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Tempus AI Surges 40% YTD: Are New Strategic Deals a Buy Signal?
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Artificial Intelligence (AI)-based healthcare solutions company Tempus AI (TEM - Free Report) has continued to capture investors’ attention despite reporting weaker-than-expected fourth-quarter 2024 results on Feb. 24, 2025. The earnings miss led to an immediate decline in the company’s share price, raising short-term concerns among investors. However, analysts continue to express confidence in Tempus AI’s long-term growth trajectory, backed by strategic acquisitions, partnerships, and expanding revenue streams. In particular, its latest acquisition of Deep 6 AI (announced last week) is expected to enhance its capabilities in clinical trial matching, potentially driving future growth and leading to a rebound in stock performance.
Following the announcement of the Deep 6 AI acquisition on March 11, shares of the company have gained 3.5%.
Year to date, the stock has rallied 39.7%, outperforming the 8.6% growth of the Medical Info Systems industry and the Medical sector’s 3.8% increase. In the meantime, the benchmark S&P 500 has declined 4.2%. The company has also outperformed other players in the health infotech field, like iRhythm Technologies (IRTC - Free Report) and SOPHiA GENETICS (SOPH - Free Report) , which have improved 11.7% and 4.9%, respectively, during the same period.
YTD Price Comparison
Image Source: Zacks Investment Research
The market’s appetite for AI applications in healthcare is rapidly increasing, with Tempus AI emerging as a top contender in this high-growth sector. Analysts cite the company’s cutting-edge product lines and strategic acquisitions as key differentiators, which position it for long-term success.
The Deep 6 AI Buyout Holds Significant Long-Term Potential
Deep 6 AI specializes in AI-driven clinical trial matching. With this acquisition, Tempus AI can further streamline the process of connecting patients with relevant clinical trials, ultimately expediting the development of new treatments. Deep 6 AI’s advanced algorithms and data analytics will complement the company’s existing AI-driven platform, enabling more effective patient identification and trial optimization. The acquisition of Deep 6 AI strengthens Tempus AI’s position in the rapidly growing AI-driven healthcare market, which can potentially boost TEM stock in the long run.
Other Strategic Acquisitions and Partnerships to Accelerate Growth
The acquisition of Ambry Genetics, finalized in February 2025, further strengthens Tempus AI’s genomics capabilities by adding a West Coast lab and expanding inherited risk testing.
Another significant move is the five-year extension of TEM's partnership with Google, which secures favorable cloud computing costs and technological support. Given the heavy computational demands of the company’s AI-driven solutions, maintaining a cost-efficient and scalable cloud infrastructure is crucial for sustaining margins and ensuring future product innovation.
Bright Long-Term Prospects
Tempus AI is a technology company advancing precision medicine through the practical application of artificial intelligence, including generative AI, in healthcare to create Intelligent Diagnostics. The company's focus on creating Intelligent Diagnostics allows physicians to deliver personalized, data-driven care while enabling researchers to accelerate the research and development of novel therapeutics. As the demand for AI-powered healthcare solutions grows, Tempus AI will be well-positioned to drive transformative advancements in patient outcomes and secure its role as a prominent player in the future of precision medicine.
In January, progressing in this line, the company launched olivia, an AI-enabled personal health concierge app. This is designed to address two core objectives: centralizing patients’ health data and making that data accessible and actionable through AI. Patients can connect directly to over 1,000 health systems through electronic health record integration by syncing data from health devices to track daily metrics or manually upload health records.
Among other major developments, Tempus AI launched the FDA-approved, NGS-based in vitro diagnostic device xT CDx in the same month. This is a 648-gene next-generation sequencing test for solid tumor profiling, which includes microsatellite instability status and companion diagnostic claims for colorectal cancer patients.
Both developments are consistent with the company’s efforts to improve patient outcomes.
