TXG Q2 Deep Dive: Robust Product Demand and Cautious Outlook Amid Funding Uncertainty

Biotech company 10x Genomics (NASDAQ:TXG) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 12.9% year on year to $172.9 million. On the other hand, next quarter’s revenue guidance of $142 million was less impressive, coming in 1.5% below analysts’ estimates. Its non-GAAP profit of $0.48 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

10x Genomics delivered second quarter results that exceeded Wall Street’s expectations, but the market responded negatively, reflecting continued concerns about the company’s end-market dynamics. Management highlighted that growth was powered by strong adoption of new single cell and spatial biology platforms, notably Chromium Flex and Xenium. CEO Serge Saxonov explained that while consumables volume increased, especially for newer products, persistent challenges in academic and government funding extended sales cycles and led to ongoing capital equipment constraints. Saxonov cited, “The academic funding landscape remains marked by shifting policies, weaker grant disbursements and lack of clarity around future budgets, all of which are contributing to extended project timelines and cautious customer spending.”

Looking into the next quarter, 10x Genomics' guidance reflects continued caution due to lingering uncertainties in research funding, especially within the academic and government sectors. Management attributed the conservative outlook to delayed grant disbursements and new restrictions on capital spending, particularly in North America and Europe. Saxonov noted, “We expect these uncertainties to continue impacting customer spending behavior until there’s greater clarity on policy direction and actual distribution of funding resources.” The company is focused on supporting customers through this environment and is prioritizing cost management, but does not anticipate near-term improvement in capital equipment demand until broader funding clarity emerges.

Key Insights from Management’s Remarks

Management attributed Q2 results to strong underlying demand for single cell and spatial biology products, aided by product innovation and favorable settlement income, but flagged persistent headwinds from the academic funding environment and capital equipment constraints.

• Single cell platform adoption: Volume growth in Chromium reactions was driven by robust uptake of GEM-X Flex and Universal On Chip Multiplex, products designed to lower experiment costs and enable large-scale studies. This growth was achieved despite year-over-year declines in consumables revenue as customers shifted toward lower-priced, higher-volume products.

• Spatial biology momentum: Xenium, the company's spatial biology platform, drove meaningful year-over-year and sequential growth in spatial consumables revenue and volume. Customers cited Xenium’s data quality and ease of use as key differentiators, which contributed to growing utilization per instrument and broader adoption across research areas.

• Product innovation pipeline: Several new products and features launched or entered late-stage development, including Visium HD 3 Prime, HD cell segmentation, and upcoming launches like Visium HD XL and Xenium RNA plus protein. These are intended to broaden applications and simplify analysis for customers.

• China demand and tariff dynamics: A temporary surge in orders from China, as customers accelerated purchases ahead of potential tariffs, contributed to APAC revenue growth. Management estimated this pull-forward effect at about $4 million, which is not expected to repeat in the next quarter.

• Patent settlement impact: A favorable patent settlement with Bruker resulted in a significant one-time payment, recognized partly as license and royalty revenue and partly as a gain on operating expenses. This helped boost overall margins and cash flow for the quarter.

Drivers of Future Performance

10x Genomics’ outlook is shaped by persistent academic funding pressures, ongoing capital equipment constraints, and the timing of new product launches across single cell and spatial biology.

• Academic and government funding uncertainty: Management flagged that slow grant disbursements, unclear budget timelines, and cautious customer behavior are likely to persist, limiting near-term growth. Saxonov said that funding clarity and actual allocation of grants are critical for a spending rebound.

• Product launches and integration: Upcoming product introductions, including Flex v2 and spatial platform enhancements, are expected to drive adoption and open new use cases, particularly in large-scale translational and AI-driven studies. The acquisition of Scale Biosciences is seen as a technology boost, though management does not expect material revenue contribution in 2025.

• Pricing dynamics and volume elasticity: Management expects ongoing pricing headwinds as customers transition to lower-cost solutions, but believes increased reaction volumes will offset pressure over time. CFO Adam Taich noted that the elasticity of demand should ultimately drive higher experiment counts as price points become more accessible.

Catalysts in Upcoming Quarters

Looking ahead, our analyst team will monitor (1) the pace of adoption and expansion of new single cell and spatial products, particularly Flex v2 and Xenium enhancements, (2) signs of improvement or further deterioration in academic and government funding, and (3) the integration and strategic impact of the Scale Biosciences acquisition. Progress in broadening product applications and customer feedback on pricing elasticity will also be important indicators of future performance.

10x Genomics currently trades at $12.56, down from $12.78 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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