Date: 2026-04-01 Quarter: Q4_FY25 (Dec-2025) — Full results reported 2026-02-24 Market cap: ~8.0B|Price: 45 | EV/NTM Rev: ~5.3x First WSM analysis of TEM. No prior position. No prior writings.
Not investable at current levels. TEM's data moat is real and the EBITDA inflection is genuinely impressive — but the 83% headline growth is an acquisition mirage, organic growth is ~30-33%, NRR just dropped from 140% to 126%, the CEO has sold 90M + whilebuyingzero, and2312M in FY24 against $1.3B total. Strip the Ambry veneer and you have a 25% guided grower at 5.3x EV/NTM Revenue with negative FCF, a CEO with Groupon baggage, and a broken go-to-market. Pass.
Action: Watchlist. Not buying. Would reconsider at <4x EV/NTM Rev (~$33/share) or if organic growth accelerates to 35%+ post-Ambry anniversary.
This is the grid that matters. Compare Q4 FY25 to the same quarter in prior years:
| Quarter | FY23 ($m) | FY23 QoQ | FY24 ($m) | FY24 QoQ | FY25 ($m) | FY25 QoQ |
|---|---|---|---|---|---|---|
| Q1 (Mar) | — | — | $145.8 | -1.3% | $255.7 | +27.4% |
| Q2 (Jun) | $132.4 | — | $166.0 | +13.9% | $314.6 | +23.0% |
| Q3 (Sep) | $136.1 | +2.8% | $180.9 | +9.0% | $334.2 | +6.2% |
| Q4 (Dec) | $147.7 | +8.5% | $200.7 | +10.9% | $367.2 | +9.9% |
Reading this grid:
| Q2_FY24 | Q3_FY24 | Q4_FY24 | Q1_FY25 | Q2_FY25 | Q3_FY25 | Q4_FY25 | |
|---|---|---|---|---|---|---|---|
| Revenue | $166.0M | $180.9M | $200.7M | $255.7M | $314.6M | $334.2M | $367.2M |
| YoY % | +25.4% | +32.9% | +35.9% | +75.4%* | +89.6%* | +84.7%* | +83.0%* |
| Organic YoY | +25.4% | +32.9% | +35.9% | ~30% | ~30% | ~30% | +33.5% |
| GM GAAP | 45.5% | 58.5% | 60.8% | 60.7% | 62.0% | 62.8% | 64.7% |
| EBITDA ($m) | -$31.2 | -$21.8 | -$7.8 | -$16.2 | -$5.6 | +$1.5 | +$12.9 |
| EBITDA Margin | -18.8% | -12.1% | -3.9% | -6.3% | -1.8% | +0.4% | +3.5% |
*Ambry-inflated YoY. Organic growth is the number that matters.
| Segment | Q4_FY24 | Q1_FY25 | Q2_FY25 | Q3_FY25 | Q4_FY25 | QoQ Q4 | YoY Q4 |
|---|---|---|---|---|---|---|---|
| Diagnostics | $120.4 | $193.8 | $241.8 | $252.9 | $266.9 | +5.5% | +121.6% |
| — Oncology | — | $119.0 | $133.2 | $139.5 | ~$151* | +8.2%* | +29% vol |
| — Hereditary | — | $63.5 | $97.3 | $102.6 | ~$116* | +13.1%* | +23% vol |
| Data & Apps | $80.2 | $61.9 | $72.8 | $81.3 | $100.4 | +23.5% | +25.1% |
| — Insights | — | — | — | — | — | — | +69.5% |
| Total | $200.7 | $255.7 | $314.6 | $334.2 | $367.2 | +9.9% | +83.0% |
*Oncology/Hereditary Q4 split estimated from total Diagnostics and prior quarter trends.
| Q1_FY24 | Q2_FY24 | Q3_FY24 | Q4_FY24 | Q1_FY25 | Q2_FY25 | Q3_FY25 | Q4_FY25 | |
|---|---|---|---|---|---|---|---|---|
| GM GAAP | 53.3% | 45.5% | 58.5% | 60.8% | 60.7% | 62.0% | 62.8% | 64.7% |
| GM Non-GAAP | 64.7% | 72.4% | 59.6% | — | 61.9% | 62.3% | 63.6% | — |
| Op Margin GAAP | -36.5% | -321.4% | -29.6% | -25.3% | -26.9% | -19.6% | -18.2% | -16.7% |
| Non-GAAP Op Mrg | — | — | -17.3% | — | -10.1% | — | -2.6% | — |
| EBITDA Margin | -30.1% | -18.8% | -12.1% | -3.9% | -6.3% | -1.8% | +0.4% | +3.5% |
| Net Margin | -44.4% | -3.3% | -41.9% | -6.5% | -26.6% | -13.6% | -23.9% | -14.8% |
→ Gross margin: 64.7% is the best quarter ever. Clear upward trajectory from 53% a year ago. Mix shift toward higher-value testing + Ambry scale. → **EBITDA: 12.9MinQ4(+3.543.9M eighteen months ago to +$12.9M. Operating leverage is emerging.