Further, in a recent breakthrough, the Centers for Medicare and Medicaid Services (CMS) announced that it would allow reimbursement for the assessment of cardiac dysfunction using the Tempus ECG-AF algorithm. ECG-AF is one of just a few FDA-authorized medical technologies in the country to be impacted by the new CMS decision. This allows Tempus AI to more broadly support clinicians in identifying patients at increased risk of atrial fibrillation/flutter.
TEM Stock Not Inexpensive
TEM stock is currently slightly overvalued compared to its industry, as shown in the chart below.
The company is currently trading at a forward 12-month price-to-sales (P/S) ratio of 6.24, a premium to the broader industry's average of 5.07X. The stock is also trading higher than other industry players like IRTC (4.49X) and SOPH (5.07X).
However, it is still below its one-year median of 8.83X, implying that it could still be a good opportunity to buy.
Image Source: Zacks Investment Research
Short-Term Snags Lead to Downward Estimates Revision for 2025
Rising Operating Expenses: Non-GAAP operating expenses grew 6.5% to $142.5 million in the last reported quarter. The increase in costs, particularly in salesforce expansion and R&D, suggests that the company is investing in future growth, but the immediate impact on profitability is causing concern.
Conservative EBITDA Outlook: The full-year adjusted EBITDA projection of $5 million was below the anticipated nearly $6 million, suggesting potential profitability challenges.
Earnings estimates for Tempus AI have declined from a loss of 47 cents per share to a loss of 58 cents per share for 2025 over the past 30 days.
Image Source: Zacks Investment Research
Hold the Stock for Now
With all strategic alliances and acquisitions, as well as the CMS’ recent decision supporting reimbursement for Tempus AI’s ECG-AF algorithm, the company is positioned to expand its footprint in AI-driven healthcare diagnostics. This milestone reinforces the company’s ability to bridge technological innovation with clinical adoption, potentially driving stronger market penetration.
Yet, despite the company’s several long-term upsides, rising expenses are concerning. Its expensive valuation is also limiting this Zacks Rank #3 (Hold) stock’s near-term gains. While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains, providing a better entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Tempus AI Surges 40% YTD: Are New Strategic Deals a Buy Signal?
Artificial Intelligence (AI)-based healthcare solutions company Tempus AI (TEM - Free Report) has continued to capture investors’ attention despite reporting weaker-than-expected fourth-quarter 2024 results on Feb. 24, 2025. The earnings miss led to an immediate decline in the company’s share price, raising short-term concerns among investors. However, analysts continue to express confidence in Tempus AI’s long-term growth trajectory, backed by strategic acquisitions, partnerships, and expanding revenue streams. In particular, its latest acquisition of Deep 6 AI (announced last week) is expected to enhance its capabilities in clinical trial matching, potentially driving future growth and leading to a rebound in stock performance.
Following the announcement of the Deep 6 AI acquisition on March 11, shares of the company have gained 3.5%.
Year to date, the stock has rallied 39.7%, outperforming the 8.6% growth of the Medical Info Systems industry and the Medical sector’s 3.8% increase. In the meantime, the benchmark S&P 500 has declined 4.2%. The company has also outperformed other players in the health infotech field, like iRhythm Technologies (IRTC - Free Report) and SOPHiA GENETICS (SOPH - Free Report) , which have improved 11.7% and 4.9%, respectively, during the same period.
YTD Price Comparison
Image Source: Zacks Investment Research
The market’s appetite for AI applications in healthcare is rapidly increasing, with Tempus AI emerging as a top contender in this high-growth sector. Analysts cite the company’s cutting-edge product lines and strategic acquisitions as key differentiators, which position it for long-term success.
The Deep 6 AI Buyout Holds Significant Long-Term Potential
Deep 6 AI specializes in AI-driven clinical trial matching. With this acquisition, Tempus AI can further streamline the process of connecting patients with relevant clinical trials, ultimately expediting the development of new treatments. Deep 6 AI’s advanced algorithms and data analytics will complement the company’s existing AI-driven platform, enabling more effective patient identification and trial optimization. The acquisition of Deep 6 AI strengthens Tempus AI’s position in the rapidly growing AI-driven healthcare market, which can potentially boost TEM stock in the long run.
