A Lesser-Known Stock Climbed More Than 100% In a Day After AI Surprise. Here’s Why.

Shares of medical technology company Doximity surged Friday after executives revealed that the company's new artificial intelligence search product is already generating exceptional profitability, sparking renewed investor enthusiasm and triggering a sharp short squeeze.

The healthcare platform's stock more than doubled in overnight trading following its fiscal first quarter 2027 earnings report, climbing more than 130% in premarket trading before paring gains after the opening bell. Shares were still up about more 35% at 2:43 p.m. ET.

The rally was fueled less by Doximity's quarterly results, which exceeded Wall Street expectations, and more by what CEO Jeffrey Tangney described as the extraordinary unit economics of the company's newest AI product.

"It's early days on our AI search product, but I can tell you we're earning more than 10 times per search in revenue than it costs," Tangney said during the company's earnings call Thursday. He added that the economics could improve even further as artificial intelligence models become more efficient. "Over time, we probably expect the overall AI cost, if anything, to go down as models get more efficient, so we feel good about the unit economics there," Tangney said.

The company also delivered a strong quarterly performance. Doximity reported first-quarter revenue of $156.6 million and adjusted EBITDA of $74.8 million, both exceeding analysts' consensus estimates. Management also increased its full-year revenue forecast by $6 million, raising guidance to a range of $671 million to $681 million.

However, analysts believe those projections may not fully capture the financial potential of the AI search business. Jessica Tassan, an analyst at Piper Sandler, said the company's updated outlook appears intentionally cautious and does not include a meaningful contribution from the expanding AI business discussed during the earnings call. She characterized management's revenue guidance as taking a conservative approach to estimating future AI search revenue, leaving room for potential upside if adoption accelerates.

Beyond profitability, executives also suggested the AI platform could significantly expand Doximity's long-term business opportunities. Tangney said the technology is opening new possibilities across healthcare and pharmaceutical markets that the company had not previously anticipated.

"Frankly, the total addressable market that this unlocks for us within health, within pharma has been a real surprise and upside for us," he said. Michael Cherney of Leerink Partners said the early success of the AI search initiative strengthens confidence that Doximity's increased investment in artificial intelligence will ultimately support attractive long-term profit margins.

The dramatic move was amplified by market mechanics as well as optimism over AI.
Before reporting earnings, roughly 17% of Doximity's publicly tradable shares had been sold short, according to FactSet.

When a heavily shorted stock rises sharply after positive news, traders betting against the company are often forced to buy shares to close their positions, creating what's known as a short squeeze.

That buying pressure likely accelerated Friday's gains, helping push the stock well beyond what might have resulted from earnings alone. The surge marked a remarkable turnaround for Doximity. Before Friday's rally, the company carried a market value of approximately $3.7 billion, while its shares had fallen about 50% since the start of the year.