| Metric | Q1_FY25 | Q2_FY25 | Q3_FY25 | Q4_FY25 |
|---|---|---|---|---|
| FCF | -$107.7M | +$36.6M | -$126.5M | — |
| OpCF | -$105.6M | +$44.1M | -$119.8M | — |
| Cash + Securities | — | $291.3M | $764.3M | $759.7M |
| Total Debt (approx) | — | $798.0M | $1,245.8M | ~$1,245M |
| Net Debt | — | ~$507M | ~$481M | ~$485M |
→ FCF is volatile and still structurally negative. Q2 positive was an anomaly. Not yet self-funding. → Cash stable at ~$760M. Runway adequate (~3 years at current burn) but $1.25B in debt is significant.
| Q3_FY24 | Q4_FY24 | Q1_FY25 | Q2_FY25 | Q3_FY25 | Q4_FY25 | |
|---|---|---|---|---|---|---|
| Shares (M) | 165.6 | 162.7 | 170.1 | 173.4 | 174.9 | ~178* |
| SBC ($M) | $21.0 | $32.4 | $23.0 | $22.4 | $34.0 | $48.7 |
| SBC % Rev | 11.6% | 16.1% | 9.0% | 7.1% | 10.2% | 13.3% |
| EPS GAAP | -$0.46 | -$0.08 | -$0.40 | -$0.25 | -$0.46 | -$0.30 |
| EPS Non-GAAP | -$0.24 | -$0.18 | -$0.24 | -$0.22 | -$0.11 | -$0.04 |
*Shares estimated from market cap / price.
→ Dilution: ~5.6% YoY (165.6M → 174.9M Q3-Q3). Manageable. → SBC spiked to $48.7M in Q4 (13.3% of revenue). FY25 total: $136.3M on 1.3B = 10.5 → Non − GAAPEPSof−0.04 beat consensus of -$0.14 by 71%. Approaching zero.
Volume growth accelerating (oncology). 20% → 26% → 27% → 29% YoY volume growth across Q1-Q4 FY25. Three consecutive quarters of acceleration in the core oncology testing franchise. Volume is the purest leading indicator for genomics revenue — and it's still accelerating at scale.
D&A broke $100M for the first time. 100.4MinQ4(+25.180.2M → $61.9M → $72.8M → $81.3M) was the biggest bear argument. Q4 finally answered it. Insights (data licensing) +69.5% YoY is the standout.
TCV expanded to >$1.1B (from $940M in Q4 FY24). +17% growth addresses some Spruce Point concerns about contract quality.
EBITDA inflection is durable. Not a one-quarter blip. Q3: $1.5M → Q4: $12.9M. FY26 guide: $65M. Management guiding for meaningful profitability for the first time.
Gross margin at record 64.7%. Consistent expansion from 53% to 65% over 8 quarters. Mix shifting toward higher-value tests (MRD at +56% QoQ) and Ambry scale efficiencies.
MRD testing: 4,700 tests in Q4, +56% QoQ. New product line with strong early traction. Leading indicator for future genomics diversification.
NRR declined from 140% to 126%. This is a 14-point drop in a key data licensing metric. At 140% NRR, the land-and-expand story in Insights was compelling. At 126%, either expansion rates are slowing or churn is increasing. This is the single most concerning data point in the quarter.
Organic growth is ~30-33%, not 83%. The headline is an acquisition mirage. Q4 organic: +33.5%. FY26 guide: +25%. Post-Ambry anniversary (Q1 FY26 onward), reported growth will compress ~50pp overnight.
FCF still structurally negative. Q3: -126.5M.Nine − monthFCF : −197.6M. $65M EBITDA guide for FY26 still implies negative FCF after interest, CapEx, and working capital.
D&A YoY growth is 25% — not exceptional. Yes, $100M is a record. But 25% growth in the segment that justifies the AI premium barely clears my minimum threshold. Insights at +69.5% is good, but the rest of D&A is dragging.
Hereditary volume growth decelerated: 37% → 23%. Post-acquisition growth surge normalizing. Confirms the Ambry tailwind is fading.
No clear bullish divergence pattern. Volume is accelerating in oncology but NRR is declining. D&A finally moved but from a low base. The leading indicators are mixed, not uniformly signaling acceleration. This is NOT the alpha pattern I look for.
The EBITDA inflection is the strongest bull case. Q4 EBITDA of $12.9M and FY26 guide of $65M represent a genuine operating leverage moment. Margin trajectory: -30% → -12% → -4% → -6% → -2% → 0.4% → 3.5%. If sustained, this changes the investor base from growth-only to GARP. But $65M on $1.59B revenue is only 4.1% margin — still very early innings.
CEO Eric Lefkofsky's behaviour pattern is the biggest risk. 227 sales, 0 purchases since IPO. $90M+ sold in 2025 alone. This is the founder-CEO telling the market "we're at the beginning of a massive opportunity" while systematically liquidating. His Groupon track record — where he extracted $300M+ pre-implosion — creates pattern risk. "The CEO matters disproportionately" is a core principle. This CEO is waving red flags. I cannot own a stock where the CEO is the most aggressive seller.
