Tempus AI (NASDAQ:TEM) experienced a 2.6% decline in after-hours trading on Thursday, settling at $43.15, following the release of its second-quarter earnings report. The stock had closed the regular session up 6.6% at $44.29. The reversal came as investors digested a revenue beat and a raised full-year outlook, but focused on the significant profitability gap the company must close in the second half of the year.
The Chicago-based precision medicine company reported revenue of $382.5 million for the quarter ended June 30, a 22% increase year-over-year and slightly above the consensus estimate of $379.7 million compiled by MarketBeat. Adjusted EBITDA swung to a positive $8.0 million from a loss of $5.6 million in the prior-year period, while the non-GAAP loss per share of $0.04 was $0.10 better than the expected $0.14 loss. Gross profit rose 26% to $246.5 million, driven by strong volume growth in its diagnostics segment.
However, the company's GAAP operating loss widened to $75.9 million from $61.8 million a year ago, and net income of $5.6 million was largely due to $98.5 million in unrealized gains on securities. CEO Eric Lefkofsky attributed the quarter's success to the company's strategy, noting that oncology testing volumes climbed 31% and data licensing and modeling revenue increased 36%. New bookings for the Data and Applications segment approached $200 million.
Looking ahead, Tempus raised its full-year 2026 revenue guidance to a range of $1.595 billion to $1.605 billion, while maintaining its adjusted EBITDA forecast near $65 million. This implies that the company must generate approximately $869.4 million in revenue and $59.8 million in adjusted EBITDA in the second half alone—a steep climb from the first half's $5.2 million in adjusted EBITDA. The implied second-half adjusted EBITDA margin of roughly 6.9% is over three times the 2.1% margin achieved in the second quarter, signaling a challenging profitability ramp.
"The revenue target seems achievable given the company's recent growth trajectory, but the margin target is more demanding," noted Guggenheim analyst Subbu Nambi. "Tempus needs to generate higher earnings from additional sales while maintaining its investment in testing and AI."
In a separate development, Tempus announced on July 20 that it would acquire Personalis (NASDAQ:PSNL), a company focused on molecular residual disease (MRD) testing, in a deal valued at roughly $1.5 billion. The acquisition introduces capital allocation challenges, as Tempus can finance up to 50% of the payment in cash and is seeking debt to limit share dilution. Lefkofsky indicated that expansion in MRD testing will be cautious until testing economics improve, cautioning that "you're just burning money" by conducting far more tests at a loss.
The company also highlighted several growth catalysts, including an FDA-approved tumor-only xT assay that could generate roughly $85 million in additional annual revenue starting in 2027, and the supply of its initial oncology foundation model to AstraZeneca (NASDAQ:AZN). However, these developments have not yet impacted current cash flow. Tempus consumed $80.8 million in operating cash during the first half, and quarterly GAAP profitability remains dependent on securities gains.
During the regular session, Tempus' shares rose alongside its diagnostic-testing peers, with Guardant Health (NASDAQ:GH) and Natera (NASDAQ:NTRA) also seeing gains of 5.87% and 6.21%, respectively, as technology stocks propelled the Nasdaq Composite up 2.78% to 25,122.18. The broader market context suggests that investor sentiment toward the sector remains positive, but Tempus faces a critical test in converting its rapid expansion into sustainable profitability.
The key question for Friday's regular session will be whether Tempus can convince investors that its second-half margin targets are attainable. With the stock now down in after-hours trading, all eyes will be on the company's ability to execute on its growth strategy while closing the profitability gap.
