Executive Summary / Key Takeaways

• 10x Genomics is a leader in the nascent but high-potential single cell and spatial biology markets, underpinned by proprietary microfluidics and advanced assay chemistry enabling high-resolution, large-scale biological analysis.
• Recent financial performance reflects significant macro pressures, particularly impacting high-value instrument sales, though consumables revenue demonstrates underlying demand and increasing utilization of the installed base.
• The company is undergoing a critical commercial reorganization and implementing cost reduction measures, including workforce adjustments, to enhance efficiency and protect its balance sheet amidst market uncertainty.
• Strategic focus on driving price elasticity through new, lower-cost product configurations and expanding into high-growth areas like biopharma and large-scale studies is key to unlocking future volume growth and market expansion.
• Near-term outlook is tempered by unpredictable U.S. academic and government funding dynamics and the temporary disruption from restructuring, leading to the withdrawal of annual guidance and provision of quarterly outlook.

Unraveling Biology at Scale: The 10x Genomics Mandate

10x Genomics, Inc. (NASDAQ: TXG) operates at the forefront of life sciences, providing integrated solutions that allow researchers to interrogate biological systems with unprecedented resolution and scale. Founded in 2012, the company has rapidly established itself as a leader in the burgeoning fields of single cell and spatial biology. Its core mission is to provide the tools necessary to understand the complexity of biology by analyzing individual cells and their spatial relationships within tissues. This capability is revolutionizing research across academic institutions, government labs, and increasingly, the biopharmaceutical industry.

The company's offerings are built around two core platforms: Chromium for single cell analysis and Spatial (Visium and Xenium) for analyzing biological molecules within their native tissue context. These platforms comprise sophisticated instruments, proprietary microfluidic chips, slides, reagents, and integrated software, forming a cohesive workflow from sample preparation to data analysis and visualization. This integrated approach, coupled with a focus on ease of use and data quality, forms the bedrock of 10x Genomics' value proposition.

The Technological Edge: Precision and Scale

At the heart of 10x Genomics' competitive advantage lies its differentiated technology. The Chromium platform leverages proprietary microfluidics to encapsulate individual cells or nuclei into tiny droplets, enabling high-throughput single cell analysis. This technology provides tangible benefits, allowing researchers to profile gene expression, immune repertoire, and chromatin accessibility at the single-cell level with high sensitivity and specificity. Recent innovations like the GEM-X architecture enhance performance, offering superior sensitivity, throughput, data quality, and cell recovery compared to previous generations. The GEM-X Flex assay, for instance, dramatically lowers the cost per cell, enabling million-cell experiments for less than $0.01 per cell and reducing the required cell input four-fold, significantly expanding the potential for translational research using limited clinical samples like FFPE tissues. The GEM-X Universal Multiplex product further addresses cost barriers by enabling analysis for approximately $600 per sample at small scales.

The Spatial platforms, Visium and Xenium, tackle the critical dimension of spatial context. Visium, the leading platform for unbiased spatial analysis, allows whole transcriptome spatial analysis. The introduction of Visium HD brings single cell scale resolution to this platform, increasing resolution by over three orders of magnitude while maintaining a robust workflow compatible with standard histology slides via the CytAssist instrument. Xenium, focused on targeted in situ analysis, offers industry-leading performance in measuring specific RNA targets within tissue sections. The Xenium Prime 5K assay significantly increases plex capability to 5,000 genes, featuring enhanced chemistry for excellent per-gene sensitivity, specificity, and spatial fidelity, along with integrated multimodal cell segmentation.

R&D efforts are continuously focused on enhancing ease of use and expanding applications. Automated cell annotation software simplifies data analysis, while developments like whole block fixation and library prep automation streamline workflows. The strategic intent behind these technological advancements is clear: to lower cost barriers, simplify workflows, expand sample compatibility (especially FFPE), and increase plex and resolution capabilities. This not only strengthens the company's competitive moat by offering superior performance and value but also aims to drive market expansion by making these powerful technologies accessible to a broader range of researchers and applications, ultimately fueling recurring consumables revenue.

Navigating a Dynamic Competitive Landscape

The life sciences tools industry is highly competitive, with established players and emerging companies vying for market share in genomics, single cell, and spatial analysis. 10x Genomics faces direct competition from large, diversified companies like Illumina (ILMN), Thermo Fisher Scientific (TMO), and Qiagen (QGEN), as well as smaller, more specialized firms and even internal development efforts by research institutions.

