How Tempus AI Is Building Scale While Near-Term Risks Persist

Several near-term factors appear to be weighing on investor confidence in Tempus AI TEM, even as the company remains strategically well positioned over the long term. The company’s Data and Services strength is reflected in its growing multi-quarter bookings, highlighted by sizable third-quarter additions and earlier large contract wins. However, uncertainty around the timing of when these bookings convert into reported revenues continues to weigh on market sentiment.

Management cautions that these bookings convert into revenues over multi-year periods and therefore do not translate into near-term top-line acceleration. Data revenues are typically recognized in the second half of the year as a result of customer budgeting cycles, which can lead to uneven quarterly results. Although backlog growth enhances long-term visibility, quarterly revenue and margin variability may persist, restricting near-term operating leverage and delaying the realization of benefits from new contract wins.

Meanwhile, Tempus plans a measured ramp in MRD as reimbursement dynamics improve. However, the MRD landscape remains highly competitive, with high-sensitivity assays from peers expected to enter the market over the next year.  Additionally, the Paige acquisition is expected to increase losses by roughly a mid-single-digit million amount per quarter, alongside continued investments in AI compute infrastructure. Any delay could weigh on growth momentum and near-term margins, particularly as GAAP losses persist.

Peer Update

While the GE HealthCare GEHC radiopharmaceuticals business offers strong growth potential, execution risks are substantial. The integration of Nihon Medi-Physics involves navigating regulatory complexities in Japan and ensuring seamless supply-chain operations across a highly sensitive product class. Moreover, the commercial success of GEHC’s new tracers like Flyrcado, depends on reimbursement support, physician adoption and manufacturing scalability. Any setback — whether regulatory, supply-related, or clinical adoption delays — could disrupt growth projections. Given the strategic importance of radiopharmaceuticals to GE HealthCare, any execution misstep could weigh disproportionately on investor confidence.

Exact Sciences’ EXAS financial results continue to be highly vulnerable to the performance of the Cologuard test, which remains the company’s lead brand. EXAS’ ability to generate revenues substantially depends on the commercial success of its Screening and Precision Oncology tests. While it is heavily investing in new cancer diagnostics, there is no certainty that these tests will generate significant revenues. If Exact Sciences fails to sustain or expand sales of Cologuard and Oncotype DX breast cancer tests or if it is delayed or limited in doing so, its business prospects, financial condition and results of operations would be adversely impacted.

TEM’s Stock Price Performance

Over the past year, Tempus’ shares have rallied 81.4% compared with the industry’s 1.3% growth. The S&P 500 composite has improved 19.5% in the same time frame.

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Expensive Valuation

TEM currently trades at a forward 12-month Price-to-Sales (P/S) of 7.02X compared with the industry average of 5.77X.

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TEM Stock Estimate Trend

In the past 30 days, Tempus AI's loss per share estimate for 2025 has narrowed 1 cent to 64 cents. 

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TEM 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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