# TEM — Tempus AI, Inc.

## Company & Research Metadata

- **Company:** Tempus AI, Inc.
- **Ticker:** TEM
- **Exchange:** Nasdaq
- **Sector / Industry:** Health Care / diagnostics and clinical data
- **Template version:** 2.7
- **Research date:** 2026-10-21
- **Valuation / score price snapshot:** $77.80 — 2026-11-03 regular-session close, America/New_York
- **Tracking tier:** Primary Watchlist
- **Owned:** No
- **Primary operating period reviewed:** Q2 2026
- **Historical period reviewed:** TTM, FY 2025, FY 2024; latest balance-sheet date shown below
- **Latest investor presentation reviewed:** Results release and associated financial tables; no separate slide deck materially used
- **Latest earnings call reviewed:** Q2 2026, complete material Q&A
- **Latest post-earnings management commentary reviewed:** No separate later management presentation incorporated

- **Price snapshot date:** 2026-11-03

- **Price snapshot time / timezone:** Regular-session close, America/New_York (including exchange half-days)
- **Competitor / analyst-Q&A audit:** 2026-10-28; original operating, price and valuation snapshots retained.

## What's Changed Since Previous Review

**Current Review:** 2026-10-28

**Previous Review:** 2026-10-21

**Update Trigger:** Competitor relevance and analyst-Q&A correction

| Area | Previous View | Current View | Investment Impact |
|---|---|---|---|
| Competition | Preceding operating and comparable-company classifications | Product/customer/geographic boundaries corrected; direct rivals separated from substitutes, partners and valuation anchors | Corrects the competitive comparison; does not by itself re-underwrite the valuation |
| Analyst questions | Prior source-linked Q&A summaries | Complete questions and sentence-form management answers; all 8 existing rows retained | Improves readability while preserving the recorded exchange meaning |
| Valuation and scores | Approved operating/price snapshots, scenarios, scores and decisions | Preserved | No price refresh, rerank or change to valuation assumptions in this correction pass |

**Thesis:** No new fundamental thesis determination is made in this correction pass. The prior investment decision is preserved; the corrected competitive scope should govern the next substantive review.

## Investment Snapshot

| Metric | Current View |
|---|---|
| Price Snapshot | $77.80 — 2026-11-03 regular-session close, America/New_York |
| Rating / Zone Status | Avoid |
| Bear / Base / Bull Fair Value | $3.65 / $33.11 / $85.21 |
| Scenario Probabilities | 30% / 50% / 20% |
| Probability-Weighted Fair Value | $34.69 |
| Probability-Weighted Expected Return | -55.4% |
| Bear-Case Return | -95.3% |
| Strong Buy Zone | ≤ $4.02 |
| Buy Zone | >$4.02–$27.75 |
| Avoid Chasing Above | > $38.54 |
| Quality Score / Tier | 62.7 / Tier C |
| Opportunity Score / Rank | 23.0 / #74 of 76 |
| Risk Level | High |
| Tracking / Ownership | Primary Watchlist / Not Owned |

**Decision rationale:** TEM is **Avoid** at $66.75, with -48.0% probability-weighted upside and -94.5% bear-case return. A differentiated clinical dataset can create a reinforcing relationship between testing and high-value research products. Confidence is 28/100 because the earnings conversion, competitive and capital assumptions below remain conditional.

## Investment Thesis

A differentiated clinical dataset can create a reinforcing relationship between testing and high-value research products. Q2 revenue grew 22%, with data licensing up 36% and oncology testing volume up 31%. The debate is whether that growth becomes durable cash earnings after laboratory costs, compensation, acquisitions and financing. AI branding should not obscure reimbursement and healthcare-service economics.

