Big pharma validates the data bet
- Tempus sells genomic tests, then turns de-identified clinical and molecular data into paid products for drug companies.
- In Q1 2026, Genomics produced $261.1 million of revenue, about 75% of total revenue.
- Data and Services grew faster in Q1 2026, rising 41% year over year to $87.0 million.
- Merck joined as a large strategic partner, and Gilead expanded its relationship, adding proof that pharma values the dataset.
- The main tension is price and proof: Tempus is still losing money under GAAP and must turn adjusted profit into real cash flow.
Data moat, high price
Tempus is trying to build a flywheel in precision medicine. It runs diagnostic tests for patients, cleans and de-identifies the data, then sells data and AI services to drug companies. The bull case is that each new test makes the dataset more useful, and each new pharma deal makes the business more valuable.
The latest evidence helps that case. In Q1 2026, management said Tempus signed a large strategic collaboration with Merck and expanded its relationship with Gilead. It also said it now has almost half a dozen partners at the greater than $100 million deal size. That makes the Data and Services story feel more real and less like a promise.
The financial turn is still early. Q1 2026 revenue grew 36% year over year to $348.1 million, and adjusted EBITDA improved to negative $2.8 million from negative $16.2 million a year earlier. Management still points to about $65 million of positive adjusted EBITDA for full-year 2026.
The bear case has not gone away. Tempus reported a Q1 2026 net loss of $125.9 million, so adjusted EBITDA is not the same as true profit. The stock also needs to justify a rich price while the company faces reimbursement risk, legal risk from a Civil Investigative Demand, and the hard task of turning data contracts into recognized revenue and cash.
Tests feed the dataset
Tempus first makes money from diagnostic testing. Doctors and hospitals order genomic and other molecular tests to help guide care. Ambry Genetics added hereditary and genetic screening, which broadened the testing base beyond oncology.
The second money stream is data. Tempus structures and de-identifies clinical and molecular records, then licenses the data and related AI tools to pharmaceutical and biotech companies. These customers use the products for research, drug development, and clinical trial matching.
This model can be powerful because one patient record can create revenue more than once. The test can be paid for when it is run, and the de-identified data can later support data licensing or services. That is why the Data and Services segment matters so much, even though it was only about 25% of Q1 2026 revenue.
The model breaks if payers cut test reimbursement, if privacy rules limit data use, if pharma customers slow new deals, or if the data does not keep proving useful in drug development. Tempus also needs to show that growth can lead to GAAP net income, which means profit under standard accounting rules.
Four ways to use the data
Oncology and molecular genomics
These are next-generation sequencing, PCR profiling, and other molecular tests sold to healthcare providers. They drive volume and feed the main dataset.
Ambry hereditary genetics
Ambry added hereditary and genetic screening in areas such as pediatrics, rare disease, cardiology, reproductive health, and immunology. It also made Genomics a larger and broader business.
Insights data licensing
Insights gives pharma and biotech customers access to de-identified clinical and molecular data for research. Management has pointed to strong growth and rising contract value in this line.
Trials and AI applications
Trials uses AI to help match patients to clinical trials, while AI applications support diagnostic and clinical decisions. Paige.AI adds digital pathology, but market adoption is still early.
Q1 mix still test-heavy
Segment mix is from the three months ended March 31, 2026. Genomics was about three quarters of revenue, while Data and Services was about one quarter, even though Data and Services grew faster.
What could break
Adjusted profit may not become real profit
High impact · Medium oddsTempus is close to adjusted EBITDA profit, but it still reported a Q1 2026 net loss of $125.9 million. Adjusted EBITDA removes costs that still matter to shareholders, such as some non-cash and financing-related items. The company also had a $2.4 billion accumulated deficit as of December 31, 2025.
Billing investigation overhang
High impact · Medium oddsTempus received a Civil Investigative Demand from the U.S. Attorney's Office for the Eastern District of New York on March 4, 2024. It relates to the False Claims Act, the Anti-Kickback statute, and the Medicare 14-Day Rule. The company has produced documents, but the possible cost or operating impact is still unknown.
Genomics reimbursement pressure
High impact · Medium oddsGenomics was about 75% of Q1 2026 revenue, so payment rates matter a lot. If Medicare, private insurers, or hospitals pay less or slow approvals, test revenue and gross profit could suffer. Management expects FDA-approved assays to lift average selling prices over time, but timing is still uncertain.
Data contracts may convert slowly
Medium impact · Medium oddsThe Data and Services segment depends on turning signed contracts into delivered data, services, and recognized revenue. Remaining total contract value was more than $1.1 billion at December 31, 2025, and newer Merck and Gilead activity adds visibility. Still, investors need to see the cadence of conversion over the next few years.
Privacy and data access rules
High impact · Low oddsThe main moat is a large proprietary dataset. If privacy rules tighten, hospitals change data-sharing terms, or patients and regulators push back, the data flywheel could slow. That would weaken the reason pharma customers pay for the platform.
Convertible debt and dilution
Medium impact · Medium oddsIn July 2025, Tempus issued $750.0 million of 0.75% convertible senior notes due 2030. The notes added cash and helped repay term loans, but they also create future debt service and possible share dilution. If the stock price rises enough for conversion, existing holders could own a smaller slice of the company.
In one breath
What does Tempus AI actually do?
Tempus runs genomic and other diagnostic tests, mainly for healthcare providers. It then structures de-identified patient data and sells data, analytics, and AI tools to drug companies.
Why do Merck and Gilead matter for Tempus?
Large pharma partners show that the dataset may be useful in real drug development work. The Merck collaboration and expanded Gilead relationship also add more revenue visibility for Data and Services.
Is Tempus profitable?
Not under GAAP. Q1 2026 adjusted EBITDA improved to negative $2.8 million, and management guides to about $65 million of positive adjusted EBITDA for 2026, but Q1 net loss was still $125.9 million.
What is the biggest risk for TEM stock?
The biggest risk is paying a high price before the company proves durable cash flow. Investors also need to watch test reimbursement, the billing investigation, and the pace of data contract revenue conversion.