Personalis, Inc. (PSNL)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2026 (our “Annual Report”). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled “Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and in Part II, Item 1A, “Risk Factors” for a discussion of 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 and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report.

Overview

We develop, market, and sell advanced cancer genomic testing services. Our testing services are used by physicians to detect residual or recurrent cancer in patients, monitor cancer response to therapy, and uncover insights for therapy selection. Our testing services are also used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and clinical trials. We also provide whole exome sequencing services for other diagnostic companies and whole genome sequencing services for population sequencing initiatives.

We are working with a growing number of leading cancer centers and world-class academic research institutions to build and publish clinical, evidence-based support for our testing services and our key indications, as well as to obtain reimbursement coverage from Medicare and other payors. Because of the ultra-high analytical sensitivity of our technology, we are primarily focusing on three indications: breast cancer, lung cancer, and immunotherapy (IO) monitoring. We have collaborations with Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); Institut Curie; The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); the University of California, San Diego; Duke University; Vanderbilt University and Johns Hopkins University (the PREDICT study); the Dana-Farber Cancer Institute; the University of Texas M.D. Anderson Cancer Center; University Medical Center Hamburg-Eppendorf (also known as UKE); Criterium and the Academic Breast Cancer Consortium; Yale Cancer Center; Aarhus University; British Columbia Cancer; and University Health Network, that will focus on building the evidence-base for our technology and these indications.

Currently, our testing services are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs. Our advanced genomic sequencing and analytics also support the development of personalized neoantigen therapies for cancer and other next-generation cancer immunotherapies. For example, we are providing genomic testing services to ModernaTX, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer therapy. In addition, we have partnered with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. We also have a collaboration with Tempus that enables Tempus to market our NeXT Personal® Dx test to physicians for breast cancer, lung cancer, colorectal cancer and immuno-oncology monitoring, and to market and sell NeXT Personal to Tempus' pharmaceutical and biotech customers who wish to bundle MRD testing with other Tempus offerings in a given study, through November 25, 2029. We have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").

Our work in oncology is underpinned by our experience and capacity for next-generation sequencing at scale. We have the capacity to sequence and analyze over 350 trillion bases of DNA per week in our facility. We believe that our capacity is already larger than most cancer genomics companies, and we continue to build automation and other infrastructure to scale further as demand increases. To date, we have sequenced approximately 605,000 human samples, of which approximately 237,000 were whole human genomes.

On July 20, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tempus (sometimes referred to as Parent), Aviary Development, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub I”) and Toucan Development, LLC, a Nevada limited liability company and a wholly owned subsidiary of Parent (“Merger Sub II”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, (a) Merger Sub I will be merged with and into Personalis (the “First Merger”), with Personalis surviving the First Merger as a wholly owned subsidiary of Parent (the “First Surviving Corporation”), and (b) as part of the same overall transaction, immediately after the First Merger, the First Surviving Corporation will merge with and into Merger Sub II (together, with the First Merger, referred to collectively as the “Merger”), with Merger Sub II surviving as a wholly owned subsidiary of Parent (see Note 13, Subsequent Events, in Part 1, Item 1 of this Form 10-Q in our Consolidated Financial Statements for additional information).

Second Quarter 2026 Strategic and Operational Highlights

Total revenue of $22.4 million increased 30%, or $5.2 million, during the second quarter of 2026 compared to the second quarter of 2025, due to (i) higher revenue from pharma testing services and (ii) higher clinical test revenue as a result of obtaining Medicare reimbursement coverage decisions in November 2025, February 2026 and May 2026 for breast cancer, lung cancer, immunotherapy monitoring for patients with late-stage solid tumors and neoadjuvant therapy (NAT) monitoring for breast cancer, respectively. These

30

Table of Contents

increases were partially offset by (i) the expected revenue decline from Enterprise sales due to the completion of the project with Natera, and (ii) planned lower population sequencing revenue from the VA MVP.

