Tempus AI, Inc. (TEM) stock intrinsic value fair value estimate & owner earnings analysis

Tempus AI sells genetic and molecular testing to cancer patients and physicians (Oncology testing, plus Hereditary testing from Ambry Genetics, acquired February 3, 2025) and licenses de-identified clinical and molecular data and analytics to drug developers, including strategic collaborations with AstraZeneca and GSK. Revenue was $1,271.8 million in 2025, up from $693.4 million in 2024 and $531.8 million in 2023, helped by acquisitions. The company had signed contracts with more than $1.1 billion of remaining contract value at December 31, 2025, of which about $300 million depends on optional future opt-ins. What the business earns for owners. We measure owner earnings as cash from operations, less the swings in working capital, less stock-based compensation, less the capital spending needed just to stay in business. On that measure the company has lost money every year we can measure: about $(3.20) per share in 2023, $(5.85) in 2024 and $(0.97) in 2025. The 2024 figure is worsened by a one-time $534.1 million stock compensation charge triggered by the IPO, when shares promised to employees earlier became vested. The 2025 figure is our anchor because Ambry was only acquired in February 2025 and earlier years describe a smaller company. Before stock compensation, the loss narrowed sharply, from about $(202.8) million in 2023 to $(167.0) million in 2024 and $(44.0) million in 2025; for context, the company's own adjusted EBITDA (a measure that leaves out stock compensation and other costs) was $(7.4) million in 2025. We do not rely on that measure in our valuation. The most recent six months do not yet show the turn. In the first half of 2026 revenue was $730.6 million versus $570.4 million a year earlier (about 28% higher), and the second quarter reported a small net profit of $5.6 million. But cash used in operations was $80.8 million (versus $61.5 million a year earlier) and stock compensation was $106.8 million (versus $45.4 million). Stock compensation is running well above 2025's full-year $124.7 million, and we treat it as a real cost paid in shares. Growth path check. Owner earnings per share improved from $(5.85) to $(0.97) in 2025, largely because the 2024 IPO charge did not repeat. We assume no improvement in year 1 of the base case, which is at or below that trend. We credit no growth. Revenue growth is real, and the contracted backlog is real, but a signed contract shows revenue, not profit. Nothing in the filings shows the company converting revenue growth into positive owner earnings after stock compensation, and margin expansion is not something we can count on before it has happened. Base case, about $(7.13) per share. The 2025 loss of about $0.97 per share continues for ten years with no improvement credited and nothing credited beyond year ten, because we cannot name and evidence anything that would produce positive owner earnings afterwards. Discounted at 6%, that is about $(7.13) per share. Bear case, about $(10.88). Stock compensation stays at the first-half 2026 pace of about $214 million a year while the 2025 pre-stock-compensation loss of $44 million persists, for a loss of about $1.48 per share a year. The company also carries $750 million of 0.75% convertible notes due July 2030, an Ares term loan and revolver at floating rates of roughly SOFR plus 6.75% to 7.75% when interest is paid in cash, and a bank covenant requiring at least $1.1 billion of trailing twelve-month revenue through the 2026 quarters. Bull case, about $(5.27). The company closes its remaining 2025 loss before stock compensation of about $44 million, and stock compensation is held at the 2025 level of $124.7 million, a cost of about $0.72 per share a year. Even the bull case is negative because stock compensation alone exceeds anything the company has yet earned. A negative value here means the business, as it stands, has consumed more owner value than it has produced, not that shareholders owe money. Our method values only the earnings stream and does not add the company's $604.8 million of cash and $150.2 million of marketable equity securities at December 31, 2025 or subtract its debt, so these figures should be read as a statement about earning power. What would make this wrong. If the company turns its rising revenue and $1.1 billion contract backlog into cash flow that exceeds stock compensation, the shares would be worth more than these figures, and we would revisit. We could not reconcile the sharp rise in first-half 2026 stock compensation from the filings alone. On funding, the company states that its cash, securities and expected cash flows are sufficient for more than twelve months.