PACIFIC BIOSCIENCES OF CALIFORNIA, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS PACIFIC BIOSCIENCES OF CALIFORNIA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except par value) June 30, 2026 December 31, 2025 Assets Current assets Cash and cash equivalents $ 61,003 $ 63,707 Investments 175,870 215,799 Accounts receivable, net 31,104 35,448 Inventory, net 61,084 49,285 Prepaid expenses and other current assets 9,545 10,793 Short-term restricted cash 33 20 Total current assets 338,639 375,052 Property and equipment, net 26,972 24,146 Operating lease right-of-use assets, net 40,331 41,695 Long-term restricted cash 1,571 1,532 Intangible assets, net 13,084 15,124 Goodwill 317,761 317,761 Other long-term assets 13,492 8,773 Total assets $ 751,850 $ 784,083 Liabilities and Stockholders’ (Deficit) Equity Current liabilities Accounts payable $ 19,224 $ 20,770 Accrued expenses 30,322 33,646 Deferred revenue, current 16,103 15,936 Operating lease liabilities, current 1,371 448 Other liabilities, current 1,786 2,031 Total current liabilities 68,806 72,831 Deferred revenue, non-current 3,339 3,929 Operating lease liabilities, non-current 60,424 56,592 Convertible senior notes, net, non-current 644,332 645,382 Other liabilities, non-current 8,162 — Total liabilities 785,063 778,734 Commitments and contingencies Stockholders’ (deficit) equity Preferred stock, $ 0.001 par value: Authorized 50,000 shares; No shares issued or outstanding — — Common stock, $ 0.001 par value: Authorized 1,000,000 shares; issued and outstanding 310,810 and 301,956 shares at June 30, 2026 and December 31, 2025, respectively 311 302 Additional paid-in capital 2,715,297 2,699,892 Accumulated other comprehensive (loss) income ( 503 ) 457 Accumulated deficit ( 2,748,318 ) ( 2,695,302 ) Total stockholders’ (deficit) equity ( 33,213 ) 5,349 Total liabilities and stockholders’ (deficit) equity $ 751,850 $ 784,083 See accompanying notes to the condensed consolidated financial statements. Q2 Fiscal 2026 Form 10-Q 3 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (In thousands, except per share amounts) 2026 2025 2026 2025 Revenue: Product revenue $ 32,950 $ 33,083 $ 64,484 $ 64,196 Service and other revenue 6,057 6,683 11,701 12,723 Total revenue 39,007 39,766 76,185 76,919 Cost of Revenue: Cost of product revenue 20,944 20,022 40,916 46,355 Cost of service and other revenue 5,242 4,853 9,424 8,631 Amortization of acquired intangible assets 183 183 366 4,528 Loss on purchase commitment — 24 — 4,092 Total cost of revenue 26,369 25,082 50,706 63,606 Gross profit 12,638 14,684 25,479 13,313 Operating Expense: Research and development 23,022 22,529 42,630 51,582 Sales, general and administrative 33,393 36,175 64,546 76,343 Impairment charges — — — 15,000 Settlement charges — — 15,400 — Gain on disposal of assets — — ( 45,796 ) — Amortization of acquired intangible assets 833 833 1,666 362,875 Change in fair value of contingent consideration — — — ( 18,700 ) Total operating expense 57,248 59,537 78,446 487,100 Operating loss ( 44,610 ) ( 44,853 ) ( 52,967 ) ( 473,787 ) Interest expense ( 2,110 ) ( 1,738 ) ( 3,850 ) ( 3,475 ) Other income, net 2,037 4,696 4,043 8,990 Loss before income taxes ( 44,683 ) ( 41,895 ) ( 52,774 ) ( 468,272 ) Income tax provision (benefit) 58 35 242 ( 267 ) Net loss ( 44,741 ) ( 41,930 ) ( 53,016 ) ( 468,005 ) Other comprehensive loss: Unrealized loss on investments ( 356 ) ( 114 ) ( 960 ) ( 155 ) Comprehensive loss $ ( 45,097 ) $ ( 42,044 ) $ ( 53,976 ) $ ( 468,160 ) Net loss per share: Basic $ ( 0.14 ) $ ( 0.14 ) $ ( 0.17 ) $ ( 1.57 ) Diluted $ ( 0.14 ) $ ( 0.14 ) $ ( 0.17 ) $ ( 1.57 ) Weighted average shares outstanding used in calculating net loss per share: Basic 310,655 300,162 308,250 298,519 Diluted 310,655 300,162 308,250 298,519 See accompanying notes to the condensed consolidated financial statements. Q2 Fiscal 2026 Form 10-Q 4 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Unaudited) Three Months Ended June 30, 2026 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' (Deficit) Equity (In thousands) Shares Amount Balance at March 31, 2026 310,487 $ 311 $ 2,705,779 $ ( 147 ) $ ( 2,703,577 ) $ 2,366 Net loss — — — — ( 44,741 ) ( 44,741 ) Other comprehensive loss — — — ( 356 ) — ( 356 ) Issuance of common stock in conjunction with equity plans 323 — 255 — — 255 Share-based compensation expense — — 9,263 — — 9,263 Balance at June 30, 2026 310,810 $ 311 $ 2,715,297 $ ( 503 ) $ ( 2,748,318 ) $ ( 33,213 ) Six Months Ended June 30, 2026 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' (Deficit) Equity (In thousands) Shares Amount Balance at December 31, 2025 301,956 $ 302 $ 2,699,892 $ 457 $ ( 2,695,302 ) $ 5,349 Net loss — — — — ( 53,016 ) ( 53,016 ) Other comprehensive loss — — — ( 960 ) — ( 960 ) Issuance of common stock in conjunction with equity plans 8,854 9 1,683 — — 1,692 Share-based compensation expense — — 13,722 — — 13,722 Balance at June 30, 2026 310,810 $ 311 $ 2,715,297 $ ( 503 ) $ ( 2,748,318 ) $ ( 33,213 ) Three Months Ended June 30, 2025 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders' Equity (In thousands) Shares Amount Balance at March 31, 2025 300,041 $ 300 $ 2,665,958 $ 381 $ ( 2,575,001 ) $ 91,638 Net loss — — — — ( 41,930 ) ( 41,930 ) Other comprehensive loss — — — ( 114 ) — ( 114 ) Issuance of common stock in conjunction with equity plans 309 — — — — — Share-based compensation expense — — 11,895 — — 11,895 Balance at June 30, 2025 300,350 $ 300 $ 2,677,853 $ 267 $ ( 2,616,931 ) $ 61,489 Six Months Ended June 30, 2025 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders' Equity (In thousands) Shares Amount Balance at December 31, 2024 294,418 $ 294 $ 2,654,804 $ 422 $ ( 2,148,926 ) $ 506,594 Net loss — — — — ( 468,005 ) ( 468,005 ) Other comprehensive loss — — — ( 155 ) — ( 155 ) Issuance of common stock in conjunction with equity plans 5,932 6 1,953 — — 1,959 Share-based compensation expense — — 21,096 — — 21,096 Balance at June 30, 2025 300,350 $ 300 $ 2,677,853 $ 267 $ ( 2,616,931 ) $ 61,489 See accompanying notes to the condensed consolidated financial statements. Q2 Fiscal 2026 Form 10-Q 5 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, (In thousands) 2026 2025 Cash flows from operating activities Net loss $ ( 53,016 ) $ ( 468,005 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 4,521 7,790 Amortization of intangible assets 2,040 367,409 Amortization of right-of-use assets 1,513 2,162 Amortization of patent license 516 — Share-based compensation expense 13,722 21,096 Impairment charges — 15,000 Gain on disposal of assets ( 48,100 ) — Accretion of discount on marketable securities, net ( 515 ) ( 2,982 ) Change in the estimated fair value of contingent consideration — ( 18,700 ) Inventory provision 1,417 8,542 Deferred income taxes — ( 546 ) Other 450 1,059 Changes in assets and liabilities Accounts receivable, net 4,344 ( 4,733 ) Inventory, net ( 14,467 ) ( 3,868 ) Prepaid expenses and other assets ( 429 ) 6,809 Accounts payable 1,156 ( 505 ) Accrued expenses ( 1,763 ) ( 2,407 ) Deferred revenue ( 423 ) 808 Operating lease liabilities 2,894 ( 1,730 ) Other liabilities 5,866 ( 632 ) Net cash used in operating activities ( 80,274 ) ( 73,433 ) Cash flows from investing activities Proceeds from disposal of assets 50,000 — Payment for waiver of milestone obligation ( 1,900 ) — Purchases of property and equipment ( 4,598 ) ( 1,939 ) Purchases of intangible assets ( 5,000 ) ( 5,000 ) Purchase of patent license ( 2,056 ) — Purchases of investments ( 57,547 ) ( 117,992 ) Maturities of investments 97,031 195,448 Net cash provided by investing activities 75,930 70,517 Cash flows from financing activities Proceeds from issuance of common stock from equity plans 1,692 1,959 Net cash provided by financing activities 1,692 1,959 Net decrease in cash, cash equivalents, and restricted cash ( 2,652 ) ( 957 ) Cash, cash equivalents, and restricted cash at beginning of period 65,259 57,592 Cash, cash equivalents, and restricted cash at end of period $ 62,607 $ 56,635 Cash and cash equivalents at end of period 61,003 54,803 Restricted cash at end of period 1,604 1,832 Cash, cash equivalents, and restricted cash at end of period $ 62,607 $ 56,635 Supplemental disclosure of non-cash investing and financing activities Right-of-use asset and lease liability recognized due to lease extension $ — $ 29,575 See accompanying notes to the condensed consolidated financial statements. Q2 Fiscal 2026 Form 10-Q 6 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Business Overview We are a life science technology company that designs, develops, and manufactures advanced sequencing solutions that enable scientists and clinical researchers to improve their understanding of the genome and ultimately, resolve genetically complex problems. Our products and technology, which primarily consist of our HiFi long-read sequencing systems, address a broad set of applications including human germline sequencing, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications. Our focus is on creating some of the world's most advanced sequencing systems to provide our customers with the most complete and accurate view of genomes, transcriptomes, and epigenomes. Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, contract research organizations, pharmaceutical companies, and agricultural companies. References in this report to “PacBio,” “we,” “us,” the “Company,” and “our” refer to Pacific Biosciences of California, Inc. and its consolidated subsidiaries. Basis of Presentation and Consolidation Our unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, or U.S. GAAP and applicable rules and regulations of the SEC regarding interim financial reporting and do not contain all information that is included in the annual financial statements and notes thereto of the Company. The unaudited condensed consolidated financial statements include the accounts of Pacific Biosciences and our wholly owned subsidiaries. Certain information and footnote disclosures typically included in our audited financial statements have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the December 31, 2025 audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state our financial position, results of operations, comprehensive loss, and cash flows for the period, but are not necessarily indicative of the results to be expected for the entire year or any future periods. All intercompany transactions and balances have been eliminated. The financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Annual Report"). Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes to the financial statements. On an ongoing basis, we evaluate our significant estimates, including those relating to the valuation of inventory, fair value of contingent consideration, valuation of acquired intangible assets, useful lives assigned to finite-lived assets, asset impairment assessments, computation of provisions for income taxes, and valuations related to our convertible senior notes. While the extent of the potential impact of current macroeconomic conditions on our business is highly uncertain, we considered information available related to assumptions and estimates used to determine the results reported and asset valuations as of June 30, 2026. Actual results could differ materially from these estimates. Q2 Fiscal 2026 Form 10-Q 7 Table of Contents Cash, Cash Equivalents, Restricted Cash, and Investments We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash equivalents may be comprised of money market funds, certificates of deposit, commercial paper, corporate bonds and notes, and government agencies’ securities. We classify our investments in debt securities as available-for-sale and report the investments at fair value in current assets. We evaluate our available-for-sale investments in unrealized loss positions and assess whether the unrealized loss is credit-related. Unrealized gains and losses that are not credit-related are recognized in accumulated other comprehensive income (loss) in stockholders’ (deficit) equity. Realized gains and losses, expected credit losses, as well as interest income, on available-for-sale securities are reported in other income, net. The cost used in the determination of gains and losses of securities sold is based on the specific identification method. The cost of marketable securities is adjusted for the amortization of premiums and discounts to expected maturity. Premium and discount amortization is recorded in other income, net. We have the ability to hold, and do not intend to sell investments in unrealized loss positions before the recovery of their amortized cost bases. Our investment portfolio at any point in time contains investments in cash deposits, money market funds, corporate debt securities and U.S. government and agency securities with high credit ratings. We have established guidelines regarding diversification and maturities of investments with the objectives of maintaining safety and liquidity, while maximizing yield. Restricted cash includes cash that is not readily available for use in the Company’s operating activities. Restricted cash is primarily comprised of cash pledged under letters of credit. Concentration and Other Risks Financial instruments that potentially subject us to credit risk consist principally of interest-bearing investments and trade receivables. We maintain cash, cash equivalents, and investments with various major financial institutions. The counterparties to the agreements relating to our investment securities consist of various major corporations, financial institutions, municipalities, and government agencies of high credit standing. As of June 30, 2026, most of our cash was deposited with U.S. financial institutions. Our investment policy generally restricts the amount of credit exposure to any one issuer. There is no limit to the percentage of the portfolio that may be maintained in securities issued by the U.S. Treasury and U.S. Government Agencies, or other securities fully backed by U.S. Treasury or Government agencies. We have not experienced significant credit losses from financial institutions. We perform credit evaluations of our customers and generally require no collateral. We have not experienced significant credit losses on our financial instruments or trade receivables to date, although our exposure to credit losses may increase if our customers are adversely affected by economic pressures or other customer-specific factors. For the three and six months ended June 30, 2026 and 2025, no customer accounted for 10% or more of our total revenue. As of June 30, 2026 and December 31, 2025, 42 % and 40 % of our accounts receivable were from domestic customers, respectively. As of June 30, 2026 and December 31, 2025, no customer represented 10% or more of our net accounts receivable. We currently purchase several key parts and components used in the manufacture of our products from a limited number of suppliers. Generally, we have been able to obtain an adequate supply of such parts and components but in certain instances have incurred additional costs to secure a supply of constrained material. An extended interruption in the supply of parts and components currently obtained from our suppliers could adversely affect our business and condensed consolidated financial statements. Recent Accounting Pronouncements Accounting Pronouncements Pending Adoption In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . This new Q2 Fiscal 2026 Form 10-Q 8 Table of Contents standard requires a company to provide disaggregated disclosures, within the notes to the financial statements, of specified categories of expenses that are included in line items on the face of the income statement. The standard will be effective for us beginning in 2027, and interim periods within 2028, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of ASU 2024-03 on the consolidated financial statements and related disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This new standard clarifies and modernizes the recognition and disclosure framework for capitalized internal-use software costs by removing all references to project stages and introduces a more judgment-based approach. The standard also clarifies the threshold to be applied to begin capitalizing. The standard will be effective for us beginning in the first quarter of 2028, with early adoption permitted, and can be applied using a prospective, retrospective, or modified transition approach. We are currently evaluating the impact of ASU 2025-06 on the consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU 2025-10, Accounting for Government Grants Received by Business Entities . This new standard provides guidance on the recognition, measurement, and presentation of government grants. The standard will be effective for us beginning in the first quarter of fiscal year 2029, with early adoption permitted, and can be applied using a modified prospective, modified retrospective or full retrospective transition approach. We are currently evaluating the impact of ASU 2025-10 on the consolidated financial statements. Significant Accounting Policies There have been no changes to our significant accounting policies as disclosed in our 2025 Annual Report. NOTE 2. FINANCIAL INSTRUMENTS Fair Value of Financial Instruments Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy established under U.S. GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows: • Level 1: quoted prices in active markets for identical assets or liabilities; • Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and • Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We consider an active market as one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Conversely, we view an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our non-performance risk, or that of our counterparty, is considered in determining the fair values of liabilities and assets, respectively. We classify our cash