Tempus AI Stock Rallies 105% in a Year: Should Investors Still Hold?

Tempus AI TEM stock has delivered a remarkable 105% gain over the past year, driven by strong performance across both its Genomics and Data segments, surpassing initial expectations for 2025. Artificial intelligence (AI) has served as a key catalyst across the company’s product portfolio, accelerating adoption and enhancing the value proposition of its offerings.

Let’s delve deeper.

Upsides for TEM Stock

Regulatory Approvals 

Tempus has received multiple 510(k) clearances from the Food and Drug Administration (FDA) across its growing portfolio of diagnostic and imaging solutions. In September, the company received FDA clearance for its RNA-based Tempus xR IVD device, which will be offered as a life sciences tool to support drug development programs. The Tempus xR IVD assay is a qualitative next-generation sequencing–based in vitro diagnostic device that uses targeted high-throughput hybridization-based capture technology to detect rearrangements in two genes. 

In the same month, Tempus also secured 510(k) clearance for its updated Tempus Pixel, an AI-powered cardiac imaging platform. The latest update enables the generation of T1 and T2 inline maps, further enhancing the platform’s capabilities for cardiac MR image analysis. 

In addition, in July, the company received FDA clearance for its Tempus ECG-Low EF software, which uses AI to identify certain patients who may have a low left ventricular ejection fraction (LVEF). 

Stable Solvency 

Tempus has a stable and well-capitalized balance sheet, reflecting prudent financial management and a strengthening operating profile. The company ended the last reported quarter with cash and cash equivalents of $760 million, while current debt was nil. Such underlying financial strength gives it strong flexibility amid the ongoing macroeconomic uncertainty. 

This strong cash position equips Tempus with the capacity to support ongoing investments across artificial intelligence development, data infrastructure expansion and selective strategic acquisitions, while maintaining resilience against potential market volatility.

Long-term debt was $1.25 billion at quarter-end, with leverage remaining at manageable levels, underscoring the company’s conservative approach to capital structure and its emphasis on long-term financial sustainability. 

Approach Toward Profitability

Tempus is showing early signs of a profitability inflection, having reached a key milestone during the quarter by generating positive adjusted EBITDA of $1.5 million. This achievement marks an important turning point in the company’s financial trajectory, underscoring improving operating leverage as revenues scale and cost discipline takes hold. Management also reaffirmed its expectation for slightly positive adjusted EBITDA for full-year 2025, reflecting continued progress in cost control and operating efficiency.

Gross profit nearly doubled year over year in the third quarter, highlighting the strengthening underlying economics of the business. Notably, management continues to emphasize disciplined spending as a critical pillar to support sustainable, long-term growth. Looking ahead, as ADLT migrations advance and data bookings convert into recognized revenues, pricing improvements and a favorable shift in product mix are expected to further support margin expansion.

TEM’s Price Comparison

Over the past year, TEM stock has outperformed the industry and the S&P 500. It has also outperformed rivals like Exact Sciences EXAS and GE HealthCare Technologies GEHC during this period.

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Average Target Price Shows Strong Near-term Upside

Based on short-term price targets, Tempus is currently trading 28.6% below its average Zacks price target.

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Key Challenge for TEM

The quality of profitability remains a key consideration for Tempus. Despite achieving positive adjusted EBITDA, GAAP losses persisted, reflecting substantial stock-based compensation, higher amortization of acquired intangibles related to the Ambry transaction and a one-time loss associated with debt extinguishment. As a result, non-GAAP profitability continues to rely on adjustments that exclude significant and recurring non-cash items.

Moreover, the absence of GAAP net loss guidance limits visibility into the timeline for achieving sustainable GAAP profitability. Consequently, the current profitability inflection thesis remains largely non-GAAP-driven in the near term.

Estimate Revision Trend

Estimates for TEM have narrowed from a loss of 68 cents per share to a loss of 64 cents for 2025 over the past 90 days. 

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How to Approach TEM Stock

Tempus’ growing portfolio of FDA-cleared diagnostic and AI-driven imaging solutions reinforces the company’s technological leadership. Further, it enhances TEM’s credibility across clinical and life sciences markets. Backed by ample liquidity and disciplined capital management, the company is well positioned to continue investing in AI innovation, data infrastructure and selective growth initiatives. While the company has begun to demonstrate progress toward profitability, GAAP losses and limited visibility into the timing of sustainable GAAP profitability remain key considerations.

We advise investors who already hold this Zacks Rank #4 (Sell) stock to maintain their positions, while prospective investors may consider waiting for a more favorable entry point. 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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