actual earnings could materially beat guidance if AI monetisation starts in FY2027.

Moat117% revenue retention — verified user base as competitive moat

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Doximity achieves 117% net revenue retention, meaning existing customers expand their spending year over year. The platform has 2M+ registered members — over 80% of US physicians, 60%+ of nurse practitioners, and 90%+ of graduating medical students. This verified professional network is extremely difficult to replicate and acts as a structural moat. Pharma penetration: 52% of mega-brands (>$100M) and only 11% of mid-tier brands — significant headroom.

Capital$500M new share repurchase program authorised

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Doximity authorised a new $500M share repurchase program after completing a prior $417M buyback. With no long-term debt (LTDebt/Eq 0.01, #14/47) and strong free cash flow generation, the company is returning capital to shareholders aggressively. EPS beat consensus ($0.46 vs $0.45 expected) despite the revenue slowdown — indicating strong cost discipline.

Key Risks

Pharma Budget Dependency95% subscription revenue is primarily from pharma marketing spend. Any sustained reduction in pharma digital marketing budgets directly impacts top-line growth with limited ability to diversify quickly.

Growth Visibility BrokenTwo consecutive quarters of guidance cuts and pharma booking delays have broken near-term predictability. The Q4 +4% guide vs Q2's +23% shows the variance is high.

AI Revenue Not Yet MonetisedHeavy AI investment is currently a financial headwind. Management has excluded AI revenue from all guidance — creating uncertainty on when/whether it converts to earnings.

Valuation Still Elevated on P/SP/S of 7.25 ranks #39/47 — not cheap on a sales basis despite the decline. If growth stalls, multiple compression could continue.

Upside Catalysts

Pharma Budget RecoveryMFN uncertainty is regulatory, not structural. Once clarity arrives, deferred pharma bookings could return rapidly — creating a catch-up quarter.

AI Monetisation (FY2027+)100+ health systems using AI products with 300K+ prescribers. If even partial monetisation begins, revenue could beat guidance materially — and management has set a low bar.

Mid-Tier Pharma PenetrationOnly 11% penetration in mid-tier pharma brands vs 52% in mega-brands. Significant white space in a captive ecosystem with no real competitor.

Deep Discount to IndustryP/E 22 vs sector 54. ROIC and ROA both #1 of 47 peers. If growth normalises above 10%, multiple re-rate could be significant.

Conviction Level

PHASED

Disciplined accumulation approach

Bull vs. Bear

BULL

✓ Pharma headwind is cyclical, not structural
✓ AI layer monetises in FY2027+
✓ 117% revenue retention — customers expand
✓ #1 ROIC & ROA of 47 peers
✓ $500M buyback signals confidence

BEAR

✗ Q4 guide only +4% — growth stalling
✗ AI spend is current earnings headwind
✗ Single revenue stream (pharma marketing)
✗ P/S 7.25 not cheap if growth stays low
✗ MFN policy uncertainty could last 12–18M

Key Signals to Watch

Next Catalyst

Q4 FY2026 Earnings — March/April 2026

Watch for pharma booking recovery and first mention of AI revenue contribution

SIGNAL 1

Revenue growth re-accelerates
above 12% in FY2027

SIGNAL 2

AI revenue included in
forward guidance

SIGNAL 3

Pharma clients confirm
budget normalisation

Bottom Line

Doximity is one of the cleanest platform businesses in healthcare — a verified, sticky, near-monopoly professional network that pharma companies must use to reach physicians. The 117% revenue retention and #1 ROIC/ROA rankings reflect a genuinely exceptional business. The problem is not the business — it's the timing. Pharma clients froze discretionary marketing spend amid MFN policy uncertainty, and the AI investment is a current cost without yet being a current revenue line.

At P/E 22 vs the industry's 54, the market has already priced in the soft patch. A phased, disciplined accumulation strategy makes sense here — the moat is durable, the headwind is regulatory and temporary, and the AI optionality is not in any valuation model yet. Not a trade. A 2–3 year hold for the thesis to fully materialise.