Over the past two years, one of the most interesting healthcare companies to go public is none other than Tempus AI (NASDAQ: TEM). In a world where healthcare IPOs are typically dominated by biotech companies that generate little to no revenue, Tempus stands out.
The firm has posted sales of approximately $952 million over the last twelve months and has made strong improvements in profitability. The stock has also been a winner for shareholders. As of the Aug. 12 close, Tempus has provided a return of 89% in 2025, nearly delivering on the double-bagger potential forecasted in December 2024.
Tempus recently reported its Q2 2025 earnings. Below, we’ll dive into the details of this report and gain an updated outlook on the stock. Ultimately, is there reason to believe that Tempus can continue to deliver the types of returns seen over the past eight months, or should investors temper their expectations? All data uses information as of the Aug. 12 close.
Tempus Executes Well in Q2, Sees Positive EBITDA in 2025
In Q2, Tempus generated sales of just under $315 million, equating to a massive growth rate of just under 90%. This solidly beat Wall Street estimates, which forecasted growth of around 79%. Tempus’s adjusted loss per share also came in slightly better than expected at 22 cents. The company also improved its profitability significantly, both on a yearly and sequential basis.
Adjusted gross margin increased to 62.8%. This compares to 61.4% in Q1 2025 and 56.8% in Q2 2024. The firm’s adjusted earnings before interest, taxes, depreciation, and amortization margin (EBITDA) increased to -1.8%. This compares to -6.3% in Q1 2025 and -18.8% in Q2 2024. Tempus also boosted its full-year revenue guidance from $1.25 billion to $1.26 billion.
Tempus says it remains on track to generate $5 million of adjusted EBITDA in 2025, compared to an adjusted EBITDA loss of $110 million in 2024. The big takeaway? Things are going according to plan at Tempus; its offerings are seeing robust and accelerating demand growth, and it still expects to achieve adjusted operating profitability this year. For investors, seeing management execute on the plan it has previously outlined is always a good sign.
Morgan Stanley Boosts Tempus Target, But Near-Term Upside Appears Limited
After Tempus AI’s Q2 earnings release, analysts at Morgan Stanley increased their price target on the stock from $65 to $68. However, the MarketBeat consensus price target on Tempus is just over $65. This indicates a slight downside in shares versus their Aug. 12 closing price of over $66. Still, recently updated targets are slightly more bullish.
Among targets updated since June 25, the average is approximately $68.60, implying just over 3% upside. The stock has yet to close higher than $90. Achieving this level would require an upward move of around 36%. Overall, these numbers indicate that is unlikely that Tempus will achieve similar types of near-term returns that it has seen since the beginning of 2025.
Additionally, if the stock continues to trade at current levels or higher, it could face elevated downside risk going into its next earnings release. Shares were trading at around $70 going into the stock’s Q4 2024 release. Very slight earnings misses that quarter caused shares to plummet 15% in one day.
TEM Revenue Is Small Compared to R&D Spending, Highlighting Long-Term Opportunity
Despite the uninspiring near-term upside implied by Wall Street targets, the long-term opportunity for Tempus AI shares looks much more significant. One study found that in 2021, pharmaceutical and biotechnology companies spent $276 billion on research and development (R&D). As companies use Tempus AI’s solutions to enhance their R&D efforts, their R&D spending translates into revenue for Tempus.
Although these numbers and assumptions are far from perfect, they help illustrate Tempus AI’s large total addressable market. Its expected revenue of $1.26 billion in 2025 is a tiny fraction of that $276 billion R&D spending figure. This shows how Tempus has a big runway for long-term revenue growth, supporting the company’s long-term bull case.
Still, investors will need to continue monitoring the company’s growth and profitability improvements. This will help indicate whether Tempus can actually capitalize on its large potential in a sustainable way.
Before you make your next trade, you’ll want to hear this.
MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now…
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
