Earnings call transcript: Illumina Q2 2025 sees EPS growth, stock rises

Illumina Inc. (ILMN) reported its financial results for the second quarter of 2025, showcasing a 9% increase in non-GAAP earnings per share (EPS) to $1.19, surpassing the forecasted $1.17. The company recorded a revenue of $1.06 billion, slightly below the expected $1.07 billion, marking a 3% decline year-over-year. Following the announcement, Illumina’s stock experienced a 2.6% increase, closing at $95.03, although it saw a slight dip of 0.79% in premarket trading.

Key Takeaways

• Illumina’s non-GAAP EPS exceeded expectations, growing by 9% year-over-year.
• Revenue fell short of forecasts, declining by 3% compared to the same period last year.
• The stock price rose by 2.6% despite a minor premarket drop.
• The NovaSeq X platform continues to drive significant revenue from high-throughput consumables.
• The company is focusing on clinical market expansion and proteomics capabilities.

Company Performance

Illumina’s overall performance in Q2 2025 reflected a mixed picture. While the company achieved a notable increase in EPS, revenue experienced a slight downturn. The company’s strategic focus on the clinical segment, which now constitutes 60% of sequencing consumables, is a key driver of its growth. Additionally, Illumina’s acquisition of Somalogic for $350 million is set to enhance its proteomics capabilities, positioning the company for future growth.

Financial Highlights

• Revenue: $1.06 billion (down 3% YoY)
• Non-GAAP EPS: $1.19 (up 9% YoY)
• Non-GAAP Operating Margin: 23.8% (up 160 basis points YoY)
• Cash Flow from Operations: $234 million
• Share Repurchases: 4.5 million shares for $380 million

Earnings vs. Forecast

Illumina reported an EPS of $1.19, surpassing the forecast of $1.17, resulting in a 1.7% positive surprise. However, the company’s revenue of $1.06 billion fell short of the anticipated $1.07 billion, reflecting a minor miss. The EPS beat is consistent with the company’s historical trend of exceeding earnings expectations, although the revenue miss highlights ongoing challenges in the research market.

Market Reaction

Following the earnings announcement, Illumina’s stock increased by 2.6%, closing at $95.03. This upward movement suggests investor confidence in the company’s strategic direction and EPS growth. However, the stock experienced a slight premarket decline of 0.79%, trading at $94.28. The stock remains well below its 52-week high of $156.66, indicating room for recovery.

Outlook & Guidance

Illumina maintains its 2025 revenue guidance of $4.23 to $4.31 billion, with expectations of 1-3% growth in sequencing consumables. The company aims for high single-digit revenue growth by 2027 and plans to expand its non-GAAP operating margin to 26% by the same year. The gradual transition to the NovaSeq X platform and expansion into cardiovascular and neurological testing are expected to drive future growth.

Executive Commentary

CEO Jacob Thaysen emphasized the company’s focus on the clinical market, stating, "Our main growth driver will be going forward also in the clinical space." He also expressed optimism about the company’s long-term prospects, noting, "We expect 2026 to look better than 2025 and 2027 to look better than 2026."

Risks and Challenges

• Research market constraints due to NIH funding uncertainty.
• Potential impacts of export restrictions on the China business.
• Market saturation risks in the sequencing consumables segment.
• Macroeconomic pressures affecting global healthcare budgets.
• Competitive pressures from emerging technologies in genomics.

Q&A

During the earnings call, analysts focused on the resilience of the clinical market and the gradual transition to the NovaSeq X platform. Concerns were raised about the impact of budget constraints on the research market and the company’s strategies to mitigate these challenges. The management expressed confidence in their tariff mitigation strategies and operational excellence programs to sustain growth.

Full transcript - Illumina Inc (ILMN) Q2 2025:

Conference Operator: Good day, ladies and gentlemen. Welcome to the second quarter 2025 Illumina earnings conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, we will conduct a question and answer session. Please be advised that today’s conference is being recorded. I would now like to hand the call over to Interim Head of Investor Relations, Brian Blanchett.

Brian Blanchett, Interim Head of Investor Relations, Illumina: Hello everyone and welcome to Illumina’s second quarter 2025 earnings call. Today we will review our financial results released after market close and provide commentary before opening for Q and A. Our earnings release is available in the Investor Relations section of illumina.com. Speaking today are Jacob Thaysen, Chief Executive Officer, and Ankur Dhingra, Chief Financial Officer. Jacob will provide an update on Illumina’s businesses followed by Ankur’s review of the company’s financials. All financial information shared on this call relates to Core Illumina. For historical consolidated financials, please refer to our earnings release and SEC filings. Please note that all year over year revenue growth rates discussed during the prepared remarks are presented on a constant currency basis to exclude the impact of foreign exchange fluctuations.

We encourage you to review the GAAP reconciliation of our non-GAAP measures which can be found in today’s release and in the supplemental data available on our website. This call is being recorded and the audio will be archived in our Investors section of our website. It is our intent that all forward-looking statements regarding the financial results and commercial activity made during today’s call will be protected under the Private Securities Litigation Reform Act of 1995. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Illumina files with the Securities and Exchange Commission, including our most recent Forms 10-Q and 10-K. With that, I will now turn the call over to Jacob.

Jacob Thaysen, Chief Executive Officer, Illumina: Thank you, Brian, and good afternoon, everyone. In the second quarter, despite a year-over-year decline, we delivered revenue at the high end of our guidance range at approximately $1.06 billion. At the same time, the team’s strong execution drove profitability above expectations with a non-GAAP operating margin of 23.8% and a non-GAAP EPS of $1.19. Together, these results reflect meaningful progress across the business and reinforce our view that the underlying fundamentals remain robust. In Q2, we saw ongoing adoption of our NovaSeq X platform with greater than 50 placements and increased high-throughput consumable sales, especially among NovaSeq X users. As the transition continues to progress, we have continued advancement of our innovation roadmap with key updates to our multiomics strategy, reflecting disciplined execution of our long-term capital deployment plan.