While competitors like Illumina leverage their dominant position in bulk sequencing and broad ecosystem, and Thermo Fisher benefits from its vast scale and integrated lab solutions, 10x Genomics differentiates itself through its specialized technological leadership in single cell and spatial biology. Its proprietary microfluidics and assay chemistry provide advantages in data quality, resolution, and workflow efficiency that rivals struggle to match. For instance, TXG's platforms offer superior resolution and sensitivity for single-cell and spatial profiling compared to some competing methods. However, larger competitors often possess greater financial resources, more established distribution networks, and potentially lower manufacturing costs due to scale.

Recent competitive dynamics include increased aggressive presence from some smaller competitors, often putting pressure on pricing, and the entry of large sequencing companies into the single cell space, which, while validating the market, also intensifies competition. 10x Genomics' strategy to counter these forces involves continuous innovation to maintain a performance edge, driving down costs through new product configurations to address price sensitivity, and building a specialized commercial organization to effectively target different customer segments and applications. The recent settlement of patent litigation with Vizgen, Inc., which included a significant upfront payment and ongoing royalties, underscores the value and defensibility of 10x Genomics' intellectual property, a critical asset in this litigious industry. Ongoing litigation with other parties, including Bruker (BRKR) (related to NanoString assets), Parse Biosciences, and Curio Bioscience, highlights the persistent nature of IP disputes in the field.

Performance Under Pressure: Recent Financials

10x Genomics' recent financial performance reflects the interplay of its strategic initiatives, technological advancements, and the challenging external environment. In the first quarter of 2025, total revenue reached $154.9 million, a significant increase from $141 million in Q1 2024. However, this growth was heavily influenced by a $17.1 million contribution from license and royalty revenue related to the Vizgen patent settlement. Excluding this one-time benefit, products and services revenue was $137.8 million, a 2% decrease year-over-year.

This decline in core revenue was primarily driven by a substantial 42% decrease in instrument revenue, falling to $14.8 million in Q1 2025 from $25.5 million in the prior year period. Both Chromium and Spatial instrument sales were impacted, reflecting the cautious customer spending and CapEx budget pressures highlighted by management. Conversely, consumables revenue demonstrated resilience, increasing 5% year-over-year to $115.4 million. Spatial consumables showed robust 18% growth, driven by increasing utilization of Xenium, while Chromium consumables remained approximately flat. Services revenue also saw strong growth, up 47%, primarily from service plans on instruments coming off warranty.

For the full year 2024, total revenue was $610.8 million, a 1% decrease from 2023. Consumables revenue grew 3% (Spatial up 104%, Chromium down 11%), while instrument revenue fell 25%. This underscores the trend of instrument weakness offsetting consumables strength in the recent period.

Gross profit in Q1 2025 was $105.4 million, resulting in a gross margin of 68%. This was a notable increase from 66% in Q1 2024, primarily benefiting from the high-margin license and royalty revenue (contributing 3.9 percentage points to the margin) and lower manufacturing costs, partially offset by higher inventory write-downs ($6.2 million in Q1 2025). Excluding the settlement impact, the core gross margin was lower at 64%. Full year 2024 gross margin was 68%, up from 66% in 2023, mainly due to a favorable product mix shift (fewer lower-margin Xenium instruments sold).

Operating expenses decreased to $144.8 million in Q1 2025 from $154.4 million in Q1 2024, benefiting from a $9.2 million gain on the Vizgen settlement. R&D expenses decreased 6% to $64.2 million, primarily due to lower personnel costs, while SG&A expenses increased 5% to $89.7 million, driven by higher outside legal expenses and personnel costs. For the full year 2024, operating expenses decreased significantly due to lower in-process R&D from a prior acquisition and lower personnel costs, despite increased legal expenses.

The company reported a net loss of $34.4 million in Q1 2025, an improvement from a $59.9 million net loss in Q1 2024, largely due to the Vizgen settlement impact. The accumulated deficit stood at $1.50 billion as of March 31, 2025.

Liquidity and Financial Resilience

Despite ongoing operating losses, 10x Genomics maintains a solid liquidity position. As of March 31, 2025, the company held $426.9 million in cash, cash equivalents, and marketable securities.

The company generated positive net cash from operating activities in Q1 2025 ($34.4 million), a significant improvement from using $15.7 million in the prior year period. This was primarily driven by favorable changes in operating assets and liabilities, including a decrease in accounts receivable ($35.3 million) and inventory ($8.1 million), partially offset by the net loss and decreases in accrued compensation.

