The introduction of rapid exome sequencing (rES) for critically ill neonates admitted to the neonatal intensive care unit has made it possible to impact clinical decision-making. Unbiased prospective studies to quantify the impact of rES over routine genetic testing are, however, scarce. We performed a clinical utility study to compare rES to conventional genetic diagnostic workup for critically ill neonates with suspected genetic disorders. In a multicenter prospective parallel cohort study involving five Dutch NICUs, we performed rES in parallel to routine genetic testing for 60 neonates with a suspected genetic disorder and monitored diagnostic yield and the time to diagnosis. To assess the economic impact of rES, healthcare resource use was collected for all neonates. rES detected more conclusive genetic diagnoses than routine genetic testing (20% vs. 10%, respectively), in a significantly shorter time to diagnosis (15 days (95% CI 10–20) vs. 59 days (95% CI 23–98,p< 0.001)). Moreover, rES reduced genetic diagnostic costs by 1.5% (€85 per neonate).Conclusion: Our findings demonstrate the clinical utility of rES for critically ill neonates based on increased diagnostic yield, shorter time to diagnosis, and net healthcare savings. Our observations warrant the widespread implementation of rES as first-tier genetic test in critically ill neonates with disorders of suspected genetic origin.What is Known:• Rapid exome sequencing (rES) enables diagnosing rare genetic disorders in a fast and reliable manner, but retrospective studies with neonates admitted to the neonatal intensive care unit (NICU) indicated that genetic disorders are likely underdiagnosed as rES is not routinely used.• Scenario modeling for implementation of rES for neonates with presumed genetic disorders indicated an expected increase in costs associated with genetic testing.What is New:• This unique prospective national clinical utility study of rES in a NICU setting shows that rES obtained more and faster diagnoses than conventional genetic tests.• Implementation of rES as replacement for all other genetic tests does not increase healthcare costs but in fact leads to a reduction in healthcare costs.Supplementary InformationThe online version contains supplementary material available at 10.1007/s00431-023-04909-1.