We are encouraged by the strength we are seeing in the clinical markets, which now accounts for roughly 60% of total sequencing consumables. Clinical has proven more resilient and in some areas is exceeding expectations, reinforcing our confidence in the durability of clinical demand. We’re seeing this momentum across multiple clinical applications. In oncology, adoption continues to grow for comprehensive genomic profiling, and we are seeing increased interest in sequencing-intensive applications like minimal residual disease, which sets us up well for future clinical growth. In genetic disease testing, growth continues to be driven by expanding national genome programs and broader adoption of whole genome and whole exome sequencing for rare diseases. In reproductive health, we are seeing growth in NIPT sample volumes, particularly in the U.S. as more customers complete validation and ramp up clinical testing.

We continue to believe the long-term clinical opportunity remains significant with NGS adoption increasing as genomics becomes standard of care for therapy selection, early detection, monitoring, and expands into other disease types. While clinical demand has been encouraging, the research environment, particularly in the U.S., remains constrained amid ongoing NIH funding uncertainty. As expected, demand from this segment remains soft in Q2, with some labs delaying projects or holding off on hiring due to concerns about future grant availability. In the meantime, we are actively working with our customers to help them navigate this period separately. In China, our ability to export instruments is still restricted. We continue to engage with regulators to identify solutions that support our long-term sustainable presence in the country, and we will keep you updated on any material developments as we navigate these near-term market dynamics.

Our focus remains on disciplined execution and laying the foundation for long-term success. The focus underpins our commitment to achieving our financial targets and delivering high single-digit revenue growth and expanding non-GAAP operating margin to 26% by 2027. We are advancing towards these targets by delivering across our three key drivers: growing our core sequencing business, including continued progress with NovaSeq X transition, scalable entry into multiomics to complement our sequencing platforms, and expanding our services, data, and software offerings to provide more integrated customer solutions. Together, these priorities support our broader strategy and vision for the industry of shifting from a cost per gigabase model to delivering the highest quality biological insight at the lowest end-to-end cost. Now, I’d like to focus on the progress we’re making in our multiomics driver, which is centered on delivering differentiated solutions that integrate with our sequencers.

We’ve already announced our capabilities in single-cell CRISPR-based Perturb-seq and spatial analysis. In June, we took another step forward in proteomics with our announced acquisition of Somalogic from Standard BioTools. This acquisition expands our presence in affinity-based proteomics, a small but fast-growing segment of the broader proteomics market, and builds on the exclusive commercial relationship we have had with Somalogic since 2021. Somalogic is a key player in high-throughput proteomics. The SomaScan assay can analyze over 9,500 unique human proteins from small biological samples, delivering deep actionable insights for drug discovery, diagnostics, and health monitoring. What sets their technology apart is its proprietary SOMAmer binding, highly precise affinity reagents that bind to specific proteins with unmatched sensitivity, scalability, and reproducibility. This approach delivers broader coverage than other methods by reducing the time and cost of deep proteomics analysis. Bringing Somalogic into Illumina builds on our existing long-standing partnership.

As our collaboration progressed, our conviction in their technology deepened and we saw a clear opportunity to accelerate innovation by integrating their capabilities into our innovation engine. With Illumina’s expertise in product development and global commercial reach, we will scale their technology faster, expand customer adoption, and achieve greater operational efficiencies. Somalogic is a strong strategic fit for Illumina. Their technology, when paired with our platforms, offers a highly successful, scalable, and cost-efficient solution for proteomics discovery. By more deeply integrating proteomics in our ecosystem, we are expanding our ability to deliver greater biology insights through our end-to-end workflows. This enhances the value proposition of the NovaSeq X and creates the potential to extend Somalogic technology into other multiomics applications such as single cell and spatial. With this addition, we are advancing towards a more comprehensive multiomics portfolio spanning DNA, RNA methylation, and now proteomics.

We expect the transaction to close in the first half of 2026 after obtaining the necessary regulatory approvals. We are looking forward to welcoming the Somalogic team to Illumina and expanding the impact of proteomics together as we advance key elements of our multiomics strategy. We are also seeing strong momentum across our recent platform launches. One example is the MiSeq i100 Plus, our latest benchtop sequencer. Since launching late last year, we placed more than 500 instruments and are now seeing customers order additional units after just a few months of use. Customer feedback on the MiSeq i100 platform remains very positive. Customers are calling it a game changer, highlighting faster turnaround times, ease of use, and room temperature shipping and storage arrangements, all features that make sequencing more accessible for labs operating in a wide range of resource settings.

This reduces reliance on centralized labs, shortens diagnosis turnaround time, and gives customers greater autonomy for running oncology, infectious disease, and other clinical applications. These features are especially attractive to labs adopting NGS for the first time, as well as those in emerging markets. The MiSeq i100 platform currently supports 18 proven workflows, including nine fully integrated from library prep through analysis. This level of integration reflects a broader shift in how we approach innovation, grounded in deeper customer insights and close collaboration throughout development. MiSeq i100 Plus sets a new standard for the future of Illumina innovation, optimizing for complete end-to-end workflows that lower barriers to adoption and deliver high-quality insights at scale. Before I hand it over to Ankur, I want to briefly share our views on the remainder of 2025.

We are encouraged by the momentum in our Q2 results, the progress of our innovation roadmap, and we remain focused on disciplined execution. However, we continue to approach the second half of the year with caution given the ongoing funding uncertainties in the U.S. research market. That said, we are raising our guidance for total company revenue growth as well as total reported revenue, non-GAAP operating margin, and non-GAAP EPS, reflecting strong execution and operating discipline across the organization. I will now turn it over to Ankur to provide more detail on our results and outlook before we move into Q&A.