Key business accomplishments and financial updates in the second quarter of 2026 include:

•
Secured Medicare Coverage for IO Monitoring: Received Medicare coverage approval for NeXT Personal® for immunotherapy monitoring for patients with late-stage solid tumors;

•
Secured Medicare Coverage for Neoadjuvant Therapy Monitoring for Breast Cancer: Received Medicare coverage approval for NeXT Personal for monitoring treatment response to NAT in patients diagnosed with Stage II-III Triple-Negative Breast Cancer (TNBC) or HER2-positive (HER2+) breast cancer;

•
Presented Compelling Colorectal Cancer Recurrence Detection: The prospective VICTORI study led by the University of British Columbia showed NeXT Personal detected 100% of all patient relapses, including all distant metastases in historically difficult-to-detect regions like the lung. Notably, just four weeks after surgery, NeXT Personal detected over 80% of patients who later relapsed, providing clinicians with an early signal of cancer to inform treatment pathways;

•
Highlighted Importance of Sub-10 ppm Sensitivity in Lung Cancer: Approximately 21% of pre-operative adenocarcinoma and 18% of post-operative landmark detections in the TRACERx study were below 10 ppm—thresholds frequently missed by less sensitive assays. Patients detected in this range experienced a three-fold increased risk of recurrence compared to patients with undetectable ctDNA, potentially enabling much earlier clinical intervention.

Components of Operating Results

Revenue

We derive our revenue primarily from sales of genomic testing services to the following five customer types:

•
Pharma testing services includes sales of testing services and data analytics for clinical trials and research to pharmaceutical companies in support of their oncology drug development programs.

•
Enterprise sales includes sales of tumor profiling and diagnostic tests directly to other businesses as an input to their products. Revenue from our previous commercial relationship with Natera to provide advanced tumor analysis for use in Natera's MRD test made up substantially all of the revenue in this category.

•
Population sequencing includes sales of genomic sequencing services and data analytics to support large-scale genetic research programs. All of the revenue in this category is from our partnership with the VA MVP.

•
Clinical diagnostic includes sales of comprehensive tumor profiling test that is used to help select therapy for a cancer patient and identify potential clinical trials for a patient, and sales of ultrasensitive, tumor-informed diagnostic tests, ordered by healthcare providers for cancer patients. Revenue in this category is derived from Medicare and private insurance reimbursements.

•
Other includes sales of genomic tests and analytics to universities and non-profits.

Our ability to increase revenue will depend on our ability to further increase sales to these groups of customers and expand our customer base within each group. To do this, we are developing a growing set of state-of-the-art services; advancing our operational infrastructure; building our regulatory credentials; focusing our marketing efforts on large pharmaceutical companies; building and publishing the clinical evidence-base to support our testing services in our key indications, pursuing reimbursement coverage from Medicare and other payors; and seeking additional partnerships. We market to biopharma customers and doctors through a small direct sales force and through our collaboration and partnership with Tempus where we are leveraging Tempus' significantly larger sales force to commercialize NeXT Personal Dx in the clinical diagnostics market as a key vector to grow our clinical diagnostic business.

We have one reportable segment which is to provide advanced cancer genomic testing services for precision oncology applications, personalized testing, and other tests. Most of our revenue to date has been derived from sales in the United States.

Costs and Expenses

Cost of Revenue

Cost of revenue includes costs for materials, personnel (salaries, bonuses, stock-based compensation, payroll taxes, and benefits), laboratory supplies and consumables, depreciation and equipment maintenance, allocated facilities and information technology (“IT”) costs and clinical diagnostic test costs. We expect variability in our gross margins over the medium-term due to fluctuations in customer mix and volume, investments in newer sequencing platforms and new capabilities, such as automation of laboratory workflows,

31

Table of Contents

and processing of diagnostic tests for the clinical market while we work to secure reimbursement. Over the long-term, we anticipate gross margin expansion as we expect increases in revenue to result in economies of scale.

Research and Development Expenses

Research and development expenses includes costs incurred to develop technology and offerings, expenses for conducting clinical studies with collaborators and partners to validate the clinical benefits of our offerings and develop and implement workflow automation technologies. The

[Excerpt truncated for page length; source filing is linked above.]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes and other financial information included elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled “Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and in Part I, Item 1A, “Risk Factors” for a discussion of 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 elsewhere in this Annual Report on Form 10-K.

