Tempus AI

The unit economics finally crossed over: Q2 delivered the company's first positive GAAP net income and a second consecutive positive Adjusted EBITDA quarter, gross margin expanded 240bps to 64.4%, and the non-GAAP operating loss narrowed 84% to just $(2.7)M. Underneath, the two highest-value engines accelerated — oncology volume +31% and Insights revenue +36% — while the FDA's tumor-only xT CDx approval unlocks ADLT pricing and the 0% convertible refinancing halved interest expense.

• First positive GAAP net income ($5.6M) and Adjusted EBITDA of $8.0M vs $(5.6)M a year ago — a $13.6M YoY swing, with non-GAAP loss from operations down 84% to $(2.7)M
• Gross margin 64.4% GAAP / 65.7% non-GAAP, up from 62.0% / 62.8%; gross profit grew 26% against 21.6% revenue growth, so mix and scale are both working
• Oncology testing volume +31% YoY, ACCELERATING from +28% in Q1 — the core reimbursed engine is speeding up, not slowing
• MRD ramp is steep and sequential: 9,000 tests in Q2 from 6,500 in Q1 (+38% QoQ), attacking the Natera/Guardant TAM
• Data & Applications $93.2M (+28%) with Insights +36% and ~$200M of new licences signed in one quarter (BioNTech, Daiichi Sankyo, Level Set Bio, Incyte) — the high-margin, low-incremental-cost engine
• Diagnostics gross margin expanded 380bps to 62.6% — the lab is getting more efficient per test as volume scales
• FDA approval of the tumor-only xT CDx makes Tempus the first laboratory holding CDx approval for both tumor-only and tumor-normal comprehensive genomic profiling, and migrates tissue testing to ADLT pricing
• Delivered the first version of an oncology foundation model to AstraZeneca — the data library converting into model-licensing revenue rather than just data access
• Capital structure materially improved: $460M of 0.0% coupon converts due 2032 retired a $207.7M term loan and $100M revolver; Q2 interest expense fell to $10.3M from $21.6M
• Personalis (~$1.5B EV, $16.25/share) consolidates the tumor-informed MRD franchise with a partner whose technology Tempus is already commercialising

Growth halved and the profit is a mark. Revenue growth decelerated from +36.1% in Q1 to +21.6% in Q2, Hereditary grew 5%, and the celebrated GAAP net income of $5.6M exists only because of $98.5M of unrealized gains on marketable securities — the actual loss from operations WIDENED to $(75.9)M. Cash burn worsened, FY Adjusted EBITDA guidance was left unchanged at ~$65M (implying a heavily back-loaded H2), and ~$545M of net convertible debt sits ahead of a ~$1.5B acquisition.

• Deceleration is the headline number that matters: total revenue +21.6% YoY in Q2 vs +36.1% in Q1 2026; Diagnostics +19.6% vs +34.7% in Q1; Hereditary revenue +5% after +54% volume growth the prior quarter — the Ambry contribution has lapped and stalled
• GAAP net income of $5.6M is entirely non-operating: $102.8M of 'other income, net' including $98.5M of UNREALIZED gains on marketable equity securities, against a loss from operations of $(75,913)k that got $14.1M WORSE than the $(61,774)k a year earlier
• The same line cuts the other way and recently did: Q1 2026 carried a $32.3M unrealized LOSS on the same $216.4M securities book. This is a volatility engine bolted onto the P&L, not earnings
• Adjusted EBITDA of $8.0M is a 2.1% margin, and FY2026 Adjusted EBITDA guidance was left UNCHANGED at ~$65M while revenue guidance rose — H1 delivered roughly $5M, so ~$59M must come in H2, a steep back-half load
• Cash burn is worsening, not narrowing: H1 operating cash flow $(80,802)k vs $(61,460)k a year ago; H1 free cash flow $(101,961)k after capex and capitalized software
• Leverage is real and growing: $1,360,710k of convertible debt (senior notes $1,172,781k + promissory note $187,929k) against $815,991k of cash and marketable equity securities = ~$545M net debt; total liabilities $1,920,977k on $2,365,911k of assets
• Data & Applications gross margin FELL to 70.2% from 72.7% — the structural margin lever is itself compressing
• SG&A of $225,845k is 59% of revenue and grew 25% YoY, faster than the 21.6% revenue growth; total cost and operating expenses grew 21.8%, so the operating-loss gap is not closing on GAAP terms
• The guidance raise's $1.600B midpoint sits below the ~$1.61B street figure — a raise that is functionally a trim relative to expectations
• Personalis adds ~$1.5B of enterprise value (at $16.25/share) for an unprofitable MRD asset, closing late Q4 2026 or early 2027 and explicitly EXCLUDED from guidance, so the financing mix, dilution, and integration cost are all unpriced
• Price action confirms the skepticism: $46.05 (2026-08-03) is ~23% below our prior 2026-07-06 vintage and ~56% below the $104.32 52-week high
• $11.6M loss on debt extinguishment in Q2 is the cash cost of the refinancing that produced the interest saving — the benefit is real but was paid for