10x Genomics, Inc. (TXG)

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

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report and our audited consolidated financial statements and notes thereto and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 12, 2026 (our "Annual Report"). As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis, in addition to historical financial information, contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” in this Quarterly Report and in Part I, Item 1A of our Annual Report.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Overview

We are a life sciences technology company focused on building innovative products and solutions to interrogate, understand and master biology. Our integrated research solutions include instruments, consumables and software for analyzing biological systems at resolution and scale that matches the complexity of biology. Our commercial product portfolio is made up of our Single Cell and Spatial solutions. Our products include our instruments, which include our Chromium instruments, our Visium CytAssist and our Xenium Analyzer, and our consumables, which include proprietary microfluidic chips, slides, reagents and other consumables for our Single Cell and Spatial solutions. We bundle our software with these products to guide customers through the workflow, from sample preparation through analysis and visualization. Customers purchase instruments and consumables from us for use in their experiments. We also derive revenue from post-warranty service contracts for our instruments.

Acquisition

On June 8, 2026, we entered into a stock purchase agreement (“SPA”) to acquire 100% of the outstanding shares of common stock of Proteintech Genomics, Inc. (“PTG”), a division of Proteintech Group, Inc. (“Proteintech”), for $6.1 million in cash. PTG specializes in developing high-plex proteomic solutions for single cell and spatial applications on 10x platforms. We expect the acquisition will allow us to expand our proteomics capabilities.

Concurrently with the SPA, we and Proteintech entered into a supply agreement under which Proteintech will supply products to us for use in single-cell and spatial analysis. The supply agreement was accounted for separately from the acquisition of the PTG business. The total consideration paid for the supply agreement and the PTG business was allocated based on the relative fair value of each component, with the fair value of the supply agreement determined by using the income approach and the fair value of PTG’s enterprise value determined by using the net asset value method. Based on the allocation, $12.4 million related to the supply agreement was recorded in “Other noncurrent assets” and “Prepaid expenses and other current assets” in the condensed consolidated balance sheets. The amount allocated to the supply agreement will be reclassified to inventory as quantities are purchased over a 10-year period. $6.1 million was allocated to the PTG business.

The fair value measurements used to allocate the total consideration between the supply agreement and the PTG business, as described above, are classified as Level 3 within the fair value hierarchy, as they are based on significant unobservable inputs, including management's estimates of future purchase volumes, contractual and market pricing, and a discount rate.

The acquisition of the PTG business was accounted for as a business combination using the acquisition method of accounting. The purchase price consideration was preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, including $3.7 million of developed technology, with the excess of the purchase consideration over the estimated fair value of the identifiable net assets acquired recorded as goodwill.

The fair value of the developed technology was estimated using a cost approach, reflecting the estimated current cost to recreate the technology with comparable functionality and utility. The developed technology intangible asset will be amortized over an estimated useful life of 10 years. Because these inputs involve significant judgment and are not observable in the market, the fair value measurement is classified as Level 3 within the fair value hierarchy.

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Comparison of the Three and Six Months Ended June 30, 2026 and 2025

Revenue

The following table represents total revenue by source for the periods indicated (dollars in thousands). Spatial includes our Visium and Xenium products:

Products and Services Revenue

Products and services revenue increased $3.9 million, or 3%, to $149.1 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. Consumables revenue increased $8.6 million, or 7%, to $130.8 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. Instruments revenue decreased $6.8 million, or 47%, to $7.7 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. Services revenue increased $2.2 million, or 26%, to $10.7 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

Products and services revenue increased $16.0 million, or 6%, to $299.0 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. Consumables revenue increased $23.0 million, or 10%, to $260.6 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. Instruments revenue decreased $10.4 million, or 35%, to $18.9 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. Services revenue increased $3.4 million, or 21%, to $19.5 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

License and Royalty Revenue

License and royalty revenue decreased $25.8 million, or 93%, in the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The decrease was primarily due to one-time royalty revenue of $27.3 million recognized in the three months ended June 30, 2025 in connection with the settlement of our worldwide patent litigation with Bruker Corporation (“Bruker”), partially offset by $1.6 million of revenue recognized during the three months ended June 30, 2026 in connection with our patent litigation settlement with Takara Bio USA Holdings, Inc. (“Takara”).

License and royalty revenue decreased $41.9 million, or 94%, in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The decrease was primarily due to one-time royalty revenue of $44.1 million recognized in the six months ended June 30, 2025 in connection with our worldwide patent litigation settlements with Vizgen, Inc. (“Vizgen”) and Bruker, partially offset by $1.6 million of revenue recognized during the three months ended June 30, 2026 in connection with our patent litigation settlement with Takara.

