Tempus AI (TEM) is expected to release its 2025 Q3 earnings after the U.S. stock market closes on November 4. The market is interested in whether the report can maintain the momentum of revenue growth, gross margin improvement, and narrowing of losses.
Market Forecast
According to Tiger Trade data, the consensus market forecast is for Tempus AI to achieve a revenue growth of 81% to $329 million in Q3; with an EPS loss of $0.168.
Previous Quarter Review
In the Q2 earnings call, Tempus AI disclosed that the company is entering a fast-growth phase. CEO Eric P. Lefkofsky stated that the company achieved revenue of $314.6 million during the quarter, marking an 89.6% increase year-on-year. Genomics revenue notably increased by 115% to $241.8 million, and oncology testing volume rose from 20% to 26%. Furthermore, the data and services division saw a revenue increase of 35.7%, mainly driven by data licensing activities.
Lefkofsky emphasized that the company's gross profit reached $195 million, showing a growth of about 160%, and the adjusted EBITDA loss narrowed to $5.6 million, nearing break-even. He announced an upward revision of the full-year 2025 revenue guidance to $1.26 billion and maintained a $5 million EBITDA forecast, indicating an improvement of nearly $110 million compared to last year.
Current Quarter Outlook
Quality and Sustainability of Growth in Data and Services
Several institutional forecasts highlight that data and services remain the core drivers for revenue and gross margin improvements this quarter, primarily due to enhanced order visibility and optimized delivery efficiency. In recent times, the contracting cycle has become more manageable with governance and process standardization, coupled with deepened services to key clients, leading to a more balanced revenue recognition pace, reducing quarter-to-quarter fluctuations. With new customer expansion and an increased penetration rate of additional services for existing clients, revenue contribution per client is growing, directly raising the structural gross margin. Management reiterated the Q3 revenue growth target in the Q2 earnings call, with institutions closely monitoring the synergy of contracting and delivery. If this trend continues, it will create better operating leverage on the expense side, further improving adjusted EPS loss.
Optimization of Delivery Pace Provided by Order Visibility
Tracking by multiple institutions indicates that increased order visibility is translating into a more stable delivery pace, reducing volatility caused by mismatches between project initiation and client budget cycles. More visible order reserves allow the company to engage in more forward-looking scheduling in capacity and implementation resource allocation, shortening delivery cycles and improving the density and consistency of revenue recognition. In terms of pricing and product mix optimization, the data and services division has enhanced client acceptance through bundled solutions, making contract structures more favorable for improving gross margin. Institutions generally expect that synergistic order and delivery will become an important foundation for the upward trend in Q3 gross margin, positively impacting operating cash flow and reducing short-term pressure on scale expansion.
Synergistic Effects of Testing and Data Integration
The synergy between genomics and data services is considered key to enhancing customer stickiness and cross-selling rates. The integration of test data and clinical data solutions encourages clients to expand their usage within the same supplier. If Q3 maintains the execution pace of Q2, the growth in new testing volumes and clinical applications will provide solid support on the revenue side, while the reusability of data assets will likely reduce the marginal cost per project. Institutional opinions mention that the increased penetration of additional services in the data and services division not only raises the lifecycle value of individual customers but also structurally improves gross margin. This is mirrored by the continued investment in standardization of delivery, including process templates, data cleaning, and labeling norms, enhancing cross-project copying efficiency and strengthening the business's scalability.
Restoration Path of Genomics Business
From the Q2 earnings call and institutional breakdowns, the genomics division appears to be experiencing a demand recovery after a period of volatility, driven by channel coverage and product mix optimization. A more balanced channel structure reduces dependency on a single channel, and with a higher proportion of high value-added solutions in the product line, the sustainability of revenue quality improvement increases. If the previous quarter's operating pace can be maintained, the growth of new testing volumes and richer clinical scenario applications will continue to elevate revenue performance and create tighter synergy with data and services. On the gross margin front, as high value-added product penetration increases, the pressure on costs from scale expansion is offset, making the pace of net loss narrowing more evident. This aligns with institutional expectations of "parallel revenue growth and margin improvement."
Improvement in Operational Efficiency and Cost Structure
Several institutions conclude that an enhancement in operational efficiency is a key variable in margin recovery, with Q3's expenditure strategy more focused on projects and clients with higher returns. Disciplined execution in sales and administrative expenses optimizes unit customer acquisition cost and delivery cost, with operating leverage gradually manifesting with revenue growth. The standardization of processes and technology platforms continues, including template-based delivery and the unification of data platform capabilities, further opening up the space for gross margin improvement. If the company sustains its Q2 guidance for Q3 revenue growth, while maintaining prudence and efficiency on the expense side, the quality of improved adjusted profit metrics will be higher, reflecting gains from structural optimization and efficiency improvement rather than scale-driven.
Cash Flow and Resource Allocation Discipline
The focus on cash flow has increased in institutional forecasts due to a healthier order structure and delivery pace improving the billing cycle and collection. In terms of resource allocation, the company is more focused on key directions for R&D and commercialization investment, reducing the dispersion of low-yield projects, thereby enhancing overall capital efficiency. As the scale benefits of the data and services division gradually materialize, declining marginal costs combined with higher gross margins provide a foundation for steady cash flow improvement. If Q3 continues to steadily advance resource optimization, the company’s profit quality and cash generation ability in subsequent quarters will strengthen in tandem, forming a sustainable growth loop.
Analyst Opinions
Mainstream institutional opinions are generally optimistic, focusing on order visibility, the continuous growth rate of data and services, and the progress of genomics repair.
TD Cowen expressed in its latest perspective that, considering the advancement of mergers and AI precision medicine solutions, it maintains a positive stance on Q3 and raises the target price to $74, emphasizing how improved order visibility and revenue structure optimization support profit margins. TD Bank Research also maintains a 「buy」 rating, believing that data and services are the main driving forces, and profitability paths improve under visible efficiency gains and disciplined expenses, remaining optimistic for the second half. Multiple institution previews and research summaries agree that Q3 is likely to follow the growth trends and gross margin improvement trajectory of the first half, with improved adjusted profit metrics depending on the realization of contracting and delivery synergy.
Overall, sell-side research focuses on order increments in data and services, the quality of customer expansion, and the application expansion in the genomics scenario, considering these factors as the foundation for an optimistic Q3 performance.