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Tempus AI Turns Non-GAAP Profit on Surging Genomics and Data
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Key Takeaways
Tempus AI delivered its first positive adjusted EBITDA as revenue jumped 84.7% to $334.2 million.
Genomics revenue more than doubled, led by oncology and hereditary testing with 217,000 clinical tests run.
TEM sees 2025 revenue of $1.265B and expects $20M adjusted EBITDA in Q4 on pricing and scale benefits.
Tempus AI (TEM - Free Report) reported non-GAAP profit in the third quarter of 2025 as genomics testing and data services gained momentum. The stock carries a Zacks Rank #3 (Hold) with a VGM Score of D. It is weak on Value but stronger on Momentum.
Revenue rose 84.7% year over year to $334.2 million, while adjusted EBITDA improved to $1.5 million. GAAP losses persisted but narrowed on a per share basis.
Business Mix and Growth Drivers
Genomics revenue more than doubled year over year to $252.9 million in the third quarter, powered by oncology testing at $139.5 million and hereditary testing at $102.6 million. Data and services revenue increased 26.1%, with Insights up 37.6%. Clinical tests delivered climbed to 217,000, up 33% year over year, reflecting broad demand across oncology and hereditary use cases.
The company’s diagnostics momentum extends beyond a single period. Management noted durable growth across oncology and the addition of Ambry hereditary testing, supported by improved average selling prices in oncology and rising contributions from Insights within data.
Pricing Catalysts That Can Lift Unit Economics
Management is migrating a large share of xT CDx volume to FDA-approved and Advanced Diagnostic Laboratory Test tracks and plans further FDA submissions. The company expects to submit xT for FDA approval by the end of 2025, with the xR assay thereafter, creating a framework for ADLT pricing into 2026. These steps, together with incremental progress in minimal residual disease reimbursement, are designed to lift average selling prices and unit economics over time.
While reimbursement improved sequentially in the quarter, average realized pricing remains well below parity with peers until approvals are secured. The minimal residual disease (MRD) ramp is described as measured, with uplift expected to accrue quarter by quarter.
Bookings to Revenue Timing Matters
Customer demand for its Data & Services offerings is strong, with multi-quarter deals, mid-20% booking growth year over year and about $150 million in new contracts. However, bookings are recognized over multi-year periods and are typically back weighted, which can mute near-term revenue recognition and quarterly margin improvement.
This elongated conversion profile can constrain reported growth even when underlying demand is healthy. As a result, quarterly revenue and margin cadence may not fully capture the momentum building in Insights and broader data services.
Profit Path and Operating Leverage Checkpoints
Guidance calls for sharply higher 2025 revenue of about $1.265 billion for the consolidated Tempus AI and Ambry business, implying roughly 80% annual growth and positive adjusted EBITDA for the full year. Cost discipline, portfolio integration, sales force efficiency and improving average selling prices are the driving factors. GAAP losses continue, reflecting non-cash items and acquisition effects, but the trajectory improved versus last year.
Image Source: Zacks Investment Research
Management expects approximately $20 million of adjusted EBITDA in the fourth quarter of 2025, with the full year slightly positive considering Paige’s quarterly loss impact. We anticipate continued EPS improvement through 2026 and a potential positive EPS in 2027.
Balance Sheet and Investment Capacity
Tempus AI ended the third quarter with $764.3 million in cash and marketable securities, supporting continued investment in AI compute and regulatory initiatives. This liquidity profile equips Tempus AI to pursue approvals, reimbursement expansion and data platform growth without sacrificing operational flexibility.
What the Rank Implies for Near-Term Performance
Tempus AI carries a Zacks Rank #3 (Hold) and a VGM Score of D, with component Style Scores of Value F, Growth C and Momentum B. That combination typically signals expectations for market-like performance over the next one to three months. Investors should monitor estimate revisions tied to ADLT-linked pricing, FDA decisions and MRD reimbursement progress.
Among peers, 10x Genomics (TXG - Free Report) and Doximity (DOCS - Free Report) also screen as Neutral in our coverage framework, offering reference points on momentum and valuation across medical information and genomics tools.