deposits and money market funds within Level 1 of the fair value hierarchy because they are valued using bank balances or quoted market prices. We classify our investments as Level 2 instruments based on market pricing and other observable inputs. We did not classify any of our investments within Level 3 of the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the entire Q2 Fiscal 2026 Form 10-Q 9 Table of Contents fair value measurement requires management to make judgments and consider factors specific to the asset or liability. The carrying amount of our accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other liabilities, current, approximate fair value due to their short maturities. Assets Measured at Fair Value on a Recurring Basis The following table sets forth the fair value of our financial assets that were measured on a recurring basis: June 30, 2026 December 31, 2025 (In thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents $ 61,003 $ — $ — $ 61,003 $ 60,496 $ 3,211 $ — $ 63,707 Investments: Corporate debt securities — 20,203 — 20,203 — 23,250 — 23,250 U.S. government & agency securities — 155,667 — 155,667 — 192,549 — 192,549 Total investments — 175,870 — 175,870 — 215,799 — 215,799 Short-term restricted cash 33 — — 33 20 — — 20 Long-term restricted cash 1,571 — — 1,571 1,532 — — 1,532 Total assets measured at fair value $ 62,607 $ 175,870 $ — $ 238,477 $ 62,048 $ 219,010 $ — $ 281,058 During the six months ended June 30, 2026, there were no transfers between Level 1, Level 2, or Level 3 assets reported at fair value on a recurring basis, and our valuation techniques did not change compared to the prior year. Contingent Consideration In connection with the August 2023 Apton Biosystems, Inc. (“Apton”) acquisition, contingent consideration of $ 25.0 million, which we could elect to pay in cash, shares of our common stock or a combination of cash and shares of our common stock, was due upon the achievement of a milestone, defined as the achievement of $ 50.0 million in revenue associated with Apton's technology, provided that the milestone event occurred prior to the five-year anniversary of the closing date of the acquisition. On January 30, 2026, we completed a disposition of certain assets (the "Asset Sale") to Illumina Cambridge Limited (the “Buyer”) pursuant to an Asset Purchase Agreement dated January 30, 2026. Under the agreement, Buyer acquired certain intellectual property and other assets related to our short-read DNA sequencing technology and related clustering, sequencing reagent, and detection technologies. In consideration, Buyer paid $ 50.0 million in cash, assumed certain liabilities, and granted us a non-exclusive license to certain intellectual property included in the purchased assets. During the three months ended March 31, 2026, in connection with the Asset Sale, Buyer paid, at our direction, 4 % of the net cash proceeds to the former equity holders of Apton in connection with the waiver of remaining milestone obligations from the Apton acquisition. As a result, we received approximately $ 48.1 million in net cash proceeds from the Asset Sale. In connection with the transaction, the Company incurred transaction costs of $ 2.3 million in the first quarter of 2026 that are offset against the gain on disposal of assets on our condensed consolidated statements of operations and comprehensive loss. The contingent consideration was accounted for as a liability at fair value, with changes during each reporting period recognized in our condensed consolidated statements of operations and comprehensive loss. The fair value of the contingent consideration liability was calculated using a Monte Carlo simulation to estimate the volatility and systematic relative risk of revenues subject to sales milestone payments and discounting the associated cash payment amounts to their present values using a credit-risk-adjusted interest rate. We classified contingent consideration within Level 3, as factors used to develop the estimate of fair value include unobservable inputs that are not supported by market activity and are significant to the fair value. Estimates and assumptions used in the Monte Carlo simulation include risk-adjusted forecasted revenues for products and services leveraging Apton's technology and an estimated credit spread. Q2 Fiscal 2026 Form 10-Q 10 Table of Contents As of March 31, 2025, primarily due to management's decision to cease development of the high-throughput short-read system, and the resulting changes in the expected future revenues, among other factors, and as the milestone event needed to occur prior to the five-year anniversary of the closing date of the acquisition, the estimated fair value of the contingent consideration liability was $ 0 , resulting in a change in fair value for the first quarter of 2025 of $ 18.7 million. Changes to the fair value are recorded as change in fair value of contingent consideration in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025. Cash, Cash Equivalents, Restricted Cash, and Investments The following tables summarize our cash, cash equivalents, restricted cash, and investments: As of June 30, 2026 (In thousands) Amortized Cost Gross unrealized gains Gross unrealized losses Fair Value Cash and cash equivalents $ 61,003 $ — $ — $ 61,003 Investments: Corporate debt securities 20,242 15 ( 54 ) 20,203 U.S. government & agency securities 156,131 17 ( 481 ) 155,667 Total investments 176,373 32 ( 535 ) 175,870 Total cash, cash equivalents and investments $ 237,376 $ 32 $ ( 535 ) $ 236,873 Short-term restricted cash $ 33 $ — $ — $ 33 Long-term restricted cash $ 1,571 $ — $ — $ 1,571 As of December 31, 2025 (In thousands) Amortized Cost Gross unrealized gains Gross unrealized losses Fair Value Cash and cash equivalents $ 63,707 $ — $ — $ 63,707 Investments: Corporate debt securities 23,172 78 — 23,250 U.S. government & agency securities 192,170 380 ( 1 ) 192,549 Total investments 215,342 458 ( 1 ) 215,799 Total cash, cash equivalents and investments $ 279,049 $ 458 $ ( 1 ) $ 279,506 Short-term restricted cash $ 20 $ — $ — $ 20 Long-term restricted cash $ 1,532 $ — $ — $ 1,532 The following table summarizes the contractual maturities of our available-for-sale investments as of June 30, 2026: (In thousands) Fair Value Due in one year or less $ 113,090 Due after one year through five years 62,780 Total $ 175,870 Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties. Q2 Fiscal 2026 Form 10-Q 11 Table of Contents Investment income included in other income, net on the condensed consolidated statements of operations and comprehensive loss was $ 2.2 million and $ 4.7 million for the three and six months ended June 30, 2026, respectively and $ 3.4 million and $ 7.3 million for the three and six months ended June 30, 2025, respectively. NOTE 3. BALANCE SHEET COMPONENTS Inventory, Net Our inventory, net, consisted of the following components: (In thousands) June 30, 2026 December 31, 2025 Purchased materials $ 28,002 $ 22,533 Work in process 20,579 16,446 Finished goods 12,503 10,306 Inventory, net $ 61,084 $ 49,285 Goodwill and Intangible Assets Goodwill Goodwill is reviewed for impairment at least annually during the second quarter, or more frequently if an event occurs indicating the potential for impairment. We completed our annual goodwill impairment assessment on April 1, 2026 and noted no impairment. Changes in our future operating results, cash flows, share price, market capitalization or discount rates used when conducting future goodwill impairment tests could affect the implied fair value of goodwill and may result in additional impairment charges in the future. Intangible Assets Intangible assets include developed technology, customer relationships, and acquired in-process research and development ("IPR&D"). In connection with the Apton acquisition in August 2023, we allocated $ 55.0 million of the purchase price to IPR&D. IPR&D is reviewed for impairment at least annually, or more frequently if an event occurs indicating the potential for impairment. We recognized a $ 40.0 million impairment charge during the year ended December 31, 2024 as a result of a quantitative interim impairment test. During the first quarter of 2025, based on our decision to cease development of the high-throughput short-read sequencing platform, which would utilize the IPR&D, and the resulting changes to the expected future cash flows, among other factors, we concluded that it was more likely than not that the fair value of the IPR&D was less than its carrying amount, requiring an interim impairment assessment. Using a discounted cash flow model under the income approach, we determined the fair value was $ 0 and recorded a $ 15.0 million impairment charge. The decline in the fair value of the IPR&D to $ 0 as of March 31, 2025 resulted primarily from changes in the timing of expected future cash flows as compared to the fair value as of December 31, 2024, driven by the restructuring initiatives that