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    ILMN
    Earnings call· Jun 2026(Q2 FY26)

    ILLUMINA Q2 FY26 earnings call ILMN

    Jul 30, 2026 Source

    Executive summary

    Illumina Q2 FY26 — Strong Clinical Demand Drives Raised Full-Year Guidance

    Illumina delivered a strong Q2 FY26, driven by robust demand from clinical customers and continued high NovaSeq X placements, leading to raised full-year revenue and EPS guidance. The company is expanding its multiomics portfolio and seeing early traction with BioInsight, while navigating persistent caution in research markets and managing inflationary cost pressures. Management remains confident in achieving high single-digit revenue growth in 2027, supported by the expanding NovaSeq X installed base.

    Highlights

    5

    • Revenue grew 9.5% year-over-year to $1.16 billion, with Rest of World organic revenue up 8.1%.

    • NovaSeq X placements remained high with more than 95 units placed in the quarter.

    • Clinical sequencing consumables revenue grew 15% ex China, with U.S./Canada growing above 20%.

    • Non-GAAP EPS of $1.31 grew 10% year-over-year, exceeding guidance.

    • Full-year 2026 guidance for Rest of World organic revenue growth was raised to greater than 5% and diluted EPS to $5.30-$5.40.

    Concerns

    3

    • Research and academic markets remain cautious, with mid- to high single-digit declines expected for 2026.

    • Slower growth in Europe, Middle East, and Latin America for sequencing consumables due to ongoing near-term dynamics.

    • Higher freight and memory costs were absorbed in the quarter, impacting gross margin.

    Guidance & targets

    15
    CategoryTargetConfidence
    Full-year 2026 Rest of World organic revenue growth
    greater than 5%
    high materiality
    High
    Full-year 2026 reported revenue
    $4.60 billion to $4.64 billion
    high materiality
    High
    Full-year 2026 Rest of World organic sequencing consumables growth
    mid-single-digit growth
    medium materiality
    High
    Full-year 2026 clinical sequencing consumables growth
    mid-teens growth
    high materiality
    High
    Full-year 2026 research and applied consumables growth
    mid- to high single-digit declines
    medium materiality
    Medium
    Full-year 2026 sequencing instruments Rest of World organic growth
    low single digits
    medium materiality
    High
    Full-year 2026 non-GAAP operating margin
    23.4% to 23.6%
    high materiality
    High
    Full-year 2026 diluted EPS
    $5.30 to $5.40
    high materiality
    High
    Q3 2026 Rest of World organic revenue growth
    approximately 4.5%
    medium materiality
    High
    Q3 2026 reported revenue
    $1.14 billion to $1.16 billion
    medium materiality
    High
    Q3 2026 non-GAAP EPS
    $1.33 to $1.38
    medium materiality
    High
    Q3 2026 non-GAAP operating margin
    approximately 24%
    medium materiality
    High
    New products contribution to growth
    1 to 2 points
    medium materiality
    Medium
    Revenue growth
    high single-digit revenue growth
    high materiality
    High
    Clinical volume conversion to NovaSeq X
    80% to 85%
    medium materiality
    High

    Operational metrics

    27
    Non-GAAP gross margin
    68.2%
    Q2 FY26

    Came in slightly better than expectations despite product mix from high instrument sales and absorbed higher freight and memory costs.

    Non-GAAP operating expenses
    $530 million
    Q2 FY26

    Includes SomaLogic expenses and approximately 60 basis points of EPS-neutral deferred compensation.

    Non-GAAP operating margin
    22.5%
    Q2 FY26

    Above guidance, driven by higher volume and absorption of inflationary effects.

    Non-GAAP net interest and other expense
    $8 million
    Q2 FY26
    Non-GAAP tax rate
    20.5%
    Q2 FY26
    Average diluted shares
    153 million
    Q2 FY26

    Reflecting continued share buybacks.

    Cash flow provided by operations
    $201 million
    Q2 FY26

    Below usual trend due to timing of tax payments and higher inventory.

    Capital expenditures
    $39 million
    Q2 FY26
    Shares repurchased
    0.9 million
    Q2 FY26
    Remaining share repurchase authorization
    $1.8 billion
    Q2 FY26

    Intends to continue repurchasing shares opportunistically.

