Brief experiences are a blessing in disguise for any inventory you’re holding. Somebody with monetary motivation and enough analysis capabilities has scoured the web looking for each single drawback with a an asset you’ve purchased together with your hard-earned cash. They’ve performed the give you the results you want. Even the current quick report by Michael Burry on one of many quickest rising disruptive tech shares on the market – Palantir $PLTR – raised just a few good questions value contemplating.
Typically it takes years earlier than we all know for sure whether or not a brief thesis was barking up the flawed tree. For Tempus AI $TEM, it’s been 9 months since Spruce Level Capital launched a scathing quick report that the corporate responded to with a terse reply. At the moment, we despatched an alert to Nanalyze Premium subscribers stating how strain from their present investor base would possible drive them to appropriate any main issues. And if there have been issues to appropriate, they’d ultimately present up within the fundamentals, particularly, income progress.
Summarizing The Brief Report
Brief experiences normally include overwhelming quantities of particulars to create the phantasm that there are issues in all places you look. That’s why we all the time begin by distilling the report right into a bullet listing of significant accusations. We’ve performed this for the Tempus AI quick report as follows:
- Solely 2% of income stems from AI functions
- Aggressive accounting and monetary reporting, income spherical tripping
- Weak point in core genomics and knowledge companies.
These allegations are bolstered when analyzing the previous of the founder, board members, and different executives with allegations of previous associations “with troubled corporations that restated monetary outcomes.” That’s the quick report in a nutshell.
Crucial query to ask for any quick repot is solely this. If these accusations are true, the place would they first begin to seem within the financials? Every of the above accusations mainly says the identical factor. Tempus AI won’t be able to continue to grow revenues. When that occurs, Spruce Level expects shares to fall 50 to 60 p.c, which is able to permit them to revenue since they’re quick the inventory. For the reason that report was issued, shares of Tempus are down 8% in comparison with an S&P 500 return of +18%. Nonetheless, income progress hasn’t skipped a beat.
The principle motive for the 87% progress final yr was the acquisition of Ambry Genetics. If we again that out, Tempus was nonetheless capable of notice 30% natural income progress in 2025. Just lately introduced steerage for 2026 is $1.59 billion in income, a slight deceleration in progress, however nonetheless strongly within the double digits at 22%. Income progress is all the time the bottom reality for any disruptive expertise firm, and Tempus remains to be checking all of the bins.
If the quick report is to be believed, then we should always see them wrestle to hit these steerage numbers. As threat averse traders, we wish to take the quick report accusations severely and establish metrics – except for simply income progress – that we are able to monitor going ahead for indicators of bother. The primary accusation is that Tempus AI isn’t doing a lot AI.
Is Tempus an AI Firm?
Appending the letter “AI” to your organization title is harking back to the dot-bomb instances when each firm appended “.com” to their title for an instantaneous enhance in valuation. A key distinction is again then, most .com corporations had been aspirational tales. As we all the time say, the bottom reality that demonstrates you’re wielding AI successfully – or any disruptive expertise for that matter – is all the time income progress, which Tempus has a lot of. Spruce Level is probably going referencing a really small section of income that Tempus has particularly labeled “AI” which certainly makes up about 2% of whole revenues.
On the highest stage, Tempus breaks down revenues into two main segments – “Diagnostics” and “Information and Functions.” The robust progress seen under for diagnostics – 111% progress in 2025 – displays the acquisition of Ambry Genetics.
We will then escape “Information and Functions” into three sub segments as follows:
- Insights – linked medical, molecular, and imaging de-identified knowledge
- TIME – trial matching
- NEXT – proactively identifies and minimizes care gaps
The third bullet level was labeled “AI” and represents only a fraction of whole revenues. Beneath you’ll be able to see the expansion of every section over time.
Whereas not explicitly labeled as “AI,” their “Insights” section gives a great deal of massive knowledge that corporations can entry by way of knowledge licenses and subscriptions. AI algorithms are solely pretty much as good as the information you feed them, so corporations with massive proprietary knowledge units may also help their prospects make knowledgeable choices. That may qualify as AI in our guide. And when the corporate is posting 30% income progress, who actually cares if it’s AI or not? It comes all the way down to how sustainable this progress is over time. If prospects discover worth within the knowledge, they’ll hold buying it and extra corporations will need entry to the information as nicely. One key metric to look at for this section is net retention rate (NRR) which got here in at 126% for 2025, down from 140% in 2024.
The second largest section, TIME, is seeing revenues decline through the years. Tempus says this providing makes use of AI to match sufferers with trials, but it surely’s apparently not including sufficient worth such that prospects wish to spend more cash on it over time.
Lastly, there’s NEXT, the smallest section but additionally the one which’s rising the quickest. Nonetheless, it solely makes up 1.5% of whole revenues, so it’s largely meaningless for now. Whereas the quick report appropriately known as this out, we’d argue that the whole “Information and Companies” section appropriately describes the “AI” in Tempus AI. Let’s simply hope it retains rising.
The Larger AI Image
One excellent query surrounds how precisely Tempus “does AI” at a extra holistic stage. The corporate’s enterprise mannequin includes promoting genetic exams to sufferers, then licensing the information from these exams to pharmaceutical corporations. Nonetheless, that knowledge can be used internally to coach Tempus’s algorithms to make higher suggestions for medical doctors.
