Twist Bioscience - Earnings Call - Q2 2025

Executive Summary

• Record revenue of $92.8M (+23% YoY, +4.6% QoQ) and gross margin of 49.6% (ahead of guidance), with 9th consecutive quarter of sequential growth; segment strength across SynBio ($36.0M, +21% YoY), NGS ($51.1M, +25% YoY), and Biopharma ($5.7M, +21% YoY).
• Revenue modestly beat S&P Global consensus, while EPS missed and EBITDA came in below consensus: Revenue $92.8M vs $92.0M estimate; EPS -$0.66 vs -$0.543 estimate; EBITDA -$35.2M vs -$29.2M estimate (non-GAAP adjusted EBITDA was -$14.8M) (*Values retrieved from S&P Global).
• FY25 guidance maintained for revenue ($372–$379M) but improved for gross margin (from ~49.0% to ~49.5%) and adjusted EBITDA (from -$55 to -$60M to -$48 to -$53M); Q3 guide set at $94–$97M revenue and adjusted EBITDA ~-$13M.
• Strategic catalyst: Spin-out of DNA data storage as Atlas Data Storage with $155M funding, sharpening focus on core businesses and accelerating path to adjusted EBITDA breakeven by end of FY26.

What Went Well and What Went Wrong

What Went Well

• Record revenue and margin expansion: “ninth consecutive quarter of sequential growth and record performance across revenue, gross margin and adjusted EBITDA” (GM 49.6% vs 41.0% YoY).
• Operational execution and capacity: COO detailed a ~200% capacity increase and ~20% turnaround-time reduction for key NGS workflows with fixed headcount, positioning for MRD growth.
• Strategic focus and product momentum: Spin-out of DNA storage to Atlas; expanded NGS portfolio (HT UDI adapters) and collaboration with Element for end-to-end workflows, enhancing adoption in agbio and diagnostics.

What Went Wrong

• Earnings metrics vs consensus: EPS missed (-$0.66 vs -$0.543*), and EBITDA missed (-$35.2M vs -$29.2M*) despite strong top-line beat; adjusted EBITDA improved to -$14.8M but remains negative (*Values retrieved from S&P Global).
• SG&A inflation: SG&A rose to $63.7M (including +$5.3M in non-cash stock-based comp), pressuring operating loss despite margin gains.
• Continued macro uncertainty: Management highlighted academic funding pressure and tariff risks; while Twist expects minimal direct impact, broader market wallets remain mixed, necessitating ongoing share-taking to hit H2 targets.

Transcript

Operator (participant)

Okay. Thank you for standing by. Welcome to Twist Bioscience's Second Quarter Financial Results Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I would now like to turn the call over to Angela Bitting, SVP of Corporate Affairs. Please go ahead.

Angela Bitting (SVP of Corporate Affairs)

Thank you, Operator. Good morning, everyone. I'd like to thank you for joining us for Twist Bioscience's Conference Call to review our fiscal 2025 Second Quarter Financial Results and business progress. We issued our financial results press release before the market, and it is available at our website at www.twistbioscience.com. With me on the call today are Dr. Emily Leproust, CEO and co-founder of Twist; Adam Laponis, CFO of Twist; and Dr. Patrick Finn, President and COO of Twist. Today, we will discuss our business progress, financial and operational performance, as well as growth opportunities. We will then open the call for questions. We ask that you limit your questions to only one and then read to you as a courtesy to others on the call. This call is being recorded.

The audio portion will be archived in the investor section of our website and will be available for two weeks. During today's presentation, we will make forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in our press release we issued earlier today, as well as those more fully described in our filings with the SEC. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements except as required by law.

We'll also discuss adjusted EBITDA, a financial measure that does not conform with generally accepted accounting principles. Information may be calculated differently than similar non-GAAP data presented by other companies. When reported, a reconciliation between GAAP and the non-GAAP financial measures will be included in our earnings documents, which can be found on the investor section of our website. With that, I will now turn the call over to our CEO and co-founder, Emily Leproust.

