TEM Q2 Revenues Soar Amid Coverage Issues: Time to Buy, Hold or Sell?

Tempus AI TEM posted robust second-quarter results and raised the sales guidance for 2025 for the second time within six months. Full-year revenues are now expected to be approximately $1.26 billion (earlier $1.25 billion), indicating nearly 82% annual growth. The company recorded second-quarter revenue growth of 89.6%. The quarterly gross profit soared 158.3% from the year-ago quarter’s level. Additionally, adjusted gross margin expanded 1649 bps, despite a 32.2% rise in the cost of revenues. Meanwhile, Tempus AI experienced another quarter of sequential improvement in adjusted EBITDA, which went from a negative $16 million in the previous quarter to a negative $5.6 million in the second quarter. This improvement made the company expect a positive adjusted EBITDA of $5 million in 2025. On the innovation side, Tempus AI continued to push boundaries. Recently, the company expanded its AI-enabled care pathway intelligence platform, Tempus Next, into breast cancer to address critical care gaps in breast cancer care. It also introduced xM, a liquid biopsy assay, for treatment response monitoring (TRM), to detect molecular response to immune-checkpoint inhibitor (ICI) therapy in advanced solid tumors. Year to date, TEM stock has skyrocketed 137.6%, outperforming the Medical Info Systems industry and the S&P 500 benchmark, which have improved about 24.7% and 10.8%, respectively. The company has also outperformed other players in the health infotech field, such as Azenta, Inc. AZTA and 10x Genomics, Inc. TXG, which have lost 41% and 2.9%, respectively, during the said period.YTD TEM’s Price PerformanceImage Source: Zacks Investment ResearchWith strong financial growth and groundbreaking innovations, Tempus AI is rapidly positioning itself as a leader in precision medicine and AI-driven healthcare. For investors, now is the time to gauge just how big this runway could get.Developments Propelling TEM’s GrowthKey Acquisitions Strengthening Its Leadership Position: Tempus announced the acquisition of Paige, an AI company specializing in digital pathology. The acquisition, valued at $81.25 million, is expected to enable Tempus to expand its dataset and strengthen its experienced technical team. Additionally, in March, Tempus acquired Deep 6 AI, a leading AI-powered precision research platform for healthcare organizations and life sciences companies. The Deep 6 AI deal expanded Tempus' reach to 30M patient records across 750 healthcare providers. Furthermore, earlier this year, Tempus completed the acquisition of Ambry Genetics, a genetic testing company that specializes in hereditary cancer screening and other genetic diseases. By combining Ambry’s genetic testing strengths with Tempus’ AI and data tools, the latter broadened its healthcare offerings into new areas, like pediatrics, women's health, rare disease, immunology and cardiology.Robust Segmental Performance: In the second quarter, Tempus reported robust growth in its Genomics business with sales surging 115% year over year, driven by accelerating oncology testing volumes, which rose 26%. The hereditary testing segment also contributed significantly, with volumes up 32%, benefiting from both market share gains and overall industry tailwinds. Meanwhile, Data and Services revenues grew 35.7%, led by a 41% rise in Insights, the company’s data licensing business. This growth was fueled by strong demand from large pharma partnerships, including the recently signed AstraZeneca Pathos deal, which contributed around $16 million in revenues for the quarter. Strong Balance Sheet: Tempus exited the second quarter of 2025 with $293.0 million in cash and marketable securities, reflecting an improvement of approximately $70 million over the previous quarter. The company reported no current debt during the quarter, indicating strong solvency. Just after quarter end, Tempus AI completed an upsized offering of $750 million 0.75% convertible senior notes, enhancing its balance sheet and allowing it to replace a portion of the existing term loan with a significantly lower interest debt instrument.Estimates for TEM Heading SouthThe Zacks Consensus Estimate for Tempus’ 2025 sales and EPS implies a year-over-year improvement of 81.2% and 56.3%, respectively. However, in the past 30 days, Tempus’ loss per share estimate for 2025 has moved south 3%. Image Source: Zacks Investment ResearchKey Challenge for TEM Tempus faces headwinds primarily related to reimbursement challenges. The company’s certain product segments, such as its minimal residual disease (MRD) and TRM portfolios, were gated due to the lack of reimbursement in the second quarter. Without payer coverage, Tempus cannot scale volumes in these areas, which limits both revenue growth and margin expansion potential. TEM Stock Expensive ValuationWith a forward five-year price-to-sales (P/S) of 9.41X, Tempus’ shares are trading at a premium compared with the industry average of 5.84X. It has a Value Score of F at present.Image Source: Zacks Investment ResearchMeanwhile, AZTA’s five-year P/S of 2.24X is also lower than the industry average. But, TXG’s shares are trading at a discount (five-year P/S of 2.84X) compared with the industry average.How to Play TEM Stock?Tempus delivered a strong second quarter with exceptional revenue and profit growth, driven by strategic acquisitions, innovative product launches, and segmental business growth. The company’s raised sales guidance and improving adjusted EBITDA outlook reflect its solid execution and growth potential. While a strong balance sheet and expanding AI-driven healthcare solutions position Tempus for long-term success, reimbursement challenges in certain product segments remain a key hurdle to scaling revenues and margins. With shares already trading at elevated levels, we advise those who already have this Zacks Rank #3 (Hold) stock in their portfolios to maintain their position, while others may wait for a more favorable entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Quantum Computing Stocks Set To SoarArtificial intelligence has already reshaped the investment landscape, and its convergence with quantum computing could lead to the most significant wealth-building opportunities of our time.Today, you have a chance to position your portfolio at the forefront of this technological revolution. In our urgent special report, Beyond AI: The Quantum Leap in Computing Power, you'll discover the little-known stocks we believe will win the quantum computing race and deliver massive gains to early investors.Access the Report Free Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report 10x Genomics (TXG): Free Stock Analysis Report Azenta, Inc. (AZTA): Free Stock Analysis Report Tempus AI, Inc. (TEM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks