Tempus AI Raises Full-Year Guidance as Merck Partnership and Data Business Momentum Signal Durable Growth Engine
Q1 2026 Earnings Call, May 5, 2026
Tempus AI delivered a quarter that gives investors genuine reason to reassess the long-term trajectory of the data and applications business. Revenue of $348.1 million grew 36% year-over-year, and management raised full-year guidance to $1.59 to $1.60 billion, with adjusted EBITDA of approximately $65 million. But the headline numbers arguably undersell what was disclosed: a major new strategic collaboration with Merck, an expanded Gilead relationship, and the clearest articulation yet of what a $100 million-plus pharma data partnership actually looks like at Tempus.
Merck Joins the Strategic Data Partnership Tier — and It's a Big Deal
The most important new disclosure is the Merck collaboration. CEO Eric Lefkofsky was careful about financial specifics, but framed it explicitly alongside AstraZeneca, GSK, and BMS as a "very large collaboration of that magnitude," implying a nine-figure, multi-year commitment. "To get to these very large levels where people are signing $100 million-plus agreements with you to license your de-identified data over multiple years — it would be pretty impressive to do that with one pharma, even more impressive with two. But we now have almost half a dozen folks at that level," Lefkofsky said. That figure — half a dozen strategic partners at the $100 million-plus tier — is a materially new data point and is more than most investors had assumed.
The Gilead expansion, while smaller than Merck, is notable for a different reason: it represents a significant step-up from Gilead's historical spending levels with Tempus, illustrating the company's account expansion playbook in action. Lefkofsky described the typical evolution: starting with a single project in one cancer subtype, then expanding across multiple subtypes and use cases, before ultimately leveraging Tempus data across the full drug development spectrum — from compound selection through Phase I/II trial design to commercial viability.
Data and Applications Business Inflecting — TCV Actually Rose in Q1
The Data and Applications segment posted $87 million in revenue, up 40.5% year-over-year, with the data licensing and modeling insights sub-segment growing over 44%. Critically, this was the third consecutive quarter of bookings exceeding $100 million, and CFO Jim Rogers disclosed that total contract value (TCV) actually increased in Q1 — a meaningful statement given the company was simultaneously burning down roughly $80 million in revenue from existing backlog. Rogers noted the company has "never been at this point in the year with this level of visibility into the overall number," and pointed to the $350 million in TCV already earmarked for 2026 revenue as of the year-end call, now augmented by the Merck and Gilead closings.
Lefkofsky went further in sketching the long-term addressable opportunity, suggesting the U.S. data and modeling business alone could reach "multi-billion dollars," driven not just by pharma's deepening use of Oncology datasets but by early traction in adjacent disease areas. A multi-million dollar Alzheimer's multimodal modeling project currently underway with an unidentified partner offers the first concrete evidence that the data moat is beginning to extend beyond Oncology, though Lefkofsky acknowledged this remains nascent.
Diagnostics Solid Across the Board, with MRD the Standout
Diagnostic revenue of $261.1 million grew approximately 35%, with Oncology therapy selection unit volume up around 28%. Solid tumor and liquid biopsy both performed well, but MRD was the clear outperformer — volume grew roughly 500% year-over-year, albeit from a small base of approximately 6,500 tests. Lefkofsky was candid that this growth is deliberately metered. Tempus's MRD assay is tumor-informed and runs through Personalis for reimbursement, and until Personalis expands its reimbursed indication set closer to Natera's coverage, Tempus cannot aggressively scale commercial deployment without imposing unsustainable cash burn on its partner. "If we dialed it up 10x, their cash burn would go up a lot," Lefkofsky said. The implication is that MRD volume growth, while impressive, is supply-constrained by reimbursement rather than demand-constrained — a meaningful distinction for modeling future ramp.
Hereditary testing, the Ambry-driven business, was the one area of softness. Growth slowed as the company laps a period of roughly 40% expansion from a year ago. Management expects a return to mid-teens growth in the second half, aided by the RARE whole-genome product finally reaching commercial scale. Lefkofsky acknowledged Tempus was "a bit late" in getting the whole-genome product to market compared to GeneDx, framing the first half of 2026 as a volume ramp rather than an ASP story.
Algorithm Attach Rate Reaches 40% — The Physician Stickiness Story Is Real
An underappreciated disclosure came in response to a question about algorithm attach rates on solid tumor assays, which have now reached approximately 40%. Tempus's proprietary algorithms — including its Homologous Recombination Deficiency algorithm, Tumor Origin test, and Immune Profile Score — are increasingly embedded in routine physician ordering workflows. Lefkofsky's description of the Immune Profile Score is worth noting for those trying to understand clinical differentiation: the tool refines the standard tumor mutational burden test by identifying patients who would respond to immunotherapy but are TMB-low, and vice versa. As these algorithms proliferate, they create workflow stickiness that pure sequencing volume metrics do not fully capture.
ASP Uplift of ~$500 on the Horizon, but Timing Uncertain
On the reimbursement front, Tempus's xF liquid biopsy test remains under FDA review with no updated timeline provided — and management reiterated this will have no pricing impact in 2026. However, the company filed an amendment to its existing FDA-approved solid tumor assay (xT) to cover tumor-only cases, which Rogers said a decision on is "imminent." Approving that amendment would accelerate migration to the ADLT-priced version of the assay. With the current blended ASP around $1,720 to $1,740, management sees roughly $500 of incremental upside over the next one to two years as FDA approvals accumulate across the assay portfolio. That is not guidance — but it is a concrete framing of the reimbursement optionality embedded in the business.
Cash Flow Negative in Q1, but Management Unconcerned
Free cash flow was negative and meaningfully worse than the adjusted EBITDA loss of approximately $3 million, driven by the timing of bonus payments and a structural feature of the Insights business: several large contracts that had front-loaded prepayments or deferred revenue are rolling over to quarterly payment structures, temporarily compressing cash inflows. Rogers guided to a "significant improvement" in Q2 as this normalizes. Lefkofsky was characteristically direct: "We're going to generate cash, we're going to be EBITDA positive. We don't need alternative financings." With the company guiding to $65 million in adjusted EBITDA for the full year and EBITDA improving every quarter for at least seven or eight consecutive periods, the Q1 cash flow is best read as a timing artifact rather than a structural concern.
Three-Year 25% Growth Target — No Volume Haircut Implied by ASP Upside
In response to an analyst question about whether the illustrative 25% three-year top-line growth target incorporates potential ASP increases that could offset volume assumptions, Rogers was explicit: "There's no implication on a volume perspective" from the reimbursement upside scenarios. In other words, the base case growth trajectory does not depend on resolving the ASP uncertainty — any favorable reimbursement outcomes would represent upside. Lefkofsky contextualized the ambition: revenue of $1.6 billion growing at 25% annually reaches roughly $2.5 billion to $3 billion within three years, "a pretty big number" at a company that was generating $300 million just three to four years ago.
The competitive dynamics in therapy selection drew pointed commentary as well. Lefkofsky dismissed the idea that Companion Diagnostic label wins by competitors will disrupt Tempus's ordering volumes, noting that the U.S. reimbursement structure does not tie drug access to a specific companion test. "The differential in growth rates — the fact that we're growing faster than others in therapy selection — is predominantly related to the technology platform we built," he said, attributing the gap to algorithm depth, workflow integration, and physician convenience rather than any CDx positioning. That is a confident claim, and the volume data for now supports it.
Tempus AI Deep Dive
The Business Model and Revenue Streams
Tempus AI operates at the structural intersection of molecular diagnostics and bioinformatics, executing a dual-sided business model that leverages laboratory testing to feed a highly lucrative data licensing engine. The core architectural advantage of the company lies in its ability to turn the historically commoditized and low-margin business of clinical sequencing into a proprietary, high-margin data asset. The company is divided into two primary reporting segments: Genomics and Data and Applications. The Genomics segment functions as the top of the funnel. Tempus runs one of the highest-volume oncology and hereditary sequencing operations in the world, administering flagship solid tumor, liquid biopsy, and minimal residual disease profiling tests. In early 2025, the company aggressively expanded its hereditary testing footprint through the $600 million acquisition of Ambry Genetics, pushing testing volumes well past 200,000 sequences per quarter. This segment generates revenue through traditional healthcare reimbursement channels, billing commercial payors and Medicare for diagnostic insights that guide physician treatment decisions.
The Data and Applications segment represents the economic engine of the long-term investment thesis. As Tempus sequences patient samples, it aggregates the resulting molecular data and pairs it with longitudinal clinical records, pathology slides, and radiological imaging ingested directly from thousands of connected hospital systems. The resulting multimodal dataset, which exceeds 500 petabytes and encompasses over 40 million patient records, is de-identified and licensed to the life sciences industry through the company's Insights product. Pharmaceutical and biotechnology companies purchase access to this data via multi-year, nine-figure contracts to accelerate drug discovery, optimize clinical trial design, and identify novel therapeutic biomarkers. Because the data is generated as a byproduct of the reimbursed diagnostics business, the data licensing segment scales at a near-zero marginal cost, commanding structural gross margins in the 73% to 75% range. This high-margin revenue stream fundamentally alters the margin profile of the combined enterprise, separating Tempus from traditional laboratory operators.
Key Customers, Competitors and The Ecosystem
The customer base for Tempus is heavily bifurcated by its two operating segments. On the clinical side, the key constituents are oncologists, cardiologists, and pathologists operating within academic medical centers and community hospital networks. Tempus has integrated its ordering and results platform into the electronic medical record systems of over 7,000 physicians, securing a sticky distribution channel. On the data side, the end customers are the world’s largest biopharmaceutical companies, including enterprise-wide licensing agreements with entities such as AstraZeneca, Merck, and Gilead Sciences, who rely on the platform for real-world evidence and cohort identification.
The precision oncology landscape is a fiercely contested oligopoly characterized by intense capital requirements and high barriers to entry. In the tissue-based molecular profiling arena, Tempus's primary competitors are Caris Life Sciences and Foundation Medicine, a subsidiary of Roche. Market share dynamics have shifted dramatically over the past few years. Foundation Medicine, once the undisputed pioneer of comprehensive genomic profiling, has suffered a severe erosion of its competitive position. Recent market data indicates that Tempus and Caris have aggressively taken share from the legacy leader, now controlling a combined estimated 60% to 65% of the United States solid tumor next-generation sequencing volumes. Roche's consecutive goodwill and intangible asset write-downs on Foundation Medicine, totaling over $700 million, underscore the severity of this competitive displacement. In the liquid biopsy and minimal residual disease segments, Tempus faces formidable competition from Guardant Health and Natera, both of which possess entrenched relationships and deep standalone genomic repositories. In the real-world data space, Tempus competes against entities like Flatiron Health, another Roche asset, though Tempus differentiates itself through the sheer volume of its paired genomic-clinical data rather than relying strictly on unstructured clinical notes.
Competitive Advantages
The primary competitive moat for Tempus is its multimodal data flywheel, specifically the proprietary pairing of molecular profiles with longitudinal clinical outcomes. While competitors like Guardant Health possess deep genomic repositories and data aggregators like Flatiron hold vast clinical datasets, Tempus integrates both modalities at the individual patient level. The company has amassed over 4 million genomic profiles linked directly to longitudinal clinical records. This paired architecture is exponentially more valuable to pharmaceutical developers training artificial intelligence models than standalone clinical or genomic data, as it allows researchers to directly correlate specific genetic mutations with real-world therapeutic responses and adverse events over time.
Scale serves as a secondary, yet equally critical, structural advantage. By processing massive volumes of clinical sequences, Tempus continually drives down its per-unit sequencing and bioinformatics costs, expanding its gross margins on the diagnostics side. Furthermore, the company has ruthlessly consolidated niche data assets to widen its moat. The $81 million acquisition of Paige.AI in the second half of 2025 provided Tempus with an exclusive repository of nearly 7 million digitized, clinically annotated pathology slides from Memorial Sloan Kettering Cancer Center. This acquisition effectively locked up one of the largest digital pathology datasets in existence, securing Tempus’s dominance in training the next generation of spatial biology and computer vision algorithms. Competitors attempting to replicate this infrastructure face an insurmountable time and capital deficit, as retrospective data aggregation at this scale requires years of embedded hospital integrations and continuous sequencing volume.
Industry Dynamics: Opportunities and Threats
The structural shift toward precision medicine represents a massive secular tailwind for Tempus. As the biopharmaceutical industry increasingly focuses on targeted therapies and genetically defined patient populations, the reliance on real-world evidence to bypass costly, traditional clinical trial designs is accelerating. Regulatory bodies are increasingly accepting synthetic control arms and real-world data for label expansions, directly expanding the total addressable market for Tempus’s data licensing business. Furthermore, the clinical adoption of minimal residual disease testing is still in its early innings. The ability to monitor cancer recurrence through routine blood draws represents a shift from a one-time diagnostic event to a recurring revenue stream spanning the lifetime of the patient, offering Tempus a vast runway for volume growth.
Conversely, the industry operates under severe regulatory and legal clouds. The diagnostics sector is inherently litigious, with intellectual property used actively as a competitive weapon. Tempus has faced aggressive patent infringement lawsuits from Guardant Health over liquid biopsy technologies, a standard tactic in an industry where Caris and Guardant routinely trade litigation over sequencing methodologies. Additionally, the reliance on Medicare reimbursement leaves the clinical business exposed to stroke-of-the-pen risks regarding Advanced Diagnostic Laboratory Test pricing and coverage determinations. Finally, data privacy remains an escalating vulnerability. The aggregation of genetic information has attracted aggressive plaintiff litigation, highlighted by recent class-action lawsuits accusing Tempus and its subsidiary Ambry Genetics of violating the Illinois Genetic Information Privacy Act through the unauthorized commercialization of de-identified genetic profiles. While Tempus asserts that its de-identification protocols are robust, the legal friction surrounding genomic data monetization poses a persistent headline risk and could invite stricter federal oversight.
Next-Generation Growth Drivers
Management is actively pivoting the company from a diagnostics and data aggregation platform into an algorithmic clinical decision support system. The most significant growth driver is the commercialization of proprietary artificial intelligence algorithms, designed to identify hidden biological patterns from standard data inputs like routine hematoxylin and eosin pathology slides or standard electrocardiograms. By leveraging the foundational artificial intelligence models accelerated by the Paige.AI acquisition, Tempus is positioning itself to sell predictive software directly to healthcare systems and pharmaceutical developers.
The company is already demonstrating regulatory traction in this software-as-a-medical-device pipeline. In late 2025, Tempus secured United States Food and Drug Administration clearance for its ECG-Low EF software, a tool utilizing artificial intelligence to detect patients at risk for low left ventricular ejection fraction from routine electrocardiogram data. This was shortly followed by clearance for the Tempus xR in vitro diagnostic device for RNA sequencing. These regulatory milestones validate the company's ability to monetize its dataset outside of traditional oncology sequencing. Because these algorithmic diagnostic tools are distributed as software integrations rather than physical laboratory tests, they carry negligible marginal costs. As these algorithms gain clinical adoption, they are poised to drive pure software margins, structurally transforming the unit economics of the broader enterprise and embedding Tempus deeper into the daily diagnostic workflows of major hospital networks.
Management Track Record
Founder and Chief Executive Officer Eric Lefkofsky brings a highly scrutinized, yet undeniably successful, track record to the public markets. As a serial entrepreneur who previously scaled and rapidly exited ventures like Groupon and Echo Global Logistics, Lefkofsky’s historical playbook has typically involved hyper-scaling businesses for rapid monetization. However, his tenure at Tempus marks a distinct departure from that venture-capital velocity. Having led the company for over a decade, Lefkofsky has demonstrated a sustained, methodical commitment to solving a structurally complex and highly regulated healthcare problem, maintaining heavy personal financial alignment with the firm's long-term equity.
Operationally, management has executed a flawless transition from a cash-burning growth story into a financially disciplined, profitable enterprise since its 2024 initial public offering. The company achieved its first quarter of positive adjusted EBITDA in late 2025 and reported exceptional first-quarter 2026 results, delivering $348.1 million in revenue, representing 36% year-over-year growth. Management subsequently raised full-year 2026 revenue guidance to approximately $1.6 billion, alongside $65 million in projected adjusted EBITDA. Capital allocation has been highly strategic, utilizing the company's equity to absorb Ambry Genetics and Paige.AI without starving the core business of research and development funding. While the integration of these large acquisitions and the management of associated debt loads require close monitoring, the executive team has firmly established a track record of under-promising and over-delivering on its path to structural profitability.
The Scorecard
Tempus AI represents a highly differentiated asset within the precision medicine ecosystem, successfully bridging the historical divide between low-margin clinical diagnostics and high-margin bioinformatics. By leveraging a massive sequencing infrastructure to aggregate an unparalleled, 500-petabyte multimodal dataset, the company has secured a dominant competitive position. The proprietary pairing of genomic profiles with longitudinal clinical outcomes establishes a formidable barrier to entry, enabling the rapid scaling of a high-margin data licensing business that fundamentally superior to legacy laboratory models. The aggressive capture of market share from legacy incumbents, combined with the strategic acquisitions of Ambry Genetics and Paige.AI, solidifies the company's operational leverage and positions it at the forefront of biopharmaceutical artificial intelligence development.
While the investment thesis is robust, it must be weighed against the structural realities of the molecular diagnostics industry. The company operates in a highly litigious environment characterized by fierce intellectual property disputes, fluid data privacy regulations, and binary reimbursement risks tied to federal healthcare policy. However, management's proven ability to execute a clear path to profitability—evidenced by a $1.6 billion revenue run-rate and the achievement of positive adjusted EBITDA—mitigates the traditional cash-burn risks associated with hyper-growth healthcare technology firms. For institutional capital seeking exposure to the digitization of oncology and the deployment of real-world evidence in drug development, Tempus AI offers a rare combination of clinical scale, deep data moats, and inflection-point profitability.