Emily Leproust (CEO and Co-founder)

Thank you, Angela, and good morning, everyone. As we look across today's global landscape, it is clear that we are operating in a time of accelerated change. From policy shifts and trade adjustments to evolving financial markets and structural transitions in healthcare and academia, the world is transforming at an unprecedented pace. At Twist, we are responding proactively. We recognize that such dynamic conditions require both vigilance and vision. We are continuously analyzing the broader environment, identifying not only challenges but also the strategic opportunities that can strengthen our long-term position. Our approach is grounded in agility, supported by rigorous execution and driven by our commitment to delivering lasting value. Diving into our significant news released this morning, I am very excited to announce that we have spun out DNA Data Storage as an independent company. The new company called Atlas Data Storage is a pure-play company focused on end-to-end data storage.

As many of you know, there are nearly endless applications of synthetic DNA. Since Twist's inception, we have prioritized opportunities where there is a significant market potential and where our technology offers a clear competitive advantage and differentiation. The market for data storage remains large, and our technology for this application has been proven. However, since May of 2023, we have intentionally constrained our spending in DNA Data Storage to keep Twist's overall investment in this business to less than $25 million annually. Because DNA Data Storage is a specialized area, the business, customers, team, and investors will look different. To drive the commercialization, a dedicated team will be needed, which can be more easily accomplished by a pure-play DNA Data Storage company. We have now reached a point where we believe increased investment is essential to accelerate development.

With a significant $155 million investment from our financial partners, Deerfield Management, Bezos Expeditions, Tell Capital, In-Q-Tel, Earth Foundry, Rsquared VC, and other undisclosed investors, as a pure-play DNA Data Storage company, Atlas Data Storage will have significant capital that will enable the new company to accelerate towards commercialization and drive success. As part of this transaction, Twist will receive consideration of approximately 24% equity interest in Atlas on a fully diluted basis, as well as royalties on future commercial sales and up to $75 million in future milestone payments, ensuring we continue to participate in future upside opportunities. In addition, we will receive a $2.5 million upfront cash payment and a $2 million secure promissory note. Importantly, Twist will benefit from technology advancement made by Atlas, where it applies to our product groups.

By operating as two separate companies, we are able to maintain sharp focus, with each organization dedicated to developing and commercializing disruptive products and services while prioritizing exceptional customer engagement. Atlas will be led by Varun Mehta, a CEO, who brings extensive data storage experience, including co-founding and leading Nimble Storage, which was acquired by Hewlett-Packard. While at HP, he helped to define storage strategy and introduce new products, including an entirely new product category. George Kadifa, Managing Director of Sumeru Equity Partners, brings more than three decades of technology operating experience and will serve as Executive Chairman of the Board for Atlas. Bill Banier, who has been the General Manager of the DNA Data Storage team at Twist, will serve as Chief Technology Officer of Atlas.

Turning to our financial results, I am pleased to report another quarter of strong sequential growth and record performance across revenue, gross margin, and adjusted EBITDA. For the second quarter of fiscal 2025, we reported a record revenue of $92.8 million, an increase of 23% year-over-year and 4.6% sequentially. Gross margin for the quarter came in ahead of our guidance at 49.6%, compared to 41% for the second quarter of fiscal 2024, demonstrating the leverage of fixed costs with higher volume, as well as our ongoing commitment to continuous improvement and margin expansion initiatives. In addition, this is another quarter of showing that, on average, 75%-80% of incremental revenue drops to the gross margin line. Revenue for Synbio increased to $36 million, gross of 21% year-over-year. Over the course of the quarter, we have implemented programs to streamline customer experience and serve our customers.

I'd like to share two of these programs to give you a sense of how we are meeting our customers where they are today. First, we introduced the Twist Wallet, a way for customers to put money into an account as a credit and then order against that credit over a period of time. This allows our customers flexibility for timing of their order and lessens the administrative burden for purchasing. In addition, given the new normal for academic customers today, we offer a promotional program to enable these customers to order express genes without paying the express premium for a limited period of time. Science does not stop, and we have found that when customers try the express speed, they do get hooked on receiving their products on the express timeline.

This promotion allows more customers to try express speed, and we believe they may continue even after the promotional period ends. Already, this promotion has resulted in many new customers accessing our products, and importantly, it's something tangible we can do to support our customers as they navigate through these times. I'd like to note that both programs illustrate our innovative approach to everything we do at Twist. While innovation drives our product lines, it also feeds into our approach to reaching customers, our user experience, and our commitment to play the long game. Turning to NGS, we reported $51.1 million in revenue, an increase of 25% year-over-year, with strengths coming primarily from our customers' commercial assets for diagnostic tests. During the quarter, we partnered with an additional software vendor to further enable the adoption of our NGS workflows in the Agbio space.

