Twist Bioscience Earnings Call Highlights AI-Driven Growth

Twist Bioscience ((TWST)) has held its Q1 earnings call. Read on for the main highlights of the call.

Twist Bioscience Earnings Call Signals Confidence Despite Ongoing Losses

Twist Bioscience’s latest earnings call carried a decidedly constructive tone, as management highlighted another quarter of double‑digit revenue growth, expanding gross margins, and surging demand from AI‑enabled discovery customers. While the company is still loss‑making on an adjusted EBITDA basis and continues to spend aggressively to capture growth, executives repeatedly stressed strong operational momentum, clear operating leverage, and a visible path to breakeven in fiscal 2026.

Consistent Revenue Growth and Multi-Year Momentum

Twist reported Q1 revenue of $103.7 million, up 17% year over year and about 5% sequentially, marking its twelfth consecutive quarter of revenue growth. Management underscored a three‑year revenue compound annual growth rate of 24%, framing the business as one that has moved beyond early‑stage volatility into a more durable growth phase. For investors, the message was that demand is broad‑based across product lines and geographies, supporting confidence in the company’s multi‑year growth trajectory.

Gross Margin Expansion Signals Operational Discipline

Gross margin reached 52% in Q1, an improvement of roughly four percentage points versus the prior fiscal year, helped by higher volumes and process efficiencies. Management reiterated full‑year guidance for gross margin above 52%, indicating that scaling the platform is translating into better unit economics. Although they cautioned that new product launches can temporarily temper margin gains, the underlying trend points toward a structurally more profitable business model as volumes rise.

DNA Synthesis and Protein Solutions Powered by AI Demand

The standout segment was DNA synthesis and protein solutions, which generated $51.1 million in revenue, up 27% year over year. The surge was driven largely by AI‑enabled discovery customers, who are using Twist’s high‑throughput DNA and protein capabilities to train and refine models. Management framed this as an early but accelerating wave, positioning the company as a picks‑and‑shovels provider to the AI revolution in biotech and drug discovery.

NGS Revenue Resilience, with Underlying Growth Masked by Customer Mix

Next‑generation sequencing (NGS) applications brought in $52.6 million in revenue. While headline growth is dampened by a single large customer’s past volatility, NGS revenue excluding that customer grew 18% year over year. The top 10 NGS customers accounted for about 36% of NGS revenue, signaling both the importance of large accounts and the concentration risk they pose. Management pitched the quarter as evidence that underlying NGS demand is solid, even if individual customer behavior can distort period‑to‑period results.

AI-Enabled Discovery Drives Gene Volumes and Data Services

Management highlighted growing traction in AI‑enabled discovery as a key strategic driver. Twist booked more than $25 million in AI‑related orders in fiscal 2025 and continues to see reorders into Q1. The company shipped roughly 271,000 genes in the quarter, up more than 30% year over year, and produced over 50,000 genes specifically for data characterization. This not only boosts DNA and protein throughput but also expands higher‑value data services, reinforcing Twist’s role at the intersection of wet‑lab biology and computational AI.

Addressable Market Expansion and Share Gains

Twist estimates that its serviceable market has expanded from roughly $2 billion in 2020 to around $7 billion today, with a target of more than $12 billion by 2030. The company called out energy applications as a particularly attractive vertical, where it sees a serviceable addressable market above $3 billion and believes it currently holds about 10% share. Management framed these figures as evidence that the growth runway remains long, with potential for continued share gains across multiple application areas.

Operational Leverage and Margin Conversion Emerging

A key theme of the call was operating leverage. Management reiterated a long‑term model in which about 75%–80% of incremental revenue falls through to gross margin. In Q1, approximately 74% of incremental revenue did so, reinforcing the thesis that the fixed‑cost platform can support much higher volumes without proportional cost increases. For investors, this conversion rate is a critical proof point that revenue growth can ultimately translate into meaningful earnings power once operating expenses moderate.

Raised Guidance and Clear Path to Profitability

Twist raised its fiscal 2026 revenue outlook to a range of $435 million to $440 million, implying roughly 16% growth at the midpoint, and reaffirmed its target of reaching adjusted EBITDA breakeven in 2026. Management also guided Q2 revenue to $107–$108 million, about 16% year‑over‑year growth at the midpoint. These targets are anchored in Q1’s performance – mid‑teens revenue growth, 52% gross margin, double‑digit growth across DNA synthesis, protein solutions, and core NGS – and are underpinned by rising AI‑linked orders and robust gene volumes. The message: the company believes it can keep growing at a healthy clip while steadily closing the gap to profitability.