The "AI" in Tempus AI is aspirational. AI application revenue was ~$12M in FY24 — less than 2% of total. The data moat (38M+ de-identified records, 1M+ cancer patients, 7M+ pathology slides) is genuine and would take a decade to replicate. But "AI" in the company name at a 5x+ revenue multiple implies monetization through AI products — and the revenue doesn't support it yet.
Commercial execution is structurally broken. RepVue: 23% quota attainment (#6,159 out of 6,245 companies on culture/leadership). Glassdoor: 2.9/5, 40% would recommend. Great product, broken go-to-market. Every quarter this persists, the competitive window narrows.
Spruce Point concerns partially addressed but not fully resolved. TCV expanded to $1.1B+ (positive). But the $300M non-binding opt-in allegation and Pathos related-party claim have not been specifically rebutted. The NRR decline from 140% → 126% actually supports the bear case.
| Issued | FY Revenue Guide | Actual | Beat/Miss |
|---|---|---|---|
| Q4_FY24 (initial) | ~$1.24B | — | — |
| Q1_FY25 | ~1.25B(+10M) | — | — |
| Q2_FY25 | ~1.26B(+10M) | — | — |
| Q3_FY25 | ~1.265B(+5M) | — | — |
| FY25 Actual | — | ~$1.30B | BEAT |
| FY26 Guide | ~$1.59B (+25%) | — | ~$65M EBITDA |
→ Four consecutive FY guide raises. Actual beat the final raised guide. Good execution on guidance. → FY26: ~1.59Brevenue(+2565M EBITDA. Conservative or realistic? Time will tell. → Non-GAAP EPS of -0.04vsconsensus−0.14 → 71% beat.
| Metric | Value | Assessment |
|---|---|---|
| Market cap | ~$8.0B | — |
| EV (mkt cap + debt - cash) | ~$8.5B | — |
| Run-rate Rev ($367.2M x 4) | $1,469M | — |
| P/S (run-rate) | 5.4x | — |
| EV/NTM Rev (FY26 $1.59B) | 5.3x | Expensive for 25% guided growth |
| EV/NTM EBITDA ($65M) | ~131x | Extremely rich |
| P/FCF | Negative | Not applicable |
Peer context:
→ TEM's premium over diagnostics peers is justified only if data/AI platform monetization accelerates materially. At 25% guided growth and nascent AI revenues, the current multiple prices in success that hasn't been delivered.
→ My buy price: <4x EV/NTM Revenue = ~6.3BEV→ 5.8B mkt cap → ~$33/share. That's ~27% below current levels.
First analysis — using market expectations as the prior.
| Metric | Expected | Actual | Verdict |
|---|---|---|---|
| Q4 Revenue | ~$367M (per prelim) | $367.2M | IN LINE |
| D&A Revenue | ~$100M (per prelim) | $100.4M | IN LINE — first >$100M |
| EBITDA | ~$20M (per Q3 guide) | $12.9M | MISS — below guided ~$20M |
| Non-GAAP EPS | -$0.14 consensus | -$0.04 | BEAT — 71% |
| NRR | 140% maintained | 126% (down 14pp) | MISS — significant decline |
| TCV | $940M maintained | $1.1B+ | BEAT — 17% expansion |
| FY26 Guide | 1.59B/ 65M EBITDA | 1.59B/ 65M | IN LINE with consensus |
| Oncology Volume | Sustained ~27% | 29% | SLIGHT BEAT |
| Hereditary Volume | Sustained ~37% | 23% (decel) | MISS — normalization |
No existing thesis — establishing initial view.
Initial thesis: TEM has a genuine data moat in precision oncology (38M+ records, 50%+ of US oncologists connected) and a credible path to operating leverage. However, the company is not investable at current levels due to: (a) organic growth of ~25-33% not supporting a 5x+ revenue multiple, (b) CEO insider selling pattern creating material governance risk, (c) commercial execution dysfunction limiting data/AI monetization, (d) NRR decline signaling potential D&A expansion headwinds.
Thesis status: Watchlist — Not Investable.
What would change my mind:
What would make me sell if I held:
Atlas rated TEM 2/5 conviction. I broadly agree but am more negative on three points:
NRR decline (140% → 126%) is underweighted by Atlas. For a data licensing business, NRR is THE expansion metric. A 14pp decline is not noise — it undermines the "data monetization at scale" thesis.
CEO risk should be weighted higher. A CEO who has sold $90M+ with zero purchases, combined with Groupon baggage and unresolved related-party allegations, meets my "run for the hills if suspect" threshold. This is a structural governance deficiency.
The EBITDA story is better than Atlas acknowledged. $12.9M Q4 EBITDA vs Atlas's $1.5M Q3 data. The trajectory from $1.5M → $12.9M in one quarter, with $65M FY26 guide, is genuinely impressive operating leverage. This is the one metric that could change the investment case.
-wsm
(No position. Watchlist.)