While the conversions from an RA to an NGS workflow take time, the resulting opportunities could bring substantive revenue in this $500 million market, where today we have close to no market share. Turning to biopharma services, our revenue was $5.7 million, gross of 21% year-over-year, with orders increasing to $6.4 million. We remain cautiously optimistic as the funnel of opportunities continues to build. By leveraging our strategic fit across our Synbio and biopharma services portfolio, we continue to remain focused on delivering valuable services for our customers. I would now like to turn the call over to Patty for commentary on operations and innovation.

Patrick Finn (President and COO)

Thanks, Emily. To underscore what Emily said earlier, Twist was intentionally designed to thrive in evolving conditions. Our foundation rests on a diversified strategy, including differentiation in product lines, customer categories, and international markets. What that looks like today is we're employing real-time operational agility. We are actively monitoring and refining our commercial and supply chain strategies to ensure continuity, speed, and responsiveness across all regions. We are deepening customer relationships. We are engaging closely with customers and partners to reinforce trust in our platform, sustain momentum, and even co-create solutions. We are investing judiciously and strategically to ensure we deliver on our innovative roadmap to continue to expand our reach, our scalability, and the long-term competitive positioning of our offerings. We are relentless in driving executional discipline. We are prioritizing quality, efficiency, and innovation to maximize value for our customers while improving operational performance.

We are optimizing costs to increase our operational leverage across the company while in parallel fueling long-term growth. Automation and scale continue to unlock meaningful cost savings across production while maintaining the highest quality and value, as well as R&D velocity for new product introductions. To dive into a specific example that illustrates our focus for our NGS product line, we know that as our customers begin to launch bespoke MRD assets, we will need additional capacity for this product line. We've been working with many customers over the course of the last few years as they move from the pilot stage to verification and validation to clinical studies. While some smaller tests are already commercial, we expect others to advance into clinical studies next year and more to be available in the broader commercial market in 2026.

We also know that the workflow for this product line must be very fast, incredibly efficient, and the highest quality, as our customers' tests literally support life-or-death decisions. With this input, we used a Twist approach to level up our automation within the same footprint, upgrading hardware and software and leveraging an exceptional engineering and software team. With a fixed headcount, we increased capacity by about 200% and lowered turnaround time by approximately 20%. In other words, we did what we are known to do. We see the ramp coming. We plan and we prepare so that our customers can count on us consistently, and then we execute to ensure we are delivering. Turning to enzyme development, we recently developed a proprietary high-fidelity polymerase that we have deployed into select internal Synbio workflows.

In addition to reducing supplier dependency, by using this internally developed product in our own manufacturing processes, we enable enhanced performance and reduce cost. This also opens up differentiated workflow opportunities within our NGS product group that we're actively exploring. At this time, I'd like to turn the call over to Adam to discuss our financials.

Adam Laponis (CFO)

Thank you, Patty. Revenue for the second quarter of 2025 increased to $92.8 million. Growth is 23% year-over-year and approximately 4.6% sequentially. Gross margin came in higher than expected at 49.6%, primarily due to increased revenue, volume leverage, and faster-than-anticipated gains and continuous process improvements within operations. Synbio revenue increased to $36 million, growth of 21% over $29.8 million for the second quarter of fiscal 2024. NGS revenue for the second quarter grew to approximately $51.1 million, an increase of 25% over $40.8 million for the same period last year. For the quarter, revenue from our top 10 NGS customers accounted for approximately 43% of NGS revenue. We served 610 NGS customers in the quarter, with 150 having adopted our products. For biopharma, revenue is $5.7 million, growth of 21% over $4.7 million for the same period of fiscal 2024. Orders are $6.4 million.

