10-Q: 10x Genomics Narrows Losses, Boosted by Patent Settlements

10x Genomics, Inc. reported a significantly reduced net loss for Q3 2025 and the nine months ended September 30, 2025, driven by substantial license and royalty revenue from patent settlements and effective cost reduction strategies, alongside a strategic acquisition.

Summary

• Net loss for the three months ended September 30, 2025, decreased to $27.5 million from $35.8 million in the prior year period.
• Net loss for the nine months ended September 30, 2025, significantly improved to $27.3 million from $133.6 million in the prior year period.
• Total revenue for the nine months ended September 30, 2025, increased by 7% to $476.8 million, primarily due to $45.8 million in license and royalty revenue from patent settlements.
• Products and services revenue decreased by 2% to $148.0 million for the three months and by 3% to $431.0 million for the nine months ended September 30, 2025.
• Instrument revenue declined by 37% for the three months and 40% for the nine months, while consumables revenue saw slight increases of 1% and 2% respectively.
• Services revenue grew by 29% for the three months and 40% for the nine months ended September 30, 2025, driven by increased service plans.
• Operating expenses decreased by 10% for the three months and 17% for the nine months, attributed to reduced personnel expenses, lower legal costs, and a reduction in force.
• The company acquired Scale Biosciences, Inc. on August 11, 2025, for an upfront payment of $9.2 million in cash and $13.5 million in Class A common stock, with potential future payments up to $50.0 million.
• Successful patent litigation settlements with Vizgen, Inc. and Bruker Corporation resulted in $49.9 million in gains on settlement and $44.1 million in license and royalty revenue for the nine months ended September 30, 2025.
• The enactment of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, restored immediate deductibility of U.S. research and experimental expenditures, leading to a reduced income tax provision.

Sentiment

Score: 7

Explanation: The company demonstrated strong financial improvement with a substantially reduced net loss and increased operating cash flow, largely driven by successful patent litigation and cost control. While product revenue saw a decline, the strategic acquisition and positive outlook on expense reduction provide a favorable medium-term view.

Positives

• Net loss significantly reduced to $27.3 million for the nine months ended September 30, 2025, from $133.6 million in the prior year.
• Total revenue for the nine months ended September 30, 2025, increased by 7% to $476.8 million.
• Substantial license and royalty revenue of $45.8 million for the nine months ended September 30, 2025, primarily from patent settlements with Vizgen ($16.8 million) and Bruker ($27.3 million).
• Operating expenses decreased by 17% for the nine months ended September 30, 2025, reflecting successful cost reduction efforts, including a reduction in force.
• Services revenue increased by 40% for the nine months ended September 30, 2025, indicating growth in post-warranty service plans.
• Cash and cash equivalents, and marketable securities totaled $482.1 million as of September 30, 2025, up from $393.4 million at December 31, 2024.
• The enactment of OBBBA on July 4, 2025, restored immediate deductibility of U.S. R&E expenditures, reducing the income tax provision.
• Successful patent litigation outcomes with Vizgen and Bruker, and a permanent injunction against Curio in Germany, France, and Sweden, strengthen intellectual property position.

Negatives

• Products and services revenue decreased by 3% for the nine months ended September 30, 2025, to $431.0 million.
• Instruments revenue significantly decreased by 40% for the nine months ended September 30, 2025, to $41.3 million.
• Chromium consumables revenue decreased by 4% for the nine months ended September 30, 2025, to $262.4 million.
• Gross margin decreased to 67% for the three months ended September 30, 2025, from 70% in the prior year, primarily due to changes in product mix and higher inventory write-downs.
• Incurred a $1.1 million loss due to change in fair value of contingent consideration related to the Scale acquisition for the three and nine months ended September 30, 2025.
• Accumulated deficit of $1.5 billion as of September 30, 2025, and continued operating losses.
• A reduction in force plan implemented in May 2025 resulted in $6.0 million in restructuring charges and the termination of approximately 8% of the global workforce.

Risks

• Inherent uncertainties in legal matters, including intellectual property disputes, make ultimate outcomes difficult to predict.
• Third parties may claim infringement of their intellectual property rights, and the company may initiate litigation to defend its technology.
• Future capital requirements depend on revenue growth, R&D efforts, acquisitions, capital expenditures, sales and marketing expansion, and legal costs.
• Liquidity assumptions may prove incorrect, potentially exhausting financial resources sooner than expected.
• Market conditions can impact the viability of financial institutions where cash and cash equivalents are held, posing a risk to accessing uninsured funds.
• Fluctuations in other income (expense), net, are expected due to changes in the fair value of contingent consideration related to the Scale acquisition.
• The company expects to continue to incur significant expenses and operating losses in the near term.
• The 752 patent asserted by Scale (now 10x Genomics) against Parse was ruled invalid by the court in October 2025, and the company plans to appeal.
• The court entered summary judgment in November 2025 that accused Scale products do not infringe Asserted Parse Patents.

Future Outlook

The company expects revenues to moderately increase sequentially in the fourth quarter of 2025. Gross margin is anticipated to fluctuate through the remainder of 2025 due to non-recurring license and royalty revenue and changes in product mix. Operating expenses are projected to trend lower in 2025 compared to the prior year, a result of cost reduction actions including a May 2025 reduction in force and additional planned non-headcount operating expense reductions. The company expects to continue incurring significant expenses and operating losses in the near term, with anticipated capital expenditures of $15 million to $20 million over the next 12 months. Further, a $20.0 million payment related to the Scale acquisition technology transfer is expected in Q1 2026, with potential contingent consideration of up to $30.0 million if certain milestones are met. Other income (expense), net, is expected to fluctuate significantly due to changes in the fair value of contingent consideration.