Ankur Dhingra, Chief Financial Officer, Illumina: Thank you, Jacob, and good afternoon, everyone. I will give you an overview of our second quarter financial results, provide more color about revenue, expenses, earnings, and developments on our balance sheet and capital deployment, and then speak about our outlook going forward. Before I get into the details of the financial performance, let me provide a high-level view of how the second quarter plays in Q2. We made further progress on our long-range goals and delivered results exceeding our expectations for the quarter. Revenue, although lower year over year, came in at the high end of our guidance range, driven by strength in high-throughput consumables. We saw strong organic margin expansion and EPS of $1.19, which well exceeded the top of our guidance range. As expected, research customers, especially the U.S. academic and government customers, continue to manage their budgets tightly in the face of funding constraints.

The trends in Q2 were generally in line with what we saw in the later part of Q1. On the other hand, our clinical customers continue to invest in expanding their portfolio and scaling current on-market tests. Our Greater China business was slightly better than the guide, and our customers in Greater China continue to be very engaged and supportive of Illumina’s differentiated technology. Sales of consumables have held up well, and we remain in discussion with the relevant authorities. Now let me provide you details of the financial performance. Second quarter revenue of $1.06 billion was down approximately 3% year over year on both constant currency and reported basis. Greater China revenue of $63 million was slightly ahead of expectations and represented a $12 million decline from the second quarter of 2024. Excluding Greater China, Illumina revenue was down approximately 2% on a constant currency basis.

Sequencing consumables revenue of $740 million was approximately flat year over year and up approximately 6% sequentially on a reported basis. High-throughput consumables grew both sequentially and year over year, including a greater than 10% sequential growth in NovaSeq X consumables revenue. Strong growth in the clinical segment, which now represents roughly 60% of our total sequencing consumables, is primarily driven by broader adoption of comprehensive genomic profiling and increased momentum in sequencing-intensive applications like minimal residual disease testing, which sets us up well for future growth. The X transition continues to progress as we’ve reported over 80% of the sequencing volumes for our research customers have already transitioned to X, with these customers continuing to face budget constraints. Our clinical customers continue with the transition, working through validation and balancing their investments between on market tests versus development of new tests.

The clinical X transition has progressed to roughly 55% in the quarter. In Q2, roughly 69% of high-throughput gigabases shipped and approximately 44% of high-throughput consumables revenue was on the NovaSeq X series. We continue to make progress on the high-throughput transition framework we previously disclosed and at the current pace, we anticipate that towards the end of 2025 approximately 50% of high-throughput revenue and approximately 75% of gigabases shipped to be a NovaSeq X series. We expect this to be driven by the clinical segment as customers scale on the NovaSeq X about sequencing activity. Total sequencing gigabase output on our connected high and mid-throughput instruments grew at a rate of more than 30% year over year, driven by robust strength in clinical but more muted growth from our research customers.

Although not a predictor of near-term revenue, giving gigabase output on connected instruments provides us a directional view of underlying applications, demand, and levels of utilization of our connected instruments and sequencing consumables. Revenue of $96 million was down approximately 18% year over year in Q2 as we saw the effect of constrained budgets from our high and mid-throughput research customers. The funnel pipelines held, but we saw extended decision times amongst our customers. Approximately 60% of the X’s placed in Q2 were to clinical customers. On the low-throughput side, MiSeq i100 Plus launch continues to progress quite well and our customers have had positive reviews for the platform and are excited about the MiSeq 100 base model launch next month in Greater China. Our instruments business was down approximately 40% due to restrictions on exportation.

Sequencing service and other revenue of $136 million was down approximately 5% year over year in line with expectations. The decrease was mainly due to the timing of certain strategic partnership revenues last year related to the AGD consortium. Excluding those items, our core services and informatics business grew high single digits moving to the rest of Illumina P&L. Non-GAAP gross margin was 69.4% for the second quarter, which increased 200 basis points quarter over quarter and remained stable year over year. We experienced favorable product mix in our sequencing business driven by high consumables revenue mix. Additionally, our ongoing Operating Excellence action plan initiatives contributed to improved gross margin performance this quarter. Tariffs had a partial impact this quarter with a net impact of approximately 110 basis points on our gross margin.

In Q2, non-GAAP operating expenses were $484 million, which is down approximately 6% or $32 million year over year. This reflects the effect of actions we’ve taken towards our long-range commitments of expanding margins while prioritizing key growth investments. As a result of our discipline, we did not experience the typical seasonal rise in OpEx that occurs post Q1. Non-GAAP operating margin was 23.8% in Q2, which increased 160 basis points year over year. Operating profit grew approximately 4% year over year on lower revenue, reflecting increased operating leverage from the improved cost structure. Looking at our results below the line, non-GAAP other expense, which is largely comprised of net interest expense, was $10 million and non-GAAP tax rate was 22.2%. Note that the recent tax legislation had no impact on our Q2 tax rate as it was enacted after quarter end.

Our average diluted shares were approximately 157 million, approximately 2 million lower than last quarter, driven by an increased level of share repurchases net of dilution from employee equity awards. Altogether, non-GAAP EPS of $1.19 per diluted share grew 9% year over year and came in well above our guidance range. Moving to cash flow, balance sheet, and capital allocation items for the quarter. Cash flow provided by operations was a robust $234 million, capital expenditures were $30 million, and free cash flow was $204 million. In Q2, we repurchased approximately 4.5 million shares of Illumina stock for $380 million at an average price of approximately $85 per share. We intend to continue to repurchase incremental shares over the course of the year as part of our approximate $800 million authorization remaining at the end of the quarter.

Additionally, we entered into a definitive agreement with Standard BioTools under which Illumina will acquire Somalogic and other specified assets for $350 million in cash payable at closing plus up to $75 million in near-term performance-based milestones and royalties. We expect the deal to close in the first half of 2026, subject to regulatory approvals. We remain hyper focused on maximizing our growth opportunities through capital allocation initiatives with high conviction in their contribution margins to a long term strategic plan. We ended the quarter with approximately $1.16 billion in cash, cash equivalents, and short term investments and gross leverage of approximately 1.7x gross debt to last 12 months EBITDA.

