Twist Bioscience (TWST) Q2 2025: Atlas Spinout Unlocks $155M for DNA Storage, Accelerates Path to Profitability

May 5, 2025 | By EarningsIQ Research

Twist Bioscience’s strategic spinout of its DNA data storage arm into Atlas Data Storage, backed by $155 million in new capital, marks a decisive shift toward core market focus and faster profitability. Margin expansion and sequential revenue growth underline operational leverage, while targeted promotions and automation are driving share gains in academic and diagnostic segments. Management’s narrative signals confidence in outpacing macro headwinds through innovation and disciplined execution, with the Atlas transaction materially tightening the timeline to adjusted EBITDA breakeven.

Summary

  • Atlas Spinout Reshapes Capital Allocation: DNA data storage carve-out frees resources and accelerates core business focus.
  • Margin Expansion Anchored by Automation: Operational gains drive gross margin above 49%, with further improvements forecasted.
  • Academic and Diagnostic Momentum: Customer-centric tactics and new product launches fuel share gains despite funding headwinds.

Performance Analysis

Twist Bioscience delivered record quarterly revenue and robust year-over-year growth across all major product lines, demonstrating resilience and execution in a complex macro environment. Symbio, synthetic biology products, posted strong momentum, with targeted promotions for academic customers and the launch of Twist Wallet, a prepayment system, helping drive adoption and reduce purchasing friction. NGS, next-generation sequencing, continued its upward trajectory, with commercial assay demand and new software partnerships expanding reach in ag-bio, a market where Twist currently holds minimal share but sees substantial potential.

Operational leverage was evident in gross margin improvement, which outpaced both internal guidance and prior-year levels, driven by higher volumes and process automation. Automation investments increased NGS capacity by 200% and reduced turnaround time by 20%, supporting future demand ramp, particularly as customers advance MRD (minimal residual disease) assays into clinical stages. Cash burn narrowed and adjusted EBITDA loss improved meaningfully, setting up a credible path to profitability as the Atlas spinout removes a major drag from the P&L.

  • Academic Promotions Drive Share Gains: Express gene promotions and wallet programs proved effective in expanding the academic customer base and boosting reorder rates.
  • Geographic Diversification Mitigates Macro Risk: EMEA delivered the highest growth rate, while APAC remained stable and China exposure stayed minimal.
  • Biopharma Orders Building: The biopharma services funnel continues to expand, with active programs and new starts supporting future growth.

Sequential order momentum exceeded $100 million for the second consecutive quarter, supporting management’s confidence in continued share gains and visibility into the second half.

Executive Commentary

"We have spun out DNA Data Storage as an independent 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 milestones payments, ensuring we continue to participate in future upside opportunities."

Dr. Emily LaProuste, CEO and Co-founder

"Gross margin came in higher than expected at 49.6%, primarily due to increased revenue, volume leverage, and faster-than-anticipated gains in continuous process improvements within operations... Starting in Q4 of fiscal 2025, we expect a $5 million per quarter improvement to adjusted EBITDA and cash burn. We expect to reach adjusted EBITDA breakeven on an accelerated timeline by the end of fiscal 2026."

Adam Laponis, CFO

Strategic Positioning

1. Spinout of DNA Data Storage (Atlas)

The carve-out of DNA data storage into Atlas Data Storage fundamentally alters Twist’s capital allocation and focus. By retaining a 24% equity stake, future royalties, and milestone payments, Twist maintains exposure to upside without the drag of annual losses and cash requirements. This move also enables Atlas to attract specialized capital, management, and customers, accelerating commercialization in a capital-intensive, adjacent market.

2. Core Business Focus and Operating Discipline

Management’s renewed focus on SynBio, NGS, and biopharma services is paired with real-time operational agility and cost optimization. Automation and internal enzyme development are reducing input costs and supplier dependency, directly supporting margin expansion. The company’s ability to convert incremental revenue into gross profit (75% to 80%) demonstrates strong operating leverage and validates the model’s scalability.

3. Customer-Centric Commercial Initiatives

Innovative commercial programs—like the Twist Wallet and express gene promotions—are tailored to meet academic customers’ funding constraints and drive conversion from “makers” to “buyers.” These efforts are not only driving immediate volume but also setting the stage for long-term share gains in a $1.4 billion academic market.

