10x Genomics, Inc.

Hello, everyone. Thank you for joining us, and welcome to the 10x Genomics second quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Cassie Corneau, Head of Investor Relations and Strategic Finance. Please go ahead.

Thank you, and good afternoon, everyone. Earlier today, 10x Genomics released financial results for the second quarter ended June 30th, 2026. If you have not received this news release or would like to be added to the company's distribution list, please send an email to investors at 10xgenomics.com. An archived webcast of this call will be available on the investor tab of the company's website, 10xgenomics.com, for at least 45 days following this call. Thank you so much for joining us today. and factors that could cause results to differ appears in the press release 10x Genomics issued today and in the documents and reports filed by 10x Genomics from time to time with the Securities and Exchange Commission. 10x Genomics disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. Joining the call today are Serge Saxonov, our CEO and co-founder, and Adam Taich, our chief financial officer. We will host a question and answer session after our prepared remarks. We ask analysts to please keep to one question so that we may accommodate everyone in the queue. With that, I will now turn the call over to Serge.

Thanks, Cassie, and good afternoon, everyone. I will start with a brief overview of our second quarter performance. Then provide an update on Atera. And finally, discuss several broader trends that are reshaping biological research and creating new opportunities for our business. Revenue for the second quarter was $151 million. During the quarter, we recognized $1.6 million of licensed and royalty revenue in connection with our settlement with Takara. Excluding non-recurring settlement revenue in both this quarter and the prior year period, Q2 revenue was $149 million and grew 3% year over year. The story of the quarter was the extraordinary customer response to Atera. We're highly encouraged by the engagement across the research ecosystem and the very strong early order flow. At the same time, our on-market products showed sustained strength. withdrew of robust growth in chromium consumable reaction volumes, reflecting expanding usage across a broad range of applications. In spatial, Xenium utilization continued to perform exceptionally well, reinforcing its position as the leading platform for spatial analysis today. Our launch of Atera is still, by far, the biggest highlight of the year. On our last call, I discussed Atera's core capabilities, many of which were not thought possible within a single platform. It delivers step-change advances across a range of features, including throughput, Plex, and sensitivity. Atera enables spatial whole-transcriptome profiling with single-cell sensitivity at scale, The promise of spatial has always been that it represents the convergence of molecular, cell, and tissue biology. ATERA is poised to deliver on that promise to provide researchers with a fundamentally more complete view of biological systems and answers to many questions that were previously out of reach. You may remember that we said initial customer reception exceeded our expectations. which were already very high heading into the launch. Since then, customer enthusiasm has only gotten stronger. This has translated into a strikingly large number of orders in a very short amount of time. The momentum we're seeing is remarkable for a platform that was completely unknown to our customers only a few months ago. We believe customers' enthusiasm should only increase as they learn more about the system and see what it is able to deliver in their hands. Similarly, we're seeing strong demand for Catalyst Research Services, a program for customers to submit their own samples to be run on ATERA in our lab. We expect sample processing to begin alongside ATERA's commercial availability. Catalyst Research Services is designed to support a range of customer needs, from generating initial pilot datasets to providing flexible and ongoing access for routine research to enabling researchers who do not yet have access to an ATERA instrument. The strong demand for the service is another encouraging leading indicator for the future of the platform and the breadth of its impact. Our vision for Atera was to build the cornerstone platform that enables scientists to interrogate a full spectrum of research questions with the versatility and scale needed to resolve the complexity of biology. It is gratifying to see that vision start to come to life as customers describe how they plan to use Atera. We're seeing engagement from universities, academic medical centers, and biopharma companies pursuing research across nearly every major disease area, from oncology across dozens of tumor types to neurodegeneration, autoimmune and inflammatory disease, cardiometabolic conditions, kidney transplant biology. The list goes on. That diversity is also evident in the specific research questions being asked. Customers are interested in applying the platform for foundational cell and tissue atlasing, mechanistic studies of how disease actually develops, monitoring response to novel immunotherapies and cell therapies, and for early biomarker and translational work. Just as importantly, customers are planning to integrate Atera into the routine fabric of their research. Researchers within academic medical centers, for instance, are planning to deploy it across the entirety of their translational oncology programs. We're hearing similar conviction from industry, where senior R&D leaders at top biopharmaceutical companies are investing in Atera with the belief that spatial biology will fundamentally change how they approach drug discovery and development. We built ATERA as a long-duration, upgradable platform with capabilities that will continue to expand over time. ATERA's extensive roadmap includes workflow automation, base-by-base spatial sequencing, and the addition of protein multiomics. With that in mind, during the quarter, we took an important step to enhance our proteomics capabilities with the acquisition of Protein Tech Genomics. Protein Tech Genomics brings deep expertise and differentiated technologies for measuring proteins in multi-omic context. We believe integrating rich proteomic information alongside spatial transcriptomics will further expand the biological questions ATERA can address and continue to strengthen the platform. The intensity of the early interest and the spectrum of customer applications are reinforcing our conviction that Atera is poised to transform how we measure and understand biology. When you look back at the history of our industry, every now and again, a new platform comes along that reshapes markets and changes how science is done. This is a very rare but profoundly exciting occurrence. We built Atera with exactly that