Other Strategic Acquisitions and Partnerships to Accelerate Growth
The acquisition of Ambry Genetics, finalized in February 2025, further strengthens Tempus AI’s genomics capabilities by adding a West Coast lab and expanding inherited risk testing.
Another significant move is the five-year extension of TEM's partnership with Google, which secures favorable cloud computing costs and technological support. Given the heavy computational demands of the company’s AI-driven solutions, maintaining a cost-efficient and scalable cloud infrastructure is crucial for sustaining margins and ensuring future product innovation.
Bright Long-Term Prospects
Tempus AI is a technology company advancing precision medicine through the practical application of artificial intelligence, including generative AI, in healthcare to create Intelligent Diagnostics. The company's focus on creating Intelligent Diagnostics allows physicians to deliver personalized, data-driven care while enabling researchers to accelerate the research and development of novel therapeutics. As the demand for AI-powered healthcare solutions grows, Tempus AI will be well-positioned to drive transformative advancements in patient outcomes and secure its role as a prominent player in the future of precision medicine.
In January, progressing in this line, the company launched olivia, an AI-enabled personal health concierge app. This is designed to address two core objectives: centralizing patients’ health data and making that data accessible and actionable through AI. Patients can connect directly to over 1,000 health systems through electronic health record integration by syncing data from health devices to track daily metrics or manually upload health records.
Among other major developments, Tempus AI launched the FDA-approved, NGS-based in vitro diagnostic device xT CDx in the same month. This is a 648-gene next-generation sequencing test for solid tumor profiling, which includes microsatellite instability status and companion diagnostic claims for colorectal cancer patients.
Both developments are consistent with the company’s efforts to improve patient outcomes.
Further, in a recent breakthrough, the Centers for Medicare and Medicaid Services (CMS) announced that it would allow reimbursement for the assessment of cardiac dysfunction using the Tempus ECG-AF algorithm. ECG-AF is one of just a few FDA-authorized medical technologies in the country to be impacted by the new CMS decision. This allows Tempus AI to more broadly support clinicians in identifying patients at increased risk of atrial fibrillation/flutter.
TEM Stock Not Inexpensive
TEM stock is currently slightly overvalued compared to its industry, as shown in the chart below.
The company is currently trading at a forward 12-month price-to-sales (P/S) ratio of 6.24, a premium to the broader industry's average of 5.07X. The stock is also trading higher than other industry players like IRTC (4.49X) and SOPH (5.07X).
However, it is still below its one-year median of 8.83X, implying that it could still be a good opportunity to buy.
Image Source: Zacks Investment Research
Short-Term Snags Lead to Downward Estimates Revision for 2025
Rising Operating Expenses: Non-GAAP operating expenses grew 6.5% to $142.5 million in the last reported quarter. The increase in costs, particularly in salesforce expansion and R&D, suggests that the company is investing in future growth, but the immediate impact on profitability is causing concern.
Conservative EBITDA Outlook: The full-year adjusted EBITDA projection of $5 million was below the anticipated nearly $6 million, suggesting potential profitability challenges.
Earnings estimates for Tempus AI have declined from a loss of 47 cents per share to a loss of 58 cents per share for 2025 over the past 30 days.
Image Source: Zacks Investment Research
Hold the Stock for Now
With all strategic alliances and acquisitions, as well as the CMS’ recent decision supporting reimbursement for Tempus AI’s ECG-AF algorithm, the company is positioned to expand its footprint in AI-driven healthcare diagnostics. This milestone reinforces the company’s ability to bridge technological innovation with clinical adoption, potentially driving stronger market penetration.
Yet, despite the company’s several long-term upsides, rising expenses are concerning. Its expensive valuation is also limiting this Zacks Rank #3 (Hold) stock’s near-term gains. While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains, providing a better entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.