prioritize accelerating adoption of HiFi sequencing and resulted in ceasing development of our high-throughput short-read sequencing platform. The impairment charge is included in our condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025. See Note 5. Restructuring for additional information on costs incurred in connection with our restructuring activities. Q2 Fiscal 2026 Form 10-Q 12 Table of Contents We have the following acquired finite-lived intangible assets: As of June 30, 2026 As of December 31, 2025 (In thousands, except years) Estimated Useful Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Developed technology 3 — 15 $ 421,179 $ ( 408,095 ) $ 13,084 $ 421,179 $ ( 406,055 ) $ 15,124 Customer relationships 2 360 ( 360 ) — 360 ( 360 ) — Total $ 421,539 $ ( 408,455 ) $ 13,084 $ 421,539 $ ( 406,415 ) $ 15,124 The estimated future amortization expense of intangible assets with finite lives is as follows: (In thousands) Remainder of 2026 $ 2,039 2027 4,079 2028 1,301 2029 745 2030 745 2031 and thereafter 4,175 Total $ 13,084 Amortization of acquired intangible assets is included within our cost of revenue if the costs and expenses related to the intangible assets are attributable to revenue generating activities. Amortization expense for intangible assets that are not directly related to sales generating activities are amortized to operating expenses. For developed technology intangible assets that are utilized in both revenue generating activities and in research and development activities, we allocate the amortization expense between cost of revenue and operating expenses. The finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives. During the three months ended March 31, 2025, we revised the estimated useful life of the developed technology acquired in the 2021 Omniome, Inc. ("Omniome") acquisition. This change reflects updated strategic plans and restructuring initiatives focused on accelerating HiFi sequencing adoption, leading to ceased development of our high-throughput short-read platform and revised expectations for the timing and amount of future cash flows from short-read sequencing products and services. As a result of the change in estimate, during the three months ended March 31, 2025, we recognized accelerated amortization of $ 359.3 million within amortization of acquired intangible assets in operating expenses, reflecting our revised estimate that the asset will no longer generate economic benefit beyond March 31, 2025. This expense had a negative impact on basic and diluted net loss per share of $ 1.20 for the six months ended June 30, 2025. We review finite-lived intangible assets for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. In the first quarter of 2025, as part of our interim goodwill impairment test, we also performed a recoverability test for the definite-lived asset group and noted no impairment. On March 7, 2025, the Company entered into an agreement to acquire certain developed technology and related intellectual property from The Chinese University of Hong Kong for total consideration of $ 9.7 million. In addition, the Company entered into a license agreement for complementary developed technology during the three months ended March 31, 2025. Both the acquired technology and license are classified as intangible assets and are being amortized over an estimated useful life of three years . Q2 Fiscal 2026 Form 10-Q 13 Table of Contents Other Assets In the first quarter of 2026, the Company entered into a license and settlement agreement with Personal Genomics of Taiwan, Inc. (“PGI”). PGI had previously filed a suit against the Company for alleged patent infringement and related matters. Under the terms of the agreement, the parties agreed to dismiss all claims and counterclaims and to release one another from all claims arising out of the litigation (the "PGI Settlement"). In connection with the settlement, PGI granted the Company a non-exclusive, royalty-free, worldwide license to certain patents and patent applications and provided a covenant not to sue the Company and its affiliates for patent infringement for a specified period. Under the fixed payment structure, the Company paid PGI $ 8.0 million in the second quarter of 2026 and will pay $ 5.0 million in the first quarter of each of 2027, 2028 and 2029, with the payment in 2027 increasing by $ 1.0 million if the Company’s 2026 revenue is at least $ 165.0 million and another $ 1.0 million if it is at least $ 180.0 million. The Company accounted for the transaction as a settlement of litigation combined with a license to patents. The total consideration was allocated on a relative fair value basis between (i) the license to the patents and (ii) the settlement of past and potential claims relating to the patents and associated with the litigation. The fair value of the license was estimated using an income approach, specifically the relief-from-royalty method, which is based on the present value of hypothetical royalty payments avoided as a result of obtaining the license. The fair value of the settlement component was estimated using an income-based approach that considered a hypothetical royalty rate applied to historical revenues generated during the alleged infringement period. This valuation represents a level 3 fair value measurement due to its reliance on certain unobservable inputs. The determination of fair value involves estimates and assumptions, including projected future revenues attributable to the licensed patents, historical revenues generated during the alleged infringement period, an estimated royalty rate derived from comparable market transactions, and a discount rate applied to the projected cash flows. The royalty rate utilized in the valuation was 5 %, the discount rate of 14.5 % applied to the projected future revenues was based on the Company’s estimated weighted average cost of capital, considering market participant assumptions and risk factors specific to the asset, and the discount rate of 6.3 % applied to the historical revenues was based on the Company's estimated cost of debt, considering market participant assumptions. The assumptions used were inherently subject to uncertainty. The portion of the consideration allocated to the license of $ 5.5 million was capitalized and included in other long-term assets on the condensed consolidated balance sheets. The asset is being amortized on a straight-line basis over a period of approximately three years, which approximates the remaining economic life of the underlying patent rights. The remaining portion of the consideration was recorded as a litigation settlement charge. In the first quarter of 2026, the Company recorded $ 0.5 million of settlement charges within cost of product revenue in the condensed consolidated statements of operations and comprehensive loss and $ 15.4 million of settlement charges within operating expenses in the condensed consolidated statements of operations and comprehensive loss. The Company recorded the liability at its present value of $ 21.4 million as of March 31, 2026. The liability will be accreted to its undiscounted amount using the effective interest method, resulting in an effective interest rate of 9.5 %, with accretion recognized as interest expense in the condensed consolidated statements of operations. The liability for the settlement obligation is classified between current and non-current portions based on the timing of expected payments. As of June 30, 2026, $ 5.6 million is included in accrued expenses and $ 8.2 million is included in other liabilities, non-current in the condensed consolidated balance sheets. Deferred Revenue As of June 30, 2026, we had a total of $ 19.4 million of deferred revenue, $ 16.1 million of which was recorded as deferred revenue, current, and $ 3.3 million of which was recorded as deferred revenue, non-current, which primarily relates to deferred service contract revenues and is scheduled to be recognized in the next six years . Revenue recorded in the three and six months ended June 30, 2026 includes $ 3.7 million and $ 8.7 million, respectively, that was included in deferred revenue as of December 31, 2025. Q2 Fiscal 2026 Form 10-Q 14 Table of Contents Performance Obligations We regularly enter into contracts with multiple performance obligations. These contracts are believed to be firm as of the balance sheet date. However, we may allow customers to make product substitutions or certain modifications at our discretion. The timing of shipments depends on several factors, including agreed upon shipping schedules, which may span multiple quarters. Most performance obligations are generally satisfied within a year of the contract execution date. As of June 30, 2026, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 47.9 million, of which approximately 79 % is expected to be converted to revenue over the next twelve months , approximately 17 % in the following twelve months , and the remainder thereafter. Product