While one analyst thinks Doximity has a compelling AI opportunity, another worries that the company could cannibalize its core business of medical networking

Doximity reported mixed financial results on Thursday, but AI excitement is driving the stock sharply higher.

Investors are looking past near-term financials as they consider Doximity's potential to make a name for itself in the world of medical artificial intelligence.

Shares of Doximity $(DOCS)$, which runs a medical networking platform, were surging 50% on Friday morning after being up as much as 94% earlier in the trading day. While Doximity reported mixed financial results the prior afternoon, management also talked up the company's AI progress on the earnings call, and that commentary seemed to resonate.

Last month, researchers and physicians at Stanford and Harvard published an independent preprint study that looked at the performance of 24 clinical AI models. CEO Jeff Tangney pointed out on Doximity's earnings call that the company's "winning model" had a 4.8% error rate, compared with Anthropic's Fable 5, which finished with a 13.6% error rate.

Tangney said the company's performance reflected the benefits of a "model within a model" that focused on drug interactions as well as the work of over 12,000 physician editors who review the AI output.

"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," he said.

The company raised its revenue guidance to between $671 million and $681 million for the fiscal year that ends next March. Doximity's prior guidance for revenue called for between $664 million and $676 million.

That said, while Doximity beat revenue expectations for its most recent quarter, it came a penny short of estimates for adjusted earnings per share, delivering 29 cents.

Doximity has made AI a bigger focus lately, although it lost some key executive talent last summer when Nate Gross, one of its co-founders, departed for OpenAI, where he now runs healthcare strategy.

See also: Software stocks are fading - but these 4 could shine through the rest of the year

Needham analyst Ryan MacDonald noted commentary from management indicating uptake of Doximity's AI offerings.

"While these metrics may be cherry-picked, they are indicative of the broader adoption that [Doximity] is seeing as its AI tools are being increasingly selected at the health system level, with 165 signed health systems clients, up from 140 last quarter," MacDonald wrote, while reiterating a buy rating on the stock.

He thinks Doximity is in a strong position "as AI clinical evidence usage evolves from a bottoms-up, personal, physician-by-physician usage to a top-down, health system mandated tool usage strategy."

But BofA's Allen Lutz was more doubtful that AI would pay off for Doximity.

"The company is seeing negligible revenue from AI and the guidance raise does not contemplate any material AI contributions," he wrote in a note to clients as he stuck with his underperform rating on the shares.

Furthermore, he worries that AI "could cannibalize the core business, which would drive weaker returns on invested capital." The company primarily makes money from pharmaceutical ads that target physicians. Its revenue also comes from services sold to recruiters and health systems.

Jaimy Lee and Emily Bary contributed.

-Hannah Pedone