Management Comments

• "We expect our revenues to moderately increase sequentially in the fourth quarter of 2025."
• "We expect our gross margin to fluctuate through the remainder of 2025 due to the non-recurring benefit in license and royalty revenue experienced in the first half of the year, as well as changes in product mix through the remainder of the year."
• "We expect our operating expenses to trend lower in 2025 versus the prior year as a result of our actions to reduce operating costs including our May 2025 reduction in force that resulted in the termination of approximately 8% of our global workforce and additional planned reductions in non-headcount operating expenses."
• "We expect to continue to incur operating losses for the foreseeable future."
• "We believe that our existing cash and cash equivalents and cash generated from sales of our products will be sufficient to meet our anticipated cash needs for at least the next 12 months."

Industry Context

The company operates in a highly competitive and litigious life sciences technology industry, particularly in genomics and spatial biology, as evidenced by numerous ongoing patent disputes with competitors like Parse, Curio, and Illumina, and successful settlements with Vizgen and Bruker. The acquisition of Scale Biosciences, Inc. indicates a strategy to expand technology and market share. The company's cost reduction efforts, including a reduction in force, may reflect broader industry pressures or a strategic pivot towards achieving profitability amidst intense competition and significant R&D investment.

Corporate Governance

Legal Proceedings

• **Parse Biosciences, Inc.:** A consent judgment and permanent injunction were entered in February 2025 regarding U.S. Patent Nos. 10,150,995, 10,619,207, and 10,738,357 (ATAC-seq). The Patent Trial and Appeals Board found U.S. Patent Nos. 10,155,981, 10,697,013, and 10,240,197 unpatentable in February 2025, which the company is appealing. Litigation is stayed pending appeal outcomes. In October 2025, the court entered summary judgment that the 752 patent (asserted by Scale, now 10x Genomics) is invalid, which the company plans to appeal. In November 2025, the court entered summary judgment that accused Scale products do not infringe Asserted Parse Patents. Additional summary judgment motions are pending.
• **Curio Bioscience, Inc.:** A lawsuit was filed in December 2023 alleging infringement of U.S. Patent Nos. 10,480,022, 10,662,468, 11,001,879, 11,549,138, and 11,761,030, with trial scheduled for May 2026. A preliminary injunction was granted by the UPC in April 2024, and a permanent injunction was issued in June 2025, ordering Curio to cease and desist from selling Seeker products in Germany, France, and Sweden due to infringement of EP Patent No. 2697391.
• **Illumina, Inc.:** Two lawsuits were filed in October 2025 alleging infringement of Asserted Spatial Patents (U.S. Patent Nos. 11,008,607, 11,549,138, 12,234,505, 12,297,487) and Asserted Single Cell Patents (U.S. Patent Nos. 11,692,214, 11,932,902, 12,275,993, 12,305,239, 12,416,192). No case schedule has been set.
• **Vizgen, Inc. & Bruker Corporation:** Patent litigation was settled in February 2025 and May 2025, respectively, contributing significant license and royalty revenue and gains on settlement.

Stakeholder Impact

• **Shareholders:** Experienced a reduced net loss and increased operating cash flow, which are positive. However, declining product revenue and ongoing operating losses present challenges. The potential for future equity issuance for contingent consideration could dilute existing shares.
• **Employees:** A reduction in force in May 2025 impacted approximately 8% of the global workforce, leading to severance costs.
• **Customers:** Continued investment in R&D and strategic acquisitions like Scale Biosciences aim to expand product offerings and solutions.
• **Creditors:** Improved cash position and operating cash flow enhance the company's ability to meet obligations.

Next Steps

• Pay $20.0 million in Q1 2026 for Scale acquisition technology transfer.
• Potentially pay up to $30.0 million in contingent consideration for Scale acquisition if milestones are met.
• Trial on claims against Curio scheduled for May 2026.
• Appeals planned for Parse IPR decisions and the invalidation of the 752 patent.
• Additional summary judgment motions pending in Scale vs. Parse litigation.
• No case schedule set for lawsuits against Illumina.
• Continue to evaluate market conditions and may pursue additional funding sources.
• Adopt ASU No. 2023-09 in Q4 2025.
• Adopt ASU 2024-03 for annual reporting periods beginning after December 15, 2026, and interim periods after December 15, 2027.

Key Dates

Recommendation

While the company demonstrated significant improvement in net loss and operating cash flow due to successful patent settlements and cost reductions, the underlying product and instrument revenue decline remains a concern. The strategic acquisition of Scale Biosciences and ongoing R&D efforts offer future growth potential, but the highly litigious environment and continued operating losses warrant a cautious 'Hold' recommendation until a clear turnaround in core product sales is evident. The positive impact of one-time legal settlements needs to be distinguished from sustainable operational performance.

Keywords

genomics, single cell genomics, spatial biology, biotechnology, life sciences, SEC filing, 10-Q, patent litigation, Scale Biosciences, Chromium, Visium, Xenium, financial results, revenue, net loss, intellectual property, cost reduction