### What the Market May Be Mispricing

| Debate | Research judgment |
|---|---|
| Diagnostic reimbursement and organic volume | A differentiated clinical dataset can create a reinforcing relationship between testing and high-value research products. |
| Data licensing durability and legal rights | Test reimbursement, collection rates, laboratory contribution, repeat ordering and licensing renewals drive returns. |
| Acquisition integration, cash burn and dilution | Q2 revenue was $382.5 million and adjusted EBITDA $8 million. |

## Business Overview

Tempus combines molecular diagnostics with clinical data, AI tools and data licensing for physicians and life-science companies. Testing creates clinical and molecular information that can support research and software products, subject to consent, privacy and data rights. Diagnostics and licensing have different margins, reimbursement and cash cycles. Acquisitions, including broader hereditary and residual-disease capabilities, expand scale while complicating organic comparisons.

### Business Takeaway

Tempus combines molecular diagnostics with clinical data, AI tools and data licensing for physicians and life-science companies. Test reimbursement, collection rates, laboratory contribution, repeat ordering and licensing renewals drive returns.

## Industry, TAM & Market Share

Precision medicine and residual-disease testing offer substantial opportunities, but clinical utility, reimbursement and physician adoption determine the reachable market. Established diagnostics companies and private clinical-data platforms compete. Large disease populations are not immediately monetizable test volumes.

### Market-Share Analysis

Comparable same-definition share data for the subject and its principal rivals were not established. TAM estimates and company-specific volume measures are not treated as directly comparable market shares. The positioning analysis below is more reliable than a table of unmatched percentages.

#### Competitive Scale / Position

| Company / Platform | Primary Position | Relative Scale | Growth Direction | Investment Relevance |
|---|---|---|---|---|
| Foundation Medicine — Roche | Direct: oncology molecular profiling and related clinical data | Product scope; no matched operating-scale series | Competes for specified tests and data contracts | Customer choice in the stated segment only |
| Guardant Health (GH) | Direct segment: liquid biopsy and oncology testing | Product scope; no matched operating-scale series | Compare assay, clinical use and reimbursement | Customer choice in the stated segment only |
| Natera (NTRA) | Direct segment: residual-disease/oncology monitoring | Product scope; no matched operating-scale series | Competes in overlapping oncology assays | Customer choice in the stated segment only |

### Industry Takeaway

Large disease populations are not immediately monetizable test volumes. The base case requires evidence of profitable adoption within that market.

## Customer Economics

Test reimbursement, collection rates, laboratory contribution, repeat ordering and licensing renewals drive returns. Data contracts can improve margins but may be concentrated and uneven. Dataset breadth creates value only if information quality and lawful usage support repeat demand.

### Customer-Economics Takeaway

The economic test is Acquisition integration, cash burn and dilution. Dataset breadth creates value only if information quality and lawful usage support repeat demand.

## Competitive Landscape & Moat

### Competitive Landscape

Compare a specific assay, clinical use or data product. Molecular testing companies are not interchangeable across screening, therapy selection and residual-disease monitoring.

| Competitor | Market Share | Positioning | Advantages vs. Company | Disadvantages vs. Company | Current Direction |
|---|---|---|---|---|---|
| Foundation Medicine — Roche | No consistent comparable series | Direct: oncology molecular profiling and related clinical data | Established genomic-testing and pharmaceutical relationships | Different data breadth and software/licensing mix | Competes for specified tests and data contracts |
| Guardant Health (GH) | No consistent comparable series | Direct segment: liquid biopsy and oncology testing | Blood-based oncology testing capabilities | Not every test or patient indication overlaps | Compare assay, clinical use and reimbursement |
| Natera (NTRA) | No consistent comparable series | Direct segment: residual-disease/oncology monitoring | Established molecular monitoring workflows | Other reproductive/organ-health products are outside this comparison | Competes in overlapping oncology assays |

### Moat Assessment

Integrated clinical and molecular data, physician relationships and workflow embedding create potential advantages. The moat remains partly dependent on acquisitions, data access and demonstrable customer outcomes.