The company anticipates aggregate capital expenditures of $10 million to $15 million over the next 12 months, primarily for manufacturing and R&D equipment. Management believes that existing cash reserves and cash generated from sales will be sufficient to meet anticipated cash needs for at least the next 12 months. While the company has historically incurred losses and negative cumulative cash flows from operations, recent quarters have shown periods of positive cash generation (Q2 and Q3 2024, Q1 2025 operating cash flow), indicating progress towards self-funding its operations and investments.

Strategic Response and Outlook

In response to the challenging macro environment and to position the company for long-term growth, 10x Genomics is executing on several key strategic initiatives. A major focus is the commercial transformation, which began in mid-2024 and is expected to be fully implemented by mid-2025. This restructuring aims to create specialized sales teams for capital equipment, biopharma, and emerging accounts, improving focus and efficiency. While this has caused some near-term disruption, management views it as necessary to effectively sell the expanding product portfolio and target key growth segments.

Cost management is another critical priority. The company committed to a workforce reduction of approximately 8% in May 2025, expected to result in $5.5 million to $6.5 million in severance costs recognized in Q2 2025. Combined with planned reductions in non-headcount expenses, these measures are anticipated to reduce operating expenses by more than $50 million in 2025 compared to 2024.

Strategically, the company is leveraging its technological leadership and focusing on price elasticity to drive volume. New, lower-cost products like GEM-X Flex and Chromium Xo are designed to expand market access and encourage higher utilization, particularly in large-scale studies and emerging applications like AI model building and translational research, where the company sees significant growth potential. The goal is to increase the contribution from biopharma, which currently accounts for 15%-20% of revenue, to 50% or more in the future.

The near-term outlook is heavily influenced by the unpredictable external environment. Due to increased uncertainty, particularly surrounding U.S. academic and government research funding (which impacts 40%-50% of revenue), the company withdrew its full year 2025 revenue guidance. This uncertainty stems from delays, reductions, and cancellations of grants, procedural issues in fund disbursement, and the volatile situation surrounding the NIH indirect cost cap, which, if fully implemented, could have a material impact not factored into previous guidance.

For the second quarter of 2025, the company expects revenue to be in the range of $138 million to $142 million, representing approximately flat sequential growth excluding the Q1 license revenue. This outlook assumes the challenging funding and macro environment will persist, continuing to impact instrument and large consumable orders, but anticipates continued strength in core usage trends like Chromium reaction volumes and Xenium utilization. Management expects to reinstate annual guidance when visibility improves.

Risks and Challenges

Investing in 10x Genomics involves significant risks. The company's financial performance is highly sensitive to the level of U.S. academic and government research funding, which is currently subject to significant uncertainty and potential reductions. The volatility surrounding the NIH indirect cost cap is a particular concern, with a potential material impact on revenue if fully implemented. The ongoing commercial restructuring, while strategic, poses risks of continued disruption and may not yield the anticipated benefits or efficiency gains. The challenging macroeconomic environment is expected to continue pressing CapEx budgets, impacting instrument sales.

The company operates in a highly competitive landscape and must continuously innovate and manage pricing to maintain its market position against larger, well-resourced competitors and emerging technologies. Dependence on single or sole-source suppliers for critical components and the complexity of manufacturing processes pose risks to production and product quality. International operations expose the company to currency fluctuations, trade tensions (particularly with China), and geopolitical risks. While recent litigation settlements are positive, ongoing IP disputes remain a potential source of significant cost and distraction. The recent workforce reduction, while aimed at cost control, carries risks of unintended negative consequences.

Conclusion

10x Genomics stands at the intersection of groundbreaking biological research and commercial opportunity, powered by its differentiated single cell and spatial biology platforms. The company's technological leadership, demonstrated through continuous innovation and quantifiable performance advantages, provides a strong foundation for future growth and a competitive moat in a dynamic market. While the near-term outlook is clouded by significant macroeconomic headwinds, particularly impacting instrument sales and stemming from unpredictable U.S. research funding, the underlying demand for its consumables and increasing utilization suggest the core technology continues to resonate with researchers.

The strategic initiatives underway, including the commercial reorganization and cost reduction measures, are critical steps aimed at enhancing operational efficiency and positioning the company to capitalize on the long-term potential in areas like biopharma and large-scale studies. The focus on driving price elasticity through new product configurations is a calculated move to expand the addressable market and unlock future volume growth, though it may exert near-term pressure on average selling prices. Investors should closely monitor the progress of the commercial restructuring, the impact of the evolving funding environment, and the adoption rate of new, lower-cost products as key indicators of the company's ability to translate its technological prowess into sustainable financial performance and realize the vast opportunity in mastering biology.