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 StockRegulatory 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 ProfitabilityTempus 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 ComparisonOver 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.Image Source: Zacks Investment ResearchAverage Target Price Shows Strong Near-term UpsideBased on short-term price targets, Tempus is currently trading 28.6% below its average Zacks price target.Image Source: Zacks Investment ResearchKey Challenge for TEMThe 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 TrendEstimates 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. Image Source: Zacks Investment ResearchHow to Approach TEM StockTempus’ 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.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They includeStock #1: A Disruptive Force with Notable Growth and ResilienceStock #2: Bullish Signs Signaling to Buy the DipStock #3: One of the Most Compelling Investments in the MarketStock #4: Leader In a Red-Hot Industry Poised for GrowthStock #5: Modern Omni-Channel Platform Coiled to SpringMost of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.Download Atomic Opportunity: Nuclear Energy's Comeback free today.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 Exact Sciences Corporation (EXAS): Free Stock Analysis Report GE HealthCare Technologies Inc. (GEHC): 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