Tempus AI Inc. (TEM): Diagnostic Business Growth Catalysts Paired with Data Business Uncertainty; Initiate at Neutral

We initiate coverage on Tempus AI Inc. (TEM) with a Neutral rating and $75 price target, balancing a highly visible near-term growth runway in the Diagnostics business against mid-term contract renewal uncertainties in the Data and Applications segment. TEM operates two product lines, Diagnostics and Data, designed to build on each other over time and create a synergistic relationship for both patients and pharma partners. We view the Diagnostics business (roughly 75% of revenue) as poised to benefit from multiple pricing tailwinds: the recent FDA approval of the solid tumor xT companion diagnostic assay lets Tempus raise reimbursement, which management expects to yield a ~$200 average selling price (ASP) uplift and ~$85mn in annualized revenue starting in 2027;