Detailed Narrative
Data & Applications Business Momentum
The Data and Applications segment demonstrated significant strength, growing 40.5% year-over-year to $87 million. This was primarily fueled by a 44% increase in data licensing and modeling business insights. The company achieved its third consecutive quarter of bookings exceeding $100 million, indicating robust demand and strong future visibility for this segment.
Strategic Pharma Collaborations
Tempus AI continues to deepen its relationships with major pharmaceutical companies. Notably, a new large strategic data and modeling collaboration was signed with Merck, and the existing relationship with Gilead was significantly expanded. These deals, alongside ongoing collaborations with AstraZeneca, GSK, and BMS, highlight the increasing adoption of Tempus's de-identified data and AI model-building platform by big pharma for R&D programs.
Diagnostic Segment Performance
The diagnostic revenue reached $261.1 million, marking a 35% year-over-year increase. This growth was largely driven by strong performance in oncology, with unit growth of 28% across solid tumor and liquid biopsies, and even better performance in MRD volumes. While the hereditary business experienced a temporary slowdown, it is anticipated to rebound to mid-teens growth in the second half of FY26.
FDA Approvals and ASP Outlook
The company is actively pursuing further FDA approvals for its main assays. While the XF submission is awaiting feedback with no expected impact on 2026 pricing, an amendment for tumor-only testing on an existing FDA-approved assay is expected imminently. Management anticipates an incremental ASP lift of approximately $500 over the next 1-2 years as more assays achieve FDA approval, building on the current ASP of around $1720-$1740.
MRD Reimbursement and Growth Strategy
The Minimal Residual Disease (MRD) assay showed robust growth, albeit from a smaller base. The company is strategically metering the expansion of its MRD sales force due to current reimbursement limitations, as 97% of these tests are tumor-informed, placing the reimbursement burden on personal. As reimbursement improves, Tempus plans to more aggressively roll out its MRD offerings, positioning itself as a formidable player in the US market.
Algorithm Integration and Physician Adoption
Tempus highlights a 40% attach rate for its algorithms on solid tumor assays, including tools for homologous recombination deficiency, tumor origin prediction, and immune profiling. These technology-enabled assets are increasingly relied upon by physicians to make data-driven decisions and improve patient care, contributing to the company's differential growth rates compared to competitors.