**Moat direction:** Stable — an analytical judgment about product and distribution economics, not a measured market-share claim.

### Competitive Takeaway

Integrated clinical and molecular data, physician relationships and workflow embedding create potential advantages. The direct rivals determine commercial pressure; diversified or sector anchors provide valuation context and are not substitutes for direct competition.

## Financial Profile

### Historical Financials

Financial reporting periods follow the issuer's fiscal year: completed FY rows plus standalone current-year quarters and cumulative H1/9M for FY2026. Revenue, FCF and SBC are flows; cash is a period-end balance. FCF = operating cash flow minus property/equipment capex from SEC company facts; quarterly FCF after Q1 and any quarterly SBC derived from YTD are visibly marked. Missing values are N/D, not zero. Unit: USD millions. Data extracted from SEC-tagged filings as of 2026-11-07. Company-specific FCF definitions and acquisition effects may require further reconciliation.

| Period | Revenue | Growth | Gross Margin | Operating Margin | FCF | FCF Margin | SBC | Diluted Shares | Cash | Debt |
|---|---:|---:|---:|---:|---:|---:|---:|---:|---:|---:|
| FY2024 | 693.4 | 30.38% | 54.96% | -99.66% | -211.17 | -30.45% | 534.14 | 120 | 448.26 | 468.09 |
| FY2025 | 1,272 | 83.41% | 62.74% | -19.44% | -239.14 | -18.80% | 124.75 | 174 | 755 | 1,327 |
| Q1 FY2026 | $348.116 | N/D | N/D | -24.3% | −$81.479 (derived: CFO - capex) | -23.4% | $52.706 | 0.179 | $521.17 | N/D |
| Q2 FY2026 | $382.486 | N/D | N/D | -19.8% | −$13.65 (derived: current YTD - prior YTD) | -3.6% | $54.121 (derived: current YTD - prior YTD) | 0.182 | $599.614 | N/D |
| H1 FY2026 | $730.602 | N/D | N/D | -22.0% | −$95.129 (derived: CFO - capex) | -13.0% | $106.827 | 0.179 | $599.614 | N/D |
| Q3 FY2026 | $411.537 | N/D | N/D | -13.8% | −$0.122 (derived: current YTD - prior YTD) | -0.0% | $48.074 (derived: current YTD - prior YTD) | 0.181 | $590.479 | N/D |
| 9M FY2026 | $1,142.139 | N/D | N/D | -19.0% | −$95.251 (derived: CFO - capex) | -8.3% | $154.901 | 0.18 | $590.479 | N/D |

### Financial Takeaways

Q2 revenue was $382.5 million and adjusted EBITDA $8 million. TTM FCF remained negative $263 million, with SBC $186 million and substantial debt or convertible financing. Positive quarterly net income can include items that do not establish sustainable cash profitability. The model includes financing costs and dilution.

**Financial direction:** Mixed — assess the reported trend alongside dilution and the balance sheet.

## Management & Capital Allocation

Management has built a differentiated platform but pursued an ambitious acquisition strategy. Governance, related-party exposure and the price paid for expansion deserve scrutiny. Monitor organic growth, reimbursement quality, cash burn and the common-share implications of convertibles and M&A.

### Management Takeaway

Monitor organic growth, reimbursement quality, cash burn and the common-share implications of convertibles and M&A.

## Valuation

### Current Valuation

| Metric | Value |
|---|---|
| Price Snapshot | $77.80 — 2026-11-03 regular-session close, America/New_York |
| Market Capitalization | $12.04B |
| Enterprise Value | $12.67B |
| Trailing P/E | n/a |
| Provider forward P/E | n/a |
| EV / Sales | 8.85 |