Warranties We generally provide a one-year warranty on instruments. In addition, we provide a limited warranty on consumables. At the time revenue is recognized, an accrual is established for estimated warranty costs based on historical experience as well as anticipated product performance. We periodically review the warranty reserve for adequacy and adjust the warranty accrual, if necessary, based on actual experience and estimated costs to be incurred. Warranties are recorded as part of accrued expenses on the condensed consolidated balance sheets and warranty expense is recorded as a component of cost of product revenue in the condensed consolidated statements of operations and comprehensive loss. There were no material changes in estimates for the periods presented below. Changes in the reserve for product warranties were as follows for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2026 2025 2026 2025 Balance at beginning of period $ 2,821 $ 2,859 $ 3,046 $ 3,100 Additions charged to cost of product revenue 1,226 1,245 2,691 2,557 Repairs and replacements ( 1,237 ) ( 1,416 ) ( 2,927 ) ( 2,969 ) Balance at end of period $ 2,810 $ 2,688 $ 2,810 $ 2,688 Q2 Fiscal 2026 Form 10-Q 15 Table of Contents NOTE 4. CONVERTIBLE SENIOR NOTES 2029 Convertible Senior Notes On November 7, 2024, we entered into an exchange agreement with SB Northstar LP (“SBN”), a subsidiary of SoftBank Group Corp., pursuant to which we agreed to exchange the remaining approximately $ 459.0 million in aggregate principal amount of our previously held 1.50 % Convertible Senior Notes due 2028 (the “2028 Notes”) outstanding for (i) $ 200.0 million aggregate principal amount of 1.50 % Convertible Senior Notes due 2029 (the “2029 Notes”), (ii) 20,451,570 shares of common stock (the “Exchange Shares”) and (iii) $ 50.0 million of cash (the “2024 Exchange Transaction”). The Exchange Shares were issued on November 21, 2024 (the “Closing Date”). The 2029 Notes, the Exchange Shares, and shares of common stock issuable upon conversion of the 2029 Notes were subject to certain lock-up restrictions for a six-month period (the “Lock-Up Period”) beginning on the Closing Date of the 2024 Exchange Transaction. Additionally, on November 21, 2024, in connection with the issuance of the 2029 Notes, the Company and SBN entered into the Letter Agreement pursuant to which the Company and SBN agreed that, for so long as SBN and its affiliates hold at least $ 180 million aggregate principal amount of the 2029 Notes, the Company and its subsidiaries are subject to certain negative covenants that restrict the Company’s and its subsidiaries’ ability to incur additional indebtedness and create liens, in each case, subject to the exceptions set forth in the Letter Agreement, including exceptions which permit the Company to incur up to $ 75 million in aggregate principal amount of secured indebtedness pursuant to Credit Facilities (as defined in the Letter Agreement). In addition, the Letter Agreement restricts the ability of the Company and its subsidiaries from guaranteeing any indebtedness or incurring certain indebtedness outside of the ordinary course of business unless, in each case, the Company and its subsidiaries concurrently provide a guarantee of the Company’s obligations under the 2029 Notes. Upon any conversion of the 2029 Notes, SBN will not be entitled to be issued a number of shares of the Company’s common stock which would cause SBN's beneficial ownership of common stock to exceed either 9.9 % of the total number of issued and outstanding shares of common stock or 9.9 % of the combined voting power of all of the securities of the Company, in each case, following such conversion. The 2029 Notes are governed by an indenture (the “2029 Indenture”) between the Company and U.S. Bank Trust Company, National Association, as trustee. The 2029 Notes bear interest at a rate of 1.50 % per annum. Interest on the 2029 Notes is payable semi-annually in arrears on February 15 and August 15, commencing on February 15, 2025. The 2029 Notes will mature on August 15, 2029, subject to earlier conversion, redemption or repurchase. The 2029 Notes are convertible at the option of the holder at any time from the expiration of the Lock-Up Period until the second scheduled trading day prior to the maturity date, including in connection with a redemption by the Company. The 2029 Notes are convertible into shares of our common stock based on an initial conversion rate of 204.5157 shares of common stock per $1,000 principal amount of the 2029 Notes (which is equal to an initial conversion price of approximately $ 4.89 per share of common stock), in each case subject to customary anti-dilution and other adjustments as a result of certain extraordinary transactions. Upon conversion of the 2029 Notes, we may elect to settle such conversion obligation in cash, shares of our common stock, or a combination of cash and shares of our common stock. On or after August 20, 2027, and prior to the 31st scheduled trading day immediately preceding the maturity date, the 2029 Notes will be redeemable by the Company in the event that the closing sale price of our common stock has been at least 150 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide the redemption notice at a redemption price of 100 % of the principal amount of such 2029 Notes, plus accrued and unpaid interest up to, but excluding, the redemption date. Upon the occurrence of a Fundamental Change (as defined in the 2029 Indenture), the holders of the 2029 Notes may require that we repurchase all or part of the principal amount of the 2029 Notes at a purchase price of par plus unpaid interest up to, but excluding, the maturity date. The 2029 Notes are subject to certain debt and lien covenants as well as springing guarantees, in each case, the terms of which are set forth in a second letter agreement between the Company and SBN entered into in connection with the Indenture. Q2 Fiscal 2026 Form 10-Q 16 Table of Contents The 2029 Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the 2029 Notes under the 2029 Indenture. The 2029 Indenture also includes customary covenants for convertible notes of this type. To the extent we elect, the sole remedy for an event of default relating to our failure to comply with certain of our reporting obligations shall, for the first 360 calendar days after the occurrence of such an event of default, consist exclusively of the right to receive additional interest on the 2029 Notes at a rate equal to (i) 0.25 % per annum of the principal amount of the 2029 Notes outstanding for each day during the first 180 calendar days of the 360 -day period after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived) and (ii) 0.50 % per annum of the principal amount of the 2029 Notes outstanding for each day from, and including, the 181 st calendar day to, and including, the 360 th calendar day after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived as provided for in the 2029 Indenture). On the 361 st day after such event of default (if the event of default relating to our failure to comply with its obligations is not cured or waived prior to such 361 st day), the 2029 Notes shall be subject to acceleration as provided for in the 2029 Indenture. The 2029 Notes are accounted for in accordance with the authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. Under ASU 2020-06, the guidance requires that debt with an embedded conversion feature is accounted for in its entirety as a liability and no portion of the proceeds from the issuance of the convertible debt instrument is accounted for as attributable to the conversion feature unless the conversion feature is required to be accounted for separately as an embedded derivative or the conversion feature results in a substantial premium. The conversion feature of the 2029 Notes is not accounted for as an embedded derivative because it is considered to be indexed to our common stock, and the 2029 Notes were not issued at a substantial premium; therefore, the 2029 Notes are accounted for in their entirety as a liability. Because we may elect to settle any conversions entirely in shares, and because settlement in shares is the default settlement method, the liability is classified as non-current. The requirement to repurchase the 2029 Notes, including unpaid interest to the maturity date in the event of a Fundamental Change, is considered a put option for certain periods requiring bifurcation under ASC 815 – Derivatives and Hedging. However, given the low probability of such a Fundamental Change occurring during the applicable periods, the value of the embedded derivative is immaterial. The additional interest feature in the event of our failure to comply with certain reporting obligations is also considered an embedded derivative requiring bifurcation under ASC 815. However, due to the nature and terms of the reporting obligations, the value of the embedded derivative is immaterial. The exchange qualified as a troubled