ambition, and the early signs suggest it is on that trajectory. Turning to single-cell, I want to highlight a few major trends driving the business. First, our customers are adopting our platforms for larger, more ambitious studies. Over the past several quarters, products like Flex Apex have enabled a new generation of this work, particularly in biopharma and translational research. One way we're supporting the shift is through our recently introduced whole blood workflows that stabilize samples at the point of collection, enabling longitudinal research, distributed sample acquisition, and access to archived material. Second, there's a growing interest in additional modalities and multiomics, an area that has always been a strength of our portfolio and a focus of our investments. Last quarter was a particularly great example. We launched a new GemX version of our Multium product, significantly improving researchers' ability to measure epigenetics and gene expression from the same cell. This unlocks new dimensions of biological context and has been met with positive early customer response. Furthermore, our protein tech genomics acquisition expands and complements our existing multi-omics capabilities. It provides us with the largest single-cell protein panels on the market and allows us to offer more complete solutions for customers to measure gene expression and proteins on the same cell. Finally, a significant trend in single-cell has been an increase in large-scale perturbation experiments to map biological mechanisms and resolve causality. We're finding that Flex Apex is becoming the standard assay for these experiments because of its scalability, robustness, and sensitivity. While we see significant Flex Apex adoption across all customer segments, the uptake of Apex in Biopharma has been particularly strong, driven by the application of perturbation screening to target identifications. The value of these studies is also increasing because of the progress in AI, which helps drive mechanistic insights from the large amounts of data generated by these experiments. As we have discussed before, we believe AI represents a significant and structural tailwind for our business. AI has enormous potential to transform biology and human health, but realizing that potential depends on generating vastly more of the right kinds of data. The key bottleneck for AI-driven progress in biology is the same bottleneck we identified when we started the company. Biology is incredibly complex. We understand only a tiny fraction of it, and solving that complexity requires measuring biological systems at massive scale and high resolution. We build single-cell and spatial technologies for precisely that purpose, which is why they're now being deployed by so many of our customers to train AI models. In fact, AI, as an influencer of demand, is now becoming pervasive across our customer base. Today, most significant biological data generation efforts are conceived, at least in part, with the goal of training AI models. On the academic side, there are multiple well-known pioneering efforts, such as those led by CZI and the ARCA Institute, dedicated to building virtual biology models. but we're also seeing a wider shift where more of basic scientific research entails training AI models. This shift is driven bottom-up by decisions of individual scientists as well as top-down by philanthropic and government funding priorities such as those outlined in recent proposals from the White House. A similar shift is also starting to happen by pharma with a rapid growth in AI-focused investments. Initially, much of the AI work in drug development has focused on the chemistry side of the process, on creating molecular interventions once a target is known. Going forward, we expect increasing investments to be made in modeling biology at the cell and tissue level to unlock new targets and to predict drug response in patients. We believe this is where the biggest bottlenecks are and where there are the greatest opportunities to transform drug development. This work is also precisely what our tools enable and why we anticipate a very large opportunity for our technologies over time. Most pharma companies now have strategic mandates to leverage AI to speed up drug development and increase the probability of success. At the same time, there's a rapidly growing number of biotech companies that seek to transform drug development using AI. More and more of them are focused on building sophisticated virtual models of human biology. The vast majority of the companies building such models are using 10x single-cell and spatial technologies. Customers overwhelmingly choose our products because they deliver the highest data quality, the largest scale, the widest biological context, and the most powerful multi-omics capabilities. It has become increasingly clear in the field that all of these considerations are critical for building high-quality, generalizable, and useful models. Jens Durruthy Researchers who previously required dedicated computational experts are starting to analyze complex datasets through natural language interactions with AI agents. We believe that will make single-cell and spatial analysis accessible to a much broader community of scientists while increasing the value of the underlying data. Together, these trends reinforce our conviction that single cell and spatial biology are foundational to the future of basic science and drug discovery research. AI is increasing both the demand for high-quality biological data and the ability of researchers to extract insights from that data. We believe those two forces will reinforce one another over the coming years. Now, as we have discussed previously, we envision a significant opportunity to extend our technologies into clinical diagnostics in the future. Realizing that opportunity requires generating robust clinical evidence on large patient cohorts. We're continuing to make progress on our internal efforts to generate such evidence in oncology and in autoimmunity. This quarter, we announced new partnerships with the Cleveland Clinic and with the Lausanne University Hospital to identify bar markers of response to therapy across multiple oncology indications. Taken together, this quarter demonstrates the strength of our strategy and continued execution across our business. We advanced a game-changing new platform, sustained strong momentum in our core consumables business, and deepened our engagement with customers through high-impact partnerships. We continue to build a stronger company operationally and financially, giving us the flexibility to invest for the long term. Our technologies are at the nexus of some of the most powerful trends transforming biology and medicine. The upcoming years are going to be profoundly exciting and we're uniquely well positioned for the opportunity ahead. With that, I will turn the call over to Adam.

