Goldman Starts Tempus AI at Neutral, $75 Target: Data Renewals Are the Test

Goldman Sachs initiated coverage of Tempus AI, Inc. (NASDAQ:TEM) with a Neutral rating and a $75 price target on September 21, framing the company's two growth engines as facing very different tests: diagnostics offers visible near-term growth, while the data and applications segment faces renewal risk as several major contracts approach extensions over the next two years.

The timing of the call matters. On the same day Goldman published its initiation, Tempus announced an extension of its partnership with Recursion Pharmaceuticals (RXRX) through 2029. The revised deal replaces potentially discretionary fees with $42 million of committed payments.

That structure cuts both ways. The extension offers evidence that Tempus can retain a marquee data customer beyond an initial contract term. But it also trades potentially higher discretionary fees for a smaller amount of committed revenue — a compromise Goldman's analysts would likely note as symptomatic of the renewal question hanging over the entire segment.

Diagnostics Gives the Bull Case Visibility

The bull case rests on substantial operating momentum. Tempus generated $382.5 million of second-quarter revenue, up 22% year-over-year. Diagnostics revenue rose 20% to $289.3 million. Oncology volumes increased 31%. MRD testing reached 9,000 tests, up 38% from the prior quarter.

Regulatory approvals could add another growth lever. The FDA's approval of tumor-only xT CDx in the second quarter allows Tempus to move its solid-tumor DNA portfolio to ADLT pricing. Management estimates this could add roughly $85 million of annual revenue beginning in 2027. The company also expects a potentially larger pricing benefit if its xF liquid-biopsy test receives FDA approval.

The momentum extends beyond oncology. Tempus recently received FDA clearance for its third cardiovascular AI product. It was also selected for an ARPA-H program that could provide up to $9.5 million toward an autonomous heart-failure care platform.

These are concrete, dated catalysts. They give the diagnostics business a visibility profile that the data segment currently lacks.

Data Growth Creates the Bigger Question

The concern Goldman highlights is important because Data and Applications is growing even faster than Diagnostics. Segment revenue increased 28% in Q2. Insights revenue jumped 36%. Tempus also signed approximately $200 million in new Data and Applications licenses during the quarter.

Management argues that longer-term contracts and deeper use of Tempus Lens make customers increasingly embedded in its ecosystem. The company is also building a whole-genome dataset targeting 100,000 genomes initially and eventually one million, linked with longitudinal clinical outcomes.

But faster growth does not automatically mean more durable revenue. Goldman's concern is that several important contracts will eventually need to be renewed. Pharmaceutical partners cycle through data vendors. Committed spend can be renegotiated downward, as the Recursion deal structure suggests.

The stakes are asymmetric. Diagnostics revenue — $289.3 million of the $382.5 million quarterly total — is anchored in clinical testing volumes with regulatory-driven pricing tailwinds. The data business, growing faster off a smaller base, depends on pharma customers choosing to keep paying for access to Tempus' multimodal datasets and Lens applications.

What to Watch

The next two years will answer the question Goldman has put on the table. Each major data contract that comes up for extension — and each one that converts to committed payments rather than discretionary fees — will either validate management's ecosystem argument or confirm the renewal risk.

The $42 million Recursion commitment through 2029 is the first data point. Investors will want to see whether upcoming renewals hold their value or follow the same trade of headline partnership continuity for smaller guaranteed revenue.