Skip to content
    ILMN
    Earnings call· Jun 2025(Q2 FY25)

    ILLUMINA Q2 FY25 earnings call ILMN

    Jul 31, 2025 Source

    Executive summary

    Illumina Q2 FY25 — Strong Clinical Demand and Raised FY25 Guidance

    Illumina delivered Q2 FY25 results exceeding expectations, driven by strong execution and cost discipline. While clinical demand remains robust, particularly for NovaSeq X consumables, the U.S. research market and China instrument exports continue to face headwinds. The company raised its full-year guidance, reflecting confidence in its operational efficiency and strategic focus on core sequencing, multiomics, and integrated customer solutions.

    Highlights

    5

    • Revenue at the high end of guidance range at approximately $1.06 billion.

    • Non-GAAP operating margin of 23.8%, exceeding expectations and up 160 basis points year-over-year.

    • Non-GAAP EPS of $1.19, well above guidance and grew 9% year-over-year.

    • Clinical markets now account for roughly 60% of total sequencing consumables, showing resilience and exceeding expectations.

    • NovaSeq X transition progressing, with 44% of high-throughput consumables revenue and 69% of gigabases shipped on NovaSeq X series in Q2.

    Concerns

    4

    • Total revenue down approximately 3% year-over-year on a constant currency basis.

    • U.S. research environment remains constrained amid ongoing NIH funding uncertainty, leading to soft demand.

    • Ability to export instruments to China is still restricted, causing instruments business in Greater China to be down approximately 40%.

    • Sequencing instruments revenue down approximately 18% year-over-year in Q2 due to constrained budgets from research customers.

    Guidance & targets

    20
    CategoryTargetConfidence
    Long-term Revenue Growth
    high single-digit revenue growth
    high materiality
    High
    Long-term Non-GAAP Operating Margin
    26%
    high materiality
    High
    Greater China Revenue
    approximately $200 million
    medium materiality
    High
    Rest of World Revenue Growth (constant currency)
    0% to 2%
    high materiality
    High
    Total Revenue Decline (constant currency)
    minus 0.5% to minus 2.5%
    high materiality
    High
    Reported Revenue
    $4.23 billion to $4.31 billion
    high materiality
    High
    Rest of World Sequencing Consumables Growth
    1% and 3%
    medium materiality
    High
    Rest of World Sequencing Instruments Growth
    decline between 4% and 6%
    medium materiality
    High
    Non-GAAP Operating Margin
    22% to 22.5%
    high materiality
    High
    FY Tax Rate
    approximately 20%
    medium materiality
    High
    Weighted Average Shares Outstanding (WASO)
    approximately 157 million shares
    low materiality
    High
    Non-GAAP EPS
    $4.45 to $4.55
    high materiality
    High
    Q3 Rest of World Revenue Growth (constant currency)
    1% and 2%
    medium materiality
    High
    Q3 Greater China Revenue
    $35 million and $45 million
    medium materiality
    High
    Q3 Total Revenue Decline (constant currency)
    1.5% to 2.5%
    high materiality
    High
    Q3 Non-GAAP Operating Margin
    approximately 22%
    high materiality
    High
    Q3 Non-GAAP Tax Rate
    approximately 16%
    medium materiality
    High
    Q3 Weighted Average Shares Outstanding (WASO)
    approximately 155 million shares
    low materiality
    High
    Q3 Non-GAAP EPS
    $1.15 to $1.19
    high materiality
    High
    Q4 Revenue Uptick Drivers
    Uptick in revenue
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Greater China
    Revenue was slightly ahead of expectations, representing a $12 million decline from Q2 2024. This was driven by resilience in consumables purchases and strong customer support despite instrument export restrictions.
    		$63 milliondown $12 million——
    Ex-Greater China
    Revenue declined approximately 2% on a constant currency basis, primarily due to softness in the U.S. research market.
    		—down approximately 2%——

    Operational metrics

    31
    Total Revenue
    $1.06 billiondown approximately 3% year-over-year
    Q2 FY25

    At the high end of guidance range on a constant currency and reported basis.

    Non-GAAP Operating Margin
    23.8%increased 160 basis points year-over-year
    Q2 FY25

    Above expectations, reflecting increased operating leverage from improved cost structure.

    Non-GAAP EPS
    $1.19grew 9% year-over-year
    Q2 FY25

    Well above guidance range.

    Clinical Sequencing Consumables Revenue Mix
    60%
    Q2 FY25

    Clinical markets now account for roughly 60% of total sequencing consumables, showing resilience.

    NovaSeq X Placements
    greater than 50
    Q2 FY25

    Ongoing adoption of the NovaSeq X platform.

    Sequencing Consumables Revenue
    $740 millionapproximately flat year-over-year; up approximately 6% sequentially
    Q2 FY25

    Reported basis.