Key Risks to Monitor
Pricing remains below peers until regulatory approvals are finalized, and the bookings-to-revenue lag can obscure near-term growth and margin trends. GAAP losses, together with execution complexity around MRD and integration, present additional pressure points. Successful navigation of regulatory, reimbursement and integration milestones is central to sustaining the profit trajectory. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Tempus AI Turns Non-GAAP Profit on Surging Genomics and Data
Key Takeaways
Tempus AI (TEM - Free Report) reported non-GAAP profit in the third quarter of 2025 as genomics testing and data services gained momentum. The stock carries a Zacks Rank #3 (Hold) with a VGM Score of D. It is weak on Value but stronger on Momentum.
Revenue rose 84.7% year over year to $334.2 million, while adjusted EBITDA improved to $1.5 million. GAAP losses persisted but narrowed on a per share basis.
Business Mix and Growth Drivers
Genomics revenue more than doubled year over year to $252.9 million in the third quarter, powered by oncology testing at $139.5 million and hereditary testing at $102.6 million. Data and services revenue increased 26.1%, with Insights up 37.6%. Clinical tests delivered climbed to 217,000, up 33% year over year, reflecting broad demand across oncology and hereditary use cases.
The company’s diagnostics momentum extends beyond a single period. Management noted durable growth across oncology and the addition of Ambry hereditary testing, supported by improved average selling prices in oncology and rising contributions from Insights within data.
Pricing Catalysts That Can Lift Unit Economics
Management is migrating a large share of xT CDx volume to FDA-approved and Advanced Diagnostic Laboratory Test tracks and plans further FDA submissions. The company expects to submit xT for FDA approval by the end of 2025, with the xR assay thereafter, creating a framework for ADLT pricing into 2026. These steps, together with incremental progress in minimal residual disease reimbursement, are designed to lift average selling prices and unit economics over time.
While reimbursement improved sequentially in the quarter, average realized pricing remains well below parity with peers until approvals are secured. The minimal residual disease (MRD) ramp is described as measured, with uplift expected to accrue quarter by quarter.
Bookings to Revenue Timing Matters
Customer demand for its Data & Services offerings is strong, with multi-quarter deals, mid-20% booking growth year over year and about $150 million in new contracts. However, bookings are recognized over multi-year periods and are typically back weighted, which can mute near-term revenue recognition and quarterly margin improvement.
This elongated conversion profile can constrain reported growth even when underlying demand is healthy. As a result, quarterly revenue and margin cadence may not fully capture the momentum building in Insights and broader data services.
Profit Path and Operating Leverage Checkpoints
Guidance calls for sharply higher 2025 revenue of about $1.265 billion for the consolidated Tempus AI and Ambry business, implying roughly 80% annual growth and positive adjusted EBITDA for the full year. Cost discipline, portfolio integration, sales force efficiency and improving average selling prices are the driving factors. GAAP losses continue, reflecting non-cash items and acquisition effects, but the trajectory improved versus last year.
Image Source: Zacks Investment Research
Management expects approximately $20 million of adjusted EBITDA in the fourth quarter of 2025, with the full year slightly positive considering Paige’s quarterly loss impact. We anticipate continued EPS improvement through 2026 and a potential positive EPS in 2027.
Balance Sheet and Investment Capacity
Tempus AI ended the third quarter with $764.3 million in cash and marketable securities, supporting continued investment in AI compute and regulatory initiatives. This liquidity profile equips Tempus AI to pursue approvals, reimbursement expansion and data platform growth without sacrificing operational flexibility.
What the Rank Implies for Near-Term Performance
Tempus AI carries a Zacks Rank #3 (Hold) and a VGM Score of D, with component Style Scores of Value F, Growth C and Momentum B. That combination typically signals expectations for market-like performance over the next one to three months. Investors should monitor estimate revisions tied to ADLT-linked pricing, FDA decisions and MRD reimbursement progress.
Among peers, 10x Genomics (TXG - Free Report) and Doximity (DOCS - Free Report) also screen as Neutral in our coverage framework, offering reference points on momentum and valuation across medical information and genomics tools.
Key Risks to Monitor
Pricing remains below peers until regulatory approvals are finalized, and the bookings-to-revenue lag can obscure near-term growth and margin trends. GAAP losses, together with execution complexity around MRD and integration, present additional pressure points. Successful navigation of regulatory, reimbursement and integration milestones is central to sustaining the profit trajectory. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.