Improving Adjusted EBITDA and Liquidity Cushion

Adjusted EBITDA remained negative at approximately $13.4 million in Q1, but this represented an improvement of about $2.8 million versus the prior year. Twist ended the quarter with $197.9 million in cash, cash equivalents, and short‑term investments, which management presented as a solid liquidity cushion. While the business is not yet self‑funding, the improved adjusted EBITDA trajectory and current cash levels provide some runway to execute on growth plans without immediate financing pressure.

Geographic Expansion and Partner Channel Strength

Geographically, EMEA stood out with revenue of $38.4 million, up 36% year over year, while the Americas generated $58.4 million, up 9%, and APAC contributed about $7.0 million. Global supply partner revenue climbed to $12.8 million, a 50% year‑over‑year increase, supported by a new NGS partner, growing diagnostics OEM relationships, and expanding APAC distribution. Management framed these trends as evidence that Twist’s platform is gaining traction globally and that partner channels are becoming an increasingly important growth lever.

Persisting Adjusted EBITDA Loss and Cash Burn

Despite progress, the company remains in investment mode, with Q1 adjusted EBITDA still a loss of about $13.4 million and net cash used in operating activities totaling $24.8 million. With an additional $10 million of capital expenditures in the quarter, Twist continues to burn cash as it scales. Management acknowledged this dynamic but argued that current spending is deliberate and aligned with long‑term value creation, with a clear goal of reaching breakeven in 2026.

Higher Operating Expenses from Front-Loaded Growth Investments

Operating expenses, including cost of revenues and operating spend, rose to $86.9 million from $77.5 million a year earlier. The increase was driven largely by commercial hiring and investments in digital infrastructure. Management disclosed that they have effectively front‑loaded about $10 million in operating expense per quarter to support growth, particularly around AI‑related opportunities and new product offerings. Investors are being asked to tolerate higher near‑term spending in exchange for the prospect of stronger, more defensible revenue streams down the road.

Customer Concentration and Volatility Risk in NGS

The company revisited a prior “air pocket” tied to a single large NGS customer, which has since resumed ordering. However, with the top 10 NGS customers representing roughly 36% of NGS revenue, Twist remains exposed to swings in purchasing patterns at a small number of accounts. Management positioned diversification efforts and new partner wins as partial offsets, but acknowledged that quarterly results can still be choppy when large customers change their ordering cadence.

Diagnostics Flat on the Surface, Mixed Underneath

Diagnostics revenue came in at $35.3 million, essentially flat versus $35.5 million a year ago. Beneath that headline, management noted softness in large‑scale academic projects, with academic and government revenue of about $12.2 million, roughly unchanged year over year. However, diagnostics revenue excluding the large customer that previously weighed on trends was up 12%, highlighting both underlying demand and the extent of dependence on a few key partners to drive visible growth.

Short-Term Margin Pressure from New Product Launches

Twist cautioned that new product launches and characterization work often rely on more manual processes at the outset, which can weigh on margins until automation and process optimization kick in. While this means near‑term gross margin expansion may be uneven, management framed these efforts as essential for building out future revenue streams. Over time, as newer offerings scale and move onto more automated workflows, the company expects to recapture and extend margin gains.

Ongoing Cash Usage to Support Scaling

The company’s strong cash balance of $197.9 million is offset by ongoing cash usage: roughly $24.8 million in operating cash outflow and $10 million in capital expenditures in Q1, combined with elevated operating expenses. Management emphasized that these investments are purposeful, aimed at scaling capacity, improving infrastructure, and capturing fast‑growing opportunities in AI‑enabled discovery and other high‑value markets. The implicit trade‑off for investors is continued near‑term cash burn in exchange for higher long‑term earnings potential and market share.

Guidance and Forward-Looking Outlook

Looking ahead, Twist guided fiscal 2026 revenue to $435–$440 million, representing around 16% growth at the midpoint, and reiterated its goal of achieving adjusted EBITDA breakeven in that year. For the near term, Q2 revenue is expected in the $107–$108 million range, also implying about 16% year‑over‑year growth. Management plans to maintain full‑year gross margin above 52% and expects that roughly 75%–80% of incremental revenue will continue to flow through to gross margin, as seen with 74% in Q1. While the company is accelerating operating expenses by about $10 million per quarter to fuel growth, it contends that this does not jeopardize the 2026 breakeven target, pointing to improving adjusted EBITDA and a solid cash position as support for its outlook.

Twist Bioscience’s earnings call painted a picture of a company leaning into growth while steadily tightening its operations. Revenue is expanding across core segments, margins are trending higher, and AI‑driven demand is emerging as a powerful long‑term catalyst, even as adjusted EBITDA remains in the red and cash burn persists. For investors, the story is one of balancing near‑term spending and customer concentration risks against clear signs of operating leverage and a management team confident in its path to profitability by 2026.