### Comparable Company Analysis

| Company | Relevance | Public / Private | Forward P/E | EV / Sales | Growth / Margin / Risk Context |
|---|---|---|---|---|---|
| TEM — Tempus AI, Inc. | Subject company | Public | n/a | 8.85 | diagnostics and clinical data; 3Y revenue-growth estimate 23.04%; operating margin -19.69% |
| Foundation Medicine | Direct operating competitor / substitute | Operating business of listed Roche | N/A | N/A | direct oncology testing and clinical-data competition; no compatible standalone public multiple used |
| NTRA — Natera | Direct selected oncology/MRD assays; other testing segments differ | Public | n/a | 21.29 | genetic testing and oncology monitoring; 3Y revenue-growth estimate 22.84%; operating margin -10.54% |
| GH — Guardant Health | Direct selected oncology/liquid-biopsy assays | Public | n/a | 18.99 | oncology testing and liquid biopsy; 3Y revenue-growth estimate 36.25%; operating margin -39.64% |
| Foundation Medicine — Roche | Direct: oncology molecular profiling and related clinical data | Operating product / listed parent | N/D — no matched snapshot collected | N/D — no matched snapshot collected | Competes for specified tests and data contracts |

**Comparable takeaway:** Compare a specific assay, clinical use or data product. Molecular testing companies are not interchangeable across screening, therapy selection and residual-disease monitoring. Quoted multiples retain their original dated snapshot; missing matched multiples are not estimated. Consolidated parent multiples do not isolate the competing product. No mechanical peer average is used.

### Valuation Scenarios

| Scenario | Key Assumptions | Fair Value | Probability | Probability Rationale | Return From Price Snapshot |
|---|---|---|---|---|---|
| Bear | 3Y revenue CAGR 15%; sustainable 2029 EPS $0.30 after compensation; 20× P/E; 18% discount rate; Reimbursement and financing pressure leave 2029 economic EPS at $0.30. | $3.65 | 30% | Execution, financing or competitive setbacks remain credible | -95.3% |
| Base | 3Y revenue CAGR 30%; sustainable 2029 EPS $1.70 after compensation; 32× P/E; 18% discount rate; Diagnostics and data scale successfully, producing $1.70 of 2029 economic EPS. | $33.11 | 50% | Most likely operating trajectory, requiring measurable progress | -57.4% |
| Bull | 3Y revenue CAGR 42%; sustainable 2029 EPS $3.50 after compensation; 40× P/E; 18% discount rate; Strong clinical adoption and high-margin data demand produce $3.50 of 2029 economic EPS. | $85.21 | 20% | Successful product conversion and operating leverage; not assured | +9.5% |
| **Probability-Weighted** | Sum of each scenario value × its probability | $34.69 | **100%** | Judgmental scenario probabilities | -55.4% |

### Valuation Takeaway

- **Primary valuation method:** Present value of sustainable 2029 equity earnings × scenario P/E, plus assumed interim dividends. The three-year discount horizon approximates late-2029 earning power.
- **Cross-check methods:** Direct competition, quoted peer multiples, current cash conversion, and the separate revenue/share/net-margin bridge in [the valuation workpaper](../valuation/watchlist_models_2026-10-21.md).
- **Key valuation dependencies:** Diagnostic reimbursement and organic volume; Data licensing durability and legal rights; Acquisition integration, cash burn and dilution. All forward figures are independent research assumptions, not company guidance or consensus.
- **Valuation confidence / Risk Level:** 28/100 / High. Scenario values are sensitive to sustainable earnings and terminal multiples.
- **Margin-of-safety conclusion:** Avoid at $66.75. New-file boundaries use Strong Buy = min(P/W FV ÷ 1.5, 1.1 × bear FV), Buy upper = P/W FV ÷ 1.25, Avoid above = P/W FV ÷ 0.90. Returns are to present fair value, not annualized returns or price targets for a particular date.