debt restructuring under ASC 470-60 – Troubled Debt Restructurings by Debtors . Since the undiscounted cash flows of the 2029 Notes were less than the carrying amount of the exchanged 2028 Notes, the carrying value of the 2029 Notes was determined based on the total undiscounted cash flows. As a result, no interest expense will be recognized for the 2029 Notes. The Company recorded a gain on debt restructuring of $ 154.4 million, which resulted in a decrease of basic net loss per share of $ 0.56 , during the year ended December 31, 2024 in our consolidated statements of operations and comprehensive loss. The gain was calculated as the difference between the carrying amount of the old debt and the carrying amount of the new debt, adjusted for debt issuance costs. We incurred issuance costs related to the 2029 Notes of approximately $ 3.1 million, including $ 0.2 million of lender fees, which were recorded as a reduction to the gain on debt restructuring in our condensed consolidated statements of operations and comprehensive loss. We also paid accrued but unpaid interest of $ 1.8 million on the 2028 Notes in connection with the 2024 Exchange Transaction. We did not receive any cash proceeds from the 2024 Exchange Transaction. In exchange for issuing the 2029 Notes, Exchange Shares and paying $ 50.0 million of cash pursuant to the 2024 Exchange Transaction, we received and cancelled the exchanged 2028 Notes. Following the closing of the 2024 Exchange Transaction, no amounts were outstanding on the 2028 Notes. The carrying amount of the liability for the 2029 Notes as of June 30, 2026 is $ 210.5 million, of which $ 207.5 million is included as convertible senior notes, net, non-current, and $ 3.0 million is included as accrued expenses on our condensed consolidated balance sheets. Q2 Fiscal 2026 Form 10-Q 17 Table of Contents Changes to the 2029 Notes during the six months ended June 30, 2026 were as follows: (In thousands) Carrying amount as of December 31, 2025 $ 212,000 Contractual interest expense ( 1,500 ) Carrying amount as of June 30, 2026 $ 210,500 As of June 30, 2026, the estimated fair value (Level 2) of the 2029 Notes was $ 182.9 million. The fair value of the 2029 Notes is estimated using a binomial lattice model that is primarily affected by the trading price of our common stock, market interest rates and volatility. 2030 Convertible Senior Notes In June 2023, we entered into a privately negotiated exchange agreement with a holder of our outstanding 2028 Notes, pursuant to which we issued $ 441.0 million in aggregate principal amount of our 1.375 % Convertible Senior Notes due 2030 (the “2030 Notes” and together with the 2029 Notes, the “Notes”) in exchange for $ 441.0 million principal amount of the 2028 Notes (the “2023 Exchange Transaction”), pursuant to exemptions from registration under the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations thereunder. The 2030 Notes were issued on June 30, 2023. The 2030 Notes are governed by an indenture (the “2030 Indenture”) between the Company and U.S. Bank Trust Company, National Association, as trustee. The 2030 Notes bear interest at a rate of 1.375 % per annum. Interest on the 2030 Notes is payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 2023. The 2030 Notes will mature on December 15, 2030, subject to earlier conversion, redemption or repurchase. The 2030 Notes are convertible at the option of the holder at any time until the second scheduled trading day prior to the maturity date, including in connection with a redemption by the Company. The 2030 Notes are convertible into shares of our common stock based on an initial conversion rate of 46.5116 shares of common stock per $1,000 principal amount of the 2030 Notes (which is equal to an initial conversion price of approximately $ 21.50 per share of common stock), in each case subject to customary anti-dilution and other adjustments as a result of certain extraordinary transactions. Upon conversion of the 2030 Notes, we may elect to settle such conversion obligation in cash, shares of our common stock, or a combination of cash and shares of our common stock. On or after June 20, 2028, and prior to the 31st scheduled trading day immediately preceding the maturity date, the 2030 Notes will be redeemable by the Company in the event that the closing sale price of our common stock has been at least 150 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide the redemption notice at a redemption price of 100 % of the principal amount of such 2030 Notes, plus accrued and unpaid interest up to, but excluding, the redemption date. Upon the occurrence of a Fundamental Change (as defined in the 2030 Indenture), the holders of the 2030 Notes may require that we repurchase all or part of the principal amount of the 2030 Notes at a purchase price equal to 100 % of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest up to, but excluding, the fundamental change repurchase date, and all unpaid interest from the fundamental change repurchase date thereon, but excluding, the maturity date. The 2030 Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the 2030 Notes under the 2030 Indenture. The 2030 Indenture also includes customary covenants for convertible notes of this type. To the extent we elect, the sole remedy for an event of default relating to our failure to comply with certain of our reporting obligations shall, for the first 360 calendar days after the occurrence of such an event of default, consist exclusively of the right to receive additional interest on the 2030 Notes at a rate equal to (i) 0.25 % per annum of the principal amount of the 2030 Notes outstanding for each day during the first 180 calendar days of the 360 -day period after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived) and (ii) 0.50 % per annum of the principal amount of the 2030 Notes outstanding for each day from, and including, the 181 st calendar day to, Q2 Fiscal 2026 Form 10-Q 18 Table of Contents and including, the 360 th calendar day after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived as provided for in the 2030 Indenture). On the 361 st day after such event of default (if the event of default relating to our failure to comply with its obligations is not cured or waived prior to such 361 st day), the 2030 Notes shall be subject to acceleration as provided for in the 2030 Indenture. The 2030 Notes are accounted for in accordance with the authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. Under ASU 2020-06, the guidance requires that debt with an embedded conversion feature is accounted for in its entirety as a liability and no portion of the proceeds from the issuance of the convertible debt instrument is accounted for as attributable to the conversion feature unless the conversion feature is required to be accounted for separately as an embedded derivative or the conversion feature results in a substantial premium. The conversion feature of the 2030 Notes is not accounted for as an embedded derivative because it is considered to be indexed to our common stock, and the 2030 Notes were not issued at a substantial premium; therefore, the 2030 Notes are accounted for in their entirety as a liability. Because we may elect to settle any conversions entirely in shares, and because settlement in shares is the default settlement method, the liability is classified as non-current. The requirement to repurchase the 2030 Notes, including unpaid interest to the maturity date in the event of a Fundamental Change, is considered a put option for certain periods requiring bifurcation under ASC 815 . However, given the low probability of such a Fundamental Change occurring during the applicable periods, the value of the embedded derivative is immaterial. The additional interest feature in the event of our failure to comply with certain reporting obligations is also considered an embedded derivative requiring bifurcation under ASC 815. However, due to the nature and terms of the reporting obligations, the value of the embedded derivative is immaterial. We incurred issuance costs related to the 2030 Notes of approximately $ 7.3 million, which were recorded as debt issuance costs and are presented as a reduction to the 2030 Notes in convertible senior notes, net, non-current on our condensed consolidated balance sheets. The debt issuance costs are amortized to interest expense using the effective interest method over the term of the 2030 Notes, resulting in an effective interest rate of 1.6 %. We did not receive any cash proceeds from the 2023 Exchange Transaction. In exchange for issuing the 2030 Notes pursuant to the 2023 Exchange Transaction, we received and cancelled the exchanged 2028 Notes. Following the closing of the 2023 Exchange Transaction, $ 459.0 million in aggregate principal amount of 2028 Notes remained outstanding with terms unchanged. The net carrying amount of the liability for the 2030 Notes is included as convertible senior notes, net, non-current