    Cash, cash equivalents and short-term investments
    $1.17 billion
    Q2 FY26

    Balance at quarter end.

    Total debt
    $1.99 billion
    Q2 FY26

    Balance at quarter end.

    Leverage ratio
    1.6x
    Q2 FY26

    At quarter end.

    Sequencing consumables revenue
    $775 millionup 5% year-over-year
    Q2 FY26

    High throughput volume drove most of the revenue growth.

    Sequencing consumables in clinical markets growth
    15%
    Q2 FY26

    U.S./Canada region continued to grow above 20%.

    Sequencing consumables in research and applied markets decline
    7%
    Q2 FY26

    Year-to-date trends consistent with outlook, but saw 9% QoQ growth.

    NovaSeq X placements
    more than 95
    Q2 FY26

    Demand remains high, especially among large clinical customers for multiunit capacity expansion orders.

    NovaSeq 6000 placements
    over 10
    Q2 FY26

    Some consumers plan to remain on this platform for years.

    Volume transitioned to NovaSeq X
    83%
    Q2 FY26

    As of Q2.

    Revenue transitioned to NovaSeq X
    59%
    Q2 FY26

    As of Q2.

    Clinical volume on NovaSeq X
    78%
    Q2 FY26

    As of Q2.

    Total sequencing gigabase output growth
    more than 30%year-over-year
    Q2 FY26

    Clinical growth well above this rate.

    Sequencing instruments revenue
    $125 millionup 31% year-over-year
    Q2 FY26

    Driven by increased sales of NovaSeq X and MiSeq i100.

    Sequencing service and other revenue
    $154 millionup 14%
    Q2 FY26

    Gaining traction in Billion Cell Atlas program.

    Microarrays and other revenue
    $105 millionup 21% reported
    Q2 FY26

    Includes SomaLogic revenue, which tracks towards high end of deal expectations. Declined 4% on Rest of World organic basis.

    Billion Cell Atlas cells delivered
    over 300 million
    to date

    Biopharma interest continues to grow, with 6 partners total.

    Q4 extra week revenue contribution
    0.5 point
    Q4 FY26

    Expected revenue contribution from an extra week in Q4, largely a consumables story.

    Industry KPIs

    5
    MetricValueDetails
    Revenue EPS guidancegreater than 5% (FY26 Rest of World organic revenue); $4.60B-$4.64B (FY26 reported revenue); 23.4%-23.6% (FY26 non-GAAP operating margin); $5.30-$5.40 (FY26 diluted EPS)%; USD; %; USD
    China revenue exposure—
    M a contribution synergiestracking towards high end of deal expectations
    Instruments vs consumables services mix$775M (sequencing consumables); $125M (sequencing instruments); $154M (sequencing service and other)USD
    Organic core revenue growth by end market8.1% (Rest of World organic); 15% (clinical ex China); >20% (clinical U.S./Canada); declined 7% (research and applied Rest of World)%

    Product announcements

    2
    ProductTypeDetails
    Whole genome MRD research workflowlaunch
    StrataMap Spatiallaunch

    Deals & partnerships

    2
    SomaLogicAcquisition of proteomics company

    Following the close of the SomaLogic acquisition, newly branded SomaScan and SomaSeq offerings are generating strong interest and helping customers connect proteomics and genomic insights.

    Biopharma partnersCollaboration on Billion Cell Atlas program for AI-enabled drug discovery

    BioInsight brings together sequencing, perturbation tools, compute power and AI to build high-quality multiomics data sets and interpretation tools. The Billion Cell Atlas is a genome-wide perturbation data set, with over 300 million cells delivered to date.

    Risks & headwinds

    4
    Research and academic market funding uncertaintyFY26

    Mid- to high single-digit declines expected for 2026 in research and applied consumables.

    Mitigation: Monitoring trends; some signs of improvement late in Q2, but too early to call a recovery.

    Slower growth in Europe, Middle East, and Latin AmericaQ2 FY26

    Clinical sequencing consumables growth slower than U.S./Canada.

    Mitigation: Acknowledged as due to ongoing near-term dynamics in the region (e.g., Middle East situation).

    Higher freight and memory costsQ2 FY26 and ongoing

    Absorbed in Q2, impacting gross margin.