Let’s say a affected person has a cancerous tumor. The affected person’s oncologist may order a Tempus take a look at to sequence the DNA and RNA of the tumor and learn how nicely it’ll reply to sure remedies equivalent to immunotherapy. If the outcomes of the take a look at aren’t conclusive, Tempus can slap on a further Immune Profile Score (IPS) take a look at which makes use of their large database of earlier immunotherapy outcomes to find out how nicely a affected person would possibly reply, giving them a rating from 0-100 (larger is healthier.) Tempus can then present a straightforward conclusion: IPS-Excessive or IPS-Low. The previous would possible profit from immunotherapy, and the latter possible received’t. And Tempus has the information to show that it really works.
This creates a optimistic suggestions loop for the corporate. As medical doctors order extra exams, Tempus captures extra knowledge, which implies the outcomes get extra correct, that means medical doctors will order extra exams, and so forth. Not solely is that this useful for sufferers, but it surely means the exams grow to be extra invaluable over time, so Tempus is ready to generate extra income per take a look at over time.
All of it sounds good on paper, however the proof is all the time within the income progress. The second accusation within the quick report says that revenues aren’t all that they appear to be.
Alleged Accounting Points
Essentially the most damning accusation from Spruce Level associated to Tempus’s accounting is that they’re artificially inflating their revenues by as a lot as $600 million. The declare right here is that Tempus counts “opt-in” choices as income. This means that some prospects haven’t really paid the total quantity of their “contract worth,” however Tempus nonetheless data this as income.
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Then there’s the problem of round-tripping, which is an accounting no-no. It mainly implies that Tempus is supposedly receiving income that didn’t really come from outdoors the enterprise. On this case, Spruce Level claims that Tempus invested $95 million in a three way partnership with SoftBank, then licensed knowledge to the three way partnership, recording income of $95 million. It additionally doesn’t assist that the three way partnership’s CEO resigned after simply six months.
For advanced points like this, we sometimes flip to the corporate to see what they should say. As we alluded to earlier, Tempus addressed the quick report – form of – in a publish on X.
This response doesn’t encourage a lot confidence. Relatively than really refuting Spruce Level’s factors (Spruce factors?), Tempus basically utilized the logical fallacy of “interesting to the stone.” That is merely a dismissal of an argument as absurd with out saying why it’s absurd. It’s what cheerleaders do in our feedback part. We’d have preferred to see a extra detailed refutation. Trying elsewhere, the one different rebuttal was from TD Cowen. The funding financial institution shrugged off the report, saying it contained no new revelations and didn’t essentially change their view on the corporate.
The accusations encompass associated social gathering revenues which corporations are required to report. Certainly, there may be point out of the Softbank three way partnership and the associated social gathering revenues within the financials which aren’t that substantial on their very own. If there are different associated social gathering revenues that Tempus AI isn’t reporting, they’d be breaking the regulation. It’s extremely possible that ARK Make investments learn this quick report and investigated something which may threaten their third largest place. Except there may be blatant fraud occurring – and now we have no motive to consider there may be – then this looks like a nonissue. The identical holds true for income recognition. Accounting guidelines exist for a motive, and so do audits throughout which a 3rd social gathering accounting agency appears for such issues earlier than they log out on an organization’s financials.
In the end, it comes all the way down to Tempus AI not with the ability to develop sooner or later. The quick report talks about weak point of their core enterprise providing, however we’re simply not seeing that.
Weak point in Core Enterprise
When wanting on the constant double-digit income progress on show, you wouldn’t assume it is a agency exhibiting any weak point in any respect. In keeping with Spruce Level, Tempus is masking their natural underperformance of their foundational companies with inorganic additions. They cite Tempus’s Could 2025 earnings report, the place the corporate raised annual income steerage by $10 million, from $1.24 billion to $1.25 billion. Spruce Level believes annual income ought to have actually improved by over $45 million because of the Ambry acquisition and a take care of Pathos AI and AstraZeneca. By elevating annual steerage by solely $10 million, Spruce Level thinks the corporate is protecting up what would have been a $35 million downward revision. Even when they’re proper, Tempus beat that 2025 income steerage by $20 million, that means that is basically a moot level. Tempus may have been sandbagging steerage for all we all know.
Spruce Level can be essential of Tempus’s choice to amass Ambry, sharing skepticism over the shortage of synergies. We don’t disagree, particularly when 70-90% of acquisitions don’t notice their meant synergies. At the very least it is a genetic testing firm buying one other genetic testing firm; not a quantum computing agency buying a satellite tv for pc firm.
Conclusion
Many of us who’re bullish on a inventory will instantly dismiss any quick report as “FUD” whereas skilled traders will see these as a blessing in disguise. Nonetheless, it’s fairly difficult to dissect these unorganized verbose rants crammed with all types of anecdotal proof. For Tempus AI, it boils all the way down to income progress that won’t persist for any variety of causes. And the longer progress persists, the much less possible the accusations are true. Maybe the largest concern now we have is that the Ambry Genetics acquisition received’t result in the synergies the corporate hopes for. That may in all probability be a principal point of interest once we revisit Tempus AI a yr from now.
