Twist Bioscience Corporation (TWST) Earnings

Management highlights

### Core Growth Drivers & Strategic Positioning - Twist delivered its 14th consecutive quarter of YoY revenue growth, with the company's semiconductor-based DNA synthesis platform holding structural advantages in cost, scale, and speed that underpin all product lines. - AI-enabled drug discovery has matured into a durable growth engine: AI-driven design-build-test-learn cycles are increasingly standard, with demand coming from existing customers running iterative cycles, new customer acquisition, and new organizations entering life sciences. Over the past three years, platform improvements have cut manufacturing costs by 60%, reduced waste by 70%, cut turnaround time by ~73%, and increased oligonucleotide capacity fourfold. ### Product & Operational Updates - The company formally launched its complex genes offering two weeks prior to the call, after a successful early access period. During early access, customers ordered over 1,800 highly complex sequences (with high GC content or repetitive elements), with over 90% delivered within the 12-day expected window, demonstrating the ability to produce complex constructs at commercial scale. - Twist supported two global public health emergency responses during the quarter: it synthesized Hantavirus material in under 24 hours for a cruise ship outbreak response, and its whole viral genome enrichment panels helped identify the undetected Bondi-Bongio Ebola virus outbreak in the DRC that evaded standard PCR testing. - NGS applications maintain strong accelerating momentum, driven by diagnostic customers growing commercial volumes and advancing toward commercialization, with a rich pipeline of opportunities for tumor-informed molecular residual disease (MRD) tests and proprietary enzyme workflows. - The company held its investor day at the Wilsonville, Oregon manufacturing facility, which highlighted the company's highly automated manufacturing, expanding capacity, proprietary software, and deep leadership team, strengthening investor confidence in the company's long-term trajectory. ### Financial Performance Highlights - Gross margin reached 52.8%, up 120 basis points sequentially, with 70% of incremental revenue falling to the gross margin line. Operating expenses were $98.7 million, including $2 million in one-time employee transition costs that will reduce Q4 2026 OPEX by over $5 million. Adjusted EBITDA loss was $11.3 million, reflecting planned one-time investments. Ending cash, cash equivalents, and short-term investments totaled $166.8 million.

Guidance

- Full fiscal 2026 total revenue guidance is increased to $456 million to $457 million, up $12 million at the midpoint, representing ~21% YoY growth. Gross margin is expected to remain above 52% for full year 2026, with a long-term target of over 60% as the business matures. - The company confirms it remains on track to achieve adjusted EBITDA breakeven in Q4 2026, and remains committed to maintaining adjusted EBITDA profitability in fiscal 2027. - Q4 2026 total revenue is expected to be $123 million to $124 million, representing ~25% YoY growth at the midpoint, with sequential revenue growth expected from both DSPS and NGS segments; NGS is expected to return to over 20% YoY growth. - Management confirms it expects to meet or exceed its prior guidance of triple-digit percentage order growth for AI-enabled discovery in fiscal 2026 versus 2025, and now projects triple-digit percentage order growth for AI-enabled discovery again in fiscal 2027 versus 2026, driven by a robust and expanding opportunity funnel. - The company projects its serviceable addressable market will reach $13 billion by 2030, and expects to more than double revenue from organic growth by 2031. Full fiscal 2027 guidance will be shared in November.

Segment performance

Twist Bioscience reported total Q3 2026 revenue of $118.4 million, growing 23% year-over-year (YoY). By product segment: 1. **DNA Synthesis and Protein Solutions (DSPS):** Revenue reached $56.6 million, up 39% YoY and 6% sequentially. The segment shipped 369,000 genes in the quarter, with continued quarter-over-quarter growth in genes manufactured for data characterization. 2. **NGS Applications:** Revenue grew to $61.8 million, up 12% YoY and 8% sequentially, driven by growth in top customer accounts. The top 10 NGS customers accounted for 48% of NGS segment revenue, with 657 total NGS customers served (182 new adopters in the quarter). By geographic segment: 1. Americas: $77.3 million, up 30% YoY 2. EMEA: $33.6 million, up 9% YoY 3. APAC: $7.5 million, up 26% YoY By industry segment: 1. Therapeutics: $40.4 million, up 49% YoY, driven by AI-enabled drug discovery adoption across pharma, biotech, and large technology companies 2. Diagnostics: $43.8 million, up 15% YoY and 10% sequentially, driven by strong growth from top accounts 3. Industry and Applied: $5.7 million, down 7% YoY 4. Academic and Government: $15.5 million, up 32% YoY and 21% sequentially, driven by strength in U.S. accounts 5. Global Supply Partner: $12.9 million, flat YoY, providing a stable recurring revenue base

