Twist Bioscience was founded by Agilent executives who were frustrated with the slow-moving, ambition-lacking pace of development. It hitched its wagon to the emerging field of synthetic biology, where its pitch for more accurate and lower-cost DNA resonated. But it quickly realized synthetic biology was not going to support a sustainable business, so it began developing new applications.

Next-generation sequencing (NGS) was an obvious target. DNA sequencing, or reading the genetic code, is only as good as the reference template and the ability to accurately detect genetic sequences in a sample. The company's high-quality DNA could be used as target enrichment probes to help scientists or clinicians physically compare samples to known sequences, such as a mutation in a tumor or a new gene engineered into a plant or microbe.

It was a perfect solution to a commercial problem. It didn't take long for NGS applications to power the business.

The DNA synthesis pioneer attempted to develop additional, unrelated applications to further diversify the growth engine. Some didn't work, some were deprioritized when the bill came due, and others simply needed more time to mature. Although nothing has yet emerged as an obvious third pillar for the business, the willingness to take intelligent risks (not all-or-nothing bets) is the hallmark of many great businesses. Stagnation or aggressive strategies often lead to poor returns for investors.

There aren't any signs Twist Bioscience is done searching for new opportunities, but brand new applications aren't the only way to diversify. The business has found traction diversifying within existing verticals. For example, the company's NGS solutions can help with DNA sequencing for diagnostics, but also for drug discovery and drug development applications. Synthetic DNA can be used by customers pursuing academic research, or industrial biotech companies engineering microbes, or environmental biotech companies scanning the globe for novel genes for metagenomics projects.

Beginning in fiscal 2026, the business will report revenue using new product groups and industry groups. This doesn't fundamentally change anything for the business itself, but it sure makes it easier to communicate progress to investors. These small changes could help the stock trade closer to fair value with less volatility, although the business does seem a little overvalued right now.

By the Numbers

The business began fiscal 2026 on relatively solid footing. On the one hand, growth is unevenly distributed across customer groups. On the other hand, diversification efforts are paying off. Customer groups that previously powered growth are experiencing weakness, but that's being more than offset by surging demand in other areas.

Total revenue grew 17% in fiscal Q1 compared to the year-ago period. It marks the third-consecutive quarter of growth in the high teens following a stretch of six consecutive quarters in which growth exceeded 23%. Considering many picks-and-shovels businesses in living technology are struggling to grow at all as customers delay purchasing decisions and shrink budgets, double-digit growth is relatively impressive.

Twist Bioscience achieved gross margin of 52.0% during the quarter. Although that's not a record, the company expects gross margin to exceed that level on a full-year basis. That would be a record.

Improving margins are being eaten by higher operating expenses. R&D expenses declined 20% in the year-over-year period, while selling, general, and administrative (SGA) expenses surged 24%. That resulted in minimal improvements to operating loss and a higher operating cash outflow.

The company typically records its highest operating cash outflows in the first quarter of every year. Still, flooding investments into sales and marketing expenses can backfire if the biotech winter persists or gets worse (like during a recession).

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The biggest source of growth flipped from NGS applications to DNA synthesis and protein solutions in the last six months. More specifically, and as the new reporting categories make clear, drug developers are now the largest source of revenue.

The Therapeutics segment was responsible for $10.4 million of the $15.0 million (70%) of revenue growth during the comparison period. That helped to offset continued weakness from Diagnostics customers that drove growth in recent years.

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It doesn't stand out in financial statements, but Twist Bioscience has diversified customer groups by steadily introducing new or improved product offerings. Recent reductions in R&D expenses could slow those efforts, or make them more focused. It's too soon to say for certain, but investors can gauge the trend by keeping an eye on the genes shipped per customer.

The business shipped 56.0 genes per customer in fiscal Q1 2021, which grew 90% to 106.8 genes per customer in fiscal Q1 2026. That outpaces customer growth of 70% in that span, providing real-world evidence of the stickiness of the platform.

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Fiscal Full-Year 2026 Guidance

Twist Bioscience expects:

• Revenue of $435 million to $440 million, representing year-over-year growth of 16% at the midpoint of $437.5 million.
• Gross margin of at least 52.0%, compared to 50.7% in 2025 and 42.6% in 2024.

Management has historically underpromised and overdelivered. That might be more difficult given the current headwinds sweeping the landscape, but investors shouldn't be surprised to see higher revenue and gross margin than guidance expects.

News Flow & Modeling Insights

(Rebuilt, reduced.)

The current model for Twist Bioscience applies a lower premium to the business. Investors cannot complain about diversification efforts bearing fruit, but that doesn't automatically mean it's a good investment regardless of valuation or price.

The DNA synthesis pioneer has delivered unusually linear growth since 2018, while improving gross margin is allowing more revenue to trickle down the income statement. These are favorable trends.

However, the business isn't close to achieving cash flow positive operations or profitability. Although operating margin has improved due to revenue growth and layoffs, it's still negative and there are no quick options for closing the gap to breakeven. That's especially true if management has to sink more money into sales and marketing expenses to maintain respectable revenue growth.

To be fair, operating loss includes non-cash charges. But operating cash flow isn't showing meaningful signs of improvement either.

Twist Bioscience could prove me wrong during fiscal 2026. Operating cash flow is usually the worst in the first quarter of each fiscal year. If the business meets or exceeds revenue and gross margin guidance – and keeps operating expense growth in check – then investors could see the first meaningful improvement in both operating income and cash flow.

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Given the headwinds in the overall landscape and the surprising slowdown in Diagnostics segment revenue – while diagnostics markets are surging from new opportunities in molecular residual disease (MRD) and multi-cancer early detection (MCED) tools – I'm a little nervous that Twist Bioscience might not continue to outperform its picks-and-shovels peers.

Investors are squeezing long-held premiums out of many growth stocks in early 2026. And considering the S&P 500 has delivered returns of at least 16% in six of the last seven years – a stretch last achieved during the Dot Com Bubble – a larger market correction wouldn't be unexpected.

The current model expects:

• Full-year 2026 revenue of $447.198 million, compared to guidance of $437.5 million at the midpoint.
• Gross margin of 52.4%, compared to guidance of more than 52.0%.
• Share dilution of 5%, compared to the recent average of 3%. The model assumes a non-zero chance of a public stock offering, which would result in more than 5% dilution.

Margin of Safety & Conviction

Twist Bioscience is considered a Current Compounder position with the following Conviction rating.

• 1 = High
• 2 = Above Average
• 3 = Average
• 4 = Below Average

The estimated fair valuation based on my current model is below:

• Market close February 11: $49.64 per share
• Modeled Fair Valuation: $29.45 per share
• Allocation Range: Up to 5%

Twist Bioscience reported 61.312 million shares outstanding as of January 27, 2026. The modeled fair valuation above assumes 64.377 million shares outstanding by the end of the fiscal year, which is equivalent to 5% dilution.

Further Reading

• February 2026 press release announcing fQ1 2026 operating results
• February 2026 regulatory filing (10-Q) detailing fQ1 2026 operating results
• February 2026 quarterly earnings preview for the Solt DB coverage ecosystem

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