Overview

We develop, market, and sell advanced cancer genomic testing services. Our testing services are used by physicians to detect residual or recurrent cancer in patients, monitor cancer response to therapy, and uncover insights for therapy selection. Our testing services are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and clinical trials. We also provide whole exome sequencing services for other diagnostic companies and whole genome sequencing services for population sequencing initiatives.

We are working with a growing number of leading cancer centers and world-class academic research institutions to build and publish the clinical evidence-base to support our testing services and our key indications, as well as to obtain reimbursement coverage from Medicare and other payors. Because of the ultra-high analytical sensitivity of our technology, we are primarily focusing on three indications: breast cancer, lung cancer, and immunotherapy (IO) monitoring. We have collaborations with Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); Institut Curie; The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); the University of California, San Diego; Duke University; Vanderbilt University and Johns Hopkins University (the PREDICT study); the Dana-Farber Cancer Institute; the University of Texas M.D. Anderson Cancer Center; University Medical Center Hamburg-Eppendorf (also known as UKE); Criterium and the Academic Breast Cancer Consortium; Yale Cancer Center; Aarhus University; British Columbia Cancer; and University Health Network, that will focus on building the evidence-base for our technology and these indications.

Today, our testing services are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs. Our advanced genomic sequencing and analytics also support the development of personalized neoantigen therapies for cancer and other next-generation cancer immunotherapies. For example, we are providing genomic testing services to ModernaTX, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer therapy. In addition, we partner with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. More recently, we launched new diagnostic offerings for the clinical setting and, in November 2023, entered into an agreement with Tempus to commercialize our NeXT Personal Dx test. In late 2024, we expanded our collaboration partnership with Tempus to enable Tempus to market and sell NeXT Personal to Tempus' pharmaceutical and biotech customers who wish to bundle MRD testing with other Tempus offerings in a given study. In July 2025, we further expanded our collaboration partnership with Tempus to authorize Tempus to market NeXT Personal Dx for colorectal cancer and extend the term of the Tempus Agreement through November 25, 2029. We have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").

Our work in oncology is underpinned by our experience and capacity for next-generation sequencing at scale. We have the capacity to sequence and analyze over 350 trillion bases of DNA per week in our facility. We believe that our capacity is already larger than most cancer genomics companies, and we continue to build automation and other infrastructure to scale further as demand increases. To date, we have sequenced approximately 571,000 human samples, of which approximately 219,000 were whole human genomes.

2025 Highlights

Total revenue of $69.6 million decreased 18%, or $15.0 million, during 2025 compared to 2024, primarily due to lower expected revenue from Enterprise sales, which was primarily Natera. Revenue from Enterprise sales was $5.9 million in 2025 compared to $25.4 million in 2024 and the decline was due to the winding down of the project with Natera. This decrease was partially offset by higher revenue from population sequencing, which increased $4.3 million, or 58%.

Key business accomplishments and financial updates in 2025 and early 2026 include:

•
Secured Milestone Medicare Coverages for Breast & Lung Cancer: Received Medicare coverage approval in the fourth quarter for the surveillance of cancer recurrence in breast cancer patients, and also, received Medicare coverage for Stage I to III NSCLC in the first quarter of 2026; both are expected to be key catalysts for clinical revenue generation and market share growth in the MRD space

•
Published Landmark TRACERx Data: Highlighted data from one of the largest and most comprehensive NSCLC patient cohorts to date in the journal Cell, demonstrating the clinical importance of Personalis’ ultrasensitive MRD approach

59

Table of Contents

•
Validated ctDNA Dynamics: Published VHIO data in Clinical Cancer Research titled "Broad Utility of Ultrasensitive Analysis of ctDNA Dynamics across Solid Tumors Treated with Immunotherapy," further reinforcing the clinical validity of the NeXT Personal® platform in a broad array of cancer types