Thanks, Serge. Unless otherwise noted, all growth rates referenced reflect year-over-year comparisons. Revenue for the second quarter was $151 million. As Serge mentioned, when excluding the $1.6 million allocated to license and royalty revenue, our second quarter revenue was $149.4 million. This represents 3% growth over Q2 2025 when excluding the non-recurring settlement revenue in both periods. These results reflect continued momentum in the key drivers of our business. Total consumables revenue was up 7%. with growth in both single-cell and spatial. Single-cell consumables revenue grew 3%, supported by double-digit growth in reaction volumes given accelerating momentum for Flex Apex. Spatial consumables continued to perform well in the quarter with revenue up 16%. We saw sequential consumables revenue growth for both Xenium and Visium, though Xenium continues to be the primary driver of spatial consumables growth. Total instrument revenue declined 47%, with chromium instrument revenue down 46% and spatial instrument revenue down 48%, both primarily driven by a lower number of units sold. As anticipated, the decline in spatial instruments reflects customers moderating purchases of our current spatial products in anticipation of a tariff. Looking at revenue by geography, Excluding the impact of non-recurring license and royalty revenue in both periods, America's revenue was up 6%. EMEA grew 15%. APAC revenue was down 19%. As a reminder, APAC benefited from approximately $4 million of temporary pull forward in purchasing activity in China in the prior year period as customers accelerated orders ahead of potential tariff changes. Turning to the rest of the P&L, gross margin increased to 74% from 72% the prior year. The increase in gross margin was primarily driven by lower manufacturing costs, which included $2.6 million of tariff refunds, as well as lower inventory write-downs, partially offset by a decrease in non-recurring license and royalty revenue. Excluding the impact of non-recurring settlement revenue in both periods, gross margins increased to 74% from 67% the prior year. Total operating expenses were $132.1 million for the quarter, as compared to $95 million in the prior year period. The second quarters of 2026 and 2025 included gains on settlements related to patent litigation. of $3.4 million and $40.7 million respectively. Excluding these gains in both periods, operating expenses were approximately flat year over year. We ended the quarter with $552 million in cash, cash equivalents, and marketable securities, up $105 million year over year, and up $12 million sequentially. Turning to our outlook for the rest of the year, we are raising our full-year outlook and now expect 2026 revenue to be in the range of $610 million to $630 million. Excluding non-recurring revenue related to patent litigation settlements in both 2026 and 2025, this represents 2% to 5% growth over the full year 2025. Jens Durruthy As of the end of the second quarter, booked orders already greatly exceeded that full year number. That said, our shipment outlook of approximately 40 units for the year remains unchanged as we continue ramping production. Looking at our quarterly cadence, ATERA demand is driving the transition dynamics we expected, as customers are moderating purchases of existing spatial products in anticipation of ATERA. We expect this spatial transition dynamic to continue into the third quarter, resulting in a modest sequential step down for our total revenue from Q2. We then expect a significant step up in the fourth quarter as Atera shipments ramp and begin to contribute more meaningfully to revenue. Atera alone accounts for the large majority of the Q4 sequential increase implied by the midpoint of our full-year guidance, with normal seasonal Q4 strength across the rest of the portfolio closing the remainder of the difference. As we look to the second half, our priorities are unchanged. Thanks, Adam. Before we open it up for questions, I want to thank the entire 10x team.

This has been another good quarter of progress across the business, and none of it is ever an accident. The value we create in the business and the progress we make toward our mission is entirely a function of the hard work and commitment to excellence you demonstrate every day. I'm incredibly proud of what we have accomplished and even more excited about what we're building for the future. Thank you to everyone at 10X for making the impossible possible. With that, we will now open it up for questions. Operator?

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Kyle Nixon from Canaccord. Your line is now open. Please go ahead.

Hey, guys. Thanks for the questions. Congrats on the quarter. Multi-part question. First on instruments. So on a Terra, great to hear all the demand and the interest and all that, but maybe why remain conservative with that expectation for the second half there? Is that primarily just the… kind of the manufacturing capacity constraints kind of in the near term or maybe just dive into that and then thinking about a run rate for quarterly placements is that whatever you do in 4Q is that a good way to think about kind of the jumping off point into 287 like Q1 and so forth. And secondly just quickly Serge on like AI getting a lot of questions on kind of like your differentiation you obviously have a lot of you know a strong push there but what's what really sets you apart 10x apart to like directly benefit from that and Can you talk about any tangible revenue that you've kind of recognized so far? Thanks.

