How Did Tempus AI Power Its Move to Positive EBITDA in Q3?

For the first time, Tempus AI TEM reported positive adjusted EBITDA of $1.5 million in the third quarter — a landmark achievement after a decade of effort. The growth was driven by a combination of robust top-line performance across major business segments and disciplined operational execution. 

The Genomics business delivered strong momentum, with total volumes rising 33% year over year. This included 27% growth in Oncology testing and a 37% rise in Hereditary testing, reflecting broad-based strength across essentially all assays offered. 

After earlier disruptions caused by restructuring the team when introducing the MRD portfolio, the company spent multiple quarters retraining and stabilizing the sales force. During the third-quarter earnings call, management stated that the team has finally become more efficient and fully trained, enabling stronger execution. Alongside Genomics, its Data Licensing (Insights) business grew 38% during the quarter and secured an impressive $150 million in new total contract value across multiple significant agreements. 

Tempus also highlighted ongoing cost discipline and efficiency efforts that helped expand margins. Notably, the company delivered positive adjusted EBITDA even after absorbing several million dollars in incremental expenses related to the Paige acquisition, which was completed mid-quarter. The company stated that without this acquisition-related drag, adjusted EBITDA would have approached $4 million. 

Peer Update

Myriad Genetics MYGN posted adjusted EBITDA of $10.3 million in the third quarter of 2025, with a full-year forecast of $27-$33 million. This profitability was driven by MYGN’s strong 70.1% adjusted gross margin, supported by favorable test mix and continued operational efficiencies in its labs. Additionally, Myriad Genetics kept a tight control on discretionary spending, which reflected in lower adjusted operating expenses year over year. 

Quest Diagnostics DGX delivered stronger profitability in the third quarter, with gross and operating margins expanding 110 basis points (bps) and 132 bps, respectively. DGX continues to target 3% annual cost savings and productivity improvements through its Invigorate cost-savings program, which includes structured plans to drive savings and improve productivity across the value chain. Quest Diagnostics deploys automation and AI technologies to improve quality, service, efficiency, and the workforce experience.

TEM Stock Outperforms Industry & Benchmark

Over the past year, Tempus AI shares have rallied 26.7%, outperforming the industry’s 12.3% growth and the S&P 500 composite’s 16.4% improvement.

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Expensive Valuation

TEM currently trades at a forward 12-month Price-to-Sales (P/S) of 8.00X compared with the industry average of 5.81X.

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TEM Stock Estimate Trend

In the past 30 days, Tempus AI's loss per share estimate for 2025 has narrowed 3 cents. 

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TEM stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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