Twist Bioscience Shares Advance Amid Improved Financial Outlook and Valuation Debate

Market Performance Overview

Twist Bioscience (TWST), a prominent player in synthetic biology and genomics tools, has seen its stock price advance by 27.1% over the past month. This upward movement has re-energized interest among biotech investors, prompting a closer examination of the company's financial health and future prospects. The recent surge contrasts with broader market trends in some segments of the biotech sector, highlighting specific positive catalysts for TWST.

Third Quarter Fiscal 2025 Financial Results Detail

For the third quarter of fiscal 2025, ended June 30, 2025, Twist Bioscience reported robust financial performance that exceeded expectations. The company recorded record revenue of $96.1 million, marking an 18% increase year-over-year and its tenth consecutive quarter of sequential growth. A key highlight was the substantial improvement in gross margin, which rose to 53.4% in Q3 FY25, compared to 43.3% in the same period last year. This 10.1 percentage point expansion underscores enhanced operational efficiency.

Revenue growth was observed across all segments: Synthetic Biology (SynBio) revenue increased 7% to $35.2 million, Next-Generation Sequencing (NGS) revenue climbed 27% to $55.3 million, and Biopharma revenue grew 10% to $5.6 million. The company also significantly narrowed its adjusted EBITDA loss to $(8.0) million in Q3 FY25, a substantial improvement from a $(22.0) million loss in the prior year period. This positive momentum led management to narrow its full-year fiscal 2025 revenue guidance to between $374 million and $376 million, implying approximately 19.7% growth at the midpoint year-over-year.

Analysis of Market Reaction and Strategic Shifts

The market's positive reaction to TWST's recent performance can be attributed to several critical factors, primarily the significant improvement in profitability metrics and strategic diversification efforts. The notable gross margin expansion was driven by increased revenue, volume leverage, and favorable order timing and mix benefits. CEO Emily Marine Leproust highlighted the company's focus on customer experience, product portfolio expansion, and deeper market penetration, stating:

"In the third quarter of fiscal 2025, we delivered another quarter of record revenue by focusing on delivering an exceptional customer experience, expanding our product portfolio, and deepening our reach into the long tail of the academic market across both synthetic biology and NGS."

CFO Adam Laponis further elaborated on the margin gains, noting, "Gross margin came in higher than expected at 53.4%, primarily due to increased revenue, volume leverage as well as some order timing and mix benefit." This operational effectiveness is partly a result of investments in facilities like the 'Factory of the Future' in Wilsonville, Oregon, an automated DNA manufacturing plant designed for industrial scale and cost efficiency.

Crucially, Twist Bioscience has successfully diversified its customer base, now serving over 3,500 clients with no single customer representing more than 10% of its revenue. This strategic pivot significantly reduces customer concentration risk, a previous concern when large entities like Ginkgo Bioworks constituted a substantial portion of its revenue. The company's expanded product offerings, including Express Genes and a growing Biopharma segment with 111 active programs, are bolstering this resilient revenue base.

Broader Context and Implications

Twist Bioscience's ability to surpass revenue projections and improve margins distinguishes it within a biotech landscape where many peers from the 2020–2021 genomics boom have underperformed. The company has transitioned into a more disciplined, margin-driven enterprise. However, the path to sustained profitability is not without challenges. The company's data business has historically been a drag, negatively impacting adjusted EBITDA by approximately $5 million per quarter, indicating persistent operational inefficiencies within that segment.

Despite these headwinds, analyst sentiment remains largely positive. A consensus rating of "Buy" from 10 analysts includes 30% "Strong Buy" and 50% "Buy" recommendations. Wall Street analysts have set a price target of $48.50, suggesting further upside potential from the current share price. While an internal fair value estimate of $40 implies a 20.3% undervaluation relative to a current price of $31.89 (as of the assessment), the analyst target offers a more aggressive outlook.

Looking Ahead

Twist Bioscience management has articulated clear financial targets for the coming periods. The company aims to achieve adjusted EBITDA breakeven by the end of fiscal 2026. This goal, coupled with a renewed focus on top-line acceleration and commercial execution, indicates a shift from primarily margin-driven improvements to broader growth initiatives. For the fourth quarter of fiscal 2025, Twist anticipates total revenues in the range of $96.0 million to $98.0 million.

Investors will be closely monitoring the company's ability to consistently address profitability concerns, particularly within its data business, and to maintain its revenue diversification strategy. While the current momentum and improved financial guidance provide a cautiously bullish outlook, the broader biotech funding environment and the capital-intensive nature of product development remain key factors that could influence TWST's future performance and volatility.