Thanks, Kyle. So just like to your first question on Ontario. So as we talked about in our prepared remarks, the demand has been extraordinary. And that's not the constraint here. The constraint is actually shipping the manufacturing capacity to ship the units in the second half of the year. And we continue to expect to be able to ship 40, which is what we said in the last call, and that still continues to be the case going forward.

Your next question is from the line of Luke Sergat from Barclays. Your line is now open. Please go ahead.

Great. Thanks for the question, guys. Just on the 3Q updated guide, you previously thought the 3Q would be roughly flat. Now you're talking about a little step down here. Just wanted to know what got pushed out or what changed there. And then secondly, as you think about the ITERA launch and also in conjunction with the Apex Flex. I mean, you've got a lot of things going on. So talk about the drivers here outside of ATERA instrumentation launch for 4Q. You talked about about half of that coming from the ATERA launch, but is that going to come from the Apex Flex on single-cell chromium?

Yeah. So let me take the first sort of pieces of that, Luke. So I wouldn't say that things have changed. In fact, I would just remind you that the Q3 that we're talking about here is consistent with what we said in our Q1 call. So we've always known the Q3 from a transition dynamic perspective in spatial would be the peak transition dynamics. And that's exactly what we're seeing. And part of it's a function of the enthusiasm that we've seen around the Terra. So we had originally said back when we gave the original guide Q1 that it would be a step down and then Q2 and Q3 would look similar from a dollars perspective. Now what we're saying is Q3 will look the same kind of as what we'd articulated back on the Q1 call. And so we're still anticipating a modest million dollar step down from Q2 to Q3. And that really is just a function of What's happening both on spatial instruments, but also a bit of spatial consumables as people are ramping up and getting prepared to receive their ATERAs. One thing I would just clarify in your question as it relates to Q4, if you think about the 40 units that we've committed to get out the door into the hands of customers in RevRec here, and we've talked about sort of where list pricing is, ATERA instruments alone get you most of the way, almost entirely of the way from Q3 to Q4. That doesn't factor in ATERA consumables. So if you sprinkle in a little bit of seasonal, you know, what we would normally have anticipated, and I'm not talking about, you know, some expectation of a big budget flush. I'm just saying if you think about our normal Q3 to Q4 industry dynamics, you know, that coupled with, but most of it coming from the ATERA launch, with a little bit of that step up from Q3 to Q4, I think you'll find it's a fairly reasonable step up from Q3 to Q4.

Your next question is from the line of Tycho Peterson from Jefferies. Your line is now open. Please go ahead.

Hey, thanks. Serge, what are you willing to say on manufacturing capacity for next year for Atera? I mean, that's a pretty common question. You know, obviously 40 systems this year, but how quickly can you scale up manufacturing, maybe just the next two to three years? And then how are you thinking about kind of initial pull through from some of the early adopters? How quickly can they, you know, get up to full utilization? And then I've got to follow up. Thanks.

Yeah, thanks, Taiko. So the team is working really hard to get to the official launch of the platform to start shipping. And like we said, yes, we have 40 that we're planning for this quarter, for Q4, for the second half of the year. And as we are kind of moving into next year, we certainly expect to keep kind of building out our capacity. We're building ATERAS on the backs of a lot of investments we made over the years into the operational infrastructure and supply chain expertise. And so all of that will be brought to bear as we scale up and move into next year and beyond. So we feel really good about being able to scale up capacity over time. to meet the demand as appropriate. So as far as pull-through is concerned, we're really good about interest in a platform. It's way too early to talk about precise estimates before we even get instruments on there and people actually start running them. That said, of course, we are focused on kind of engaging customers that are in particular eager to use the platform and particularly eager to ramp up sooner rather than later. So, yeah, we feel good about the potential of utilization here, you know, just for kind of calibration. Max utilization of a terror is somewhere between, depending on the kinds of assays you run, between one and a half million and to three million or so, Again, depending on the assays, it's about 2x that of Xenium. So there is plenty of room for people to make use of these instruments. Again, a little too early to give precise numbers, but feeling quite optimistic about the trajectory at this stage.

Okay. And then follow-up on single-cell. I mean, just thinking, you know, next year the street's got 4% growth in chromium consumables. I mean, pricing stabilized. These are big perturb-seek studies. getting underway. Why couldn't it be double digits? Can you just talk a little bit about how you're thinking about the next couple of years for Chromium?

Yeah, I mean, look, a little bit early to talk about the next couple of years. We're in the middle of a fairly material transition year right now because of the flux APEX dynamic. APEX has had a good momentum so far since launch towards the end of Q4. Jens Durruthy would convert to Flex from our existing other products, will have converted, which should put us in a good spot for subsequent quarters and years going forward.

Your next question comes from the line of Dan Arias from Stiefel. Your line is now open. Please go ahead.

Hi, guys. Thanks for the questions here. Serge, maybe a bit of a technical question on it. Tara, when you guys do your assessments of the platform sensitivity, what portion of the time are you finding that sensitivity is higher than Xenium? I mean, I'm not trying to geek out here, but I am curious about just the degree to which potential customers are able to appreciate an advantage on performance just in order to get them over the hump on a purchase decision. It seems like it varies depending on where in the transcriptome you look. So I guess I'm just curious about what the overall view would be when you compare the two platforms and then how that translates to sales messaging.

Yeah, I mean, there's a lot of nuance, obviously, to these kinds of comparisons, but the high-level picture is unambiguously, like with sort of not real caveats, like the aterosensitivity is substantially higher than genomes. Now, it's important to be comparing apples to apples when it comes to various assays, and certainly for the very targeted panels, if you care about specific genes, you can really boost your sensitivity on Xenium, and you can do that on Atera as well. If you're comparing wider-used assays, for example, whole transcriptome on Atera, you're able to get the single-cell sensitivity, which with large flex kinds of panels on Xenium is you can't really do that. So very, very high sensitivity. And you can remember, with Atera, you can also augment it with additional custom content if you need to boost any genes further. And overall, yes, we feel really, really strong about this platform. There's going to be some comparisons maybe. This is our kind of early days of the platform. We specifically released some early data sets out there to give people a flavor of what the platform is able to accomplish. There is still work that's going on in R&D to keep improving the specs of the platform. By and large, even based on the data sets that we have released so far, the feedback from the community has been overwhelmingly positive. It bodes really well for the trajectory of the platform.

Thank you. Your next question comes from the line of Subbu Nampi from Guggenheim Securities. Your line is now open. Please go ahead.

Hi, guys. This is Thomas on for Subbu. Thanks for taking our question. Given there's normally hiccups with the first iteration of any product launch, what feedback are you hearing from customers who might still be on the sidelines? And then how are you thinking about the roadmap for the rest of this year after the first placements to make this transition smooth for those customers? Thanks.

Yeah, obviously, like I said earlier, a lot of demand for the platform. So this has been really, really great to see from the reactions from customers. Lots of interest. Lots of eagerness. Very few conversations these days that when I engage with a customer, someone is not trying to lobby to get units earlier rather than later. So from that perspective, from the demand perspective, not really an issue. In terms of product performance, once it's out there in the field, important something, really important question, something we take incredibly seriously. Obviously, we have had a lot of experience with product development and with delivering game-changing platforms that work really well to the field. And Atera in particular, something that we have been working on for a very long time. I talked about that in the last call. We've been talking about that since then. And we do a lot of testing, a lot of buttoning up of all the different elements before we ship our products, and particularly through Atera. And the team has been making tremendous progress. So we feel really good about where things are headed, about the product, and based on what we're seeing internally as well. And so in many ways, we expect it to be very similar to our previous successful launches. Again, it's not better given all the experience that we have, all the work that has gone in, all the investment that has gone into Atera specifically. and of course on the roadmap, we've talked about many elements of that, making big investments going forward as well. There's going to be a lot more coming on the software side, more content, more panels. There's going to be additional capability around automation, proteomics, multiomics, base-by-base sequencing. So yes, there is a lot to be said for the platform. Your next question comes from the line of Michael Riskin from Bank of America. Your line is now open. Please go ahead.

Hey, thanks, guys. I want to go back to Chromium and the single cell platform. Chromium consumables are kind of flat, effectively quarter over quarter, just sequentially start the year. And instruments were a little bit on the lighter side. I understand a lot of focus on Spatial and maybe Xenium. But just we'll have to dug into more to what you're seeing there. You've got things like the Billion Cell Atlas ongoing. You've got things like Perturb Seag ongoing. You've been talking about AI. Thank you very much.

