TXG Q1 Earnings Call: Academic Funding Uncertainty Drives Guidance Withdrawal and Cost Reductions

Biotech company 10x Genomics (NASDAQ:TXG) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 9.8% year on year to $154.9 million. On the other hand, next quarter’s revenue guidance of $140 million was less impressive, coming in 3.6% below analysts’ estimates. Its non-GAAP loss of $0.10 per share was 64.9% above analysts’ consensus estimates.

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StockStory’s Take

10x Genomics’ first quarter results reflected divergent trends across its core business lines, shaped by shifting dynamics in research funding and product adoption. CEO Serge Saxonov attributed the quarter’s performance to ongoing strength in consumables usage, especially among single cell and spatial platforms, despite a pronounced decline in instrument sales. Saxonov emphasized that “robust year-over-year growth in Chromium reaction volumes” was supported by adoption of Flex and on-chip multiplexing products. He also highlighted the impact of a recent patent litigation settlement, which contributed non-recurring license and royalty revenue. While the company pointed to increased usage among existing customers and positive reception for recent product launches, management was candid about the challenging macro environment, particularly in U.S. academic and government research, which affected purchasing patterns and visibility.

Looking ahead, management outlined a cautious approach in light of heightened uncertainty surrounding academic and government research funding in the United States, which supports a significant portion of the company’s revenue. Saxonov noted, “The combination of actual cuts and looming risks is making [customers] hesitant to initiate new projects or invest in capital purchases.” CFO Adam Taich stated that this unpredictability led to the withdrawal of full-year guidance, with the company opting for quarterly updates. Despite the tough backdrop, leadership remains focused on core usage trends, continued cost discipline, and expansion in biopharma markets. Management also underscored the importance of recent cost reduction initiatives and organizational realignments to preserve the company’s financial health while maintaining investments in high-priority areas.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to increased consumable usage, muted instrument demand, and heightened macroeconomic uncertainty, especially in the U.S. research sector. Recent product launches and a major litigation settlement also played significant roles in shaping performance.

• Consumables demand offset instrument weakness: The company experienced strong adoption of consumables, particularly Chromium Flex and on-chip multiplexing products, which helped counterbalance a significant decline in instrument sales. This trend was seen as a sign of solid core demand, even as customers delayed capital expenditures due to funding constraints.
• Spatial biology platforms gaining traction: The Xenium platform drove notable growth in spatial consumables revenue, with both new and existing customers increasing usage. Management cited multiple recent scientific publications and collaborations—such as with the Arc Institute and Immunai—that leverage single cell and spatial technologies for large-scale research and drug discovery applications.
• Macro funding pressures affecting sales cycles: Leadership described a deteriorating U.S. funding environment, with delays, reductions, and cancellations of academic grants introducing unpredictability into customer purchasing. Approximately 40% to 50% of revenue remains exposed to U.S. academic and government funding, amplifying the impact of these trends.
• Cost structure realignment and headcount reduction: To address the uncertain outlook, 10x Genomics completed a company-wide cost review, resulting in an 8% reduction in global workforce and significant cuts to non-headcount expenses. Management expects these steps to reduce 2025 operating expenses by more than $50 million compared to last year.
• Global and product mix impacts: International markets showed mixed results, with APAC performing well due to structural improvements and direct sales in Japan, while EMEA and Americas saw declines tied to timing effects and challenging capital expenditure environments. The company also highlighted minimal anticipated impact from potential China tariffs due to a diversified manufacturing footprint.

Drivers of Future Performance

Management anticipates continued headwinds from U.S. research funding uncertainty, while focusing on consumable usage growth, cost discipline, and biopharma expansion to support performance.

• Academic funding instability: Ongoing unpredictability in U.S. academic and government research grants may continue to disrupt purchasing cycles, especially for instruments, leading the company to provide only quarterly guidance. Management warned that further deteriorations or delays in funding decisions could impact revenue visibility and growth in the coming quarters.
• Biopharma and international opportunities: The company is increasing its focus on biopharma, where demand for single cell and spatial biology solutions is growing, particularly for drug discovery and clinical research applications. Management believes that partnerships and product adoption in this segment could help diversify revenue streams and reduce reliance on academic funding.
• Cost management and operational agility: Organizational restructuring and expense reductions are expected to preserve cash and profitability, enabling continued investment in core innovation. Management indicated the company remains prepared to adjust spending further if macro conditions worsen, while maintaining its capacity to scale in areas demonstrating robust demand.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will monitor (1) whether U.S. research funding stabilizes and improves customer purchasing behavior, (2) continued momentum in consumables usage across single cell and spatial platforms, and (3) execution of cost reduction and organizational realignment initiatives. Progress in biopharma collaborations and geographic expansion will also be important factors in assessing the company’s ability to diversify revenue sources.

10x Genomics currently trades at a forward price-to-sales ratio of 2.1×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it’s free).

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