Pacific Biosciences of California, Inc. (PACB) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong product development and market expansion, with optimistic guidance for revenue growth and cost reduction. Despite some uncertainties in management responses, the focus on clinical market penetration, new product launches, and cost-effective sequencing solutions suggests positive sentiment. The Q&A section supports this with expected growth in international markets and operational efficiencies. The positive outlook on revenue and consumable growth, coupled with strategic cost management, outweighs any negative aspects, leading to a positive stock price prediction.
Key Financial Performance
Fourth Quarter Revenue $44.6 million, a 14% year-over-year increase and 16% quarter-over-quarter increase. The growth was driven by increased Revio and Vega sales as well as record consumables, reflecting meaningful traction across a range of clinical sequencing applications.
Full Year Revenue $160 million, a 4% year-over-year increase. Consumable revenue drove the majority of the growth, both on a quarterly and full-year basis.
Consumable Revenue (Q4) $21.6 million, a 15% year-over-year increase. This was driven by an increase in the installed base and consistent system utilization despite a difficult funding environment.
Consumable Revenue (Full Year) $82 million, a 16% year-over-year increase. Growth was primarily due to an increase in the Revio installed base and consistent utilization, along with Vega consumable sales.
Instrument Revenue (Q4) $17.3 million, a 13% year-over-year increase. Growth was primarily driven by an increase in Vega systems.
Instrument Revenue (Full Year) $53.8 million, an 18% year-over-year decrease. This was primarily due to lower Revio system shipments, partially offset by an increase in Vega systems.
Service and Other Revenue (Q4) $5.7 million, an 11% year-over-year increase. This was primarily driven by an increase in service contract revenue related to Revio.
Service and Other Revenue (Full Year) $24.2 million, a 36% year-over-year increase. This was primarily driven by an increase in service contract revenue related to Revio.
Non-GAAP Gross Margin (Q4) 40%, compared to 31% in Q4 2024. The increase was driven by product mix, cost improvement initiatives for Revio and Vega, and high yields for Revio SMRT Cells.
Non-GAAP Gross Margin (Full Year) 40%, compared to 33% in 2024. The improvement was due to similar factors as the quarterly increase.
Non-GAAP Operating Expenses (Q4) $56.2 million, an 18% year-over-year decrease. This was largely driven by lower headcount due to restructuring efforts and lower noncash share-based compensation.
Non-GAAP Operating Expenses (Full Year) $229.9 million, a 20% year-over-year decrease. This was due to disciplined spending and restructuring efforts.
Cash Burn (Full Year) $105 million, a 44% year-over-year improvement. This was due to improved financial management and restructuring efforts.
Cash and Investments (End of 2025) $280 million, compared to $389.9 million at the end of 2024. The decrease reflects ongoing operational expenses and investments.
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Operating Highlights
Revio and Vega platforms: Achieved all-time record consumable revenue and strong instrument placements. Shipped 21 Revio and 42 Vega systems in Q4, with cumulative shipments of 331 and 147 systems, respectively.
SPRQ-Nx chemistry: Introduced next-generation consumable chemistry with multi-use SMRT cells, reducing genome sequencing costs to less than $300 and increasing system throughput by 25%.
Clinical market: 55% growth in consumables for clinical and hospital customers in 2025, driven by whole genome sequencing applications in rare disease and targeted applications like the PureTarget kit.
Regional growth: EMEA revenue increased 45% in Q4, driven by higher Vega instrument shipments and Revio consumables. Asia Pacific revenue increased 4%, supported by regulatory approval in China for clinical long-read sequencing.
Financial performance: Achieved 14% revenue growth in Q4 to $44.6 million, with consumables revenue growing 15%. Non-GAAP gross margin improved to 40% in 2025 from 33% in 2024.
Cost management: Reduced non-GAAP operating expenses by 20% year-over-year to $230 million in 2025. Cash burn improved by 44% year-over-year to $105 million.
Focus on long-read sequencing: Sold short-read sequencing assets for $48 million to concentrate on long-read sequencing portfolio, enhancing financial flexibility.
Clinical adoption initiatives: Investing in rare disease, oncology, and carrier screening markets. Collaborating with institutions like University of Washington Medicine and Ambry Genetics to expand HiFi applications.
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Risk or Challenges
Academic Funding Environment: Continued significant pressure on academic funding has adversely impacted instrument sales in 2025, particularly in the Americas. This challenging funding environment is not expected to improve significantly in 2026, which could limit growth opportunities in the academic segment.
Instrument Sales: Lower Revio system shipments in 2025 due to funding challenges in academic and industrial markets. This has been a meaningful portion of the business historically, and the muted academic spending environment is expected to persist.
