Doximity: Strong Growth but What's Next?

Here's our initial take on Doximity's (NYSE: DOCS) financial report.

Key Metrics

Solid earnings but weak guidance

At first glance, Doximity's earnings report looked rather strong. In its fiscal fourth quarter (ended March 31), the digital medical platform provider reported 17% year-over-year revenue growth, which handily beat analysts' expectations. On the bottom line, the company's $0.38 adjusted earnings per share (EPS) was significantly greater than the $0.27 analysts had expected.

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Beyond the headline numbers, Doximity's earnings report was generally solid. Free cash flow increased by 56% year over year, and for the full fiscal year, the company reported a stellar 47% free cash flow margin.

The report wasn't all good news, however. Doximity's guidance wasn't quite what analysts had been looking for. For the first quarter, Doximity is guiding for $139.5 million in revenue at the midpoint of its range. Not only would that represent 1% sequential growth, but it also fell far short of analysts' expectations of $143 million.

For the full year, it wasn't much better. The consensus called for $635 million in revenue for the fiscal year ending in March 2026, and Doximity guided for $625 million at the midpoint. This would translate into 9.6% year-over-year revenue growth, much more of a deceleration than analysts expected.

Immediate market reaction

Unsurprisingly, the initial reaction to Doximity's earnings was negative. While the fiscal fourth-quarter results were impressive, giving disappointing forward guidance is a pretty certain recipe for a negative move in a stock.

As of 3:30 p.m. ET on May 16, the day after the earnings announcement, Doximity was trading lower by about 10%. After spiking higher earlier in the year, the stock is now at about 37% below its highs.

What to watch

Doximity still sees a massive opportunity ahead of it, estimating its addressable market at about $18.5 billion. Based on trailing-12-month revenue, it currently has about 3% of this amount. With slower growth projected going forward, it's a question of whether Doximity is having trouble maintaining its momentum now that about 80% of U.S. physicians already use the platform or if management is simply being cautious in a weakening economic climate.

Helpful resources

• Full earnings report
• Investor relations page

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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Doximity. The Motley Fool has a disclosure policy.