•
Clinical Momentum: Clinical test revenue of $2.0 million, more than double the $0.8 million in 2024

•
Volume Performance: Clinical test volume reached 16,233 tests, a nearly 400% increase over the 3,285 test volume in 2024

•
Strong Cash Position: Ended the year with approximately $240.0 million in cash, cash equivalents, and short-term investments. This includes approximately $109.0 million in net proceeds from our At-The-Market (ATM) sales program, executed at a weighted-average price of $8.43 per share

Factors Affecting Our Performance

There are several important factors that we expect to impact our operating performance and results of operations, including:

•
The adoption of ultrasensitive MRD testing. We are pioneering the ultrasensitive MRD testing market with the belief that an ultrasensitive approach will lead to earlier intervention and the ability to better trust that a negative MRD patient is likely cancer-free. There are no assurances that the market will value ultrasensitive testing over other ways to monitor cancer and look for recurrence and disease.

•
The continued development of the market for genomic-based tests. Our performance depends on the willingness of pharmaceutical companies, enterprise customers, and oncologists to continue to seek more comprehensive molecular information to develop more efficacious cancer therapies.

•
Increasing adoption of our testing services and solutions by existing bio-pharma customers. Our performance depends on our ability to retain and broaden adoption with existing customers. Because our technology is novel, some customers begin using our testing services by initiating pilot studies involving a small number of samples to gain experience with our service. As a result, historically a significant portion of our revenue has come from existing customers. We believe that our ability to convert initial pilots into larger orders from existing customers has the potential to drive substantial long-term revenue. We expect there may be some variation in the number of samples they choose to test each quarter.

•
Adoption of our testing services by new customers. While new customers initially may not account for significant revenue, we believe that they have the potential to grow substantially over the long term as they gain confidence in our testing services. Our ability to engage new customers is critical to our long-term success. Our publications, posters and presentations at scientific conferences lead to engagement at the scientific level with potential customers who often make the initial decision to gain experience with our testing services. Accessing these new customers through scientific engagement and marketing to gain initial buy-in is critical to our success and gives us the opportunity to demonstrate the utility of our testing services.

•
Obtaining coverage and reimbursement status of our diagnostic tests. We believe having our tests covered by Medicare is important to—and a key catalyst for—clinical revenue and market share growth in the MRD testing market. Our NeXT Personal Dx test received Medicare coverage for post-treatment surveillance of cancer recurrence in patients with Stage II and III breast cancer in November 2025, with an effective date of October 7, 2025. Our NeXT Personal Dx test also received Medicare coverage for surveillance of patients with Stage I to III NSCLC in February 2026, with an effective date of January 9, 2026. Coverage decision for one additional indication is pending. We may not be able to establish the medical necessity of this additional indication (coverage) or payment rates that cover our costs (reimbursement).

•
Our revenues and costs are affected by the volume of samples we receive from customers from period to period. The timing and size of sample shipments received after orders have been placed is variable. Since sample shipments can be large, and are often received from a third party, the timing of arrival can be difficult to predict over the short term. Although our long-term performance is not affected, we see quarter-to-quarter volatility due to these factors. Samples arriving later than expected may not be processed in the quarter proposed and result in revenue the following quarter. Since many of our customers request defined turnaround times, we employ project managers to coordinate and manage the complex process from sample receipt to sequencing and delivery of results.

•
Investment in service innovation to support growth. Investment in research and development, including the development of new services and capabilities is critical to establish and maintain our leading position. We have invested significantly in our NeXT platform, introducing new services and additional capabilities. We are also collaborating with KOLs to support the clinical utility of our testing services. We believe this work is critical to gaining customer adoption and expect our investments in these efforts to continue.

60

Table of Contents

•
Leverage our operational infrastructure. We have invested significantly in our sample processing capabilities and commercial infrastructure. With our current operating model and infrastructure, we can increase our production and commercialize new generations of our testing services. We expect to grow our revenue and spread our costs over a larger volume of services.

Components of Operating Results

Revenue

We derive our revenue primarily from sales of genomic testing services to the following five custome

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]