Yeah, Mike, thanks for the question. So yeah, I mean, on single cell, I would say the first order dynamic by far is that sort of transition that I talked about earlier, the rise of Flex Apex and transition of some of the other products to that assay. Again, it's had a really nice pickup, a really nice momentum. We expect that to continue. And as a result of that, yeah, the volume growth has been are quite consistent and very robust and very encouraging. And a lot of the growth is, in fact, being driven by kind of emergence of AI applications and also more larger scale experiments that involve larger cohorts and kind of distributed sample collection that Flex is particularly great for. That also has a bit of an influence, in fact, on instruments in a sense that because of the capability enabled by FLEX of having the distributed sample collection and then centralization of processing, that naturally leads to more centralization to our service providers, to core labs, to big labs, which kind of reduces the necessity to be placing instruments at every single lab. and also you know at this point we do have a lot of chromium instruments out there so accessibility is generally not an issue at all so um yeah so overall uh the dynamics around single cell are very similar to what we've been describing for the last couple of quarters and we expect that to continue in the over the you know rest of the year and i do expect like i said earlier yeah all the people or like large majority of the people who intend to transition to APEX will have largely done so by the end of the year. And that should put us in a good position to keep driving that sort of robust reaction growth, but also having it be translated into more top-line impact as well. As far as AI question is concerned, there's a lot of layers to that, and I think it's really, really important to set context here, which is what I did earlier as well with my prepared remarks. Like I said earlier, and I think there's a wide sort of recognition of that, that AI is now a major structural tailwind for us, because what these big AI models need is precisely what we have built. over the years. And AI at this point, in one shape or form, is becoming pervasive across just about all of our customer segments. At this point, there isn't really a large project out there where AI isn't either a big driver or at least an important influencer. And even small-scale projects, I think, in many instances, are performed with an eye toward feeding the data into AI models. In some cases, AI is a driver of demand. In some cases, it's an influencer and sometimes an accelerator. And what that means, right, one issue here is that AI can mean a lot of different things. And also, the landscape is changing quite fast. And so that's why I went specifically in a bit more detail in explaining how AI, for example, is used potentially in drug, in the context of drug development. for the parts specifically to measure biology. You know, if you think about drug development, the three kind of high stages of drug development, target ID to understand the biology of what targets to go after, the chemistry, the middle part, actually making the drug, the molecule, and then figuring out which patients to give the drug to. The middle part is chemistry, where a lot of current AI sort of investments up to now have been focused. but the big, big opportunity is really around the biology, the target ID and patient selection. And that's where our tools are becoming, are really, really compelling and are becoming increasingly important. And so there are some parts of our revenue where unambiguously AI revenue is coming from those like tech bio companies, some large academic projects, but there's also others where there is a mix. Big pharma companies that we know are developing these AI models of biology, but also using are products for other goals. And same thing in academia. And so there's a mix. So right now, at this stage, I'd say it's still very early, but the opportunity is massive. And our products and technologies are particularly well positioned for this opportunity. And as we go forward and as these categories grow, we'll provide more granular color on them. and how to think about sort of numbers around them.

Serge, the only thing I think I would just add just to the point you're making around centralization on chromium instruments, obviously we're focused on driving every part of our business, but I think that distinguishing between demand for instruments versus demand for the platform and driving the volume and the activity that we're doing for chromium consumables, I mean, just for context, if you remember that chromium instruments is about 2% of sales. So just kind of important context as we're thinking about the total business.

Your next question comes from the line of Matt LaRue from William Blake. Your line is now open. Please go ahead.

Hi, good afternoon. You referenced a number of the larger projects you're working on with respect to AI and also on the translational side, and in some cases, you know, customers adopting or increasing use of multiple platforms. I'm curious, as you're having these discussions about larger projects, multiyear projects, kind of how important the suite of products that you have and software and analysis tools where there's perhaps some integration or at least familiarity and how that kind of ecosystem might be having an effect as customers think about longer-term projects versus the merits of the platforms on their own.

Yeah, a really interesting question. Well, you know, The first order, as I would say, is that the platforms by themselves, whether you look at single cell and spatial, have really strong merits just to stand on their own. I would say, and certainly is really appealing in many ways to our customers. You know, if you think about, for example, Floyd's Apex, really, really high sensitivity products. Incredible scalability, huge robustness. This is actually really important for AI, in particular, a subtle point where it works across many different tissue tests, many different cell tests, many different contexts. And increasingly, it's becoming critical. So if you want to build AI models that are useful, that generalize, you really need to be able to measure lots of different contexts. You can't be measuring the same cell line over and over again, for example. And FLEX is incredibly great for that. Well, so another sort of emerging trend is, and maybe it's a little bit your question too here, is multiomics, being able to measure other modalities. And again, we have unmatched strength on that, along that dimension. And yeah, certainly there is an attractiveness to be able to do, to train your models from a spatial perspective, as well as from single cell. And we certainly provide and all of these kinds of solutions to our customers. And also, yes, on the software side, something we haven't talked that much about, but of course we have invested in software fairly materially from the beginning, from really the beginning of the company. And in particular, it's becoming important here because the data sets with APEX and with ATERA are getting to be very large, especially for training AI models. And we have made... Quite a number of advances specifically to enable people to run larger scale experiments in a straightforward kind of ergonomic manner. So all of these pieces together do kind of tie out to provide really compelling solutions for our customers. Certainly much, much more compelling than any other potential alternative on the market.

Your next question is from the line of Casey Woodring from J.P. Morgan. Your line is now open. Please go ahead.

Hi, this is Jayden on for Casey. Thank you so much for taking my question. I had one just on the broader market trends. Can you unpack what you're seeing across your academic end market? We've been hearing that some academic customers are beginning to receive grant approvals, but that funding has not yet fully flowed through to purchasing activity. Is that consistent with what you're seeing? and how much of that are you thinking about the timing for potential improvement in that end market for the rest of the year and would that be upside to the guide? Thanks.