Now moving to guidance for the year 2025, as you may have seen in the press release, we have raised our operating margin and EPS expectations for 2025 and are holding Rest of the World constant currency revenue growth at the range we provided in May. We’ve also increased our revenue expectations from China. Let me provide further details starting with revenue. We’re raising our revenue guidance for the Greater China region by $25 million at the midpoint to approximately $200 million for the year. Although we remain restricted to export instruments into the country, we have seen resilience in consumables purchases and strong customer support that we believe will extend at least in part through Q3. For Rest of the World, we are reiterating our revenue guidance of growth between 0% to 2% on constant currency.

Hence, we now anticipate total Illumina constant currency revenue decline to be in the range of -0.5% to -2.5% including FX changes. We now expect reported Illumina revenue in the range of $4.23 to $4.31 billion. Now shifting into our product assumptions for Rest of the World, we now expect sequencing consumables growth between 1% and 3%, up from flat to 2%, driven by strong sequencing activity from our clinical customers and aligning our guidance with our reported revenue to include the impact of pricing actions. We’re lowering our expectations for Rest of the World’s sequencing instruments to a decline between 4% and 6% year over year including the impact of pricing actions. This decrease is largely due to conservatism from our research customers that we saw towards the end of Q2.

Although we still expect demand for NovaSeq X instruments to slightly increase and low throughput growth driven by placements of the MiSeq i100 Plus, we have seen weakness in mid throughput. Now moving down the P&L, as previously communicated, the Illumina team is making good progress on our operational excellence initiatives and lowering our cost base. Our cost discipline as well as increased revenue driven by Greater China outperformance and favorable FX rates has allowed us to raise our operating margin guidance by approximately 50 basis points to a range of 22% to 22.5%. Furthermore, earlier this month new legislation was passed that allows U.S.-based R&D spend to be tax deductible. Given the scale of Illumina’s large U.S. R&D base, we anticipate this bill having a positive effect on our tax rate for 2025 and beyond. We now expect our FY25 tax rate to be approximately 20%.

Given our increased level of share repurchases, we now expect a FY25 WASO of approximately 157 million shares. Bringing it all together, these developments have allowed us to raise our EPS guidance by $0.25 at the midpoint to a range of $4.45 to $4.55. Approximately $0.10 of this improvement is from tax changes, approximately $0.10 from China and the remainder from FX and operating margin improvements. To summarize, at the midpoint, our revised FY25 guidance reflects an increase in revenue of $50 million, an increase in operating margin of 50 basis points and an increase in EPS of $0.25. Now moving to the third quarter of 2025. For the third quarter, we expect revenue outside the Greater China region to grow between 1% and 2% year over year on a constant currency basis and revenue in Greater China region between $35 million and $45 million.

Together, we anticipate total Illumina constant currency revenue decline to be in the range of 1.5% to 2.5%. We expect non-GAAP operating margin of approximately 22%, non-GAAP tax rate to be approximately 16%, WASO of approximately 155 million shares and non-GAAP earnings per share in the range of $1.15 to $1.19 for Q4. This implies an uptick in revenue, roughly half coming from usual seasonality in instrument purchases. We expect the remainder to come from a combination of data service offerings like AGD and new products like our proteomic solution. In closing, I want to express my continued appreciation to the Illumina team for their relentless focus on execution and delivering another quarter of progress towards our short and long term goals, which is allowing us to raise the guidance for the year. Thank you for joining our call today.

I will now invite the operator to open the line for Q&A.

Conference Operator: At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. To give as many analysts as possible the opportunity to ask a question, please limit yourself to one question. If you have additional questions, please raise your hand again to be put into the queue. We will now pause a moment to assemble the queue. Thank you. Our first question will come from Vijay Kumar with Evercore. Please unmute and ask your question.

Ankur Dhingra, Chief Financial Officer, Illumina: Hey guys, thanks for taking my question and congrats on the print here and execution. Just maybe my one question is on the guide change. If you could just give us a bridge here, right? Looks like instruments came down by $25 million, China up $25 million, maybe some was FX. What else? Did consumables change? Is there anything else changing on microarrays? I think you mentioned new products here, Ankur, and maybe Jacob, you can talk about new products and pipeline. How big of a deal is it? I feel like street has not given enough attention on pipeline, but could this be more meaningful next year?

Jacob Thaysen, Chief Executive Officer, Illumina: Thank you, Vijay. Thank you very much, and thank you for your acknowledgment of our great quarter here. You’re absolutely right. We have a lot in our pip, and in fact, I did see the feedback from our early access customers here recently on both Constellation, on five base, and on our spatial solutions, and I would say we got very, very strong feedback from all three products. Our customers are very happy to get access to this before, as you reminded me earlier, we will probably more be launching it and get feedback from customers now. We’re engaging with them very early so we can get feedback on it, but they can also start to be excited about it and start to think about publication but also making grants. That is something that we believe will start to have an impact here already in 2026.

We do believe that this will be an addition of growth starting from 2026 and onwards. Ankur.

Ankur Dhingra, Chief Financial Officer, Illumina: Yeah, thanks Jacob. Thanks Vijay as well. To your question about the ins and outs for the guide here, let me tell you, let me parse it into two different ways based on the question you were asking. One is the guide’s up because of FX as well as increase in China in aggregate. If you think about it from the rest of the world perspective, we are reducing our expectations on the instrumentation side based on just what we’ve seen in Q2 overall and primarily coming from the research market. We’ve seen the pipeline work through during the quarter. At the same time, the offset for that instrumentation is in consumables for the rest of the world. We are increasing our expectations for the consumables business, which came in quite well in Q2 and as we see the pipeline for the rest of the year as well.

