TEM Stock Gains 17.9% in a Year: Time to Buy, Hold or Sell?

Over the past year, Tempus AI's TEM shares have surged 17.9%, far outpacing the industry’s 20% loss. The S&P 500 composite has risen 29.1% over the same time frame. The strong uptick highlights the sustained momentum in the company’s Data and Applications segment, which has become a core pillar of its business. The Diagnostics arm also delivered robust performance in 2025, positioning itself as a key driver of the company’s overall growth.

Shares of Tempus’ peers, such as Doximity DOCS and Omnicell OMCL, within the Zacks Medical Info Systems industry, have plunged 57.6% and 14.5%, respectively, over the past year.

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Regulatory Pricing Catch-Up

Tempus has multiple structural catalysts to support pricing improvement, with clearer visibility on the timeline for xT migration. In the fourth quarter of 2025, the average selling price was approximately $1,640, up about $40 sequentially.

Management continues to highlight a significant pricing opportunity from transitioning xT CDx volume from the lab-developed test (LDT) version to the FDA-approved version, with plans to exit 2026 with the majority of volume on the FDA-approved pathway. Tempus also disclosed the FDA submission of xF, its liquid biopsy, supporting a longer-term regulatory-driven pricing tailwind. Minimal Residual Disease (“MRD”) reimbursement remains a phased rollout, with management emphasizing a measured ramp rather than rapid volume expansion.

Durable Diagnostics Momentum

Tempus’ Diagnostics segment continues to deliver broad-based growth across Oncology and Hereditary, with full-year results confirming this is not a one-quarter trend. In 2025, Diagnostics revenues surged 111.5% year over year, supported by Oncology volume growth of 26% and Hereditary growth of 29%. MRD volume reached about 4,700 tests in the fourth quarter, up 56% quarter over quarter, reflecting scaling of newer testing categories within the portfolio. Management believes its broad test menu and strong distribution network position the company to continue gaining share, provided execution remains solid.

Tempus expects the Diagnostics business to sustain strong momentum in 2026, particularly in oncology, where growth is projected to be around 30%. This outlook is supported by several factors. First, the structural adoption of genomic sequencing in oncology continues to increase, driving sustained volume growth across both solid tumor and liquid biopsy testing. Second, MRD is expected to emerge as a key growth driver as reimbursement improves and commercial efforts expand, unlocking a large, currently underpenetrated addressable market.

Expanding Data Monetization

Tempus’ Data and Applications segment continues to demonstrate diversified demand, with improving visibility beyond any single deal. In the fourth quarter of 2025, revenues reached $100.4 million, up 25.1% year over year, while Insights grew 69.5%, excluding the prior-year impact of the AstraZeneca warrant. The company exited 2025 with more than $1.1 billion in Total Remaining Contract Value and Net Revenue Retention of 126%, indicating continued expansion within its existing customer base.

Management expects approximately $1.59 billion in 2026 revenues, implying around 25% growth and supporting the medium-term data monetization story, even as revenue recognition remains phased.

A key driver of future growth is Tempus’ investment in artificial intelligence (AI), particularly the development of large-scale foundation models trained on proprietary datasets. These capabilities are expected to generate increasingly advanced insights across oncology and other medical fields, strengthening both the licensing and application businesses. Expansion into additional indications, including radiology, cardiology, and neuropsychology, further broadens the addressable market and creates cross-selling opportunities.

TEM’s Valuation

Tempus currently trades at a discounted valuation. The stock is trading at a 12-month forward price-to-earnings (P/S) ratio of 5.02X, which is lower than the industry median of 5.38X and its average of 7.79X.

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Key Challenges

Ongoing tensions between Iran and the United States could affect the global medical industry through potential supply-chain disruptions and logistical delays, along with higher raw material and energy costs led by conflict-related oil price volatility. These factors may also lead to medicine price fluctuations and increased regulatory and compliance complexity as geopolitical pressures influence trade and operations.

Although the company reported positive adjusted EBITDA, GAAP losses persist due to substantial stock-based compensation, higher amortization of acquired intangibles from the Ambry transaction and a one-time loss related to debt extinguishment. Current profitability remains largely non-GAAP, and the absence of GAAP net loss guidance limits visibility into the timing of sustainable GAAP profitability.

TEM EPS & Sales Growth

The Zacks Consensus Estimate for 2026 revenues implies a huge 25.3% year-over-year improvement. Earnings per share are expected to remain negative, but up 44.3% over 2025.

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Final Thoughts on TEM

Tempus’ regulatory pricing catch-up is gaining clarity, with gradual ASP improvement driven by the transition of xT CDx to its FDA-approved version and future upside from additional approvals like xF. Its Diagnostics segment continues to deliver strong, broad-based growth across Oncology and Hereditary, supported by rising genomic adoption and expanding MRD testing. The Data and Applications business is scaling steadily, with strong customer retention and increasing demand. Backed by investments in AI and expansion into new data domains, Tempus is well positioned to drive sustained growth across diagnostics and data monetization.

Given the discounted valuation and stock price surge, we advise investors who already hold this Zacks Rank #3 (Hold) 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.

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This article originally published on Zacks Investment Research (zacks.com).

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