We had 95 active programs as of March 31, 2025, and we started 64 new programs during the quarter. Looking at revenue by industry, healthcare revenue rose to $52.8 million for the second quarter of 2025, compared to $40.9 million in the same period of fiscal 2024, an increase of 29% and reflecting the increased uptake of our products by pharma, biotech, and diagnostic customers. Industrial chemical revenue rose to $22.8 million in the second quarter, up 12% from $20.3 million in the same period of fiscal 2024. Academic revenue was $16.5 million for the second quarter of 2025, up 20% from $13.7 million from the same period of fiscal 2024, with growth coming from both Synbio and NGS customers. Looking geographically, Americas revenue increased to approximately $55.2 million in the second quarter, up 20% compared to $45.9 million in the same period of fiscal 2024.

EMEA revenue rose to $30.6 million in the second quarter versus $22.3 million, up 38% compared to the same period of fiscal 2024, strong growth year-over-year. APAC revenue was $7 million in the second quarter, compared to $7.2 million in the same period of fiscal 2024. China continues to be a relatively small portion of our revenue at approximately 1.5% of total revenue for the second quarter of fiscal 2025. Moving down the P&L, our gross margin for the second quarter increased to 49.6%, an improvement of almost nine margin percentage points versus the second quarter of fiscal 2024, reflecting our strong revenue growth as well as our continuous process improvements while holding expenses relatively flat year-over-year. With the evolving landscape, we expect our supply chain to be minimally impacted by tariffs at this time.

In addition to sourcing our raw materials primarily from U.S.-based providers, our technology miniaturizes the chemical synthesis process for making DNA, so we use significantly less material than a traditional well-plate-based approach to DNA synthesis. Importantly, we continue to expect improvements in gross margin after comprehending supplier price increases from tariffs, even after the 90-day pause. All of these assumptions are included in our guide. Operating expenses, excluding cost of revenues for the second quarter, were approximately $87.6 million compared to approximately $79.8 million in the same period of 2024, driven by a $5.5 million increase in non-cash stock-based compensation. Operating expenses included approximately $6.1 million for data storage in the second quarter.

Looking at our progress and our path to profitability, for the second quarter of fiscal 2025, adjusted EBITDA was a loss of approximately $14.8 million, an improvement of about $11.9 million versus the second quarter of fiscal 2024. Cash flow from operating activities continues to improve, and we're driving to adjusted EBITDA break-even. We ended the quarter with cash, cash equivalents, and short-term investments of approximately $257.1 million. Turning to guidance, we are reiterating our total revenue guide of $372 million-$379 million for fiscal 2025, indicating growth of approximately 20% at the midpoint year-over-year, which comprehends NIH funding and tariff impacts and the expectation that we will continue to take share in H2 as we have in the first half of the fiscal year.

Synbio revenue guidance of $144-$147 million, growth of approximately 18% at the midpoint year-over-year, reflecting the continued share gains we saw in H1, driven by the express portfolio. NGS revenue guidance of $205-$209 million, growth of approximately 23% at the midpoint year-over-year. Biopharma revenue guidance of $23 million, growth of approximately 13% year-over-year. For Q3 fiscal 2025, we expect total revenue of approximately $94-$97 million, growth of approximately 17% versus Q3 of fiscal 2024 at the midpoint. Synbio revenue of approximately $37-$39 million, growth of approximately 15% year-over-year at the midpoint. NGS revenue of approximately $51-$52 million, growth of 19% year-over-year at the midpoint. Biopharma revenue of approximately $6 million, growth of 18% year-over-year. For the full year fiscal 2025, we now expect gross margin of approximately 49.5% with quarterly sequential improvements.

In addition, we expect a margin above 50% in the back half of the fiscal year. We now expect adjusted EBITDA loss of approximately $48 million-$53 million for fiscal 2025, an improvement of approximately $41 million-$46 million versus fiscal 2024. This improvement includes the expected impact of the Atlas Data Storage transaction. Starting in Q4 of fiscal 2025, we expect a $5 million per quarter improvement to adjusted EBITDA and cash burn. We expect Q3 fiscal 2025 adjusted EBITDA loss to be approximately $13 million, as improvements from the Atlas Data Storage transaction will be partially offset by transaction-related expenses in the current quarter, with sequential improvements in subsequent quarters. In addition, with the announcement made today regarding data storage, we expect to reach adjusted EBITDA break-even on an accelerated timeline by the end of fiscal 2026. With that, I'll turn the call back to Emily.