Risks & headwinds

- Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from projections, with key risks detailed in the company's SEC filings and recent earnings press release. No new material risks beyond standard disclosed risks were discussed on the call. - The operating environment for academic and government customers remains dynamic, with fluctuating order patterns that can create quarterly variability. - While the company sees strong durable demand for AI-enabled discovery, growth depends on continued customer adoption of AI-driven drug discovery workflows and sustained investment in early-stage discovery by biopharma and technology entrants.

Analyst Q&A

• Q: Can you provide more detail on ordering dynamics for NGS, and what visibility supports your projection of another year of triple-digit AI-enabled discovery order growth in 2027? /

  A: The quarter delivered strong overall growth of more than 20%, with momentum expected to continue into Q4. AI-enabled discovery growth is driven by three factors: existing customers that have built models are now placing repeat orders for iterative development, new customers are continuously entering the space, and existing customers are expanding into new modalities (e.g., moving from VHH to full IgG antibodies, with bi-specific discovery emerging). Current customer conversations, quoted projects, and planned sequence volumes give management strong confidence in continued triple-digit growth.

• Q: Why is protein growth slower than gene shipment growth, how does order-to-revenue conversion work for AI orders, and how will adjusted EBITDA reach breakeven in Q4 and hold through 2027? /

  A: The 49% YoY growth in therapeutic revenue (the primary segment for AI work) aligns with strong gene growth. The slower overall DSPS growth reflects a shift to shorter antibody sequences for human therapeutic work, rather than any pricing or demand issue. For AI projects, order timelines are measured in weeks, so order growth and revenue recognition have converged after a brief split at the end of 2025. Q3 included one-time employee transition costs; with these costs removed and disciplined investment, adjusted EBITDA will reach breakeven in Q4 and improve sequentially through 2027.

• Q: Will adjusted EBITDA stay positive throughout 2027, and what is the growth outlook for new NGS products? /

  A: Full 2027 guidance will be shared in November, but management expects full-year adjusted EBITDA to improve year-over-year and be positive for full-year 2026, with continued sequential progress planned. For NGS, new high-performance ligase and polymerase enzymes developed via AI-driven discovery are performing very well in customer testing. Molecular residual disease (MRD), particularly tumor-informed MRD testing, continues to see strong growing demand; Twist's daily capacity of 32 million oligos supports the high probe requirements of large-scale MRD testing, positioning the company well for long-term growth in this segment.

• Q: Is competitor discounting impacting Twist's AI and therapeutics business, and where does the Q4 upside to guidance come from? /

  A: Management is not concerned about competition: very few other platforms can deliver the volume of sequences (from thousands to millions) that AI discovery requires. The guidance raise reflects broad-based strength across the business, particularly in AI-driven therapeutics, and management's confidence in current demand and pipeline. Twist prioritizes long-term company building over quarterly optimization, and the strong growth trajectory supports continued market share gains.

• Q: What gives Twist higher visibility into 2027 AI orders compared to the shorter order cycles of its historical business? /

  A: For large-scale AI discovery programs, customers now engage earlier to confirm Twist has the capacity to meet their large-volume needs, leading to far more transparency around future order plans than historical small-batch DNA orders. The relationship has also deepened: Twist is now a end-to-end solution provider rather than just a DNA supplier, with deeper scientific engagement that gives clearer visibility into future customer demand.