Tempus AI Q3 Revenue Soars 85%, Yet Profitability and Cash Flow Concerns Persist

What happened

Tempus AI reported Q3 2025 revenue of $334.2 million, an 85% year-over-year surge driven by oncology and hereditary testing, with contributions from the Ambry Genetics integration. Adjusted EBITDA turned slightly positive at $1.5 million, suggesting emerging operating leverage as the company scales toward its raised 2025 revenue guidance of approximately $1.265 billion. However, GAAP net losses remained high at $80.0 million, free cash flow was negative, and heavy stock-based compensation continued to dilute shareholders. The DeepValue report highlights persistent risks including debt, covenant constraints, and intense competition in genomics and AI diagnostics. Despite the revenue growth, the company's ~$12.5 billion market cap embeds optimistic assumptions about future cash flow improvements that are not yet proven.

Implication

The revenue jump confirms Tempus's ability to drive top-line growth through its multimodal platform and acquisitions, supporting its strategic narrative. However, the lack of sustained GAAP profitability and negative free cash flow indicate the business model hasn't achieved economic durability, with key risks from reimbursement uncertainty and integration challenges. Valuation remains stretched, with a negative DCF-implied value suggesting the stock prices in a sharp inflection that may not materialize. Investors must monitor execution against guidance, debt management, and evidence of consistent positive cash generation. Until these fundamentals improve, the stock represents a high-beta growth option rather than a mispriced compounder, aligning with a 'WAIT' stance.

Thesis delta

The news reinforces Tempus's high-growth trajectory and management's confidence, but it does not alter the core thesis of cautious waiting. Persistent GAAP losses, cash burn, and valuation concerns remain unchanged, requiring proof of sustainable economics before any shift to a more bullish view. Investors should continue to watch for clear signs of profitability and reduced dilution as critical triggers for reassessment.