Doximity, Inc. (DOCS) Q2 2026 Earnings Call Transcript

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Overview

The earnings call reveals strong financial performance with a 56% EBITDA margin and 15% revenue growth guidance. Product development is promising with AI investments and Pathway acquisition. Market strategy is robust, focusing on AI and health systems. Expenses are controlled with margins expected to remain stable. Shareholder return is not explicitly mentioned, but positive cash flow is anticipated. Q&A insights show optimism in AI and integrated programs, despite some uncertainties in policy impacts. Overall, the sentiment is positive, likely leading to a stock price increase of 2% to 8%.

Key Financial Performance

Revenue $169 million for the second quarter of fiscal 2026, representing 23% year-on-year growth. This was a 7% beat from the high end of the guidance range. Growth was driven by AI-optimized integrated programs and the client portal.

Adjusted EBITDA $101 million for Q2 fiscal 2026, with a margin of 60%. This represents a 32% year-on-year growth and was 15% above the high end of the guidance range.

Free Cash Flow $91.6 million for Q2 fiscal 2026, up 37% year-on-year. Growth attributed to strong operational performance.

Net Revenue Retention Rate 118% on a trailing 12-month basis, indicating strong customer retention and expansion.

Subscription-based Revenue Customers 121 customers contributed at least $500,000 each in subscription-based revenue on a trailing 12-month basis, a 16% increase from 104 customers in the prior year. These customers accounted for 84% of total revenue.

Non-GAAP Gross Margin 92% for Q2 fiscal 2026, flat compared to the prior year period.

Share Repurchase $21.9 million worth of shares repurchased during Q2 fiscal 2026 at an average price of $61.62.

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Operating Highlights

AI optimized integrated programs and portal: Led to better-than-expected first half performance, contributing to revenue growth.

Ask DoxGPT feature: Allows physicians to ask follow-up questions and dive deeper into clinical topics directly from the newsfeed.

AI tools for clinical reference and documentation: Quarterly active prescribers grew more than 50% from the prior quarter.

Pathway acquisition and AI scribe: Fully integrated Pathway's medical data set and AI models into DoxGPT, providing advanced features like instant drug reference and access to over 2,000 medical journals.

Doximity Scribe: HIPAA-compliant ambient notetaking tool with rapid adoption, nearly tripling quarterly active users compared to Q1.

Client portal and SMB customer reach: Broadened reach among SMB customers, contributing to 100% year-over-year bookings growth in this cohort.

Multi-module integrated offerings: Represented over 40% of bookings in Q2, compared to less than 5% in the same quarter last year, driving smoother upsell cycles.

Revenue and profitability: Achieved $169 million in revenue (23% YoY growth) and a 60% adjusted EBITDA margin in Q2.

Free cash flow: Increased by 37% YoY to $91.6 million in Q2.

Customer base: 121 customers contributed at least $500,000 each in subscription-based revenue, a 16% increase from the prior year.

AI investment: Continued investment in AI solutions, with costs expected to increase in the back half of the year.

Policy changes and budget uncertainty: Acknowledged potential impact of recent policy changes on client budgets, taking a measured approach to revenue guidance.

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Risk or Challenges

Client budget uncertainty: Client discussions suggest some uncertainty over how recent policy changes may influence annual budgets, which are expected to be finalized over the next 2 months. This could impact revenue projections and client spending.

Fluctuating quarterly revenue growth: Transition to more integrated programs has led to fluctuations in quarterly revenue growth, which may affect predictability and financial planning.

Increased AI development costs: Costs related to developing and powering AI solutions are expected to increase in the back half of the year, which could impact profitability.

Dependence on pharma business: The increased outlook is primarily due to the outperformance of the pharma business during the upsell season. Over-reliance on this sector could pose risks if market conditions change.

Revenue concentration risk: 121 customers contributing at least $500,000 each accounted for 84% of total revenue. High revenue concentration among a small number of clients could pose risks if any major client reduces spending.

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Guidance & Outlook

Revenue Outlook for Q3 FY 2026: Doximity expects revenue in the range of $180 million to $181 million, representing 7% growth at the midpoint.

Revenue Outlook for FY 2026: Doximity expects full fiscal year revenue in the range of $640 million to $646 million, representing 13% growth at the midpoint.

Adjusted EBITDA Outlook for Q3 FY 2026: Doximity expects adjusted EBITDA in the range of $103 million to $104 million, representing a 57% adjusted EBITDA margin.

Adjusted EBITDA Outlook for FY 2026: Doximity expects adjusted EBITDA in the range of $351 million to $357 million, representing a 55% adjusted EBITDA margin.

