Goldman Sachs’ Neutral initiation of Tempus AI, Inc. (NASDAQ:TEM) on September 21 puts the company’s fastest-growing businesses under 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 is notable because Tempus AI, Inc. announced an extension of its partnership with Recursion Pharmaceuticals (RXRX) through 2029 on the same day, replacing potentially discretionary fees with $42 million of committed payments.
Diagnostics Gives the Bull Case Visibility
The bull case has substantial operating momentum behind it.
Tempus AI, Inc. generated $382.5 million of second-quarter revenue, up 22% year-over-year, while Diagnostics revenue rose 20% to $289.3 million. Oncology volumes increased 31%, and 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.
That momentum extends beyond oncology. Tempus recently received FDA clearance for its third cardiovascular AI product and was selected for an ARPA-H program that could provide up to $9.5 million toward an autonomous heart-failure care platform.
Data Growth Creates the Bigger Question
The concern Goldman highlights is important because Data and Applications is growing even faster than Diagnostics. Revenue increased 28% in Q2, while Insights revenue jumped 36%. Tempus AI, Inc. 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. The Recursion extension offers some evidence of renewal durability, although the revised agreement trades potentially higher discretionary fees for a smaller amount of committed revenue.
Hedge Funds Are Adding While Shorts Remain Significant
Institutional positioning provides a mixed but notable signal. In Q2 2026, ARK Investment Management increased its stake 5% to 10.02 million shares, while Citadel expanded its position 318% to 2.51 million shares. Contrarius Investment Management also initiated a 554,750-share position.
Short interest, however, remains substantial at 29.46 million shares, or 29.17% of the float, despite falling from 33.23 million a month earlier.
With Goldman assigning a $75 target against a recent share price around $77.84, the market is already demanding continued execution. For Tempus AI, Inc., the deciding question is whether its diagnostics growth and expanding data platform can turn today’s contract-driven momentum into durable, recurring economics before the renewal cycle becomes the bigger story.
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