Emily Leproust (CEO and Co-founder)

Thank you, Adam. As you can see, we are not standing still. We are leaning in. We view this environment not just as something to manage through, but a chance to accelerate our impact and strengthen our competitive position. Our leadership team is focused on what we can control. We will make decisions backed by data and grounded in a culture that has always defined Twist. We focus on innovation, resilience, and customer impact. Our guiding principles of grit, impact, service, and trust resonate in this and in any environment. Twist's ability to adjust quickly and operate with discipline gives us an edge over competitors who are larger and less nimble. Our leadership team is actively prioritizing the variables we can control while tracking global shifts to stay ahead of the curve.

We continue to take market share, leveraging our differentiated platform with our customers at the forefront of our attention. Our team, platform, and mission remain our greatest asset, and we are leveraging all three to support sustainable growth. We know predictability is on everyone's mind, including all of us at Twist. One thing that gives us confidence moving into the second half of our fiscal year is that we booked more than $100 million of orders in each of the last two quarters. In addition, our sales team sees strengths in the funnel and opportunities ahead. Our view of the future is clear and optimistic. Every employee at Twist is aligned around our high-hindsight goals and empowered by our team committed to scientific advancement and market leadership. We are moving forward with confidence, prepared to withstand volatility, and where possible, to turn that volatility into opportunity.

At this time, let's open up the call for questions. Operators.

Operator (participant)

Thank you. As a reminder to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, simply press star one one again. As a reminder, in order to accommodate all participants in the queue, please limit yourself to one question only. Please stand by while we compile the Q&A roster. Our first question coming from the line of Luke Sergott with Barclays is now open.

Luke Sergott (Director of Healthcare Equity Research)

Hey, great. Thanks for the question. Big news on the DNA storage. I just wanted to kind of figure out what you guys are, given all the uncertainty around tariffs, what you guys are baking in there from within your guide, given kind of how the quarter played out, what you guys are seeing there. If you're also seeing any demand starting to come over from competitors that manufacture in China, ultimately, the tariff situation serving as the catalyst to push forward what was potential there for BioSecure.

Adam Laponis (CFO)

Hey, Luke. This is Adam. Thanks for the question. A couple of comments here. We did see strong share gains in this quarter across the business. Obviously, our team's innovation and our ability to remain nimble and react quickly to some of the macro challenges that we highlighted in the call were a big part of this. As I look to what's baked into the guide, we do see opportunity for upside in our 2025 guidance of 20% growth to the midpoint, but we never want to be on the wrong side of the guide. With today's announcement on the data storage, we're more focused than we've ever been. We see that path to profitability, but we also want to be understanding and respectful of the fact that there is uncertainty and we have baked in what we know today around the tariffs.

In terms of what we discussed in terms of Q3 and beyond, we know we're lapping some tougher numbers in Q3. Last quarter year in Synbio, we had a bump in revenue. The key for us is we're going to win by winning. We view any market disruptions an opportunity to take share. For the last few years, even with constrained budgets in biotechnology, we were able to take share. We see this similar opportunity today in academic research and really encouraged by the performance in Q2, where we saw 20% growth year-over-year with our academic customers across the board. We are confident moving forward, but we are also understanding that there is uncertainty in the market, but we'll take advantage of that wherever we can.

Operator (participant)

Thank you. Our next question is coming from the line of Matt Sykes with Goldman Sachs. He is now open.

Matt Sykes (Managing Director and Senior Equity Research Analyst)

Hey, good morning. Thanks for taking my questions. Maybe just one on the promotions that you guys are doing at Synbio. I know earlier this year you rolled out a promotion for academic customers given the stress they're under. It sounds like if I heard it right, you're broadening that out across the business. I guess my question would be, one, is that 20% growth you saw in the academic market this quarter partly a result of that promotional activity? Were there any kind of visible market share shifts that were helped by that promotion? Two, do you expect a similar kind of dynamic if that is the case for the rest of your customers for Synbio? How long do you believe that you'll stick with this promotional period, and what are the impacts on gross margins for that? Thank you.

Emily Leproust (CEO and Co-founder)

Thank you, Matt. Great question. One of the reasons why we push for the promotion is really anchored in the performance of the product. When we say that we can ship genes in five to six days, it does what it says on the tube. We do do it. We do it not just for one gene, but we can do it for all of our genes to a very, very high throughput. We saw that there was some confusion, worry in the academic field around funding. It was our way to do one-two punch, one to assist our customers and to making sure that the express got into more hands. We believe that that is going to help us long-term to convert the academic market where, as you know, we are still at the beginning of that conversion.

