Tempus AI (TEM) Q1 2025: A Deeper Dive into the Growth Engine of AI-Driven Oncology
2025/05/26
Introduction:
Tempus AI (TEM) has quickly become one of the most talked-about names in precision medicine—and for good reason. Following a blowout Q1, the company is now positioning itself as a major AI-powered data platform in U.S. healthcare. Here’s why it’s on my radar—and why the story may just be getting started.
Q1 Performance Snapshot
Revenue for Q1 2025 surged 75.4% YoY to 255.7M, largely boosted by the acquisition of Ambry Genetics. Gross profit nearly doubled to 155.2M, with gross margin expanding to 60.6%. Adjusted EBITDA loss narrowed sharply from -43.9M to -16.2M.
While this shows financial traction, Tempus is still not EBITDA-profitable and holds ~580M in net debt—a fact the market may overlook amid the AI hype.
Data is the Moat
With over 40M patient records, 2M imaging records, 3M samples sequenced, and 300K DNA+RNA profiles, Tempus has one of the richest datasets in U.S. healthcare. These assets position it as a foundational partner for biopharma companies developing precision therapies.
Deal Momentum: AstraZeneca + Pathos
The $200M data deal with AstraZeneca/Pathos boosted total contract value past 1B. Even more notable: a 140% data licensing retention rate, which signals clients not only renew but expand usage—an extremely bullish signal for a SaaS-like health data business.
Oncology & Hereditary Testing Growth
Oncology NGS test volume reached 75,000 in Q1, while revenue per test hit a new high of $1,590. The xT CDx test, priced at $4,500 under ADLT status, is driving this revenue uplift.
Meanwhile, Ambry’s hereditary test volumes rose to ~78,000 vs. ~63,500 last year. This validates the demand tailwind from broader cancer screening guidelines.
Technical Setup
Post-earnings, TEM broke out above 60 with strong volume. The 50-day MA has crossed above the 200-day (golden cross), and the trend remains bullish short-term. Key levels to watch: support at 56–58 and resistance at 66.
Valuation Discussion: Is 7x Sales Justified?
Compared to peers in AI diagnostics and oncology platforms (e.g., Guardant Health, EXAS), Tempus is trading at ~7x 2025E sales. Given its YoY growth rate (~80%) and strong TCV retention, this valuation looks fair, with upside to 10x if profitability ramps.
However, near-term EBITDA-negative status and a 580M net debt load limit the premium. The current valuation assumes flawless execution.
What to Watch Next
MRD assay reimbursement updates (a key limiter)
xT CDx national adoption progress
New pharma or government contracts (Pfizer, DoD, etc.)
Q2 guidance clarity and organic growth trajectory
Key Risks
Debt service burden (~18M interest per quarter)
Delays in profitability could stall momentum
Any slowdown in pharma partnerships or data renewal could cut growth sharply
Final Take
Tempus AI is transitioning from a narrative-driven name to a data-rich, enterprise-grade precision medicine platform. If they can deliver EBITDA-positive results by year-end and avoid dilution, it could justify a significant premium.
For now, the easy money has been made—but long-term bulls still have a case.
Disclosure: Not investment advice. Do your own research.