Economic Uncertainty: Ongoing uncertainty around funding visibility and grant timing for academic customers, particularly in the Americas, continues to create challenges for capital spending and growth.
Supply Chain Volatility: Significant volatility in components such as memory costs could create headwinds for compute associated with Revio and Vega instruments, potentially impacting gross margins.
Market Penetration Challenges: While clinical adoption of HiFi is growing, it still represents only a small fraction of the potential patient population. Long sales cycles for population-scale sequencing studies could delay revenue realization.
Regional Revenue Disparities: Revenue growth in the Americas was only 3% in Q4 2025, lagging behind stronger growth in EMEA and Asia Pacific. This disparity could indicate regional challenges in market penetration or customer adoption.
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Guidance & Outlook
Revenue Expectations for 2026: PacBio expects full-year revenue to be in the range of $165 million to $180 million, representing approximately 8% year-over-year growth at the midpoint. Consumables are anticipated to remain the primary driver of growth, supported by increasing utilization by clinical and hospital customers and further expansion of the Revio and Vega installed base.
Gross Margin Projections: Non-GAAP gross margin is expected to improve by 100 to 400 basis points in 2026, driven by higher consumables mix and the introduction of SPRQ-Nx in the second half of the year. However, potential headwinds may arise from the compute associated with instruments due to volatility in component costs such as memory.
Consumables Growth: Consumables are expected to continue driving growth, particularly through increasing utilization by clinical and hospital customers. The launch of SPRQ-Nx is anticipated to further strengthen consumables' contribution to revenue.
Academic Funding Environment: The academic funding environment is expected to remain muted, particularly in the Americas, with no broad recovery in capital spending anticipated for academic customers.
SPRQ-Nx Launch: The SPRQ-Nx chemistry and multi-use SMRT cells are expected to launch in 2026, improving the economics of HiFi sequencing and increasing penetration across key markets.
Clinical Adoption: PacBio plans to accelerate clinical adoption of HiFi sequencing across rare disease, oncology, and carrier screening, supporting both new and existing customers as they increase utilization.
Population Sequencing Studies: PacBio expects to enable population-scale sequencing studies, with hundreds of thousands of samples in various stages of negotiation and approval. These studies are anticipated to drive long-term growth.
Next-Generation Informatics: PacBio aims to scale multiomic HiFi data and apply AI to unlock unique biological insights, leveraging initiatives like Google's AI for Science.
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Shareholder Return Plan
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Key Q&A
Q:How should we think about pull-through progression as SPRQ chemistry lowers per sample costs? Will that lower cost drive higher utilization or risk pulling revenue forward?
A:Pull-through was stable year-over-year, and SPRQ-Nx is expected to lower the price per sample, likely increasing utilization and expanding market share. The focus is on driving revenue up, with pull-through remaining in the range of 225 to 250. Short-term dislocations may occur depending on sample timing and customer adoption. SPRQ-Nx is seen as enabling technology to increase footprint, consumable revenue, and gross margin.
Q:What gives you confidence that consumables growth is structurally sustainable versus being driven by a smaller cohort of power users?
A:The market is expanding due to HiFi technology and competitive economics with short-read and other long-read technologies. SPRQ-Nx will be introduced to Vega later in the year, expanding both Revio and Vega sales. Vega targets microbiology and metagenomics, while Revio focuses on discovery and clinical opportunities. Both systems are expected to grow in units shipped year-over-year.
Q:How should we think about steady state mix between Vega and Revio, and what does that imply for average system ASPs?
A:Vega and Revio target different market segments. Vega focuses on microbiology and metagenomics, while Revio targets discovery and clinical opportunities. Both systems are expected to grow in units shipped year-over-year, with a third higher-throughput system planned for launch in the future.
Q:What should we expect OUS (outside the United States) to do this year from a clinical growth perspective? Did you see any budget flush, particularly from Europe in 4Q?
A:There was minimal budget flush in 4Q, with one notable consumable order from a competitor. Clinical growth in 2025 was strong (55% growth off a smaller base), and 2026 is expected to see strong growth in rare disease and whole genome sequencing, particularly in EMEA. SPRQ chemistry will balance favorable pricing with clinical growth.
Q:When thinking about international expansion for multi-use SMRT cells, how are you considering rollout in tandem with the U.S. if your aim is to keep elasticity contained this year?
A:The beta program started in the U.S. to monitor workflows and has shown a 25% increase in yield. The program will expand to EMEA and APAC over the year, with a controlled rollout to maximize sample utilization and consumable growth. Full rollout is expected by late spring or early summer.