In terms of how long it's going to last, we said it will at least last until the end of our fiscal year. We want to make sure that our customers know that. In terms of impact on margin, I think it's positive. As you know from the math, if the sales price is 5% lower than average, but your volume increased 10% or more, it is positive. As far as the impact on the quarter, it was not complete impact since we started about midway through the quarter. At the end of the day, a lot more academic customers are getting their hands on express genes, and they're seeing the value of it. They're reordering. We see it as a win for the customers and a win for us as well.

Operator (participant)

Thank you. Our next question is coming from the line of Subbu Nambi with Guggenheim Securities. He is now open.

Subbu Nambi (Managing Director and Senior Analyst)

Hey, guys. Good morning. Thank you for taking my questions. You have been reporting the percent of NGS revenue from your top 10 customers each quarter. How much of the second-half guidance is from these top 10 customers, especially in NGS?

Adam Laponis (CFO)

Super. This is Adam. Thank you for the question. If I look at the guidance for NGS, I'd say we expect to see growth from both the existing customers on the top 10 as well as other customers who aren't in the top 10 today. One thing we talk about a lot is it's not always the same top 10 customers every quarter. We do see a rotation there. We are seeing new customers launching. We haven't baked in any assumed increases for things like MRD in that back half guide. We do see the top 10 growing at about the same rate as the entire NGS business.

Operator (participant)

Thank you. Our next question coming from the line of Doug Schenkel with Wolfe Research. He is now open.

Doug Schenkel (Managing Director and Head of Life Science Tools & Diagnostics)

Good morning. Thanks for taking the question. I want to just dig a little deeper into guidance questions. The first is on the SpinCo. Are you planning to reinvest some of the SPIN savings into higher priority R&D initiatives? If we're interpreting guidance right, it seems like that might be the case. That is the first part. The second is on the MRD launches that you referenced. You talked about customers moving into clinical studies. When would they start to build inventory, and how is that contemplated into guidance? The third part is on pacing. Guidance implies about 28% of sales in the fourth quarter at the midpoint. That is a smidge more back-end loaded compared to the last two years. Is there anything to read into that? Thank you.

Adam Laponis (CFO)

Hi, Doug. This is Adam here. I'll see if I can hit all three parts. I may need you to help me out a bit because I'll forget them as I start talking. In terms of the last one first, I think the pacing is we've said consistently that we're going to see sequential growth, and we feel confident in that growth. When you look at it year on year, the impact of growth in both quarters is slower than it was in the front half, but it is seeing that sequential increase. We're seeing that set up nicely in terms of the continued adoption and share taking both in Synbio and the growth in our existing and new customers in NGS. Stepping back into the first two questions, if you could repeat them for me, I'd appreciate it because, as I said, I know it's pretty good.

Doug Schenkel (Managing Director and Head of Life Science Tools & Diagnostics)

Absolutely. Yeah. Sorry to rattle through those so quickly. The first was on reinvestment of SPIN savings and R&D initiatives. It looks like that's what you're doing, at least partially, a small amount. The second was on the MRD launches. You talked about customers moving into clinical studies. I'm just wondering when they would build inventory and how is that contemplated into guidance?

Adam Laponis (CFO)

No. Great question. In terms of the launch of Atlas Data Storage, we did raise our adjusted EBITDA at the midpoint, about $7 million this quarter. That does reflect most of the savings from not having data storage, which is about a $5 million a quarter cash burn in our P&L. That is contemplated in Q4. In Q3, given the timing of it, as well as some transactional costs, the impact will be only partial. We are assuming that most of that savings is dropping to the bottom of the P&L. In terms of the MRD, we're not assuming any material launches ramping in the back half of 2026.

Operator (participant)

Thank you. Our next question coming from the line of Vijay Kumar with Evercore ISI. He is now open.

Vijay Kumar (Senior Managing Director of Equity Research)

Hey, guys. Thank you for taking my question. I guess just to clarify one on the macro here, Adam or Anna, if you will. On tariffs, are you assuming no impact at all, or is there any impact, but you're offsetting those impacts? And sort of sticking to that macro team, academic and government, can you just remind us what is USA and G as a percentage of revenues? I think there's a proposal for NIH budgets being down 37%. So are you assuming second-half growth to moderate, or should that sustain at second-quarter levels? Thank you.

