10-Q: Doximity Q3 2026: Revenue Up 10%, Net Income Dips

Doximity reported a 10% revenue increase for Q3 FY2026, reaching $185.1 million, while net income decreased to $61.6 million.

Summary

• Revenue for the three months ended December 31, 2025, increased by 10% to $185.1 million, compared to $168.6 million in the prior year.
• Net income for the three months ended December 31, 2025, decreased to $61.6 million from $75.2 million in the prior year.
• Adjusted EBITDA for the three months ended December 31, 2025, increased by 9.2% to $111.4 million, up from $102.0 million.
• For the nine months ended December 31, 2025, revenue grew 16% to $499.5 million, and net income increased to $176.9 million from $160.7 million.
• The company settled a securities lawsuit for $31 million, fully covered by insurance.
• Acquired Pathway Medical Inc., an AI-based medical knowledge platform, for $36.3 million on July 29, 2025.
• The board authorized a new $500 million Class A common stock repurchase program on February 3, 2026, following $417.0 million already repurchased under a previous program.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a mixed report. While revenue growth and Adjusted EBITDA remain strong, the decline in net income and net revenue retention rate for the quarter, coupled with ongoing legal uncertainties, introduces some caution despite strategic acquisitions and share repurchase programs.

Positives

• Strong revenue growth: 10% for the quarter and 16% for the nine months.
• Adjusted EBITDA increased by 9.2% for the quarter and 19.6% for the nine months, indicating operational efficiency.
• Growth in high-value customers: 126 customers with TTM subscription revenue greater than $500,000, up from 115.
• Successful acquisition of Pathway Medical Inc. to enhance AI capabilities and engineering workforce.
• Settlement of the securities lawsuit for $31 million, fully covered by insurance, resolving a significant legal overhang.
• New $500 million share repurchase program authorized, signaling confidence in future cash flow and commitment to shareholder returns.
• Positive impact from the Tax Act (H.R. 1) allowing accelerated deduction of R&D expenses, increasing prepaid taxes by $39.6 million.

Negatives

• Net income decreased by 18.1% for the three months ended December 31, 2025, to $61.6 million from $75.2 million.
• Diluted net income per share decreased to $0.31 from $0.37 for the three months ended December 31, 2025.
• Gross margin slightly decreased to 90% from 92% for the three months ended December 31, 2025.
• Net revenue retention rate decreased to 112% from 117%, indicating slower growth from existing customers.
• Increased operating expenses across all categories (R&D, Sales & Marketing, G&A) for both the three and nine-month periods.
• Other income, net, decreased for the three months due to lower yields earned on cash equivalents and marketable securities portfolio.

Risks

• Exposure to ongoing shareholder derivative lawsuits, with an inability to predict outcome or estimate loss.
• Litigation from OpenEvidence Inc. alleging unauthorized access to its AI medical information platform, with claims for injunctions and damages.
• Risks associated with future acquisitions, including integration challenges, unanticipated costs, and diversion of management attention.
• Potential for impairment charges on goodwill and other intangible assets if acquisitions do not yield expected returns.
• General market risks including interest rate fluctuations and inflation, which could impact investment income and costs.
• Risks related to the Class A common stock and the dual-class common stock structure.

Future Outlook

The company expects continued growth in revenue, expenses, and operating results, focusing on member and customer acquisition and retention, and maintaining profitability. Future investments are planned for business growth, capital expenditures, and sales and marketing efforts. The company also anticipates managing growth effectively, complying with regulations, defending litigation, protecting intellectual property, maintaining data privacy, and responding to technological changes. The sufficiency of cash and cash equivalents and marketable securities is expected to meet liquidity needs for at least the next 12 months.

Management Comments

• "We are the leading digital platform for U.S. medical professionals, as measured by the number of members."
• "Our mission is to help every physician be more productive and provide better care for their patients."
• "Doximity puts modern software in the hands of physicians and other medical professionals."
• "Our business model is designed to both respect and support physicians while driving value for our customers through our Marketing, Hiring, and Workflow Solutions."
• "Our business model has delivered high revenue growth at scale with profitability."

