Tempus (TEM) Q1 2026 earnings review
Sequential Stumble Unmasks the Reality of Lapping M&A
Tempus continues to post impressive year-over-year headline numbers, with Q1 revenue up 36.1% to $348.1M. However, management's narrative of 'accelerating demand' directly contradicts the sequential data. Revenue actually contracted by $19M compared to 25Q4. More alarmingly, the company's hard-fought milestone of positive Adjusted EBITDA—achieved in H2 2025—has sharply reversed back into the red at $(2.8M). Net loss nearly doubled sequentially to $125.9M due to heavy stock-based compensation and investment losses. While the data licensing business and MRD volumes remain bright spots, the core hereditary business is showing severe organic deceleration. Raising FY26 guidance to ~$1.60B while printing a negative EBITDA quarter sets up a massive 'prove-it' scenario for the rest of the year.
🐂 Bull Case
Data and Applications revenue is accelerating, up 40.5% YoY to $87M. New strategic collaborations with Merck and Gilead validate the 'Lens' platform and prove the recurring value of Tempus's massive multimodal datasets.
MRD test volume hit ~6,500 in Q1, up 500% YoY and accelerating from 4,700 in Q4. This demonstrates phenomenal market traction in a high-value segment, even before full 'ungating' via widespread reimbursement.
🐻 Bear Case
After boasting about hitting a '10-year goal' of positive Adjusted EBITDA in Q3 and Q4 2025, Tempus slipped back to a $2.8M loss in Q1. The path to the guided $65M FY26 EBITDA now requires a steep, aggressive ramp.
Management promised 'high teens' growth for Hereditary testing in 2026. Adjusting for Ambry's pre-acquisition volume, organic volume growth was a dismal 7% YoY, signaling serious market saturation or lost market share.
⚖️ Verdict: 🔴
Bearish. Paying premium valuations for AI-healthcare requires flawless execution. A sequential revenue drop, a reversal in EBITDA, and an organic collapse in Hereditary growth overshadow the strong YoY comps and Data segment wins.
Key Themes
Profitability Narrative Contradicted by Data
In Q4 2025, management celebrated crossing into positive Adjusted EBITDA as proof of permanent operating leverage. Q1 2026 shattered that narrative. Adjusted EBITDA reversed to $(2.8M), and GAAP Loss from Operations deteriorated 23.3% YoY to $(84.7M). When stripping away adjustments, the GAAP Net Loss ballooned to $125.9M, driven by an immense $56.3M in stock-based compensation. The company is masking core cash burn behind aggressive 'adjusted' metrics that are no longer moving in the right direction.
Hereditary Organic Growth Plummets
The headline 54% Hereditary volume growth is highly misleading due to the timing of the Ambry acquisition (Feb 2025). When management accounted for pre-acquisition volumes, organic growth was only 7%. This is a sharp, alarming deceleration from the 23% delivered in Q4 2025 and falls drastically short of the 'high teens' guidance management set just one quarter ago.
Insights Data Licensing Re-Accelerating
The Data and Applications segment is the primary growth driver, accelerating to 40.5% YoY growth (up from 25.1% in Q4), with the core 'Insights' product growing 44.1%. Management delivered on their Q4 promise of ~40% Q1 growth. The addition of enterprise-wide collaborations with Merck and Gilead provides high-margin, recurring visibility that insulates Tempus from volatile diagnostic volumes.
MRD Scaling Rapidly
Minimal Residual Disease (MRD) testing is executing flawlessly. Volume hit 6,500 tests, representing accelerating sequential momentum from 4,700 tests in Q4 2025 and an astronomical 500% YoY increase. As Tempus pushes for broader MolDx reimbursement, this segment remains a massive greenfield opportunity.
Pan-Cancer RNA Algorithm Launch
Tempus launched a first-of-its-kind pan-cancer algorithm using RNA expression to identify Homologous Recombination Deficiency (HRD). This expands the addressable patient population for PARP inhibitors beyond standard DNA testing. This specific technological innovation directly increases the utility (and potentially the ASP) of their testing suite by finding actionable targets traditional methods miss.
Macro Reimbursement Backdrop Slowly Yielding
A persistent macro headwind for AI healthcare companies has been the lack of direct reimbursement for 'dry lab' algorithms. However, Tempus is building irrefutable clinical utility data, such as the ALERT trial with Medtronic, which proved Tempus's AI EHR notifications increased life-saving heart valve procedures by 40%. Proving hard clinical ROI is the necessary precursor to forcing payer capitulation in the U.S. healthcare system.
Other KPIs
Improving. Non-GAAP Diagnostics gross margin expanded significantly from 56.8% a year ago. However, on a consolidated GAAP basis, gross margin was 63.8%, which actually represents a slight sequential deceleration from the 64.7% printed in Q4 2025.
Reversing. Liquidity dropped sharply from the $759.6 million reported at the end of 2025. This $115M sequential burn reflects persistent operating cash consumption, capitalized software costs, and a $32.3 million hit from unrealized losses on marketable securities.
Guidance
Decelerating. While management raised the absolute range, the ~$1.595B midpoint implies roughly 25.6% YoY growth versus FY25 ($1.27B). This represents a deceleration from the 36.1% YoY growth posted in Q1, acknowledging tougher comps in the back half of the year as the company laps the Ambry and Paige AI acquisitions.
Accelerating. The company maintained this aggressive target. Given the negative $(2.8M) print in Q1, hitting this annual guidance requires a massive, immediate acceleration. The company must average over $22M in Adjusted EBITDA per quarter for the rest of the year—a dramatic leap from anything achieved historically.
Key Questions
Bridging the EBITDA Gap
With Q1 Adjusted EBITDA coming in negative, how exactly do you bridge to the $65 million full-year target? Is this entirely dependent on Q4 ASP step-ups, or are there significant cost-cutting measures planned for Q2 and Q3?
Hereditary Deceleration
Adjusted organic growth for Hereditary volume was only 7% this quarter, far below the 'high teens' expected just three months ago. Have you lost market share, or is the market saturated?
Sequential Revenue Decline
Despite strong YoY optics, total revenue declined sequentially from Q4 to Q1. How much of this is driven by expected seasonality versus underlying weakness in core testing volumes?
Stock-Based Compensation Trajectory
SBC and related taxes ran at over $56 million this quarter, completely overwhelming gross profit gains. At what point does SBC begin to leverage down as a percentage of revenue?