DOCS

Doximity is the rare asset-light software business that pairs a genuine moat with conservative finance. Its 10-K reports over 3 million members representing >85% of U.S. physicians and ~90% of graduating medical students — a network effect that is extraordinarily hard to replicate and underpins 89.1% gross margins and a 33.3% operating margin. FY2026 revenue grew 13.1% to $645M and operating cash flow rose 19.5% to $326M against essentially zero capex, so free cash flow ≈ $326M — an ~8.6% FCF yield on the $3.77B market cap (~12x FCF). The balance sheet is pristine: liabilities/equity of just 0.18x, $219M cash, no meaningful debt, and a 20.6% ROE. At a 21x P/E and 5.8x sales, the market is valuing this like a slowing software name rather than a profitable category leader.

The blemishes are real but explainable. Net income fell 12.2% to $196M even as revenue grew and the share count shrank 3.1% — but operating income dipped only 5.7%, and the gap is driven by a deliberate 40.5% surge in R&D to $131M to fund the Clinical AI Suite (Ask/DoxGPT and Scribe). The MD&A frames this as investment into AI-powered clinical workflow tools, and adjusted EBITDA still rose to $357.8M from $313.8M. Management also returned $432M via buybacks (up 259%), which drove retained earnings negative and shrank total equity/assets — an aggressive capital-return posture that signals confidence but is the reason the headline equity and asset lines fell.