## Analyst Questions

The table consolidates related questions and follow-ups from each material participant in the complete call.

| Analyst / Firm | Core Question | Management Response | Research Read-Through |
|---|---|---|---|
| Kallum Titchmarsh / Morgan Stanley | How does reimbursement timing affect assumptions for Personalis? | Management said reimbursement timing changes partner economics. | Confirm that this opportunity converts into profitable recurring demand. |
| Brad Bowers / Mizuho | How do the AstraZeneca contracts affect 2027 visibility? | Management said a large customer commitment supports 2027. | Confirm that this opportunity converts into profitable recurring demand. |
| Kyle Mikson / Canaccord | What is the reimbursement outlook for liquid-biopsy pricing? | Management said reimbursement upside exceeds prior assumptions. | Stress monetization if competition or mix reduces economic yield. |
| Matt Shea / Needham | What supports data-product demand? | Management said the pipeline and customer stickiness are improving. | Confirm that this opportunity converts into profitable recurring demand. |
| Mark Massaro / BTIG | How are Medicare reimbursement and test economics balanced against volume growth? | Management said profitable growth takes priority over uneconomic volume. | Confirm that this opportunity converts into profitable recurring demand. |
| Ricki Levitus / Guggenheim | How is GenomeNext's initial ramp progressing? | Management said the first month was ahead of expectations. | Confirm that this opportunity converts into profitable recurring demand. |
| Brendan Smith / TD Cowen | How should investors interpret the timing of data revenue? | Management said embedded partnerships differ from one-off file sales. | Treat the stated timetable as conditional on demonstrated execution. |
| Robert Bamberger / Baird | How does algorithm attachment affect testing adoption? | Management said attachment supports clinical adoption and test growth. | Confirm that this opportunity converts into profitable recurring demand. |

### Analyst-Q&A Takeaway

Reimbursement and data partnerships improve the opportunity, but prices, revenue timing and Personalis economics remain sensitive. Profitable test volume and cash conversion matter more than assay growth alone.

## Thesis Monitoring

| Driver | Current State | Positive Trigger / Catalyst | Negative Trigger / Falsifier | What It Changes |
|---|---|---|---|---|
| Diagnostic reimbursement and organic volume | A differentiated clinical dataset can create a reinforcing relationship between testing and high-value research products. | Revenue trajectory sustains approximately 30% annual growth on a comparable basis | Growth remains below the 15% bear assumption over a full operating cycle | Revenue outlook and scenario probabilities |
| Data licensing durability and legal rights | Test reimbursement, collection rates, laboratory contribution, repeat ordering and licensing renewals drive returns. | After-cost earnings progress toward the base implied net margin of 11.0% | Competition, credit losses or service costs make that margin trajectory unattainable | Margins, moat score and valuation multiple |
| Acquisition integration, cash burn and dilution | Q2 revenue was $382.5 million and adjusted EBITDA $8 million. | Financing and compensation remain consistent with 203.0M economic shares in the 2029 base case | Required capital or cumulative dilution materially exceeds the model without matching earnings | Financial score, confidence and downside value |

## Quality & Opportunity Scorecards

### Quality Score

| Component | Score | Weight | Weighted Contribution | Evidence |
|---|---|---|---|---|
| Business durability and economics | 59 | 25% | 14.8 | Test reimbursement, collection rates, laboratory contribution, repeat ordering and licensing renewals drive returns. |
| Moat and competitive position | 70 | 25% | 17.5 | Integrated clinical and molecular data, physician relationships and workflow embedding create potential advantages. |
| Growth runway and durability | 89 | 20% | 17.8 | Precision medicine and residual-disease testing offer substantial opportunities, but clinical utility, reimbursement and physician adoption determine the reachable market. |
| Financial quality and balance sheet | 38 | 15% | 5.7 | Q2 revenue was $382.5 million and adjusted EBITDA $8 million. |
| Management, governance and capital allocation | 46 | 15% | 6.9 | Management has built a differentiated platform but pursued an ambitious acquisition strategy. |
| **Quality Score** | **62.7** | **100%** | **62.7** | Weighted score, independent of ownership and current price |

