Can Doximity Keep Shrinking Its Share Count Through Its AI Investment Year

Doximity (DOCS), which calls itself the leading digital platform for U.S. medical professionals, has seen its stock fall steeply over the past year. Even after a rise over the past three months, the shares sit about 65% below their 52-week high. Management continued its repurchase program, allocating approximately $401 million over the latest twelve months. The test is whether it can keep that up through what it calls its AI investment year.

What Does The Buyback Do For Your Stake In Doximity?

Over the last year, Doximity cut its total shares outstanding by 2.9%. Each remaining share now claims a slightly bigger piece of the profit, even if you do nothing.

That should lift earnings per share faster than profit, but the edge has been thin. Over three years, net income grew 17.5% a year on average and earnings per share grew 18.4%. That gap is less than a point a year, so most of the per-share growth came from the business earning more.

Part of the repurchase volume offsets equity issued through employee stock-based compensation, which was 23% of revenue in the quarter ended June 30, the first quarter of Doximity's fiscal 2027, and management tied most of the increase to a grant for its AI-focused research team. After accounting for that stock pay, the payout to shareholders equals 5.5% of the company's market value.

Where Does Doximity Find The Cash To Keep Buying?

Pharma brands buy native ads that reach doctors on the platform, and hospitals buy its workflow and AI tools. That model turns about 45% of revenue into free cash flow over the trailing twelve months. Even so, free cash flow covers only about 0.7 times the cash it pays out, so cash on hand funds the rest.

At the end of fiscal Q1 2027, Doximity held $688 million of cash, cash equivalents and marketable securities, and no debt. That is more than the roughly $400 million then left on its repurchase program. So the buyback can run without borrowing, but at this pace it slowly drains the reserve.

The AI push is the other claim on that cash. Management raised its fiscal 2027 revenue guide but cut its adjusted EBITDA guide. Most of the AI spending pays for AI compute to serve doctors using Doximity Ask, its clinical AI tool. If that spending outruns the new revenue, less cash is left for the buyback.

Should You Read Doximity's Fall As An Opening?

In early August, management described the pharma spending environment as tight but more stable. A securities class action filed in September alleges violations of federal securities laws; the allegations remain unadjudicated and the company has not admitted liability.

The AI search programs sold to pharma customers at launch ran for only three to four months. Management now wants larger, longer contracts and expects most AI search revenue contracted so far to be recognized in fiscal Q3 2027. At 29 times trailing earnings, the price needs that growth.

Still-tight pharma budgets, the class action and that price make the fall a bet on AI search, not a clear opening. The debt-free reserve keeps the buyback running while you wait, but the buyback cannot supply the growth the price needs. Compare the shares with other stocks trading well below their highs.

Is Doximity's Buyback Enough Reason To Hold Through Its AI Bet?

Perhaps, if you can wait for AI search to become steady revenue. The buyback enlarges your stake while you wait, but it does not make the bet smaller. If you would rather not tie your money to one company's AI ramp, the Trefis High Quality Portfolio spreads that risk across quality businesses. That portfolio has a track record of outpacing the three major indices.