Emily Leproust (CEO and Co-founder)

Thanks for the question. As far as the tariffs, so obviously the tariffs are on pause now. Even when the tariffs were not on pause, the vast majority of our products were exempt to any tariffs into Europe. As far as China tariffs, first of all, China is a very small number for us.

Similarly, even now, even though there are big tariffs on most U.S. products into China, DNA-related products are exempt as well now. Overall, we think that if tariffs are back, it will be more of a headwind for our competitors than for us. Again, as Adam mentioned earlier, we will win by winning. Our products are faster, better, with better scales, with higher quality, better user experience. Tariffs, in the end, are a tailwind for us and a headwind for competitions, but we will win by winning. As far as academia, we had very good growth in academia of 20% in the last quarter, year-over-year. Great growth. We are still massively underpenetrated in academia, so we have a big opportunity ahead of us.

It's a very similar opportunity to what we had experienced over the last few years with biopharma when biopharma funding was under pressure. Our product quality, the value of our products from a quality to cost point of view, was just so positive that we've grown significantly. We think the same opportunity will happen here.

Operator (participant)

Thank you. Our next question coming from the line of Matt Leroux with William Blair. He is now open.

Matt Leroux (Analyst)

Good morning. Maybe just following up on the question on the environment. You referenced a couple of times on the call that the guidance assumes continued share taking in the back half of the year. Clearly, this has been a story of share taking for many years, so maybe it's not that unusual. Just the emphasis on that, can we read into that that you're observing softer market conditions or softer customer wallets in April versus March and moving on, and thus the share taking aspect is more important? Maybe just speak a little bit to what you're seeing broadly for some of your customers, their spend and behavior relative to what you're seeing in terms of your own activity levels with your customers.

Emily Leproust (CEO and Co-founder)

Yeah. Thank you, Matt. I mean, it's a very broad question. As you know, we have a lot of SKUs in many different applications, many different geographies. In terms of academia, for sure, it's clear that there is some pressure in academia. However, in a world with funding pressure, I think we have a very strong value proposition. In NGS diagnostics, we don't have the same dynamic at all. I'll say that liquid biopsy, MRD, broadly genetic testing is doing really well. It is a completely different dynamic there. In terms of biopharma, I think there's a little bit of a continuation of dynamic from the past where there are the haves and the have-nots in terms of funding. For the customers that have tight funding, we really resonate really well. Even with the companies that have good funding, they are cautious about budget.

In this environment where our brand is high quality, high speed, and low cost, I think it resonates really well. Plus, we've launched a number of new products over the last few quarters to expand our aperture. For instance, Flex Prep is still early days, but it seems to be doing really well in AgBio. Our new library preps are doing great. Overall, yes, there is different and almost macro environment for each of the different markets we serve. I think that's where we're good at. We are not the one-size-fits-all, right? We are a customization of biology company, and we'll meet customers where they are in terms of their funding, what they need. Our products are just based in innovation of, again, speed, quality at a very, very competitive, if not leading cost.

I think that makes us, in any environment, we can win, but we adjust and adapt our tactics for each of the products and the markets we serve.

Operator (participant)

Thank you. Our next question coming from the line of Puneet Souda with Leerink Partners. He is now open.

Puneet Souda (Managing Director of Investment Banking)

Yeah. Hi, guys. Thanks for taking my questions. Just a couple here, if I could. First, I do not know if you provided the U.S. academic growth. I think you provided the worldwide growth. What are you assuming in the second half for the U.S. academic growth? On the order side, you had more than $100 million, you said, in the orders in the last two quarters. Can you elaborate a bit into what is the assumption there? What is growing within that NGS versus Synbio versus other segment? Was there any pull forward due to tariffs, meaning European customers assuming tariffs, retaliatory tariffs? Did you see any impact from that? Thank you.

Adam Laponis (CFO)

Yeah. Let me start on that with the U.S. academics. We did not disclose the U.S. academics, but we did see strong growth across the board in both NGS and SynBio. We expect the growth to continue in the second half. With orders more than $100 million in each of the first two quarters, we did see significant growth across all of our platforms, SynBio, NGS, and biopharma products and services. We expect that to continue. We did not see any meaningful pull forward from tariffs. We see the demand continuing to grow, and we are confident that we'll continue to see sequential share gains in the back half.

