TEM — Tempus AI, Inc.

Summary of Tempus AI (TEM) Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue Growth: Core business revenue increased by over 33%, significantly boosted by the acquisition of Ambry.
• Diagnostics Business:
  • Oncology unit growth at 29%, with a remarkable 56% quarter-over-quarter growth in Minimal Residual Disease (MRD) testing.
  • Hereditary testing unit growth at 23%.
• Data Business:
  • Licensing revenue (Insights) grew 69% in the quarter, with a projected growth rate of approximately 40% for Q1 2026.
  • Total contract value exceeded $1.1 billion, with net revenue retention at 126%.
• Adjusted EBITDA: Projected at approximately $65 million for 2026.
• Average Selling Price (ASP): Q4 ASP was approximately $1,640, with expectations to exceed $2,200 in the coming years.

2. Strategic Updates and Business Highlights

• Tempus emphasized its unique position in the AI healthcare ecosystem, leveraging over 450 petabytes of proprietary multimodal data to train AI models and deliver insights to clinicians.
• The company highlighted the launch of Paige Predict, which enhances diagnostic capabilities by predicting mutations from pathology slides.
• The acquisition of Ambry is seen as a strategic move to broaden Tempus' testing compendium, enhancing its offerings in hereditary profiling.
• The foundation model for AI is on track, with benchmarks reportedly met, and further development is underway to enhance diagnostic capabilities.

3. Forward Guidance and Outlook

• 2026 Guidance: Tempus expects to achieve $1.59 billion in revenue, aligning with a long-term growth expectation of 25%.
• The company anticipates continued strong growth in both the Diagnostics and Data segments, with Oncology growth expected to remain robust.
• The Hereditary testing segment is expected to moderate, with growth anticipated in the high teens.

4. Bad News, Challenges, or Points of Concern

• Hereditary Testing Growth: There are concerns about potential lumpiness in growth rates for Hereditary testing in 2026, as it may moderate from previous highs.
• MRD Testing Constraints: Currently, only a small percentage of the sales force is focused on MRD, which limits its market penetration. There is potential for significant growth once sales efforts are fully unblocked, but reimbursement challenges remain.
• Competitive Pressures: The entry of traditional AI players into the healthcare space raises questions about Tempus' competitive position, although management believes their proprietary data and established relationships provide a strong defense.

5. Notable Q&A Insights

• Customer Feedback: Clients report improved decision-making capabilities due to Tempus' data and technology, leading to increased contract renewals.
• Foundation Model Development: The first version of the foundation model is expected to enhance diagnostic offerings significantly, with internal models being developed across various data types.
• Sales Organization: No major changes were made to the sales organization in 2026, and the focus remains on leveraging technology and AI to improve diagnostics.
• ASP and Gross Margin Outlook: While ASP increases are expected to drive gross margins higher, Tempus is cautious about balancing profitability with the need to provide comprehensive testing panels.

This summary encapsulates the key points from the earnings call, providing a balanced view of Tempus' performance, strategic direction, and potential challenges ahead.