The second part on your question was around services. The two parts to that, one is we’ve talked about these data services business. If you recall, last year for the full year we had about $80 to $90 million full year business in that data services side coming from our AGD consortium, which was slightly heavily weighted towards the first half of the year last year, which is, if you recall, I made a commentary during our earnings call last quarter to say that comparison becomes favorable for us in the back half of this year. We are anticipating some business in that space and potentially some of the new services that we’re looking to launch here in the back half of the year. If all goes well, we will talk about it when we get to our 2026 guidance about what we anticipate from those services.

Conference Operator: Your next question will come from Subbu Nambi with Guggenheim. Please go ahead. Hey guys, thank you for taking my question. Have you guys seen any change in.

Ankur Dhingra, Chief Financial Officer, Illumina: Customer behavior in anticipation of competition? How are you preparing for that possibility? As we look at the Roche platform, one attribute that seems hard for you to match based on the current engineering is probably turnaround time. Building off of Vijay’s question, is there something in the pipeline that would allow you to be more competitive with a high-throughput platform when it comes to turnaround time?

Jacob Thaysen, Chief Executive Officer, Illumina: Yeah. Subbu, we definitely spend a lot of time thinking about competition, but I would say we spend even more time thinking about our customers and how we continue to serve them every day. This is something that I saw coming into this company, that I think we could do a better job on engaging with our customers. As I mentioned before, engaging them on early access to our technology, sharing the roadmap and other things. That’s kind of what our main focus is, to make sure that we are always supporting our customers. We continue to innovate. We have the largest focus and largest budget in this industry from an R&D perspective, and as you can anticipate, we also have a lot of things going on.

We have been out there speaking openly about what we are working on in the multiomics space, but clearly we are not sharing everything. We are also working on our instrumentations to address what we believe are the main growth markets going forward, which particularly is in the clinical space, also in the decentralized space. We are looking to the attributes, we are working a lot with our customers to understand also what are the attributes they are looking for. You are right, there are customer bases that are looking for fast turnaround time. This is a niche market in the NICU where you need to have a very fast result out and you will compromise maybe in the ease of use or even the quality of sequencing.

If you look for the vast majority, here we are looking in where an overnight run is more than reasonable and you can get all the information you want out. That’s the market we are focusing on, and our technology is very powerful to support that part of the business. In the end, our focus will be the highest quality insight for the lowest end to end, independent on what customer we are addressing.

Conference Operator: Your next question will come from Puneet Souda with Leerink Partners.

Brian Blanchett, Interim Head of Investor Relations, Illumina: Yeah, hi Jacob, Ankur, thanks for taking my questions. Just wondering, did you see any pull forward from the customers in the quarter? We were hearing some of the customers were stocking ahead of the tariffs during May and April as well. When you think about the customers on the clinical side, what are you hearing from some of your larger customers? The clinical transition rate here is slow, but this is more in line with what you had expected for the X transition. I mean, just trying to understand, you know, what are some of the larger customers with large fleets of X, large fleets of 6,000, telling you about transition to X. I think the question there is could that transition happen aggressively in the second half? What are you hearing from those customers? Thank you.

Jacob Thaysen, Chief Executive Officer, Illumina: Yeah, let me start to address the first one about whether we saw any pull forward. We didn’t. We saw, to that extent, a normal quarter. What we do see is that we have increased backlog. In the beginning, when we launched the X, obviously many customers needed to test out and started to validate, and it was unclear what volume and when they would shift that over. In that sense, it was more from hand to mouth, so to say, from an order perspective. Now many of our customers feel very comfortable running the X and running that in manufacturing mode or in production mode. That also means that they can better plan, which is now showing up in a higher backlog. That is where we expect it to be. As you mentioned, we continue to see the transition to the X happening.

If you dig down into the individual customer level, there are, of course, each customer has the plans they want to validate, they want to make sure they can. You can see many of our clinical customers are growing very rapidly. They do not want to compromise that growth. They have a very clear program for when they want to move it over. There’s no cliff happening where everything is moved over in one quarter or another quarter. It will happen for a customer saying now it’s time for us to shift over, and then you will see them, that customer, rapidly move over an assay or a number of assays. We expect that to happen fluently here. There will be maybe a quarter that will be a little higher, maybe a quarter that will be a little over from a transition perspective.

We don’t see any cliff happening anytime soon here at all.

Conference Operator: Our next question will come from Doug Schenkel with Wolfe. Your line is open. Please go ahead.

Good afternoon. Thank you for taking my question. I believe your guidance implies the company will generate about 2 points of revenue growth in the fourth quarter, excluding China, which would be the highest rate in at least two years, assuming I have that right. My first question is, do I have that right? If so, what’s the significance of that in the context of thinking of some of the pricing issues and other things that you’ve been working through over the last couple of years? Secondly, building off of that, and if I may just make three key observations heading into the question: one, exiting 2025, global research will be under 40% of sales, which still could decline given the NIH backdrop in 2026.

Even recognizing some of the good news we got out of the Senate today, but on a weighted basis, even recognizing maybe it’s not going to be as bad as feared, that could be a 2 to 3 point headwind next year. Second, China could remain under pressure, but China could be down to around 2% of sales exiting the year. Whether it’s a good guy or a bad guy, it’s getting small. Third, a clear good news, a clear good guy is clinical will be over 60% of sales growing double digits with much higher volume offset by some pricing. On a weighted basis that could grow six points. You got maybe a 2 to 3 point growth headwind when it comes to the research end market.

Mathematically, when I blend these things, it seems like you should be able to grow core revenue low single digits and maybe even mid single digits excluding China next year. Is this a reasonable framework as we sit here today? Is there anything else you’d want us to contemplate as we’re updating our models? Whether it’s upside contributions from pipeline, some caution when it comes to competition, anything would be helpful on all of these fronts. Thank you.

