Shares of Tempus AI (TEM) plunged 18.77% during intraday trading on Tuesday, February 25th, as the healthcare technology firm's fourth-quarter results and outlook failed to meet investor expectations.
The company reported revenue of $200.7 million for the fourth quarter of 2024, representing a 35.8% year-over-year increase. However, this figure missed analyst estimates of $203.1 million. Additionally, Tempus AI reported a wider-than-expected adjusted net loss of $0.18 per share, compared to analyst expectations of a $0.16 loss.
The disappointing financial performance can be attributed to several factors. Firstly, a significant data delivery project worth over $10 million slipped from the fourth quarter to early 2025, impacting the company's revenue for the period. Furthermore, concerns arose regarding the future growth prospects of Ambry Genetics, a recently acquired subsidiary. Analysts expect Ambry's growth rate to slow to the high-10s in 2025 due to lapping previous accelerants, such as ASP headwinds.
In addition to the lackluster fourth-quarter results, JPMorgan downgraded Tempus AI's stock rating from Overweight to Neutral. The brokerage cited valuation concerns, as the stock's sharp rally had pushed its valuation to about 11 times estimated 2025 sales, well above the diagnostics sector average.