Pharma Business Performance: The outperformance of the pharma business during the upsell season has contributed to the increased outlook. Multi-module integrated offerings have grown significantly, representing over 40% of bookings in Q2 FY 2026 compared to less than 5% in the same quarter last year.

AI and Integrated Programs: Doximity's AI-optimized programs and integrated offerings are expected to provide higher returns for clients and better predictability for the business long-term. These programs are contributing to a smoother upsell cycle and more strategic spending cadence.

Investment in AI: Doximity plans to continue investing in AI, with costs related to developing and powering AI solutions expected to increase in the back half of FY 2026.

Market Conditions and Client Budgets: Client discussions suggest some uncertainty over how recent policy changes may influence annual budgets, which are expected to be finalized over the next 2 months. This uncertainty is reflected in the implied Q4 guidance.

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Shareholder Return Plan

Share Repurchase Program: During the second quarter, we repurchased $21.9 million worth of shares at an average price of $61.62. We believe repurchasing our shares is a valuable use of the incremental cash we generate, above what's needed to reinvest in the business. As of September 30, we had $280 million remaining in our existing repurchase program.

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Key Q&A

Q:Is the uncertainty around budget discussions related to the end-of-year budget flush or next year's budgets?

A:The uncertainty is primarily related to calendar 2026 budgets, which are expected to be released in the next two months. The general environment has slowed down big decisions like annual budget sizes, potentially leading to more caution in the upfront cycle. However, client engagement with the platform remains high, and interest in integrated programs is growing.

Q:What is Doximity's approach to AI and its potential for physicians?

A:Doximity plans to fully leverage AI, as evidenced by a 50% quarter-on-quarter growth in AI QAUs and a tripling of scribe users. The AI tools, such as DoxGPT and scribe, are designed to save doctors time and improve workflows. Doximity has conducted hundreds of head-to-head studies showing superior quality and depth of answers compared to competitors. They have also partnered with research solutions to provide access to over 2,000 medical journals.

Q:Are clients making changes to their budget allocations, particularly regarding direct-to-consumer (DTC) advertising?

A:It is too early to determine the impact of potential changes in DTC advertising budgets. Some brands are revisiting their strategies due to policy uncertainties, but DTC ad dollars are often controlled by different agencies than HCP dollars. Conversations with agency partners about moving DTC ad money to Doximity are ongoing, but outcomes are uncertain.

Q:How has the transition to integrated programs affected budget flush expectations and upsell timing?

A:The transition to integrated programs has led to clients deploying upsell dollars earlier in the year, resulting in a stronger Q2 and a more challenging Q3 comparison. Upsell dollars are now more evenly distributed over the last 4-6 months of the year, leading to a 14% year-over-year growth rate for the back half of calendar 2025. This transition is expected to deliver more consistent value to customers and better predictability for Doximity.

Q:What is the current status and future potential of Doximity's AI strategy?

A:Doximity's AI strategy is integrated into its programs, with 40% of sales coming from AI-optimized integrated programs. The client portal has seen a 3x increase in active users, and ROI studies have increased 10x. Telehealth usage has grown to over 300,000 daily calls, and AI tools like scribe and DoxGPT are being integrated into workflows. The company is in the early stages of marketing these tools to its user base.

Q:How is Doximity targeting small and medium businesses (SMBs) and agency partners?

A:Doximity's agency partnership program has contributed to over 100% year-over-year growth in SMBs. The program has brought in high seven-figure business and provides significant value to smaller clients through ROI data and audience creation capabilities. The program is expected to continue scaling.

Q:What is the significance of integrated offerings in Doximity's bookings?

A:Integrated offerings represented 40% of upsell sales in Q2, impacting revenue in Q2 and Q3. These programs provide better visibility, consistent returns, and easier upsell opportunities for customers. They are expected to lead sales in the upfront cycle and represent a significant portion of future bookings.

Q:What is the long-term potential of multimodal integrated programs?

A:Doximity believes multimodal integrated programs could become the vast majority of its business due to their ability to deliver strong ROI through AI optimization. These programs simplify client engagement and provide better results, similar to trends seen in consumer internet platforms.

Q:How is Doximity's AI suite being adopted by health systems?

A:Doximity works with over 300 health systems, representing 45% of U.S. physicians. Many have signed on to the AI suite, and the company expects to report more details in the coming quarters. Health systems value Doximity's trusted partnership, HIPAA compliance, and ability to handle protected health information.

Q:What is the impact of recent policy changes, such as the Trump Rx initiative, on Doximity's business?

A:It is too early to assess the impact of the Trump Rx initiative. While it appears to be a net positive for healthcare by expanding access to GLP-1s for Medicare and Medicaid patients, its effect on upfront budgets is not yet clear.

