By Dean Seal

Doximity is taking a guarded approach to guidance until it can see how shifting federal policies affect its big pharmaceutical clients.

The company, which runs a networking platform for healthcare professionals, on Thursday provided a weaker-than-expected outlook for its current fiscal year. Much of the caution stems from uncertainty around how the budgets of Doximity's key healthcare clients will be affected by the Trump administration's global tariffs, executive orders and indications of a desire to shake up the healthcare industry.

"There is a big cloud of policy uncertainty that I think we're all assuming will continue this year," Chief Executive Jeff Tangney said on a call with analysts.

The stock fell more than 20% after hours on Thursday. In Friday's midday trading, it was down 12% at $51.54, well off the $83 high it hit back in February.

Investors had their sights set on another gangbuster year. Sales in fiscal 2025 were up 20% from strong revenue retention, particularly among Doximity's top 20 customers. The company now has 116 customers contributing more than $500 million in annual subscription revenue. And those customers accounted for 84% of fiscal 2025 revenue, meaning the risk of small-customer churn is diminishing, Mizuho analysts said in a research note.

Topping that performance was always going to be a challenge. Adding to that complexity is the weakening macroeconomic backdrop. Those two factors help explain why Doximity is only guiding for fiscal 2026 revenue to grow at about half the rate it did the year prior, the Mizuho analysts said

Doximity has previously faced hard times coming out of the pandemic as doctors went back to the office and the economy stuttered. It learned that upselling to its pharmaceutical clients becomes choppier when macroeconomic visibility weakens, Chief Financial Officer Anna Bryson said on the call.

With visibility once again dimming, Doximity is guiding for its clients' budgets to be on the softer side of its previous targets, Bryson said. "We think it's the right thing to do to be prudent, that we could see a slowdown," she said.

A debate will continue around how conservative Doximity's guidance is until the company's typical upselling season kicks off in August, JPMorgan analysts said in a research note. At that point, the company will have a better idea of how the budgets of its pharmaceutical clients are shaping up, they said.

Doximity's stock has more than doubled in the past 12 months. Friday's selloff seems to miss the bigger picture on strides Doximity made in fiscal 2025, Raymond James analysts said.

They said that the company's progress in areas such as its client portal and new products "only increase our confidence in the durable growth rate."

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

May 16, 2025 14:07 ET (18:07 GMT)

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