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Excluding non-recurring license and royalty revenue related to patent litigation settlements in 2026 and 2025, we expect our revenues to moderately increase in 2026 as compared to 2025.

Cost of Products and Services Revenue, Gross Profit and Gross Margin

Cost of products and services revenue decreased $9.3 million, or 19%, to $38.5 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The decrease was primarily driven by lower manufacturing costs of $3.3 million which included $2.6 million of tariff refunds, lower inventory write-downs of $3.0 million, lower warranty costs of $2.7 million, and lower royalty costs of $0.4 million. Gross margin increased to 74% for the three months ended June 30, 2026 as compared to 72% for the three months ended June 30, 2025. The increase was primarily due to lower manufacturing costs including tariff refunds, lower inventory write-downs, lower warranty costs, and changes in product mix, partially offset by a decrease in license and royalty revenue due to the non-recurring benefit in license and royalty revenue recorded in the three months ended June 30, 2025.

Cost of products and services revenue decreased $14.1 million, or 14%, to $83.2 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The decrease was prima

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Overview

We are a life sciences technology company focused on building innovative products and solutions to interrogate, understand and master biology. Our integrated research solutions include instruments, consumables and software for analyzing biological systems at resolution and scale that matches the complexity of biology. Our commercial product portfolio is made up of our Single Cell and Spatial solutions. Our products include our instruments, which include our Chromium instruments, our Visium CytAssist and our Xenium Analyzer, and our consumables, which include proprietary microfluidic chips, slides, reagents and other consumables for our Single Cell and Spatial solutions. We bundle our software with these products to guide customers through the workflow, from sample preparation through analysis and visualization. Customers purchase instruments and consumables from us for use in their experiments. We also derive revenue from post-warranty service contracts for our instruments.

Acquisition

In August 2025, we entered into an agreement to acquire all outstanding shares of common stock of Scale Biosciences, Inc. (“Scale Bio”), a single cell genomics technology company. Upon closing the transaction in August 2025, we made an upfront payment consisting of $9.2 million in cash and $13.5 million (1,099,992 shares) in shares of our Class A common stock. In the first quarter of 2026, we expect to pay $20.0 million, subject to any adjustments, in cash and in shares of our Class A common stock in connection with the technology transfer completed in the third quarter of 2025. In the future, we may pay up to $30.0 million of contingent consideration if certain milestones are met.

The transaction was accounted for as an asset acquisition because substantially all of the fair value of the assets acquired is concentrated in the developed technology. We determined that the contingent consideration was within the scope of ASC 480, Distinguishing Liabilities from Equity, because the contingent consideration is payable in cash or shares of our Class A common stock, at our election. The contingent consideration was recorded at fair value as of the acquisition date. Upon closing, we recognized $22.4 million for the fair value of the contingent consideration. Refer to Note 4, Acquisitions, in the Notes to consolidated financial statements included in this Annual report on Form 10-K, for a description of the fair value measurement of the contingent consideration.

Key business metrics

We regularly review a number of operating and financial metrics, including cumulative instruments sold and total consumables reactions, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that these metrics are representative of our current business;

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however, we anticipate these may change or may be substituted for additional or different metrics as our business grows and as we introduce new products or new versions of existing products.

Cumulative instruments sold

Our products are sold to academic and translational researchers and biopharmaceutical companies. Our Chromium and Visium CytAssist instruments are user installable and do not require in-person training. Our Xenium instrument requires installation and we offer in-person training for its use. We believe cumulative instruments sold is one of the indicators of our ability to drive customer adoption of our products. We define cumulative instruments sold as the cumulative number of Chromium instruments, Visium CytAssists and Xenium Analyzers sold since inception.

Our quarterly instrument unit volumes can fluctuate due to a number of factors, including the procurement and budgeting cycles of many of our customers and the availability of academic and government research funding. We also believe the timing of unit sales has been impacted and will continue to be impacted by the timing of product introductions and transitions which can either accelerate or delay demand of existing and new products or new versions of existing products depending on the needs of individual researchers to conclude existing studies or to use capabilities of new products or versions. Also, the timing and magnitude of our price changes can influence quarterly instrument unit volumes. For example, we believe that historical announcements of price changes have caused customers to pull forward purchases or postpone purchases of instruments. We therefore believe that an annual representation of cumulative instruments sold is most appropriate for assessing trends in our business.