Yeah, good question too. So it's kind of interesting, almost feels like Groundhog Day a little bit because we've been in this kind of tenuous environment for a while now where people are hoping and expecting that things will improve. And to some extent, the sentiment has been, in expectation, has been getting somewhat better. But I think the story is largely the same as it was last quarter. Improvement in sentiment, but the environment, again, is still tenuous, and the dollars are still not flowing out, at least as far as the spending decisions are concerned. So I would say, you know, still the same kind of various issues that have been at play for a while. where even if you see sort of at the very highest level, the dollars are kind of appearing there in terms of funding, they don't actually impact purchasing because of how these dollars are allocated, for example, because of multi-year funding or there's sort of increased oversights of the review process that kind of puts kind of some sand in the gears and just general shortage of staffing and things like that for grant reviews and order processing that we're hearing, keep hearing from our customers. So I would say the environment is roughly similar to what it has been before.

Yeah, and I would just add to that in the context of the guide, we're not anticipating things get any better. So to the extent that there's some improvement, that's just a broader macro comment I would make is that we're anticipating kind of in the guide that we've raised that the macro sort of stays the same with what we've been seeing. And it's been fairly consistent. and that's the way that we're thinking about our guidance.

Your next question is from the line of David Westenberg from Piper Sandler. Your line is now open. Please go ahead.

Hi, this is Sky on for Dave. Thanks for taking the question. Could you talk a little bit more about the commercial landscape of Atera and what it might look like going forward? Is it being sold by the existing sales force or is there a specialized team and do you anticipate needing to expand the sales count there? And then also, are there any incentives in place to kind of steer Xenia or Visium customer prospects towards ATERA? Thanks.

Yeah. So, yeah, good question. I mean, commercially, if you remember, two years ago now, almost two years ago now, we did a major restructuring of our sales force, and we specifically created the team focused on CapEx sales. and that has actually put us in a really good position now with the arrival of ATERA to have a team that's specifically focused on ATERA instruments to introduce them to the market and to drive sales. We are also leveraging the rest of our team to reach out to customers much more broadly and have the teams kind of work in concert to drive ATERA into the market. I think your other question was any special incentives to drive customers to Otero? No, I mean, look, first of all, our focus is always to make sure that customers are, that we satisfy the applications needs that they have and kind of provide them with the right solution in every case. And we've been, Sales Team has been selling all of our solutions and certainly, The amount of excitement around Atera is there, but it's driven fundamentally by customer demand.

Your next question is from the line of Puneet Soda from LeRinc. Your line is now open. Please go ahead.

Hi, Serge and team. Thanks for taking my questions here. If I could ask, again, ATERA, obviously a really powerful instrument, but just wanted to get a sense of how are you incentivizing the broader labs beyond the top labs and institutes that are already interested in ATERA and likely in the first 40 that are likely going to get it? Are you incentivizing them with any discounts? And are there any discounts for the broader labs? on Xenium. Just wanted to get that or any change in pricing that you're expecting here in the near term. And then just given the funding of the capital equipment remains challenging in the current time, so I want to check there. And then on the AI side, I mean, it does appear that the biology foundation models or the virtual cell models will require funding in the scale of $100 million or something closer in order to build the data for those models. Can you maybe just elaborate on what are the line of sight to the major large grants or funding sources right now that you see and the timing for those to land into 10x revenue? Thank you.

Yeah, thanks, Muneeb. So first of all, there's a bunch of those questions. First of all, on the ATERA, you look obviously early days, but the demand has been really, really strong kind of across the board, not just sort of your kind of early technology people, but much wider than that. And so that's really encouraging. For example, you know, Biopharma is, again, early days, but like a disproportionate customer here with Atera. So we feel quite good at this stage about the amount of demand there beyond just the early customers. And we haven't had to incentivize customers in any way to get in here and to put in their orders. So very, very encouraging signs. And I would say on the other side of the business, I mean, certainly, like I said, kind of in the answer to the previous question, we have the sales team that's selling all of our products right now and very focused on that, especially given that Terra is not yet shipping. But again, we are, you know, we always run some programs in different territories and different regions where our customers work with customers, where our salespeople work with customers to give them kind of the right deals for their, you know, for their sort of budgets and their applications. And we're going to continue to do that, but nothing particularly out of the extraordinary last quarter or this quarter or going forward. So, yeah, so we feel good about that trajectory, no question around that. As far as, you know, as far as AI and funding is concerned, I think there's a lot of kind of work at the highest levels happening where I kind of spoke to that, where there's a general kind of re-appreciation of kind of funding flows. I think, in fact, a lot of large-scale projects, anything that has to do with sort of larger-scale science, is now having AI as its kind of as a driver. And if you think about it, kind of the fundamental mental model, if you want to understand biology using AI, you have to use single cell and spatial because these are the only scale, they are the scale technologies to measure biology. And so whether that's, you know, whether it's the biopharma kind of world or the world of academia or various consortia, that's sort of the case. And so as people put in their priorities, whether it's sort of from governments or from various philanthropic organizations, we anticipate that that will ultimately translate into more deployment of single cell and spatial and ultimately more revenue to us.

Your next question is from the line of Dan Brennan from T.E. Cowan. Your line is now open. Please go ahead.

