PACIFIC BIOSCIENCES OF CALIFORNIA, INC. (PACB)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with (i) our unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and (ii) our 2025 Annual Report filed with the U.S. Securities and Exchange Commission, or the SEC, on February 25, 2026. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. The words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and you should not place undue reliance on our forward-looking statements. We do not assume any obligation to update any forward-looking statements. In preparing this Management's Discussion and Analysis ("MD&A"), we presume that readers have access to and have read the MD&A in our 2025 Annual Report on Form 10-K, pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K.

Our MD&A is organized into the following sections:

•Overview and Outlook

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Policies and Estimates

•Recent Accounting Pronouncements

•Off Balance Sheet Arrangements

OVERVIEW AND OUTLOOK

About PacBio

We are a premier life science technology company that designs, develops, and manufactures advanced sequencing solutions that enable scientists and clinical researchers to improve their understanding of the genome and ultimately, resolve genetically complex problems.

Our products and technology, which primarily consist of our HiFi long-read sequencing systems, address a broad set of applications including human germline sequencing, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.

Our focus is on creating some of the world's most advanced sequencing systems to provide our customers with the most complete and accurate view of genomes, transcriptomes, and epigenomes.

Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, contract research organizations ("CROs"), pharmaceutical companies, and agricultural companies.

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Strategic Objectives

Our 2026 main objectives are to grow revenue and expand gross margins through the following five activities. These initiatives are designed to improve the economics of HiFi sequencing, expand adoption across clinical and research markets, and drive durable growth across our platform portfolio.

•Accelerate samples onto the Revio platform through SPRQ-Nx chemistry and application kits. SPRQ-Nx is designed to lower the cost of sequencing and improve sequencing efficiency, which we believe will support higher throughput, increased sample volumes, and broader adoption of HiFi sequencing in large-scale research studies and clinical applications.

•Expand the capabilities of the Vega benchtop platform to broaden our market reach. We plan to enable faster run times and enhanced user experience through software improvements, which are intended to support broader adoption and improve the overall economics of HiFi sequencing.

•Progress our clinical strategy to improve outcomes and create durability. Revio is increasingly being adopted in laboratory-developed test ("LDT") and clinical research settings, supporting consolidation of multiple tests, addressing complex genetic challenges, and driving sustained utilization of HiFi sequencing. This includes in the Americas, where we continue to aggressively shift our strategy to clinical and commercial accounts where we believe the funding dynamics are more favorable and HiFi sequencing can provide meaningful improvements in diagnostic yield, particularly in rare disease cohorts, resolution of previously unsolved Mendelian disease cases, characterization of repeat expansion disorders, and structural variant detection, among others, relative to currently known short-read sequencing technologies.

•Advance data-driven interpretation through scalable HiFi datasets and analytics. We are focused on leveraging the accuracy of HiFi sequencing and growing datasets to support advanced data analysis and AI-assisted interpretation approaches. Collaborative initiatives such as the HiFi Solves Global Consortium are designed to aggregate large, well-characterized HiFi datasets, which we believe can support improved understanding of complex genetic variation and disease biology while maintaining expert oversight.

•Invest in future product launches to drive platform innovation. We continue to develop sequencing solutions designed to increase throughput, simplify workflows, lower the cost to sequence a genome, and enhance downstream data analysis and interpretation capabilities, which we believe will allow us to address a larger portion of the market.

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We continue to believe that with the capabilities of our technology, we can be a market leader in whole-genome clinical sequencing. Leading institutions have adopted our products to study rare and inherited disease. We believe the market opportunity for clinical sequencing is significant and could drive substantial revenue growth for the Company. We plan to continue to pursue partner collaborations where the technologies being developed or applications being considered extend beyond whole-genome clinical sequencing. Collaborative arrangements add to the awareness of our products and service offerings and may drive new applications for use of our technology.

Recent Developments

Restructuring

On July 30, 2026, our Board of Directors approved a restructuring plan to continue to better align our organizational structure and resources with our strategic initiatives. The restructuring includes operating expense reductions and a reduction in force (the “Reduction in Force”). These restructuring actions are expected to result in a workforce reduction of approximately 40 employees, or approximately 8% of our workforce, as we align our organizational structure with our strategic priorities. Including the Reduction in Force and related non-headcount cost actions, we expect to reduce our annualized operating expenses by $30 million to $40 million by the end of 2027.

We estimate that we will incur aggregate pre-tax charges of approximately $2.0 million in connection with the Reduction in Force, primarily consisting of severance payments, employee benefits, outplacement services and related costs. We expect that the Reduction in Force will be completed and that these charges will be incurred in the third quarter of 2026.

Appointments and Resignations

Our Board of Directors appointed Mark Van Oene as President and Chief Executive Officer and as a member of our Board of Directors, effective August 5, 2026. Mr. Van Oene succeeds Christian Henry, who stepped down as our President and Chief Executive Officer effective August 5, 2026. Mr. Henry will continue to serve as a member of our Board of Directors.