Q:Where is the biggest opportunity to reduce OpEx spending this year without hindering the pace of recovery?
A:OpEx reductions will focus on managing G&A and R&D expenses, prioritizing critical programs, and reducing production costs through in-sourcing. Marketing investments will be optimized for ROI, and the sales organization will expand slightly. Litigation costs from ongoing cases since 2019 will also impact expenses.
Q:Was there any cost taken out of the P&L from the short-read divestment last week?
A:Most costs were already eliminated in the 2025 reduction in force. The Onso system will still be supported through 2026, with cost savings expected in 2027. The divestment provides a tailwind to gross margin as Onso was a lower-margin instrument.
Q:Does cost improve when moving to long-read sequencing from the standard of care?
A:Yes, long-read sequencing improves diagnostic yield, turnaround time, and cost by consolidating multiple tests into one genome. This approach is faster, cheaper, and provides better answers, as demonstrated by customers like Radboud.
Q:With the promise of a sub-$300 genome with SPRQ-Nx, how should we think about balancing elasticity of demand with the price headwind over the next few years?
A:Elasticity of demand will be driven by substitution of HiFi for existing technologies. While not always linear, substantial elasticity is expected over 1-2 years, driving more gigabases, instrument sales, and higher gross margin consumable pull-through. Early access phases will manage rollout to optimize consumable revenue.
Q:Is there any color you can share on the first quarter expectations for pacing in the year?
A:Q1 is expected to be seasonally lower than Q4 but above Q1 2025. Growth will be driven by clinical accounts, new placements, and strong interest in Revio due to SPRQ-Nx. Europe is expected to remain a strong region.
Q:What is driving the component volatility flagged in the gross margin guide?
A:Memory shortages impacting compute costs for Revio and Vega systems are driving component volatility. The impact is baked into the 100 to 400 basis point gross margin increase guide, with stabilization expected mid-year.
Q:Did you provide color on placements and pull-through for Revio and Vega?
A:Revio pull-through is expected to remain in the 225 to 250 range, with placements consistent or slightly better than 2025. Vega pull-through is around 25,000, with potential to reach 25,000 to 40,000. Vega placements are expected to grow, with faster sales cycles and intra-quarter leads.
Q:What will it take to see U.S. clinical growth really accelerate?
A:U.S. clinical growth is focused on targeted sequencing panels and whole genome approaches in children's hospitals. Demonstrating favorable economics, faster turnaround, and higher diagnostic yield will drive interest and growth.
Q:Are you expecting multisystem placement orders to become more common in 2026? Will this impact ASP via discounts?
A:Multisystem orders are expected to be variable but will continue, especially for clinical customers scaling up. ASP trade-offs may occur to accelerate consumable revenue, with fleet additions improving gross margin and operating margin.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the burn rate for 2026, stating it would depend on factors like alpha and beta builds of the next-generation system and operating expense discipline. Additionally, they did not provide a clear timeline or specifics on U.S. clinical growth acceleration, focusing instead on general strategies and opportunities.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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Full Conference
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Pacific EMEA
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assay
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carrier screening
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disease genomics
economics
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exomes
family
genome SPRQ
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instrument shipment
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noncash share
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PACB Transcript
Pacific Biosciences of California, Inc. (PACB) Q4 2025 Earnings Call Transcript
Positive2-14
The earnings call indicates strong product development and market expansion, with optimistic guidance for revenue growth and cost reduction. Despite some uncertainties in management responses, the focus on clinical market penetration, new product launches, and cost-effective sequencing solutions suggests positive sentiment. The Q&A section supports this with expected growth in international markets and operational efficiencies. The positive outlook on revenue and consumable growth, coupled with strategic cost management, outweighs any negative aspects, leading to a positive stock price prediction.
Pacific Biosciences of California, Inc. (PACB) Presents at 44th Annual J.P. Morgan Healthcare Conference Transcript
Neutral1-12
Pacific Biosciences of California, Inc. (PACB) Q3 2025 Earnings Call Transcript
Unknown11-5
The earnings call presents a mixed picture: improvements in gross margins and reduced operating expenses are positives, but declines in Americas and Asia Pacific revenues are concerning. The Q&A highlights temporary challenges in Vega placements and strategic moves towards clinical applications. While there is optimism about future growth, particularly in EMEA and China, the lack of specific guidance and ongoing challenges in academic funding temper expectations. This balance of positive and negative factors suggests a neutral short-term stock price movement.
Pacific Biosciences Of California, Inc. (PACB) Presents At Morgan Stanley 23rd Annual Global Healthcare Conference (Transcript)
Neutral9-10
PACB Slides
PACB Report
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