Jacob Thaysen, Chief Executive Officer, Illumina: Yes, thanks. That was a long question to really ask me whether I’m providing some guidance on 2026, which I think is a little too early. We are very much focusing on executing here on the business here for 2025, but we do see good momentum. What I will leave you with here is that we are, as we mentioned also last year when we put out our strategy, we expect ourselves and we expect that the X transition is the main driver for growth over the next period of time and it will be the one that we thereby start to step into growth. We expect 2026 to look better than 2025 and 2027 to look better than 2026. That’s kind of in the logic of things.

As you also mentioned, there are of course ins and outs, but our main growth driver will be going forward also in the clinical space. I think that is very much supported by the evidence of all our clinical customers of the result they’re showing. We continue to see that DX will be the main driver of this. We also expect that multiomics will still start to add some at least 1% point of growth here coming into 2026, 2027, probably more at the 2027 level. That’s where we are today. We do believe that the future is very exciting. The markets we are serving are large. Yes, there will be ins and outs and we will be focusing on the business that we can fully control, which is of course more than 95% of our business, which is outside Greater China.

Conference Operator: Your next question will come from Evercore with Bernstein.

Ankur Dhingra, Chief Financial Officer, Illumina: Hi there.

Conference Operator: Good afternoon. Thanks so much for taking the question.

Ankur Dhingra, Chief Financial Officer, Illumina: Following up on one of your answers, you said that you didn’t see any.

Conference Operator: Pull forward in advance of tariffs, what about the China consumables, how much of that, if any, was pulled forward, maybe in advance of, you know, from current customers worried about potentially not being.

Ankur Dhingra, Chief Financial Officer, Illumina: Able to buy more sequencing consumables in the.

Conference Operator: Not so distant future. To that point, is it fair to say that your guidance increase for Greater China could be quite specific to 2025 and not necessarily a sign of an.

Ankur Dhingra, Chief Financial Officer, Illumina: Improving outlook for 2026?

Jacob Thaysen, Chief Executive Officer, Illumina: Yeah. Look, Yves, let me go back and talk about China. Even though I do not like to spend too much time on a very small part of our business, just to put it in context, here is.

Ankur Dhingra, Chief Financial Officer, Illumina: That.

Jacob Thaysen, Chief Executive Officer, Illumina: I’m very pleased with what I see. Jenny, our General Manager in China, and the Chinese team, what they are doing, they’re doing an amazing job to support our customers out there. I think it speaks volumes also that we continue to see a lot of interest from our customers. I think the feedback we’re getting from customers is that they really want us to stay in China based on the high quality we provide, the innovations, and of course the ecosystem that is very important for the Chinese customers also. We do see a lot of interest from them. As you also mentioned, overall under the current circumstances, the situation is unsustainable. We continue to work very diligently with the regulators to get a resolution.

From a pull forward perspective, I think we saw some of that maybe in Q1, in the first quarter, but we don’t see that right now. I think we are more into a natural run rate for the business and that’s also what we have. We feel good about how we have guided for China and yeah.

Ankur Dhingra, Chief Financial Officer, Illumina: Eve, I would add only a couple things. Thanks, Jacob. Pull forward in the rest of the world outside Greater China, really not much of a pull forward. We did see good orders. Just a reminder for the largest part of the business, which is high-throughput consumables on X, there is a limited shelf life. The pull forward really cannot be significant. We saw orders for future shipping, but not necessarily a pull forward in shipments during Q2. To your second part about Greater China, as Jacob said, we are in discussion, but the raise of guidance in Greater China for Q3, you’re right, we’re not thinking about it for the long term. It is for the current quarter. Our working model there, as Jacob is saying, is we’re in discussion with the authorities to get to a constructive resolution here for the long run.

Conference Operator: Your next question will come from David Westenberg with Piper Sandler.

Brian Blanchett, Interim Head of Investor Relations, Illumina: Hi, thanks for taking the question and congrats on a good quarter here. I want to stay with the clinical cliff. I know that clinical has been a great market actually for you the last three years relative to academics, but maybe there is a little bit of some uncertainty from some investors. Can you talk about spending patterns that you’ve seen from clinical customers and maybe even isolate some that have had it since the very beginning, the first year, and what their spending has looked like as we look now into Q3 and if there’s any granularity in terms of customer transition patterns, like their entire fleet versus a portion of their fleet and how that’s kind of impacting spending in clinical. Secondly, in this transition, you’ve also mentioned this is clinical, it only went from 43% to 44% of the volume on X.

If you have a big jump in X in the back half of the year driven by clinical, why wouldn’t that see a revenue drop there? Thank you for taking the question.

Jacob Thaysen, Chief Executive Officer, Illumina: Okay. Hey, Dave. Thanks for that. Overall, let me start with just positioning this a little bit and then we can have Ankur digging further into the details. You’re absolutely right that the clinical part of our business is very strong. I truly believe this is going to continue to be a strong market force for the foreseeable future, which is quite far out there. The markets are very attractive. We continue to see a lot of opportunities in the oncology space. As we all know, there’s a lot going on on the therapy selection part of it, but we’re just opening up for the minimal residual disease testing. In the end, screening will also be meaningful eventually. That’s a long horizon on the opportunity in the clinical oncology space.

Actually, in the genetic disease testing area, also rare diseases and others, we see a lot of interest both to expand rare disease testing for a broader part of the population. Rare diseases are not as rare as you would think, and then also shifting into newborn screening, which is going to be a large opportunity going forward. We absolutely agree that there are big opportunities in the clinical space and it will be a main driver for Illumina going forward. Now, as you mentioned, down into the details around what a transition looks like, I’ll start by saying that overall, most customers, if they have been on the 6000, are making a decision that when they shift over to the NovaSeq X, most of the time they are not only just trying to reduce the cost of the test, they’re actually trying to expand the test.