Financial Overview

Key highlights of the six months ended June 30, 2026 consolidated financial results include the following:

•Revenue was comprised of $22.6 million in instrument revenue, $41.9 million in consumables revenue and $11.7 million in service and other revenue during the six months ended June 30, 2026. Revenue was comprised of $25.2 million in instrument revenue, $39.0 million in consumables revenue and $12.7 million in service and other revenue during the six months ended June 30, 2025. Lower Vega unit sales and a decrease in service and other revenue were partially offset by an increase in consumables revenue and higher Revio unit sales.

•We recorded a gross profit of $25.5 million during the six months ended June 30, 2026 compared to $13.3 million during the same period of 2025. We recorded approximately $12.4 million of restructuring charges during the six months ended June 30, 2025. See Note 5. Restructuring in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information. Gross margins may be affected by product mix, manufacturing efficiencies, changes in warranty costs, average selling price fluctuations, product promotions, future product launches, changes to inventory reserves, costs of raw materials, increased computing component costs, specifically memory, and tariffs.

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•Loss from operations decreased $420.8 million during the six months ended June 30, 2026, compared with the same period of 2025, primarily due to a $408.7 million decrease in operating expenses. Operating expenses of $78.4 million for the six months ended June 30, 2026 included litigation settlement expenses of $15.4 million. Operating expenses were partially offset by a $45.8 million gain on disposal of assets to Illumina Cambridge Limited due to the Asset Sale. See Note 2. Financial Instruments in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information. Operating expenses of $487.1 million during the six months ended June 30, 2025 included $382.4 million of costs incurred in connection with the restructuring and strategic shift, which primarily included $359.3 million of accelerated amortization of acquired intangibles, $15.0 million of impairment charges, and $4.8 million of employee separation costs, partially offset by an $18.7 million decrease in the change in the fair value of the contingent consideration.

•Cash, cash equivalents, and investments were $236.9 million at June 30, 2026, which represents a 15% decrease compared to the balance at December 31, 2025. During the six months ended June 30, 2026 we received net cash proceeds of approximately $48.1 million in conjunction with the gain on disposal of assets discussed above. We also paid $8.0 million related to the settlement agreement with Personal Genomics of Taiwan, Inc. (“PGI”). See Note 3. Balance Sheet Components in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details regarding the settlement with PGI.

We believe that demand for our instruments (particularly Vega) remains constrained due to, among other reasons, the funding environment in the United States, contributing to elongated sales cycles, or in certain cases, customers not placing instrument orders. Additionally, sales cycles have been and continue to be impacted by, among other reasons, continued capital funding constraints in academic and research markets, procurement timing considerations, and longer adoption cycles among new customers, which have affected the timing of certain instrument orders. However, we believe that revenues will

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read the “Risk Factors” section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Our Management’s Discussion and Analysis ("MD&A") is organized in the following sections:

•Overview and Outlook •Results of Operations •Liquidity and Capital Resources•Off Balance Sheet Arrangements•Critical Accounting Policies and Estimates•Recent Accounting Pronouncements

OVERVIEW AND OUTLOOK

About PacBio

We are a premier life science technology company that designs, develops, and manufactures advanced sequencing solutions that enable scientists and clinical researchers to improve their understanding of the genome and ultimately, resolve genetically complex problems.

Our products and technology, which include our HiFi long-read sequencing technology, address a broad set of applications including human germline sequencing, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.

Our focus is on creating some of the world’s most advanced sequencing systems to provide our customers with the most complete and accurate view of genomes, transcriptomes, and epigenomes.

Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, CROs, pharmaceutical companies, and agricultural companies.

Recent Developments

On January 30, 2026, we completed a disposition of assets to Buyer in accordance with the terms of the Asset Purchase Agreement, pursuant to which, among other matters, Buyer acquired certain intellectual property and other assets related to our short-read DNA sequencing technology and related clustering, sequencing reagent, and detection technologies. As consideration for the Asset Sale, Buyer paid us $50.0 million in cash and assumed certain liabilities. In addition, Buyer granted us a non-exclusive license to certain intellectual property included in the purchased assets. In connection with the Asset Sale, Buyer will pay at our direction 4% of the net proceeds from the Purchase Price to the former equity holders of Apton related to the waiver of all remaining milestone obligations associated with our purchase of Apton in August 2023, which payment is expected in the first quarter of 2026. As a result, we received approximately $48.1 million in net cash proceeds from the Asset Sale.

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Strategic Objectives

Looking ahead to 2026, our main objectives are to grow revenue and expand gross margins through the following five activities. These initiatives are designed to improve the economics of HiFi sequencing, expand adoption across clinical and research markets, and drive durable growth across our platform portfolio.