Awesome. Hey, guys. Thank you. Thanks for the questions. Maybe just starting just on a tear out, you know, good to hear the orders already, you know, exceeding the 40. Is there any way just to help think about the placement opportunity? I know you get asked this, but I'm just trying to frame it. What are the next few years and, you know, how purely additive to that to the business is it versus, you know, what might take away? Obviously, Xenium, you're going to stop shipping, but I'm just wondering on your other products as well.

Yeah, like I think fundamentally, you know, we've talked about Xenium and we've been quite over the past quite some amount of time. We've seen really, really nice growth in Xenium and actually still continue to see it. So Xenium has been growing the spatial market quite like really robustly and it's been really exciting. And as we look forward to Atera, we actually, We expect it to amplify and accelerate that trend and also the early signals we're getting. Now, it is true that, of course, it's going to impact sales of Xenium and certainly starting to moderate that somewhat already and more so going forward and Visium as well. Our expectation is that the third demand will more than make up for any diminution in the other platforms.

I would just add to that, Serge, even after the post-Atera launch, both on the consumable side, both Visium and Xenium grew sequentially, you know, grew from prior quarter. So there's a really good momentum happening there in spatial with the existing products.

Your next question comes from the line of Justin Bowers at Deutsche Bank. Your line is now open. Please go ahead.

Good afternoon. So I just want to continue in the spirit of the last couple of questions. Can you talk about how you're segmenting the market for ATERA versus Xenium and some of the lessons learned from the Xenium launch? And really, how does this new product cycle expand the TAN for spatial?

Yeah, look, we're seeing, like I mentioned, kind of from across the board for ATERA, like really really a lot of kind of diversity, both in terms of like the kinds of customers, whether it's universities, academic medical centers, biopharma companies, and also from the applications perspective, like really broad. We started out with a focus obviously on oncology here, but also tons of interest in neuroscience, autoimmune, cardio metabolic, kidney, I mentioned this earlier in my prepared remarks, just every kind of biological system, therapeutic area. and also the kinds of experiments that people are looking to run. They're also like really, really huge graphs. You know, you have your sort of foundational tissue outlisting. You have all these mechanistic studies of disease response to drugs like immunotherapy, cell therapies, and kind of all this biomarker translational work as well. So, you know, really strong early science about just like really material market expansion. And we're even at this stage where we didn't really, we have not focused at all. We're already seeing and some new customers coming out and expressing really strong interest in Atera. And our view is ultimately, over time, Atera is the future. Obviously, the instrument has not even shipped yet, so Xenium is the best spatial platform right now and will keep being used, as Adam just mentioned, really, really continues to show really, really strong growth. But as we go forward, we do expect that Terra will take up more and more of the spatial market and also drive material expansion of the market.

Your next question is from the line of Callum Titchmarsh from Morgan Stanley. Your line is now open. Please go ahead.

Hi, this is Jason on for Callum. Thank you for taking my question. So I appreciate the prior guidance on expectations for ATERA instrument placements in the back half. I was wondering if you could provide some guidance on how we should think about ATERA consumables revenue for 2026. Would similar consumables pull through per instrument as Xenium be a good jumping off point? Thank you.

Well, I can start maybe. I think as Serge articulated, I mean, we don't have any units out in the field as of yet. So we know what max pull through could be, and it's 2x from a maximum perspective as compared to Xenium. And I think I would also just add, as Serge noted, I mean, our intent for a wide variety of reasons is to get the first 40 instruments in the hands because demand is so high, to get the first 40 instruments in the hands of folks that do intend to be running those. And in many cases, are service providers that can provide access to those that either don't have the CapEx or weren't one of the first lucky 40 to get their hands on one. I would say there's certainly our intent, because I don't think anyone wants to get an instrument of that caliber and cost without the consumables to run through them. So we are starting to take orders on the consumable side, but it's not something we'll quantify at this time. But it is embedded into that Q3 to Q4 step up. And again, just to articulate that, you know, we've been talking about spatial consumables and the momentum there. So I just want folks to understand logically We are still anticipating that we'll have good growth year on year from a consumable standpoint in Q3, but there will be a sequential step down because as we're starting to have conversations with customers about when they will receive their Terra, some of those are very large Xenium users. And so some of them are already planning ahead and won't be running projects and so won't be placing an order towards the end of Q3 that they would normally place. and we're accounting for that in the guidance that we've given you. And then as you think about that step up, you know, from Q3 to Q4, most of that, as I mentioned, is covered by ATERA instruments alone. If you think about, we've said, you know, we'll get 40 out the door and, you know, the vast majority of those will actually happen in Q4. And so if you've got that, couple that with some consumables, you know, that come through. and then just normal year-end sort of dynamics. And again, it doesn't take a big sort of year-end flush as we've seen in certain years actually to bridge yourself from that Q3 number to the Q4 number if you think about it at the midpoint of our guide.

There are no further questions at this time. We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.