    Mitigation: Operational excellence, sharing some cost increase with customers, securing supply for critical components for next few quarters.

    Tougher comparisons for instrument growthSecond half of FY26

    Moderation in year-over-year growth rates for sequencing instruments.

    Mitigation: NovaSeq X demand remains robust, and unit placements are expected to remain at elevated levels.

    What to watch in Q3 FY26

    5

    Research market recovery

    next quarter
    CurrentCustomers remain cautious; mid- to high single-digit declines expected for 2026.
    TargetSigns of sustained improvement in funding and order patterns.

    Why it matters

    A recovery in research markets could provide additional revenue tailwinds beyond clinical strength.

    In research and academic markets, results improved from Q1, but customers remain cautious as they navigate funding uncertainty. We saw some signs of improvements late in the quarter, but it's too early to call💬 a recovery.

    Q&A highlights

    7

    Given strong clinical growth and NovaSeq X placements, why shouldn't 2027 revenue growth be higher than the previously outlined high single-digit target?

    Management is very pleased with Q2 performance and believes clinical market momentum will continue for years, driven by elevated NovaSeq X placements. While committed to high single-digit growth for 2027, they will focus on building strong value propositions and see where it takes them, acknowledging that the 'clinical cliff' is more of a 'wave' they are surfing.

    “I'm still very committed to delivering on the high single-digit growth, but we will continue to focus on building a very, very strong value proposition to our customers, and then we see where it takes us.”

    asked by Puneet Souda · answered by Jacob Thaysen

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Q2 Performance and Raised Outlook

    Illumina reported a strong Q2 FY26, with revenue growing 9.5% year-over-year to $1.16 billion, or 6.5% on an organic basis. Rest of World organic revenue growth was 8.1%, exceeding guidance. This performance, coupled with disciplined expense management, led to non-GAAP EPS of $1.31, a 10% year-over-year increase, also above expectations. Consequently, the company raised its full-year 2026 guidance for Rest of World organic revenue growth to greater than 5% and diluted EPS to $5.30-$5.40, reflecting increased confidence for the second half of the year.

    02

    Clinical Market Momentum and NovaSeq X Adoption

    Clinical markets, representing approximately 65% of sequencing consumables revenue, continued to be the primary growth driver. Rest of World clinical growth was broad-based at 15% ex China, with U.S./Canada showing particular strength, growing above 20%. The company placed over 95 NovaSeq X instruments in Q2, with demand remaining high, especially from large clinical customers expanding capacity for new trials. This expanding NovaSeq X installed base is expected to drive consumable growth beyond 2026 and support the path towards high single-digit revenue growth in 2027.

    03

    Innovation and Multiomics Expansion

    Illumina is expanding its multiomics offerings to provide customers with more ways to analyze biology. Key innovations include the launch of the whole genome MRD research workflow, designed to shorten assay development timelines, and the StrataMap Spatial, a sequencing-based spatial workflow. The company is also seeing sustained proteomics momentum following the SomaLogic acquisition and is expanding its BioInsight data and insights offerings, including the Billion Cell Atlas, which has delivered over 300 million cells and secured 6 pharma partners, generating early revenue.

    04

    Cautious Research Market and Operational Efficiency

    While clinical markets thrive, research and academic markets remain cautious due to funding uncertainty, with sequencing consumables in this segment declining 7% Rest of World. Despite some signs of improvement late in the quarter, a full recovery is not yet anticipated for 2026. Operationally, Illumina absorbed higher freight and memory costs in Q2, but non-GAAP gross margin still came in slightly better than expected at 68.2%, demonstrating the team's ability to manage headwinds through cost actions and improved efficiency.

    05

    Strategic Capital Allocation and Leadership Additions

    The company generated $162 million in free cash flow and repurchased 0.9 million shares for $122 million in Q2, with $1.8 billion remaining under authorization. Illumina ended the quarter with $1.17 billion in cash and a leverage ratio of 1.6x gross debt to LTM EBITDA. The management team was strengthened with the addition of Michael Sullivan and Julie Coletti, and the Board welcomed David King and Dan Skovronsky, bringing deep healthcare and R&D experience to support clinical and innovation priorities.

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