Industry Context

StockSavvy.ai notes that Doximity operates in the rapidly evolving digital health and medical technology sector, characterized by increasing demand for virtual care tools, AI-powered solutions, and professional networking platforms for healthcare professionals. The acquisition of Pathway Medical Inc. aligns with the broader industry trend of integrating AI to enhance medical knowledge and workflow efficiency. The company's focus on subscription-based solutions for pharmaceutical companies and health systems positions it within a growing market for targeted healthcare marketing and talent acquisition.

Comparison to Industry Standards

• Doximity's net revenue retention rate of 112% is solid, though a slight decrease from 117% in the prior year, suggesting a maturing customer base or increased competition compared to high-growth SaaS companies like Salesforce (often 120%+) or ZoomInfo (historically 110-120%).
• The gross margin of 90% is exceptionally strong, comparable to top-tier software companies such as Microsoft's cloud services or Adobe, indicating efficient delivery of its digital platform.
• The acquisition of Pathway Medical Inc. for $36.3 million, an AI-based medical knowledge platform, is a strategic move consistent with industry leaders like Google Health or IBM Watson Health (though IBM Watson Health has faced challenges), who are investing heavily in AI to augment medical capabilities.

Legal Proceedings

• Securities lawsuit (In re Doximity, Inc. Securities Litigation, No. 5:24-cv-02281 (N.D. Cal.)) settled on December 24, 2025, for $31 million, fully covered by insurance.
• Five shareholder derivative lawsuits (e.g., In re Doximity, Inc. Stockholder Derivative Litigation, No. 5:24-cv-02801 (N.D. Cal.)) are ongoing, asserting claims for violations of securities law, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste. The outcome is unpredictable, and the amount or range of loss cannot be reasonably estimated.
• OpenEvidence Inc. v. Doximity, Inc. et al. (No. 1:25-cv-11802-RGS (D. Mass.)) lawsuit filed on June 20, 2025, alleging unauthorized access to an AI medical information platform, violation of the Computer Fraud and Abuse Act (CFAA), breach of contract, unjust enrichment, and trespass to chattels. Motions to dismiss were partially denied on January 22, 2026, and litigation is proceeding.

Stakeholder Impact

• Shareholders: Impacted by decreased net income and diluted EPS for the quarter, but potentially benefit from the new share repurchase program and the resolution of the securities lawsuit. Ongoing derivative and AI-related lawsuits introduce uncertainty.
• Employees: Pathway Medical Inc. employees joining Doximity received RSUs and PSUs, indicating integration and retention efforts.
• Customers: Benefit from enhanced platform capabilities through the Pathway Medical acquisition and continued investment in Marketing, Hiring, and Workflow Solutions.
• Regulatory Authorities: The company continues to incur compliance costs associated with being a publicly-traded company.

Next Steps

• Continue to grow the platform and product offerings.
• Invest in cloud infrastructure and customer support organizations.
• Defend vigorously against the OpenEvidence Inc. lawsuit.
• Establish performance targets for the additional $8 million of PSUs over the next two fiscal years, beginning in fiscal 2027.
• Execute the newly authorized $500 million Class A common stock repurchase program.
• Evaluate the impact of new accounting standards (ASU 2023-09, ASU 2024-03, ASU 2025-05, ASU 2025-06).

Key Dates

Recommendation

While Doximity demonstrates solid revenue growth and strong Adjusted EBITDA, the decline in quarterly net income and the net revenue retention rate, coupled with ongoing legal challenges, suggest a "hold" recommendation. The strategic acquisition of Pathway Medical and the new share repurchase program are positive signals, but investors should monitor the resolution of the derivative and OpenEvidence lawsuits and the trend in net revenue retention for clearer direction.

Keywords

Doximity, DOCS, SEC filing, 10-Q, financial results, healthcare technology, medical platform, AI, physician network, Q3 2026, revenue, net income, EBITDA, stock repurchase, legal proceedings, Pathway Medical, acquisition