Tempus AI has priced a private placement of $400 million in 0% convertible senior notes due 2032, up from an initially planned $350 million. The company intends to use the proceeds to repay $307.7 million in outstanding loans, cover approximately $27.2 million for capped-call hedges, and support general corporate purposes. The deal is expected to close on May 12.
The move comes just days after Tempus reported first-quarter revenue of $348.1 million, a 36.1% year-over-year increase. Diagnostics revenue contributed $261.1 million, while Data and Applications—which includes data licensing and modeling—added $87 million. The company raised its 2026 revenue outlook to a range of $1.59 billion to $1.60 billion and now projects adjusted EBITDA of around $65 million.
Despite the revenue growth, Tempus's net loss widened to $125.9 million from $68.0 million in the same period last year. Total liabilities reached $1.72 billion as of March 31. The company's shares traded at $49.47 in premarket action, down $4.07 from the previous close, giving it a market capitalization of roughly $8.85 billion.
The notes are convertible into equity at an initial price of approximately $69.26 per share, representing a 40% premium over Tempus's May 7 closing price on Nasdaq. Tempus also entered into a capped-call hedge to mitigate potential dilution, with an initial cap set at $98.94 per share.
The timing of the debt offering may raise questions, as management recently expressed confidence in the company's liquidity. Founder and CEO Eric Lefkofsky stated during the earnings call that Tempus did not 'need more cash' for operations, while CFO James Rogers attributed the light first-quarter free cash flow to payables and bonuses and projected 'significant improvements' in the second quarter.
Wall Street analysts remain cautiously optimistic. TD Cowen's Dan Brennan reiterated a buy rating and raised his price target to $68 from $65. Investing.com noted solid momentum in genomics and data but flagged that Tempus barely beat estimates and continues to struggle with weak cash flow.
Tempus faces competition from Roche's Foundation Medicine and Guardant Health in precision oncology testing, as well as IQVIA and Flatiron Health in data services. These rivals often have larger budgets and stronger payer relationships.
New partnerships are a key part of Tempus's growth strategy. The company highlighted a strategic tie-up with Merck and an extension of its oncology-focused deal with Gilead around the Lens analytics platform. Lefkofsky noted that more major pharmaceutical companies have begun signing multi-year agreements to license Tempus's de-identified data for model development.
While the debt offering provides cheaper capital and greater operational flexibility, equity risk remains. If shares rise above the conversion price and surpass the hedge cap, dilution could become a concern. Conversely, slower growth, widening losses, or reimbursement pressures could hinder Tempus's ability to convert sales into cash. The company is scheduled to hold its first investor day on May 29, where management plans to provide deeper insights into its Diagnostics and Data and Applications segments.