Total consumables reactions sold

A consumable reaction is the reagent setup needed to perform an experiment using one of our solutions. Reactions represent the unit volumes that we sell when a researcher purchases our consumables. As such, we believe consumable reactions sold is an appropriate metric for assessing trends in our business. The figures in the table above (rounded to the nearest hundred) represent the total consumable reactions, by product platform and in total, for the years ended December 31, 2025, 2024 and 2023. For the year ended December 31, 2025, Chromium Single Cell reactions include Chromium and Scale Bio reactions.

As we expand our product portfolios and as our business evolves, we will continue to evaluate the key metrics of our business. We may change or substitute these for additional or different metrics if we determine such other metrics are meaningful in understanding our business.

Key factors affecting our performance

We believe that our financial performance has been and in the foreseeable future will continue to be primarily driven by the following factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to grow and improve our results of operations. Our ability to successfully address the factors below is subject to various risks and uncertainties, including those described under the heading “Risk Factors.”

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Instrument sales

Management focuses on instrument sales as an indicator of current business success and a leading indicator of likely future sales of consumables. We expect the number of cumulative instruments sold to continue to grow as we increase penetration in our existing markets and expand into, or offer new features and solutions that appeal to, new markets.

We plan to support instrument sales in the coming years through multiple strategies including expanding our sales efforts globally, adjusting prices for our instruments and continuing to enhance the underlying technology and applications for life sciences research. We regularly solicit feedback from our customers and focus our research and development efforts on enhancing the fleet of 10x instruments and enabling their ability to use additional applications that address their needs, and we believe that these efforts help to drive sales of our instruments and consumables.

Recurring consumable revenue

We regularly assess trends relating to recurring consumable revenue based on our product offerings, our customer base and our understanding of how our customers use our products. We sell additional instruments and launch additional consumables solutions, some of which do not require the use of a 10x instrument, and adjust prices of our consumables to drive increased consumables usage by our existing customers and to gain new customers. Consumables revenue on an absolute basis is expected to increase over time and remain the bulk of our revenue.

Pricing changes

We believe that price changes can affect purchasing decisions by our customers and potential customers. We expect average selling prices for certain products to decline over time as we expand our portfolio with lower-priced instruments and consumables and products which can lower the total cost of an experiment. We believe that lowering prices for our products can expand usage and we anticipate that increased adoption and volume growth will drive higher overall sales of our instruments and consumables over time.

Revenue mix and gross margin

Our revenue is derived from sales of our instruments, consumables and services. There have been fluctuations in the mix between instruments and consumables and amongst our consumables. Each of our consumables solutions is designed to allow researchers to study a different aspect of biology, such as RNA, protein or epigenetics, at a resolution and scale that may be impractical or impossible using previously existing tools. As each of our solutions has been introduced, they have been initially purchased by a small number of early adopters. As these early adopters successfully perform experiments and publish scientific articles using our solutions, the utility of these solutions is more broadly understood and the solutions are then subsequently adopted by the larger research community. The revenue contribution from these and other consumable products has varied and is expected to vary on a quarterly basis due to several factors, including the publication of scientific papers demonstrating the value of the consumables, the availability of grants to fund research, budgetary timing, our introduction of new product features or configurations and new consumables offerings and our own manufacturing capacity or the capacity of our partners. For each of the years ended December 31, 2025, 2024 and 2023, our Chromium Universal Gene Expression consumables were our highest selling consumables products.

Our margins are generally higher for those instruments and consumables that we sell directly to customers as compared to those that we sell through distributors. We expect the mix of direct sales as compared to sales through distributors to remain relatively constant in the near term.

We expect our gross margin to fluctuate throughout 2026 due to a number of factors including changes in product mix and the non-recurring benefit in license and royalty revenue experienced in the first half of 2025.

Continued investment in growth

Historically, our revenue growth has been driven by the development of new solutions and quick adoption of our solutions by our customer base. We intend to continue to make focused investments to support the growth of our business. Excluding acquisitions, we do not expect our operating expenditures to meaningfully increase in 2026. As cost of revenue, operating expenses and capital expenditures fluctuate over time, we may experience short-term, negative impacts to our results of operations and cash flows, but we are undertaking such investments in the belief that they will contribute to long-term growth.

Acquisitions of key technologies

We have made, and intend to continue to make, investments that meet management’s criteria to expand or add key technologies that we believe will facilitate the commercialization of new products and new versions of existing products in the future. Such investments could take the form of an acquisition of a business, asset acquisition or the exclusive or non-exclusive

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in-license of intellectual

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