4. Platform Expansion and Market Diversification

NGS workflow partnerships and new product launches (such as FlexPrep for ag-bio) are opening new addressable markets. The company is leveraging its platform to co-create solutions with customers, deepening relationships and embedding itself in high-growth diagnostic and biopharma segments.

5. Margin and Profitability Trajectory

Gross margin expansion above 49% reflects both volume leverage and disciplined cost control. The removal of the DNA data storage drag accelerates the path to adjusted EBITDA breakeven, now targeted by the end of fiscal 2026. Management is signaling a willingness to reinvest some savings into R&D, but the majority of the Atlas-related improvement will drop to the bottom line.

Key Considerations

This quarter’s results reflect a decisive pivot toward core business execution and operational efficiency, with management leveraging both strategic transactions and tactical commercial programs to drive growth and margin expansion.

Key Considerations:

  • Atlas Spinout Unlocks Capital: The carve-out removes a $25 million annual drag, freeing up management and financial resources for core growth areas.
  • Customer Promotions Prove Effective: Targeted express gene promotions in academia are driving adoption, with positive margin contribution due to volume leverage.
  • Automation and Internal R&D Fuel Margin Gains: Investments in production automation and proprietary enzyme development are lowering costs and improving quality.
  • Order Momentum Supports Guidance: Consecutive quarters with $100 million-plus in orders provide visibility and confidence in second-half execution.
  • Geographic and End-Market Diversification: Strong EMEA growth and minimal China exposure reduce macro risk and tariff sensitivity.

Risks

Twist faces ongoing risks from academic and NIH funding volatility, which could dampen growth in its still-underpenetrated academic segment. Competitive intensity and potential price pressure remain as rivals seek to capitalize on tariff-driven market shifts. While automation and process improvements are driving margin gains, the sustainability of promotional strategies and the pace of NGS workflow adoption will be key areas to monitor. Execution risk remains as the company ramps new products and enters new markets, with any operational missteps potentially impacting the path to profitability.

Forward Outlook

For Q3 2025, Twist guided to:

  • Total revenue of $94 to $97 million, up ~17% YoY at midpoint
  • SynBio revenue of $37 to $39 million, NGS revenue of $51 to $52 million, Biopharma revenue of ~$6 million

For full-year 2025, management maintained guidance:

  • Total revenue of $372 to $379 million (20% growth at midpoint)
  • Gross margin of approximately 49.5%, with sequential quarterly improvement and >50% targeted in H2
  • Adjusted EBITDA loss of $48 to $53 million, with $5 million per quarter improvement from Atlas spinout starting Q4

Management highlighted:

  • Order book strength and continued share gains in SynBio and NGS
  • Minimal tariff impact and opportunity to capitalize on competitor supply chain disruptions

Takeaways

Twist’s strategic pivot and operational execution are accelerating its path to profitability, with the Atlas spinout removing a major financial drag and freeing up resources for core growth. Margin expansion and customer-centric commercial tactics are driving share gains in key end-markets, while automation and internal R&D are supporting sustainable cost improvements.

  • Atlas Spinout Accelerates Profitability: The DNA data storage carve-out is a structural shift, materially improving adjusted EBITDA and sharpening core business focus.
  • Margin Expansion Validates Model: Automation, internal enzyme development, and volume leverage are driving gross margin above 49%, with further upside signaled.
  • Academic and Diagnostic Share Gains Will Be Critical: Sustained growth in underpenetrated academic and diagnostic segments will be key to achieving long-term guidance and valuation upside.

Conclusion

Twist Bioscience’s Q2 2025 marks a strategic inflection, with the Atlas spinout unlocking capital and focus, and operational discipline driving margin and order momentum. Execution on automation, customer programs, and platform expansion positions the company to capitalize on market volatility and accelerate its path to profitability, though continued vigilance on funding dynamics and competitive intensity is warranted.

Industry Read-Through

The Atlas spinout signals a growing trend of genomic tools companies separating capital-intensive adjacent bets to sharpen core business execution. Twist’s automation-led margin improvement and targeted customer programs offer a playbook for peers facing funding headwinds and academic budget constraints. Tariff dynamics and supply chain localization are shifting share toward nimble, US-based players, while the acceleration of NGS adoption in diagnostics and ag-bio highlights the expanding addressable market for synthetic biology and sequencing providers. Investors should watch for further consolidation, platform partnerships, and vertical integration as the sector adapts to a more complex policy and funding landscape.

TWST Health Care Biotechnology Synthetic Biology NGS Automation Academic Spinout