10x Genomics (TXG)

Biotech company 10x Genomics (NASDAQ:TXG) beat Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 1.7% year on year to $149 million. On top of that, next quarter’s revenue guidance ($156 million at the midpoint) was surprisingly good and 3.5% above what analysts were expecting. Its GAAP loss of $0.22 per share was 22.3% above analysts’ consensus estimates.

Company Overview

Founded in 2012 by scientists seeking to overcome limitations in traditional biological research methods, 10x Genomics (NASDAQ:TXG) develops instruments, consumables, and software that enable researchers to analyze biological systems at single-cell resolution and spatial context.

Genomics and sequencing companies within the life sciences industry provide the technology for increasingly personalized medicine, drug discovery, and disease research. These firms leverage cutting-edge platforms for high-throughput sequencing and genomic analysis, enabling researchers and healthcare providers to better understand genetic underpinnings of diseases. While the industry enjoys high barriers to entry due to proprietary technology and intellectual property, the business model also faces significant R&D costs, reliance on continued innovation, and exposure to shifts in academic, biotech, and clinical research funding. Over the next few years, the subsector is well-positioned to benefit from tailwinds such as increasing adoption of precision medicine, expanded applications for sequencing technologies in areas like oncology and rare disease diagnostics, and growing use of genomic data in drug development. Advances in artificial intelligence could further enhance the speed and accuracy of genomic insights. However, potential headwinds include price sensitivity among research institutions and healthcare systems that are constantly trying to contain and lower costs. Additionally, regulations around data privacy and genomic testing are not yet set in stone, adding uncertainty to the industry.

10x Genomics competes with NanoString Technologies (NASDAQ:NSTG), Bio-Rad Laboratories (NYSE:BIO), Illumina (NASDAQ:ILMN), and Akoya Biosciences (NASDAQ:AKYA) in the spatial biology and single-cell analysis markets. The company also faces competition from emerging private companies like Parse Biosciences and Vizgen.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $641.8 million in revenue over the past 12 months, 10x Genomics is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, 10x Genomics’s 19.6% annualized revenue growth over the last five years was impressive. Its growth beat the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. 10x Genomics’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 4.2% over the last two years was well below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its most important segment, Consumables. Over the last two years, 10x Genomics’s Consumables revenue (recurring orders) was flat. This segment has lagged the company’s overall sales.

This quarter, 10x Genomics’s revenue fell by 1.7% year on year to $149 million but beat Wall Street’s estimates by 4.6%. Company management is currently guiding for a 5.5% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 7.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

10x Genomics’s high expenses have contributed to an average operating margin of negative 40% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, 10x Genomics’s operating margin rose by 82.9 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming in on its more recent performance, we can see the company’s trajectory is intact as its margin has also increased by 25.2 percentage points on a two-year basis.

10x Genomics’s operating margin was negative 21.6% this quarter.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although 10x Genomics’s full-year earnings are still negative, it reduced its losses and improved its EPS by 14.4% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

In Q3, 10x Genomics reported EPS of negative $0.22, up from negative $0.30 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects 10x Genomics to perform poorly. Analysts forecast its full-year EPS of negative $0.62 will tumble to negative $1.00.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

10x Genomics’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 17.2%, meaning it lit $17.20 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that 10x Genomics’s margin expanded by 69.6 percentage points during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

10x Genomics’s five-year average ROIC was negative 50.7%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, 10x Genomics’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

10x Genomics is a well-capitalized company with $482.1 million of cash and $86.99 million of debt on its balance sheet. This $395.1 million net cash position is 20.8% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was great to see 10x Genomics’s revenue guidance for next quarter top analysts’ expectations. We were also glad this quarter's revenue and EPS outperformed Wall Street’s estimates. Zooming out, we think this print featured some important positives. The stock traded up 13.1% to $14.69 immediately after reporting.

Updated: December 3, 2025 at 11:27 PM EST

When considering an investment in 10x Genomics, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

10x Genomics isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its relatively low ROIC suggests management has struggled to find compelling investment opportunities. And while the company’s rising cash profitability gives it more optionality, the downside is its operating margins reveal poor profitability compared to other healthcare companies.

10x Genomics’s forward price-to-sales ratio is 3.7x. The market typically values companies like 10x Genomics based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy.

Wall Street analysts have a consensus one-year price target of $16.36 on the company (compared to the current share price of $18.22), implying they don’t see much short-term potential in 10x Genomics.