PACB Q3 Deep Dive: Consumable Strength Offsets Instrument Headwinds, Clinical Expansion in Focus

Genomics company Pacific Biosciences of California (NASDAQ:PACB) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 3.8% year on year to $38.44 million. Its non-GAAP loss of $0.12 per share was 14.2% above analysts’ consensus estimates.

Is now the time to buy PACB? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

PacBio’s third quarter was met with a significant negative market reaction, reflecting disappointment over revenue that fell short of Wall Street expectations. Management attributed the underperformance primarily to a slowdown in instrument shipments, especially Vega systems in Europe, and lower average selling prices for Revio systems. CEO Christian Henry highlighted that while instrument placements were weaker, consumable sales reached an all-time high, driven by growing adoption among clinical and commercial customers. Henry described the funding environment in the Americas as “challenging,” particularly for academic and government research customers, which lengthened procurement cycles and weighed on demand.

Looking forward, PacBio’s strategy is centered on increasing adoption of its HiFi long-read sequencing technology, particularly in clinical and large-scale population genomics applications. Management is optimistic that the launch of new SPRQ-Nx chemistry—designed to lower sequencing costs and improve gross margins—will accelerate market penetration. Henry emphasized, “We believe we can dramatically improve the economics for long-read sequencing, which will help us penetrate the clinical market and expand our opportunity into large population scale programs.” The company is also focusing on expanding its installed base and diversifying revenue sources beyond academia.

Key Insights from Management’s Remarks

Management cited robust demand for consumables and momentum in clinical applications as positives, but pointed to instrument shipment delays and regional funding pressures as key challenges.

• Consumable sales momentum: PacBio’s consumable revenue hit a record, with 15% year-over-year growth, driven by strong adoption among commercial and clinical customers. This segment’s performance was supported by increased utilization of the company’s SPRQ Chemistry and a larger installed base of HiFi sequencers.

• Instrument shipment delays: Vega system shipments in Europe were lower than expected due to procurement processes extending beyond the quarter’s end. Several of these delayed shipments have since received purchase orders and are expected to be recognized in the following quarter.

• Regional funding challenges: The Americas, especially the U.S., saw continued headwinds from constrained funding for academic and government customers. Management noted elongated procurement cycles and limited impact from the end of government fiscal year spending.

• Gross margin improvement: Non-GAAP gross margins reached their highest level since 2022, supported by the favorable shift in revenue mix toward consumables and improvements in manufacturing yields for consumables and instruments.

• Clinical market progress: PacBio achieved a significant milestone with regulatory approval of the Sequel II CNDx system in China, enabling clinical-grade long-read sequencing. Partnerships and product launches, such as the PureTarget portfolio, are driving adoption in clinical research applications like carrier screening and rare disease diagnostics.

Drivers of Future Performance

PacBio’s outlook is shaped by ongoing clinical adoption, new chemistry rollouts, and persistent funding uncertainty in academic markets.

• SPRQ-Nx chemistry rollout: Management expects the new SPRQ-Nx chemistry to lower sequencing costs below $300 per genome, making long-read sequencing more competitive with short-read platforms. This is anticipated to boost instrument adoption and consumable utilization, supporting both revenue growth and improved gross margins.

• Clinical and population genomics focus: The company is prioritizing clinical applications and large population-scale studies, with recent wins in China and Europe. Regulatory approvals and new partnerships, such as with Berry Genomics and EpiCypher, are expected to drive further demand in these segments.

• Funding environment risks: Management remains cautious about the academic and government research market, especially in the U.S., citing ongoing funding headwinds and elongated purchasing cycles. While clinical and commercial demand is growing, uncertainty in traditional markets could continue to weigh on overall revenue growth.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) the commercial launch and adoption rate of SPRQ-Nx chemistry and multi-use SMRT Cells, (2) continued expansion into clinical and population-scale genomics applications, particularly in China and Europe, and (3) any signs of stabilization or improvement in academic and government funding environments in the U.S. Developments in these areas will be critical indicators of PacBio’s ability to diversify growth and improve profitability.

PacBio currently trades at $1.68, down from $1.92 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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