•Accelerate samples onto the Revio platform through SPRQ-Nx chemistry and application kits. SPRQ-Nx is designed to lower the cost of sequencing and improve sequencing efficiency, which we believe will support higher throughput, increased sample volumes, and broader adoption of HiFi sequencing in large-scale research studies and clinical applications.

•Expand the capabilities of the Vega benchtop platform to broaden our market reach. We plan to enable faster run times and enhanced user experience through software improvements, which are intended to support broader adoption and improve the overall economics of HiFi sequencing.

•Progress our clinical strategy to improve outcomes and create durability. Revio is increasingly being adopted in laboratory-developed test ("LDT") and clinical research settings, supporting consolidation of multiple tests, addressing complex genetic challenges, and driving sustained utilization of HiFi sequencing.

•Advance data-driven interpretation through scalable HiFi datasets and analytics. We are focused on leveraging the accuracy of HiFi sequencing and growing datasets to support advanced data analysis and AI-assisted interpretation approaches. Collaborative initiatives such as the HiFi Solves Global Consortium are designed to aggregate large, well-characterized HiFi datasets, which we believe can support improved understanding of complex genetic variation and disease biology while maintaining expert oversight.

•Invest in future product launches to drive platform innovation. We continue to develop sequencing solutions designed to increase throughput, simplify workflows, lower the cost to sequence a genome, and enhance downstream data analysis and interpretation capabilities, which we believe will allow us to address a larger portion of the market.

We continue to believe that with the capabilities of our technology, we can be a market leader in whole-genome clinical sequencing. Leading institutions have adopted our products to study rare and inherited disease. We believe the market opportunity for clinical sequencing is significant and could drive substantial revenue growth for the company. We plan to continue to pursue partner collaborations where the technologies being developed or applications being considered extend beyond whole-genome clinical sequencing. Collaborative arrangements add to the awareness of our products and service offerings and may drive new applications for use of our technology.

Financial Overview

Key highlights of our 2025 consolidated financial results include the following:

•Revenue was comprised of approximately $82.0 million in consumables revenue, $53.8 million in instrument revenue, and $24.2 million in service and other revenue for the year ended December 31, 2025. Revenue was comprised $70.3 million in consumables revenue, $65.8 million in instrument revenue, and $17.9 million in service and other revenue for the year ended December 31, 2024. The increase in total revenue was primarily due to higher consumable sales, Vega instrument sales, and

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service and other revenue, partially offset by lower Revio instrument sales as compared to the prior year.

•Gross profit increased for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily driven by higher consumable volumes, which drove a more favorable product mix. Gross margins may be affected by product mix, manufacturing efficiencies, changes in warranty costs, average selling price fluctuations, future product launches, changes to inventory reserves, costs of raw materials, and tariffs.

•Loss from operations increased for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to $383.1 million of restructuring-related costs. See Note 6. Restructuring in Part II, Item 8 of this Annual Report on Form 10-K for additional information about restructuring activities. These restructuring-related costs were partially offset by a $169.5 million decrease in impairment charges and a $17.9 million change in fair value of contingent consideration. As a result of the restructuring, core operating expenses, consisting of research and development and sales, general and administrative expenses, decreased by $71.1 million.

•Cash, cash equivalents, and investments were $279.5 million at December 31, 2025, which represents a 28% decrease compared to the balance of $389.9 million at December 31, 2024.

We believe that our sales cycles for Revio instruments continues to be elongated due to, among other reasons, continued capital funding constraints in academic and research markets, procurement timing considerations, and longer adoption cycles among new customers, which have affected the timing of certain instrument orders.

Macroeconomic dynamics impacting the Company in the future may include rising inflation, geopolitical tensions, volatile capital markets, tariffs, uncertainty in the United States related to NIH and academic funding, and fluctuating exchange rates. These factors could continue to impact our revenues and results of operations in future periods; however, the magnitude and duration of these impacts is highly uncertain and inherently unpredictable.

On an ongoing basis, we evaluate our significant estimates, including those related to the valuation of goodwill, indefinite-lived and finite-lived assets. However, these estimates could change in future periods based on events or changes in circumstances, which could result in material future impairment charges. We recorded $15.0 million of impairment charges during the first quarter of 2025. See additional discussion below in Results of Operations, as well as Note 4. Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further information. Additionally, refer to the Critical Accounting Policies and Estimates section later in this Item 7 for further discussion on the Company's asset impairment assessments.

See the Risk Factors section for further discussion.

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RESULTS OF OPERATIONS

A detailed discussion of our consolidated financial results comparison between 2025 and 2024 is presented below. A discussion of the changes in our results of operations between the years ended December 31, 2024 and December 31, 2023, has been omitted from this Annual Report on Form 10-K but may be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on March 17, 2025, which is incorporated herein by reference, and is available free of charge on the SEC’s website at www.sec.gov and our corporate website (www.pacb.com).

Comparison of the Years Ended December 31, 2025 and 2024

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