Healthtech Landscape — Q1 2026

US digital health funding reached approximately $6.4 billion in the first half of 2025, up from $6 billion in H1 2024, with full-year tracking towards $17–18 billion. The headline: AI-powered companies attracted the majority of new investment, signalling a clear shift in where smart capital is flowing.

The sector's story in early 2026 is one of divergence. Companies with defensible data assets and proven clinical utility — like Tempus — are thriving. Those that built on pandemic-era demand without sustainable unit economics — like Babylon Health — have become cautionary tales. The survivors are leaner, more focused, and increasingly AI-native.

Babylon Health's collapse remains the most significant corporate failure in digital health history. Once valued at over $4 billion, the UK-founded virtual healthcare provider's journey from SPAC darling to administration has reshaped how investors evaluate healthtech companies.

The lessons are stark: a subscription-based virtual care model that prioritised user acquisition over sustainable clinical operations proved fragile when growth capital dried up. Babylon's AI-powered triage system — once its key differentiator — couldn't overcome the fundamental challenge of delivering cost-effective healthcare at scale.

For the broader sector, Babylon's legacy is a higher bar for unit economics, clinical evidence, and regulatory compliance. Investors now demand clear paths to profitability before writing large cheques — a healthy correction that has weeded out weaker business models.

Tempus AI (NASDAQ: TEM) stands out as the sector's most compelling growth story. The company IPO'd in June 2024 at $37 per share and has since demonstrated exceptional performance: 72% annualised revenue growth with 26% free cash flow margins as of Q3 2025. The Rule of 40 at 98% is a performance metric that puts Tempus in rare company across all of tech, not just healthtech.

In March 2025, Tempus acquired Deep 6 AI, an AI-driven clinical trial recruitment platform with 750+ provider sites and over 30 million patients. This acquisition significantly expands Tempus's capabilities in clinical research — an area where AI is proving transformative for patient matching and trial efficiency.

Bessemer Venture Partners' "State of Health AI 2026" report highlighted Tempus as a gold standard for AI-native healthcare companies, and Seeking Alpha rates it a strong buy for risk-tolerant investors seeking exposure to precision medicine via AI and machine learning.

Flatiron Health, acquired by Roche in 2018 for $1.9 billion, continues to operate as the backbone of oncology data analytics. The company's electronic health record (EHR) system and real-world evidence platform serve over 280 cancer clinics across the US, generating the kind of longitudinal patient data that is increasingly valuable for both clinical research and AI model training.

Whilst no longer an independent entity chasing venture funding, Flatiron's position within Roche gives it access to resources and pharmaceutical industry relationships that independent competitors struggle to match. For competitors in oncology data, Flatiron's embedded position represents a formidable moat.

Huma (formerly Medopad) has evolved from a remote patient monitoring tool into a broader digital health platform, serving both NHS trusts in the UK and international healthcare providers. The company's focus on chronic disease management and clinical decision support positions it in one of healthcare's largest addressable markets.

Huma's partnership-led model — working with health systems rather than trying to replace them — reflects a maturing understanding of how digital health integrates with existing clinical workflows. The company's platform approach, which allows health systems to build custom applications on Huma's infrastructure, creates switching costs that direct-to-consumer models lack.

Cerebral, the telehealth mental health startup, entered 2025 in the midst of a significant restructuring following regulatory scrutiny over its ADHD prescribing practices. The company's journey — from pandemic-era hypergrowth to regulatory investigation to operational reset — mirrors the broader digital mental health category's growing pains.

The mental health telehealth market remains large and growing, but investor sentiment has shifted decisively towards companies with stronger clinical governance, evidence bases, and regulatory relationships. Cerebral's ability to rebuild trust — with regulators, clinicians, and patients — will determine whether it can recapture its position in a crowded market.

Healthtech is no longer a sector where rapid user acquisition and telehealth consultations alone justify venture valuations. The winning companies are those with defensible data assets, regulatory moats, and proven clinical utility. Understanding how the major players are building these advantages — and where the white space remains — requires the kind of deep, continuous intelligence that generic industry reports can't deliver.