Tempus AI Turns Non-GAAP Profit on Surging Genomics and Data

Core Insights - Tempus AI (TEM) reported a non-GAAP profit in Q3 2025, driven by growth in genomics testing and data services, with revenue increasing by 84.7% year over year to $334.2 million and adjusted EBITDA reaching $1.5 million [1][8] - The stock holds a Zacks Rank 3 (Hold) with a VGM Score of D, indicating weaknesses in value but stronger momentum [1][13] Business Mix and Growth Drivers - Genomics revenue more than doubled to $252.9 million, with oncology testing contributing $139.5 million and hereditary testing $102.6 million [2] - Data and services revenue grew by 26.1%, with Insights increasing by 37.6%, and clinical tests delivered reached 217,000, up 33% year over year [2][3] Pricing Catalysts - Management is transitioning a significant portion of xT CDx volume to FDA-approved tracks and plans further FDA submissions, expecting to submit xT for approval by the end of 2025 [4] - These initiatives aim to enhance average selling prices and unit economics over time, although average realized pricing remains below peer levels until approvals are secured [5] Revenue Recognition and Demand - Strong customer demand for Data & Services is evident, with mid-20% booking growth year over year and approximately $150 million in new contracts [6] - However, the multi-year recognition of bookings may delay near-term revenue recognition and margin improvement [7] Profitability and Future Guidance - The company anticipates 2025 revenue of approximately $1.265 billion, implying around 80% annual growth and positive adjusted EBITDA for the full year [8] - Management expects about $20 million of adjusted EBITDA in Q4 2025, with continued EPS improvement projected through 2026 and potential positive EPS in 2027 [11] Financial Position - Tempus AI ended Q3 with $764.3 million in cash and marketable securities, providing the capacity for ongoing investments in AI compute and regulatory initiatives [12] Market Position and Performance Expectations - The stock's Zacks Rank 3 (Hold) and VGM Score of D suggest expectations for market-like performance in the near term, with a focus on estimate revisions related to pricing, FDA decisions, and reimbursement progress [13]