This is a very and highly competitive environment. For many of our customers, it’s about staying competitive. The way you do that is to provide even better assays for your customers, and that is by expanding them and providing more insights. Secondly, there are customers that will stay on the 6000 until the end of life, so to say for the assay, where they feel like they maybe have two years more end of life. From a finance perspective, it doesn’t make sense for them to spend the energy and the investment to shift it over to the NovaSeq X. That’s on the highest level of the transition. Ankur, do you have.

Ankur Dhingra, Chief Financial Officer, Illumina: I think that’s fairly good, Jacob. It’s not an overnight change. It takes validation, and it’s a step-by-step process. Dave, we’ve seen in the past as well, the transition quarter to quarter has not been a linear line. It is lumpy. Some moves in a quarter, some doesn’t. I’m not reading a whole lot into this, all to say that we suddenly have a big material change coming here within the next couple quarters either. Our goal still has been that overall the volume, 75% of the volume, shifts to X in the back half of the year or in the half two of this year. Based on what we’ve seen this quarter, it might be more towards the latter part of Q4, but then again it’ll be lumpy quarter to quarter.

Conference Operator: Your next question will come from Tycho Peterson with Jefferies.

Brian Blanchett, Interim Head of Investor Relations, Illumina: Hey, thanks. Understanding your instrument guidance overall here, how do you think? How should we think about the trajectory of X placements for the rest of the year? I’m asking because with X as a percentage of high-throughput revenues, it only increased by 1%. You went from 43% to 44% this past quarter. How do we get comfortable you can hit 50% by the end of the year? Can you also comment on what percentage of customers are now getting 30B reads? I know you introduced software to enable that, but that would have, I would think, some implications on consumables. On operating margins, you were much better than expected. Was that all tariff unwind or from the cost out programs or both?

Ankur Dhingra, Chief Financial Officer, Illumina: Thanks.

Brian Blanchett, Interim Head of Investor Relations, Illumina: Hey Tycho, were you asking about the 10 billion reads or, sorry, what was that question?

Jacob Thaysen, Chief Executive Officer, Illumina: 30B?

Brian Blanchett, Interim Head of Investor Relations, Illumina: Yeah, the version 1.3 software released from last year. The main question is about X placements.

Jacob Thaysen, Chief Executive Officer, Illumina: Let me start there on the X placement. I’d like to remind you also that we have very strong placements in Q4, with more than 90 placements, and also into Q1 where we also had 60 placements. Many of those customers that purchased and where we installed Xs are still using that, especially in the clinical space where we had the vast majority of instruments being placed, are still using and bringing them into their production. You would like to see that also have a meaningful impact here in the second half of the year. This won’t be a cliff at all, but you will continue to see the shift of the X transition for the rest of the year.

As we guided before, we still believe that on an average basis there’s between 50 and 60 instruments being placed per quarter, and there is an opportunity potential to see more instruments being placed in the fourth quarter depending on how we see budgets coming to fruition. On the flow cell itself, you’re right that with the 1.3 release of our software, we did a lot of work to improve and we will continue to do that on our customer experience. A part of that was also to improve some of the yield in the 25B, but we are not committing to a 30B at this point.

Ankur Dhingra, Chief Financial Officer, Illumina: I’ll cover the operating margin side. Tycho, bulk of the operating margin improvement was based on the cost actions, some of them from last year and then some based on the actions we took in the early part of the year here, beginning to get reflected in the P&L. The tariff side, we’ve started work on it and are beginning to see a pathway towards reducing the impact of tariffs. Not much of that was in our Q2 results per se. We think in the latter half of the year and certainly early 2026 we’ll begin to see some of those benefits begin to come through, but not in Q2. As I said during my call, we expect our OpEx to kind of run at that lower level, reflecting almost over $100 million annualized improvement in our OpEx right now based on what you’re seeing in Q2.

That’s a structural change that we have gone through in our cost structure, which obviously should set us up well for much better operating leverage going forward as revenue returns to growth.

Conference Operator: Your next question will come from Kyle Mikson with Canaccord.

Jacob Thaysen, Chief Executive Officer, Illumina: Yeah, hey guys, thanks for the questions. Nice quarter on the growth framework. Jacob, you talked about in the past. I think like volume growth in the 20 to 30% range, price decreases as well in the mid teens. Just was wondering if you could size how much of that volume growth will be from clinical versus research. I know there were some data points and assumptions that were talked about earlier.

Ankur Dhingra, Chief Financial Officer, Illumina: Just would love to hear your thoughts on that.

Jacob Thaysen, Chief Executive Officer, Illumina: Do you have the cushion to push price lower if you have to? If and when new competitive threats enter the fold, is that when Roche kind of unveils its pricing?

Ankur Dhingra, Chief Financial Officer, Illumina: Thanks.

Jacob Thaysen, Chief Executive Officer, Illumina: Yeah. We continue to see, as we mentioned also in prepared remarks, we continue to see strong volume growth with our customers. If you dig a little bit deeper into this quarter, I think it should be obvious also that clinical was stronger than the research segment. That was as anticipated because of all the ins and outs with NIH and other types of funding right now. I think that while it’s been a little bigger difference this time around, we do expect that we will see clinical growth be stronger on the long horizon simply because the opportunity there is larger. We do actually think that when we see multiomics starting to really take off, that will also start to improve on the research side of things. That might be a little further ahead in our strategic planning period here.

I think on the pricing perspective we are still very stable, and we are within the expected range of the pricing decline we are seeing on what we can do in pricing. Look, I mean we want to make sure we always understand our customer and what they need in order to optimize their performance. Of course, we are also having a conversation about if there are new applications that can be opened up by differentiating in pricing. That is something we always will have with our customers. I think there’s a saying out there that there might be competition that have a lower pricing, but in most circumstances Illumina have the best cost structure. We will always be able to compete if we choose to do so on pricing.