Q:What is the role of Pathway in Doximity's AI strategy?

A:Pathway has been integrated into DoxGPT, providing accurate, peer-reviewed answers to drug-related questions. While not yet monetized, Pathway enhances Doximity's AI capabilities and positions it uniquely in the market. The acquisition has been a game-changer for delivering accurate and fast answers to physicians.

Q:What is Doximity's market share in clinical reference, and how does it position itself?

A:Doximity does not have specific market share data but aims to provide accurate, peer-reviewed answers through its integrated drug reference. The company is relatively new in the clinical reference space but plans to lean in fully and compete effectively.

Q:What is the growth potential of Doximity's health system business?

A:Doximity's health system business is growing, particularly in enterprise offerings like on-call scheduling and recruiting solutions. The enterprise business is one of the fastest-growing segments, and recruiting solutions have seen 25% year-over-year growth. Health systems are expected to be a long-term growth driver.

Q:How does Doximity view the medical device industry as a growth opportunity?

A:While the medical device industry is smaller than pharma and health systems, Doximity has a consistent presence and sees it as a potential growth area. The industry is behind pharma in digital adoption, but Doximity continues to focus on this segment.

Q:How has the adoption of integrated programs evolved among Doximity's clients?

A:Integrated programs initially gained traction with the largest clients but are now being adopted by mid-tier and SMB clients. This broader adoption indicates strong business health and client satisfaction with the optimization and returns provided by these programs.

Q:What is the status of Doximity's client portal and its impact on sales?

A:The client portal has tripled in active users and significantly increased sales productivity, conversion rates, and upsell speed. It allows clients to see ROI more frequently, influencing their spending decisions positively. The portal continues to be a valuable tool for Doximity's growth.

Q:How does Doximity integrate with large pharma CRMs like Veeva and Salesforce?

A:Doximity complements Veeva by focusing on digital marketing, while Veeva focuses on in-person sales. The two platforms are complementary rather than competitive. Doximity does not work as much with Salesforce, which has limited presence in this space.

Q:How does Doximity view competition in the HCP engagement space?

A:Doximity continues to gain market share by delivering industry-leading ROI through its unique suite of native solutions. While competition is increasing, Doximity's large platform, high engagement levels, and advancements in AI position it well to outgrow the market.

Q:What is the outlook for Doximity's R&D expenses and margins?

A:R&D expenses are expected to plateau as scale efficiencies kick in. While there is an initial expense boost for AI product launches, margins are not expected to change materially from the current 55% level.

Q:What is the significance of integrated programs in Doximity's bookings?

A:Integrated programs, which optimize across various modules, represented 40% of bookings. These programs simplify client engagement and deliver strong ROI, making them a significant growth driver for Doximity.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer to the potential impact of the Trump Rx initiative and other policy changes on upfront budgets, citing the recency of the news and limited details available. Additionally, they did not provide specific market share data for clinical reference or detailed long-term guidance on R&D expenses and investments in AI.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

DOCS Transcript

Doximity, Inc. (DOCS) Q2 2026 Earnings Call Transcript

Positive11-6

Doximity, Inc. (DOCS) Q1 2026 Earnings Call Transcript

Positive8-7

Doximity's earnings call summary and Q&A section indicate strong financial performance, with revenue and EBITDA exceeding guidance, and promising AI investments. Despite cautious guidance due to policy uncertainty, the company's robust client engagement, strategic AI integration, and successful product portfolio suggest a positive outlook. The Pathway acquisition's minimal cost impact and high engagement metrics further support this view. Overall, the company's strategic initiatives and market growth potential outweigh any uncertainties, leading to a positive sentiment.

Doximity, Inc. (NYSE:DOCS) Q4 2025 Earnings Call Transcript

Positive5-17

Doximity shows strong financial performance with significant revenue and EBITDA growth, a robust client retention rate, and successful AI tool adoption. Despite some uncertainties in AI investment payback and macroeconomic impacts, the company's strategic initiatives and share repurchase program indicate confidence. The Q&A highlights strong client interest in AI and no signs of market slowdown. The positive guidance and financial results, along with a proactive shareholder return plan, suggest a positive stock price movement in the short term.

Earnings call transcript: Doximity’s Q4 2025 results beat EPS expectations

Positive5-15

The earnings call reflects strong financial performance with record revenue and EBITDA growth, surpassing guidance. Despite cautious client spending due to macroeconomic factors, AI tools are driving double growth rates among adopters. The company's robust share repurchase program and stable margins further strengthen its position. While guidance is conservative, the overall sentiment remains positive due to strong client loyalty and operational efficiency. The Q&A session highlighted enthusiasm for AI and strategic investments, suggesting potential for future growth.

DOCS Report

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