    NovaSeq X Consumables Revenue Growth
    greater than 10%sequential growth
    Q2 FY25

    Strong sequential growth, especially among NovaSeq X users.

    Clinical NovaSeq X Transition Rate
    55%
    Q2 FY25

    Percentage of clinical sequencing volume transitioned to NovaSeq X.

    High-throughput Gigabases Shipped on NovaSeq X
    69%
    Q2 FY25

    Percentage of total high-throughput gigabases shipped on NovaSeq X series.

    High-throughput Consumables Revenue on NovaSeq X
    44%
    Q2 FY25

    Percentage of total high-throughput consumables revenue on NovaSeq X series.

    Target High-throughput Revenue on NovaSeq X
    approximately 50%
    end of FY25

    Anticipated percentage of high-throughput revenue on NovaSeq X series, driven by clinical segment scaling.

    Target High-throughput Gigabases Shipped on NovaSeq X
    approximately 75%
    end of FY25

    Anticipated percentage of high-throughput gigabases shipped on NovaSeq X series, driven by clinical segment scaling.

    Total Sequencing Gigabase Output Growth
    more than 30%year-over-year
    Q2 FY25

    On connected, high- and mid-throughput instruments, driven by robust clinical strength, but more muted growth from research customers.

    Sequencing Instruments Revenue
    $96 milliondown approximately 18% year-over-year
    Q2 FY25

    Effect of constrained budgets from high- and mid-throughput research customers.

    NovaSeq X Placements to Clinical Customers
    60%
    Q2 FY25

    Approximately 60% of NovaSeq X instruments placed in Q2 were to clinical customers.

    Greater China Instruments Business Growth
    down approximately 40%
    Q2 FY25

    Due to restrictions on exportation.

    Sequencing Service and Other Revenue
    $136 milliondown approximately 5% year-over-year
    Q2 FY25

    Mainly due to the timing of certain strategic partnership revenues last year related to the AGD consortium.

    Core Services and Informatics Business Growth
    high single digits
    Q2 FY25

    Excluding the timing of certain strategic partnership revenues.

    Non-GAAP Gross Margin
    69.4%increased 200 basis points quarter-over-quarter; stable year-over-year
    Q2 FY25

    Improved gross margin performance.

    Tariff Impact on Gross Margin
    approximately 110
    Q2 FY25

    Net impact on gross margin.

    Non-GAAP Operating Expenses
    $484 milliondown approximately 6% or $32 million year-over-year
    Q2 FY25

    Reflects actions towards expanding margins and prioritizing key growth investments.

    Non-GAAP Other Expense
    $10 million
    Q2 FY25

    Largely comprised of net interest expense.

    Non-GAAP Tax Rate
    22.2%
    Q2 FY25

    Recent tax legislation had no impact on Q2 tax rate.

    Average Diluted Shares
    approximately 157 millionapproximately 2 million lower than last quarter
    Q2 FY25

    Driven by increased share repurchases, net of dilution from employee equity awards.

    Capital Expenditures
    $30 million
    Q2 FY25

    Capital expenditures for the quarter.

    Share Repurchases
    $380 million
    Q2 FY25

    Repurchased shares of Illumina stock.

    Remaining Share Repurchase Authorization
    approximate $800 million
    end of Q2 FY25

    Remaining authorization at the end of the quarter.

    Cash, Cash Equivalents and Short-Term Investments
    approximately $1.16 billion
    end of Q2 FY25

    Balance at the end of the quarter.

    Gross Leverage Ratio
    approximately 1.7x
    Q2 FY25

    Gross leverage ratio.

    Annualized OpEx Improvement
    over $100 million
    Q2 FY25 annualized

    Annualized improvement in OpEx based on Q2 performance, reflecting structural change in cost structure.

    Academic Customer Base Revenue Growth
    15% decline
    FY25

    Unchanged expectation for this market segment for the full year.

    Industry KPIs

    9
    MetricValueDetails
    FCF conversion ROIC$204 millionUSD
    Revenue EPS guidanceFY25 revenue: $4.23B-$4.31B; FY25 non-GAAP EPS: $4.45-$4.55USD
    China revenue exposure$63 millionUSD
    Pricing price realizationwithin the expected range
    Diagnostics testing demandstrong growth
    M a contribution synergies$350 million cash + up to $75 million milestonesUSD
    Segment organic revenue growthdown approximately 2%%
    Instruments vs consumables services mix60% clinical / 40% research%
    Organic core revenue growth by end marketdown approximately 3%%

    Product announcements

    2
    ProductTypeDetails
    MiSeq i100 Pluslaunch
    MiSeq 100 base modellaunch

    Deals & partnerships

    1
    SomaLogic (from Standard BioTools)Acquisition of SomaLogic to expand presence in affinity-based proteomics and integrate capabilities into Illumina's innovation engine.$350 million in cash payable at closing, plus up to $75 million in near-term performance-based milestones and royalties

    SomaLogic's SomaScan Assay analyzes over 9,500 unique human proteins from small biological samples using proprietary SOMAmer binding reagents. This approach provides broader coverage, sensitivity, scalability, and reproducibility, reducing time and cost for proteomics analysis. The transaction is subject to regulatory approvals.