Conference Operator: Your next question will come from Dan Arias with Stifel. Star 6 will allow you to unmute. Dan.

Jacob Thaysen, Chief Executive Officer, Illumina: Hi guys, thanks for the questions.

Ankur Dhingra, Chief Financial Officer, Illumina: I was having some phone issues. Ankur, apologies if you touched on this already, but can you just talk a little bit about GV growth from here and high throughput? Do you think you can stay in that 30% range in 3Q and 4Q? If so, does that mean that we can still feel okay about that framework for 2026 that you’ve laid out, sort of mid-20s GV growth and then a mid teens pricing headwind as an offset? Thanks.

Jacob Thaysen, Chief Executive Officer, Illumina: Okay.

Ankur Dhingra, Chief Financial Officer, Illumina: Yeah, good question, Dan. We usually get that as part of the script. I talk about two things. One, generally to talk about the connected instruments, and when we look at our runs on those connected instruments in high throughput, that was above 30% overall. The dynamic that we saw during the quarter was clinical, as we’ve been talking about, remained quite strong. We did see some slowdown on the research side, especially in the U.S. broader research side of things, which was as anticipated given everything that’s going on in that space from a funding environment perspective. Looking forward, do I anticipate that it can stay above the 30% mark? We think so.

I think the clinical specifically and also at least rest of the world outside Greater China, though Greater China hasn’t been connected, staying above 30%, there’s still several structural support that is coming in terms of especially minimal residual disease (MRD) being a very attractive space. We’ve also seen during the quarter a good movement on the reimbursement side in the genetic disease side of tests and otherwise. We are seeing the adoption of whole genome gaining traction even from a reimbursement perspective. There are good structural developments, especially on the clinical side of things, that can drive the GB growth on the research side of things. Think our play with the proteomics should be a net new incremental from a sequencing perspective.

As we close the deal or we launch the IPP here, that tool also attempts to bring some of the proteomics into the sequencing side of the business. It has always been heavily on the mass spec side as a market, but as we bring that into the sequencing ecosystem, that’s another additional area that we’re adding into the sequencing ecosystem.

Jacob Thaysen, Chief Executive Officer, Illumina: Just to highlight, I think we mentioned this before, and I still stay with this, the opportunity in this space is tremendous and the activity in this space continues to be very, very strong. I don’t see why there would be any reason for not continuing with a very strong growth. Granted, this will shift a little bit quarter to quarter, but if you look at the longer horizon, the opportunity in this space is very, very solid and we’re seeing that in both, as we mentioned before, oncology and genetic disease testing. The next thing that will happen is that you will look into new areas that we haven’t really focused on right now, like cardiovascular, neurodiseases, and other things. This will be a long term with a very strong growth opportunity.

Conference Operator: Your next question will come from Dan Brennan with TD Cowen.

Ankur Dhingra, Chief Financial Officer, Illumina: Great, thank you for taking the questions. Maybe just a couple.

Jacob Thaysen, Chief Executive Officer, Illumina: Maybe on the mid throughput.

Ankur Dhingra, Chief Financial Officer, Illumina: I think Ankur, you made a comment when you were updating the guide about mid-throughput trends maybe not as robust. Can you speak to that? The market, maybe competition, and then on the earnings raise for the R&D expensing, is that just on a go-forward basis or is that retroactive to the beginning of the year? Just wondering if you kind of baked in the full amount. The final point would just be, can you remind us on the broader U.S. academic customer base? I know you’ve given us some color in the past. What’s kind of assumed now in the full-year guide from a revenue standpoint year over year, and has that changed with the updated guide? Thank you.

Jacob Thaysen, Chief Executive Officer, Illumina: I’ll start talking about the mid throughput here. Just to put it in some perspective, most of our high throughput customers, when they purchase an X, they do that to run high volume and with high utilization, and they do that in a production-like logic. They know when they buy one that they want to run it every day in and out. When you look into the mid throughput segment, which is much stronger associated with the research space, I think we have approximately 75% of that business, the 1K 2K business sitting there. These are more project-based, and thereby also there’s a consideration when there are some conservatives built in for the different companies or even from the academic institutions. They are pushing out the decision to acquire new instruments, and we are seeing that the decision-making process is taking longer time.

We are also seeing that even though they still run the project, we are also seeing that some of that is being outsourced to service providers. The business is still there, but it shows up in the high throughput segment. We do anticipate when the macro environment will change that we’ll see some of those customers go back and want to in-source some of the testing because they feel and they want to keep their samples in house. At the same time, the MiSeq i100 Plus has been super successful here. The launch, we placed more than 500 instruments from the start of our launch in late 2024, and obviously it is in the low throughput area. With the capacity that can be done in the MyCard100, it is pushing into what I would call the low end of the mid throughput area.

We are also seeing dynamic coming from that end. Finally, you’re right, this space is where we see most competition. That hasn’t really changed; the dynamic in that space hasn’t changed over the past quarter. I wouldn’t attribute any of the softness you see right now specifically to competition. That’s high level how I see things right now.

Ankur Dhingra, Chief Financial Officer, Illumina: Yeah, sure. I’ll address the second part of the question there on the academia customer base. Our guide and expectations for that part of the market remain unchanged. What we saw in Q2 from a business trend perspective was somewhat similar to what we saw towards the latter part of Q1. Our expectation there, I believe we said 15% decline for the year for that part of the business in the last call. It’s still the same.

Conference Operator: This concludes the Q&A section of the call. I would now like to turn the call back to Brian Blanchett for closing remarks.

Brian Blanchett, Interim Head of Investor Relations, Illumina: Thank you for joining us today. A replay of this call will be available in the Investor section of our website. This concludes our call and we look forward to seeing you at our upcoming events. Thank you.

Conference Operator: This concludes today’s call. We thank you for your participation. You may disconnect at this time and have a great day.

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