- **Quality Tier:** C
- **Speculative override:** None

### Opportunity Score

| Component | Raw Input | Normalized Score | Weight | Weighted Contribution |
|---|---|---|---|---|
| Quality | 62.7 | 62.7 | 30% | 18.8 |
| Probability-weighted upside | -55.4% | 0.0 | 35% | 0.0 |
| Bear-case downside | -95.3% | 0.0 | 20% | 0.0 |
| Risk / valuation confidence | 28 | 28.0 | 15% | 4.2 |
| **Opportunity Score** |  | **23.0** | **100%** | **23.0** |

- **Opportunity Rank:** #74 of 76
- **Zone Status:** Avoid

## Portfolio Context

- **Tracking tier:** Primary Watchlist
- **Owned:** No
- **Tracking source of truth:** `my_watchlist.md`
- **Portfolio source of truth:** `portfolio/holdings.md`
- **Scoring independence:** Ownership, account, shares, position size and cost basis do not change research, valuation, Quality, Opportunity, rank or zones.

## Investment Decision History

| Timestamp | Price | Rating | Zone Status | Buy Zone | Strong Buy Zone | Avoid Chasing Above | Base FV | P/W FV | P/W Return | Quality | Opportunity / Rank | Change / Rationale |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2026-10-21 (America/New_York) | $66.75 | Avoid | Avoid | >$4.02–$27.75 | ≤ $4.02 | > $38.54 | $33.11 | $34.69 | -48.0% | 62.7 | 23.0 / #68 | Initial missing-file analysis; common-universe ranking; independent scenario assumptions |

---

## Material Sources

| Source | Type | Date / Period | What It Supports |
|---|---|---|---|
| [Tempus Reports Second Quarter 2026 Results / Tempus AI](https://investors.tempus.com/news-releases/news-release-details/tempus-reports-second-quarter-2026-results) | Company IR / earnings filing | Q2 2026 | Latest operating results, guidance, products and financial supplement |
| [TEM complete earnings-call transcript](https://stockanalysis.com/stocks/tem/transcripts/660947-q2-2026/) | Transcript | Q2 2026 | Prepared remarks and all material Q&A exchanges |
| [TEM regular-session historical price](https://stockanalysis.com/stocks/tem/history/) | Market data | 2026-10-20 close | Common price used in returns, scores and zones |
| [TEM valuation statistics](https://stockanalysis.com/stocks/tem/statistics/) | Market data | 2026-10-20 close; ratios retrieved 2026-10-21 | Market capitalization, shares, quoted multiples and current ratios |
| [TEM historical income statement](https://stockanalysis.com/stocks/tem/financials/income-statement/) | Standardized financial statements | Latest reported period and two preceding fiscal years | Historical income statement; source-native currency and definitions |
| [TEM historical balance sheet](https://stockanalysis.com/stocks/tem/financials/balance-sheet/) | Standardized financial statements | Latest reported period and two preceding fiscal years | Historical balance sheet; source-native currency and definitions |
| [TEM historical cash flows](https://stockanalysis.com/stocks/tem/financials/cash-flow-statement/) | Standardized financial statements | Latest reported period and two preceding fiscal years | Historical cash flows; source-native currency and definitions |
| [Natera statistics](https://stockanalysis.com/stocks/ntra/statistics/) | Comparable-company market data | 2026-10-20 regular close | Peer multiples and financial context; public quote basis |
| [Guardant Health statistics](https://stockanalysis.com/stocks/gh/statistics/) | Comparable-company market data | 2026-10-20 regular close | Peer multiples and financial context; public quote basis |
| [SEC XBRL company facts — TEM](https://data.sec.gov/api/xbrl/companyfacts/CIK0001717115.json) | Regulatory filing (as tagged) | FY2026, through 2026-09-30 | Current-year standalone-quarter and year-to-date source facts for FCF, SBC, revenue and other reported metrics |