    Risks & headwinds

    3
    U.S. Research Market Funding Uncertaintyongoing; second half of 2025

    soft demand in Q2; academic customer base expected to decline 15% for FY25

    Mitigation: actively working with customers to help them navigate this period

    China Instrument Export Restrictionsongoing

    instruments business down approximately 40% in Q2

    Mitigation: continue to engage with regulators to identify solutions that supports our long-term sustainable presence in the country

    Tariff Impact on Gross MarginQ2 FY25; expected to see benefits in latter half of FY25 and early FY26

    approximately 110 basis points impact in Q2

    Mitigation: started work on it and beginning to see a pathway towards reducing the impact of tariffs

    What to watch in Q3 FY25

    5

    NovaSeq X high-throughput revenue transition

    end of 2025
    Current44% of high-throughput consumables revenue on NovaSeq X series in Q2
    TargetApproximately 50% of high-throughput revenue on NovaSeq X series

    Why it matters

    Indicates the pace of adoption of the new platform, which is a key driver for future revenue growth and margin expansion.

    And at the current pace, we anticipate that towards the end of 2025, approximately 50% of high throughput revenue and approximately 75% of Gbs shipped to be a NovaSeq X series.

    Q&A highlights

    5

    Asked for a detailed bridge of the FY25 guidance changes, including instrument and consumables shifts, and the potential impact of new pipeline products (constellation, 5-base, spatial solutions) on 2026 growth.

    Management explained that lowered instrument expectations due to research market conservatism were offset by increased expectations for consumables. They also highlighted anticipated business from data services and new products in H2. Jacob noted strong early access feedback for constellation, 5-base, and spatial solutions, expecting them to impact growth from 2026 onwards.

    “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... But at the same time, the offset for that instrumentation is in consumables for the rest of the world.”

    asked by Vijay Kumar · answered by Ankur Dhingra

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Performance Highlights

    Illumina reported Q2 FY25 revenue of $1.06 billion, down 3% year-over-year on a constant currency basis, but at the high end of guidance. Strong execution led to a non-GAAP operating margin of 23.8% and non-GAAP EPS of $1.19, both exceeding expectations. This performance reflects significant progress despite ongoing market challenges🌐.

    02

    Clinical Market Resilience

    The clinical market demonstrated robust growth, now accounting for approximately 60% of total sequencing consumables. This momentum is driven by increasing adoption of comprehensive genomic profiling in oncology, growth in sequencing-intensive applications like minimal residual disease (MRD), and expanding national genome programs for rare diseases. NIPT sample volumes are also growing, particularly in the U.S., reinforcing confidence in durable clinical demand.

    03

    Research Market Constraints & China Restrictions

    The U.S. research environment remains constrained due to NIH funding uncertainty, leading to delayed projects and hiring freezes, resulting in soft demand in Q2. Additionally, instrument exports to China are still restricted, impacting the instruments business, which was down approximately 40% in the region. Management is actively engaging with regulators to find solutions for its long-term presence in China.

    04

    NovaSeq X Transition & MiSeq i100 Plus Success

    The NovaSeq X platform transition continues to progress, with approximately 44% of high-throughput consumables revenue and 69% of gigabases shipped on the NovaSeq X series in Q2. The MiSeq i100 Plus, a benchtop sequencer launched late last year, has seen over 500 placements and positive customer feedback for its faster turnaround times, ease of use, and room temperature reagents, making sequencing more accessible.

    05

    Multiomics Strategy & SomaLogic Acquisition

    Illumina is advancing its multiomics strategy to integrate differentiated solutions with its sequencing platforms. The company announced the acquisition of SomaLogic from Standard BioTools for $350 million cash plus up to $75 million in milestones. This acquisition, expected to close in H1 2026, expands Illumina's presence in high-throughput proteomics, enhancing its end-to-end workflows across DNA, RNA, methylation, and proteomics.

    06

    Raised FY25 Outlook

    The company raised its full-year FY25 guidance for non-GAAP operating margin to 22-22.5% and non-GAAP EPS to $4.45-$4.55, reflecting operational excellence and cost discipline. This includes a $25 million increase in Greater China revenue guidance to $200 million and an improved outlook for rest-of-world sequencing consumables growth, partially offset by lowered expectations for instruments.

    AI-generated summary of the company’s earnings call. Not investment advice.