Tempus AI (TEM) Q2 2026 earnings review
Top-Line Growth Persists, But GAAP Profitability is a Mirage
Tempus delivered a solid 22% YoY revenue growth in Q2, driven by a 31% surge in Oncology testing volume and a 36% jump in Insights revenue. The headline GAAP net income of $5.6 million suggests a major profitability milestone, but this is an illusion driven entirely by a $98.5 million unrealized gain on marketable securities. Operating loss actually worsened to $(75.9) million. While the company successfully raised its revenue guidance and made a bold $1.5 billion move to acquire Personalis for its MRD technology, the sudden deceleration in the Hereditary segment (down to 5% revenue growth) and deteriorating operating margins demand investor scrutiny.
🐂 Bull Case
Oncology test volumes are accelerating (+31% YoY) and the Data & Applications segment secured ~$200 million in new bookings, proving the 'AI Foundation Model' narrative is translating into tangible, large-scale pharma contracts.
The $1.5 billion acquisition of Personalis secures a leading tumor-informed MRD technology, matching Tempus's vast commercial infrastructure with a high-growth product category.
🐻 Bear Case
The transition to positive GAAP Net Income was purely cosmetic, fueled by non-operating stock market gains, while GAAP Operating Loss expanded 23% YoY to $(75.9) million.
Hereditary testing went from being a core growth engine (>30% YoY growth in 2025) to a laggard, plummeting to just 5% revenue growth this quarter.
⚖️ Verdict: ⚪
Neutral. The core Oncology and Insights businesses are thriving, and the FDA CDx approval will be a future tailwind. However, the steep deceleration in the Hereditary segment and poor GAAP operating leverage offset the top-line success.
Key Themes
Low Quality of Earnings
Tempus reported GAAP net income of $5.6 million, a massive swing from a $(42.8) million loss a year ago. However, this relies entirely on $98.5 million in unrealized gains on marketable securities. When isolating the actual business performance, GAAP loss from operations deteriorated by 23% YoY to $(75.9) million. Non-GAAP loss from operations (which excludes $54.1M in stock-based compensation and $16.6M in amortization) was $(2.7) million. The core business is not yet profitable.
Oncology Core is Accelerating
Despite a broader deceleration in total revenue, the core Oncology testing volume is accelerating, hitting 31% YoY growth (up from 28% in 26Q1 and 26% a year ago in 25Q2). Management's narrative that their integrated technology platform functions as an unbeatable moat is supported by these persistent volume share gains in a competitive therapy selection market.
Aggressive MRD Expansion via Personalis Acquisition
Tempus entered a definitive agreement to acquire Personalis for ~$1.5 billion enterprise value. This tightly integrates the ultrasensitive NeXT Personal MRD technology into Tempus's platform. Given Tempus's existing commercial footprint, which pushed previous MRD test volumes up to 9,000 this quarter (from 6,500 in Q1 and 4,700 in 25Q4), owning the assay outright gives Tempus the required margins and control to aggressively ungating its sales force in the massive MRD market.
Hereditary Growth Hits a Wall
The Hereditary testing business (Ambry), which grew unit volumes at 32% in 25Q2 and 37% in 25Q3, has hit a wall. Q2 2026 Hereditary revenue grew by only 5%. Management noted a 'slowdown' in Q1 due to tough prior-year comps, but a drop to 5% suggests competitive pressures or market saturation are taking a heavier toll than previously guided.
Data & Applications: Big Pharma Momentum Continues
The Insights business grew 36% YoY, driving Data and Applications revenue to $93.2 million. The company signed ~$200 million in new Data and Applications licenses in the quarter, adding to its >$1.1 billion Total Contract Value (TCV) backlog. Tempus successfully delivered its first oncology foundation model to AstraZeneca, validating its capability to move beyond basic data licensing into higher-value, proprietary AI model building.
FDA Approval Unlocks ADLT Pricing
Tempus received FDA approval for its tumor-only xT CDx assay, making it the first lab to hold companion diagnostic approval for both tumor-only and tumor-normal comprehensive genomic profiling. Management expects this to transition tissue testing to Advanced Diagnostic Laboratory Test (ADLT) pricing, which will serve as a major catalyst for Average Selling Price (ASP) uplift in the coming quarters.
Stock-Based Compensation Continues to Dilute
Stock-based compensation and related employer payroll taxes reached $55.6 million for the quarter, up 128% from $24.3 million in 25Q2. While Adjusted EBITDA improved to $8.0 million, that figure adds back these massive equity grants. This level of dilution remains a structural concern for long-term equity value.
Other KPIs
Accelerating. GAAP gross margin expanded from 62.0% in 25Q2 to 64.4% in 26Q2. Non-GAAP gross margin reached 65.7%, led by highly profitable growth in the Data and Applications segment (71.3% Non-GAAP gross margin).
Cash and marketable securities increased to $820.7 million, bolstered by the successful completion of a $460 million offering of 0.0% convertible senior notes due 2032. This fortifies the balance sheet ahead of the cash-intensive integration of the Personalis acquisition.
Guidance
Accelerating slightly. The company raised the lower and upper bounds of its full-year revenue guidance (previously $1.59 - $1.60 billion), implying a robust ~25% annual growth rate. This assumes no impact from the Personalis transaction, which is expected to close in late Q4 2026 or early 2027.
Stable. The company reiterated its expectation to generate roughly $65 million in Adjusted EBITDA for the full year. Given that Q1 generated $(2.8M) and Q2 generated $8.0M, this implies a significantly steeper profit ramp in the second half of the year (requiring ~$60M in H2 Adjusted EBITDA), representing execution risk.
Key Questions
Hereditary Market Dynamics
Hereditary testing revenue growth fell sharply to 5% year-over-year. Is this purely the result of difficult comps from market share gains last year, or are you seeing heightened price pressure and increased competition returning to the space?
ADLT Pricing Timeline
With the FDA approval for the tumor-only xT CDx assay secured, what is the exact timeline for transitioning this testing to ADLT pricing, and how much ASP uplift is factored into the H2 2026 guidance?
Adjusted EBITDA Ramp
Maintaining the $65 million Adjusted EBITDA guidance requires a very steep profitability ramp in the second half of 2026. What specific cost levers or margin improvements give you confidence in achieving this back-half leverage?
Personalis Integration and Cash Burn
Assuming the Personalis transaction closes in late 2026, how should investors think about the cash burn profile of the combined entity in 2027, particularly as you ungate the broader Tempus sales force to sell the NeXT Personal assay?