Tempus AI's Data Business Keeps Scaling Up: Can the Growth Pace Last?
Tempus AI TEM, a Chicago-based company focused on precision medicine, is building network effects via its three interconnected product lines. In the first quarter of 2025, revenues in its Data and Services segment increased 43.2% year over year to $61.9 million, driven by a 58% growth in Insights, the company's data licensing business. Gross profit outpaced revenue growth, up 65.2% with only a modest 3% increase in the cost of revenues. The business has scaled significantly, securing deals with companies like Novartis, Merck EMD, Takeda and United Therapeutics over the past year. Against that backdrop, Tempus' ability to sustain such strong growth rates in Data and Services is particularly impressive.
Most of these contracts span multiple years, with total remaining contract value reflecting data and services yet to be delivered. Several recent developments are setting the stage for the momentum to continue. A major highlight is Tempus AI's $200 million data and modeling license agreement with AstraZeneca AZN and Pathos to build the world's largest foundation model, bringing AZN's total remaining contract value to over $1 billion as of April 30. AZN and Pathos are also covering a large portion of the compute costs to train the model. Notably, the agreement's non-exclusive nature allows Tempus to license data and build models with others in the future.
The company also expanded its collaboration with Illumina, which will use its multimodal data platform to accelerate clinical benefits of molecular profiling across all major diseases. In May, Tempus inked a large data agreement with Boehringer Ingelheim focused on biomarker development and novel discovery efforts, building on their past collaboration. Further, the company's new oncology-focused platform, Loop, is already in use by a large pharmaceutical company to prioritize drug targets in patient subpopulations with severe unmet needs.
TEM's Key Competitors in Data and Services
ICON ICLR, an Ireland-based contract research organization, experienced a significant increase in overall biotech opportunities and a modest uptick in project win rates in the first quarter of 2025. However, it was ultimately offset by an increased number of customer-cancelled request for proposal (RFP) opportunities. In large pharma, RFP opportunities were softer in the quarter; still, ICLR's high success rate underscored its strong positioning as a strategic partner.
IQVIA 's IQV Technology & Analytics Solutions business continued the strong recovery trend in the first quarter of 2025, with clients launching new drugs and executing their commercial roadmaps. However, IQV faced slower decision-making from clinical customers on new programs, reflecting broader macroeconomic pressure and industry caution. IQVIA reported a 10% increase in average time from RFP issuance to award in the quarter, both year over year and sequentially.
TEM Outperforms Peers, Industry, But Valuation Stretched
Year to date, Tempus AI shares have surged 102.5%, outperforming the industry's 18% growth and also delivering stronger returns than IQV and ICLR.
Image Source: Zacks Investment Research
TEM currently trades at a forward 12-month Price-to-Sales (P/S) of 8.47X compared to the industry average of 5.83X.
Image Source: Zacks Investment Research
TEM Stock Estimate Trend
As you can see, earnings estimates for Tempus AI in 2025 and 2026 are showing a mixed picture.
TEM stock currently carries a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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