10x Genomics Q4 Prelims Likely Mask Persistent Weakness in Core Operations

What happened

10x Genomics announced preliminary, unaudited select results for the fourth quarter and full year 2025, a routine update that typically precedes detailed financial disclosures. The DeepValue report reveals that core products and services revenue has been flat to declining, with instruments plunging over 35% year-over-year in recent quarters due to academic funding pressures. This weakness is partially offset by high-teens growth in spatial consumables, but overall organic growth relies heavily on non-recurring IP settlements, which artificially boost margins and cash flow. Management previously guided 2025 revenue to a flat $610-630 million and warned of ongoing challenges, including NIH funding risks and execution issues from sales reorganization. The preliminary announcement likely aims to manage expectations, but it underscores the company's struggle to achieve sustainable growth without one-time gains, questioning its valuation.

Implication

The announcement highlights that 10x Genomics continues to face structural headwinds, with instrument sales collapsing and Chromium consumables declining, threatening its razor-blade business model. Spatial consumables growth, while resilient, may not be enough to drive overall revenue expansion or justify the current ~3.5-4.0x EV/sales multiple, especially given flat guidance. Non-recurring IP settlements have temporarily improved financial metrics, but their roll-off could expose margin pressure and cash flow volatility, increasing downside risk. Investors should scrutinize the full results for any signs of organic acceleration in products and services revenue, excluding license and royalty income, to assess sustainability. With a 'POTENTIAL SELL' rating and base case implied value of $16, any confirmation of weak core performance could trigger capital loss, making it prudent to avoid new exposure or trim positions.

Thesis delta

The preliminary results do not shift the investment thesis; they likely confirm existing concerns about flat organic growth and reliance on non-recurring IP income, as highlighted in the DeepValue report. If anything, the announcement may increase focus on whether 10x Genomics can achieve sustainable profitability without these temporary boosts, but without specific numbers, the thesis remains unchanged. Thus, the 'POTENTIAL SELL' recommendation with a re-assessment window of 6-12 months is still warranted, pending clearer evidence of improvement.