in the condensed consolidated balance sheets as follows: (In thousands) June 30, 2026 December 31, 2025 Principal amount $ 441,000 $ 441,000 Unamortized debt premium 343 379 Unamortized debt issuance costs ( 4,511 ) ( 4,997 ) Net carrying amount $ 436,832 $ 436,382 Interest expense for the 2030 Notes was as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2026 2025 2026 2025 Contractual interest expense $ 1,516 $ 1,516 $ 3,032 $ 3,032 Amortization of debt issuance costs 243 240 486 479 Total interest expense $ 1,759 $ 1,756 $ 3,518 $ 3,511 As of June 30, 2026, the estimated fair value (Level 2) of the 2030 Notes was $ 324.4 million. The fair value of the 2030 Notes is estimated using a binomial lattice model that is primarily affected by the trading price of our common stock, market interest rates and volatility. Q2 Fiscal 2026 Form 10-Q 19 Table of Contents NOTE 5. RESTRUCTURING 2025 Restructuring In the first quarter of 2025, we implemented an expense reduction initiative aimed at lowering our annualized run-rate operating expenses. These actions, which included workforce reductions and other cost-saving measures, were part of a broader strategic shift to prioritize the adoption of HiFi sequencing. A summary of the pre-tax restructuring charges are as follows: (In thousands) Cumulative amount incurred to date Employee separation costs $ 4,787 Other costs 1,076 Total restructuring charges (1) $ 5,863 (1) Cumulative charges incurred to date include $ 3.8 million in sales, general and administrative expense and $ 2.1 million in research and development expense. Charges included employee separation costs comprised of approximately $ 2.5 million related to salaries, wages and other employee benefits paid to terminated employees pursuant to the Worker Adjustment and Retraining Notification Act and approximately $ 2.3 million of severance costs. Charges included in other costs are primarily related to legal expenses incurred in connection with employee separation matters. In connection with the restructuring and strategic shift, we incurred an additional $ 389.9 million in costs. These primarily include $ 359.3 million of accelerated amortization of certain intangible assets, $ 15.0 million of IPR&D impairment charges, charges of $ 8.1 million related to excess inventory due to decreased external demand, $ 3.9 million for estimated losses on purchase commitments tied to anticipated future excess inventory included in cost of revenue, and $ 3.1 million of accelerated depreciation of fixed assets. See Note 3. Balance Sheet Components for additional information on the IPR&D impairment assessment and the change in estimated useful life of the intangible asset and accelerated amortization. A summary of the liabilities related to the restructuring is as follows: (In thousands) Other Costs Amount recorded in current liabilities as of December 31, 2025 $ 389 Cash paid during 2026 ( 389 ) Amount recorded in current liabilities as of June 30, 2026 $ — Estimated total restructuring costs to still be incurred $ — During the six months ended June 30, 2026 no further restructuring charges related to the 2025 restructuring were incurred. 2024 Restructuring In the second quarter of 2024, we implemented an expense reduction initiative that included workforce reductions, the closing of our San Diego office, and other actions to reduce annualized run-rate operating expenses. We recognized approximately $ 0.9 million of expense related to the 2024 restructuring during the six months ended June 30, 2025. See Note 6 – Restructuring in Part II, Item 8 of the 2025 Annual Report for information regarding the 2024 restructuring initiative. During the six months ended June 30, 2026 no further restructuring charges related to the 2024 restructuring were incurred. Q2 Fiscal 2026 Form 10-Q 20 Table of Contents NOTE 6. COMMITMENTS AND CONTINGENCIES Leases The Company has entered into various operating lease agreements, primarily relating to our corporate offices. See Note 7 – Commitments and Contingencies , subsection titled “Leases”, in Part II, Item 8 of the 2025 Annual Report for information regarding the Company’s maturity of lease liabilities under its lease agreements. Contingencies We may become involved in legal proceedings, claims and assessments from time to time in the ordinary course of business. We accrue liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. We do not believe that the ultimate outcome of any such pending matters is probable or reasonably estimable, or that these matters will have a material adverse effect on our business; however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on us because of litigation and settlement costs, diversion of management resources, and other factors. Please see subsection titled Legal Proceedings, in Part II, Item 1 of this Quarterly Report on Form 10-Q. Indemnification Pursuant to Delaware law and agreements entered into with each of our directors and officers, we may have obligations, under certain circumstances, to hold harmless and indemnify each of our directors and officers against losses suffered or incurred by the indemnified party in connection with their service to us, and judgements, fines, settlements and expenses related to claims arising against such directors and officers to the fullest extent permitted under Delaware law, our bylaws and our certificate of incorporation. We also enter and have entered into indemnification agreements with our directors and officers that may require us to indemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by applicable law. In addition, we may have obligations to hold harmless and indemnify third parties involved with our fundraising efforts and their respective affiliates, directors, officers, employees, agents or other representatives against any and all losses, claims, damages and liabilities related to claims arising against such parties pursuant to the terms of agreements entered into between such third parties and us in connection with such fundraising efforts. To the extent that any such indemnification obligations apply to the lawsuits described above, any associated expenses incurred are included within the related accrued litigation expense amounts. No additional liability associated with such indemnification obligations has been recorded as of June 30, 2026 and December 31, 2025. NOTE 7. EQUITY PLANS AND SHARE-BASED COMPENSATION Equity Plans As of June 30, 2026, the Company had share-based compensation awards outstanding under the 2020 Equity Incentive Plan (as amended, the "2020 Plan"), the 2020 Inducement Equity Incentive Plan (the “Inducement Plan”), the 2021 adopted Omniome Equity Incentive Plan of Pacific Biosciences of California, Inc. (the “Omniome Plan”) and the 2010 Employee Stock Purchase Plan ("ESPP"), from which we issued equity awards and employee stock. On June 3, 2026, our stockholders approved an amendment to the 2020 Plan to reserve an additional 16 million shares of our common stock for issuance pursuant to equity awards granted under the 2020 Plan. As of June 30, 2026, we had 24.1 million shares remaining and available for future issuance under the 2020 Plan, Inducement Plan, and Omniome Plan. Shares remaining and available for future issuance reflect shares that may become eligible to vest upon the achievement of maximum targets for certain equity awards. Refer to Note 9 – Stockholders' Equity , in Part II, Item 8 of our 2025 Annual Report for more information on the Company's equity plans . Q2 Fiscal 2026 Form 10-Q 21 Table of Contents Stock Options The following table summarizes stock option activity for time-based awards: (shares in thousands) Number of shares Weighted average exercise price Outstanding at December 31, 2025 15,509 $ 6.40 Granted 7,794 $ 1.66 Exercised ( 244 ) $ 1.28 Canceled ( 813 ) $ 5.32 Expired ( 442 ) $ 8.93 Outstanding at June 30, 2026 21,804 $ 4.75 Restricted Stock Units ("RSU") and Performance Stock Units ("PSU") We grant RSUs for which the respective shares vest when the requisite service period is achieved. We granted PSUs during the first quarter of 2023 for which the number of shares issuable is based on performance relative to specified revenue targets and continued employment through the vesting period. The PSUs were issuable following the third year of the performance period. Maximum achievement of the revenue goal under the PSUs would result in up to 200 % of the target number of shares subject to the PSUs to become eligible to vest, while not meeting the minimum achievement of the revenue goal under the PSUs would result in no shares subject to the PSUs becoming eligible to vest. The performance period ended on December 31, 2025. Because threshold levels of achievement were not met, the PSUs were forfeited based on the determination by the Board of Directors in the first quarter of 2026. The following table summarizes the time-based RSUs and PSUs activity: RSU PSU Weighted average grant date fair value (shares in thousands) RSU PSU Outstanding at December 31, 2025 17,551 392 $ 3.50 $ 9.43 Granted 9,897 — $ 1.68 $ — Vested ( 7,343 ) — $ 3.59 $ — Forfeited ( 1,121 ) ( 392 ) $ 2.49 $ 9.43 Outstanding at June 30, 2026 18,984 — $ 2.57 $ — ESPP Shares issued under our ESPP wer e 1,266,217 and 1,752,417 durin g the six months ended June 30, 2026 and 2025, respectively. In the first quarter of 2026, an additional 4.0 million shares were reserved under the ESPP. As of June 30, 2026, 17.9 million shares of our common stock remain avai lable for issuance under our ESPP. Share-based Compensation The following table summarizes share-based compensation expense: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2026 2025 2026 2025 Cost of revenue $ 694 $ 925 $ 1,342 $ 2,090 Research and development 2,405 3,307 1,633 5,914 Sales, general and administrative 6,164 7,663 10,747 13,092 Total share-based compensation expense $ 9,263 $ 11,895 $ 13,722 $ 21,096 Q2 Fiscal 2026 Form 10-Q 22 Table of Contents Determining Fair Value We estimate the fair value of stock options granted using the Black-Scholes valuation method and a single option award approach. When determining the current share prices underlying the stock options for calculating the grant-date fair value, we reference the observable market prices of our stock. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair market value of RSUs and PSUs granted is the closing price of our shares on the date of grant and is generally recognized as compensation expense on a straight-line basis over the respective vesting period. For shares purchased under our ESPP, we estimate the grant-date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model. We estimate forfeitures of stock options, RSUs and shares purchased under our ESPP which is utilized to determine the compensation expense to be recorded over the requisite service period. • Expected Term - The expected term used in the Black-Scholes valuation method represents the period that the stock options are expected to be outstanding and is determined based on historical experience of similar awards, considering the contractual terms of the stock options and vesting schedules. • Expected Volatility - The expected volatility used in the Black-Scholes valuation method is derived from the implied volatility related to our share price over the expected term. • Expected Dividend - We have never paid dividends on our shares and, accordingly, the dividend yield percentage is zero for all periods. • Risk-Free Interest Rate - The risk-free interest rate used in the Black-Scholes valuation method is the implied yield currently available on U.S. Treasury constant maturities issued with a term equivalent to the expected terms. The fair value of employee stock options was estimated using the following assumptions: Six Months Ended June 30, 2026 2025 Expected term in years 4.9 4.9 Expected volatility 96 % — 97 % 95 % — 96 % Risk-free interest rate 3.48 % — 4.16 % 3.89 % — 4.29 % Dividend yield — — Weighted average grant date fair value per share $ 1.23 $ 0.90 The fair value of shares to be issued under the ESPP was estimated using the following assumptions: Six Months Ended June 30, 2026 2025 Expected term in years 0.5 — 2.0 0.5 — 2.0 Expected volatility 97 % 113 % Risk-free interest rate 3.47 % — 3.68 % 3.96 % — 4.31 % Dividend yield — — Weighted average grant date fair value per share $ 0.90 $ 0.93 NOTE 8. NET LOSS PER SHARE Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed using the weighted average number of shares of common stock outstanding and potential shares assuming the dilutive effect of the Notes, using the if-converted method, and outstanding equity awards using the treasury stock method. Q2 Fiscal 2026 Form 10-Q 23 Table of Contents The following table presents the calculation of the basic and diluted net loss per share amounts presented in the condensed consolidated statements of operations and comprehensive loss: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except per share amounts) 2026 2025 2026 2025 Numerator: Net loss $ ( 44,741 ) $ ( 41,930 ) $ ( 53,016 ) $ ( 468,005 ) Denominator: Basic Weighted average shares used in computing basic net loss per share 310,655 300,162 308,250 298,519 Basic net loss per share $ ( 0.14 ) $ ( 0.14 ) $ ( 0.17 ) $ ( 1.57 ) Diluted Weighted average shares used in computing diluted net loss per share 310,655 300,162 308,250 298,519 Diluted net loss per share $ ( 0.14 ) $ ( 0.14 ) $ ( 0.17 ) $ ( 1.57 ) The following shares issuable upon conversion of the Notes and outstanding equity awards were excluded from the computation of diluted net loss per share for the periods presented because the effect of including such shares would have been antidilutive: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2026 2025 2026 2025 Shares issuable upon conversion of convertible senior notes 61,415 61,415 61,415 61,415 Equity awards 46,451 44,643 46,451 44,643 See Note 7. Equity Plans and Share-Based Compensation for detailed information on equity awards. NOTE 9. SEGMENT AND GEOGRAPHIC INFORMATION We are organized as, and operate in, one reportable segment: the development, manufacturing, and marketing of integrated platforms for genetic analysis. Our chief operating decision-maker ("CODM") is our Chief Executive Officer. Our CODM reviews financial information presented on a consolidated basis for the purposes of evaluating financial performance and allocating resources. On a regular basis, our CODM reviews: • total revenues by category • total expenses and expenses by function, including sales and marketing and general and administrative, which include depreciation and share-based compensation • net loss per share Our assets are primarily located in the United States of America and not allocated to any specific region, and we do not measure the performance of geographic regions based upon asset-based metrics. Therefore, geographic information is presented only for revenue. Q2 Fiscal 2026 Form 10-Q 24 Table of Contents A summary of the segment profit or loss, including significant segment expenses is as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2026 2025 2026 2025 Total revenue $ 39,007 $ 39,766 $ 76,185 $ 76,919 Less: Cost of revenue 26,369 25,082 50,706 63,606 Research and development 23,022 22,529 42,630 51,582 Sales and marketing 18,492 19,516 34,270 39,592 General and administrative 14,901 16,659 30,276 36,751 Impairment charges — — — 15,000 Settlement charges — — 15,400 — Gain on disposal of assets — — ( 45,796 ) — Change in fair value of contingent consideration — — — ( 18,700 ) Amortization of acquired intangible assets 833 833 1,666 362,875 Operating loss ( 44,610 ) ( 44,853 ) ( 52,967 ) ( 473,787 ) Other (expense) income, net ( 73 ) 2,958 193 5,515 Loss before income taxes ( 44,683 ) ( 41,895 ) ( 52,774 ) ( 468,272 ) Income tax provision (benefit) 58 35 242 ( 267 ) Net loss $ ( 44,741 ) $ ( 41,930 ) $ ( 53,016 ) $ ( 468,005 ) A summary of our revenue by geographic location is as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2026 2025 2026 2025 Americas $ 17,624 $ 17,687 $ 34,309 $ 33,990 Europe, Middle East and Africa 14,426 9,467 25,195 18,707 Asia-Pacific 6,957 12,612 16,681 24,222 Total revenue $ 39,007 $ 39,766 $ 76,185 $ 76,919 A summary of our revenue by category is as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2026 2025 2026 2025 Instrument revenue $ 12,839 $ 14,150 $ 22,560 $ 25,166 Consumable revenue 20,111 18,933 41,924 39,030 Product revenue 32,950 33,083 64,484 64,196 Service and other revenue 6,057 6,683 11,701 12,723 Total revenue $ 39,007 $ 39,766 $ 76,185 $ 76,919 Q2 Fiscal 2026 Form 10-Q 25 Table of Contents NOTE 10. SUBSEQUENT EVENTS Restructuring On July 30, 2026, our Board of Directors approved a restructuring plan to continue to better align our organizational structure and resources with our strategic initiatives. The restructuring includes operating expense reductions and a reduction in force (the “Reduction in Force”). These restructuring actions are expected to result in a workforce reduction of approximately 40 employees, or approximately 8 % of our workforce, as we align our organizational structure with our strategic priorities. We estimate that we will incur aggregate pre-tax charges of approximately $ 2.0 million in connection with the Reduction in Force, primarily consisting of severance payments, employee benefits, outplacement services and related costs. We expect that the Reduction in Force will be completed and that these charges will be incurred in the third quarter of 2026. Appointments and Resignations Our Board of Directors appointed Mark Van Oene as President and Chief Executive Officer and as a member of our Board of Directors, effective August 5, 2026. Mr. Van Oene succeeds Christian Henry, who stepped down as our President and Chief Executive Officer effective August 5, 2026. Mr. Henry will continue to serve as a member of our Board of Directors. Q2 Fiscal 2026 Form 10-Q 26 Table of Contents