Operator (participant)

Thank you. Our next question coming from the line of Sung Ji Nam with Scotiabank. He is now open.

Sung Ji Nam (Managing Director and Senior Equity Research Analyst)

Hi. Thanks for taking the question. Maybe on the U.S. academic one as well, could you talk about how important is the academic market for the DNA makers market? In terms of based on all the policy discussions going on, have your assumptions in terms of the express gene growth opportunity, has that changed at all, especially targeting the U.S. academic market? Thank you.

Patrick Finn (President and COO)

Yeah. Thanks, Ji. Good question. Yeah. I think that the value proposition is really starting to resonate. We know there's about a $1.4 billion opportunity to convert the makers into buyers that's underpinned by economics and speed. From an academic standpoint, in a constrained budget environment, the Twist value proposition resonates very, very strongly. Again, either it's more shots on goal, but then secondly, in a situation where you maybe want to focus on higher value research, sending Twist more clonal work to do more cloning and delivering more product to the customer base is actually a very, very favorable offering. We continue to be very optimistic and bullish looking forward.

Operator (participant)

Thank you. Our next question coming from the line of Tom Peterson with Robert W. Baird & Co. He is now open.

Tom Peterson (Senior Research Associate)

Hey, everyone. Congrats on the quarter. Thanks for taking our questions. Adam, maybe just a follow-up on the adjusted EBITDA commentary. Appreciate some of the color on the OpEx spend for the DNA data storage business. I guess, what other assumptions underpin the fiscal 2026 adjusted EBITDA break-even target that you've put out? How should we be thinking about core OpEx growth over the medium term? Thanks.

Adam Laponis (CFO)

Thanks for the question, and happy to talk about it. We did announce that we expect to be adjusted EBITDA positive by the end of fiscal 2026. I think given the Atlas announcement, we can see a clear path to that. What we've said previously is that we see continued sequential improvements, not just in revenue and gross margin, but also in adjusted EBITDA moving forward, and that that trend will continue. In terms of an investment level, what we've talked about in the past is inflationary levels of investment in OpEx across the business. I think we'll see a general trend similar to that moving forward on the path to adjusted EBITDA positive.

Operator (participant)

Thank you. Our next question is coming from the line of Brandon Smith with TD Cowen. He is now open.

Brendan Smith (Director and Senior Analyst in Equity Research)

All right. Great. Thanks for taking the questions, guys. Congrats on all the progress. Kind of piggybacking on that last question, I guess with that adjusted EBITDA break-even now by the end of next year, I just want to ask maybe how do your expectations for profitability of each revenue segment with this new guidance kind of compare to your prior adjusted EBITDA issuance? I guess I'm really just wondering if you can give any additional color on where you see the profitability bar for each segment, just given all the new product launches and kind of internal initiatives you've implemented since that prior issuance.

Adam Laponis (CFO)

Brandon, thank you for the question. We do look at the business in aggregate as a single segment. What I've talked about a lot in the past, and I think it'll continue on average in the future moving forward, is as the gross margin continues to expand above 50%, we won't be happy and we'll want to continue marching. We see about 75%-80% of incremental revenue dropping to the gross margin line on all of our product lines across the business. We'll continue to adapt and adjust the investment levels in the OpEx line to meet the growth that we want to attain across different products. We're pretty pleased with all three, seeing the growth and the contribution to the growth and gross margin as well. I expect that trend to continue beyond just 2025.

Operator (participant)

Thank you. I am showing no further questions in the queue at this time. I will now turn the call back over to Dr. Emily Leproust for any closing.

Emily Leproust (CEO and Co-founder)

Thank you for your questions and for joining us today. At Twist, we remain committed to transparency, disciplined growth, and long-term value creation. We recognize that the world around us is shifting, but our focus is steady. We're executing with purpose, investing in innovation, and continuing to build a business designed not just to endure complexity, but to lead through it. We appreciate your continued confidence in our team and our mission, and we look forward to updating you on our progress in the next quarters ahead. Thank you.

Operator (participant)

Thank you. This concludes today's conference call. Thank you for your participation, and you may now disconnect.