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Call participants
Chief Executive Officer — Jacob Thaysen
Chief Financial Officer — Ankur Dhingra
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Risks
US academic and government research demand: CFO Dhingra confirmed, “research customers, especially the US academic and government customers, continue to manage their budgets tightly in the face of funding constraints,” and guided for a 15% decline in the segment for the year.
Greater China export restrictions: CEO Thaysen stated, “our ability to export instruments is still restricted,” and called the current situation “unsustainable.”
Mid throughput segment challenges: CEO Thaysen noted “decision-making process is taking longer time” in the mid throughput segment due to conservative purchasing and project-based demand.
Takeaways
Total revenue: $1.06 billion, down approximately 3% year-over-year on both a constant currency and reported basis, but at the high end of the guidance range.
Non-GAAP operating margin: Non-GAAP operating margin was 23.8%, up 160 basis points year-over-year, with non-GAAP gross margin of 69.4%, stable year-over-year and non-GAAP gross margin was up 200 basis points sequentially.
Non-GAAP EPS: Non-GAAP EPS was $1.19, up 9% year-over-year and above the top of the guidance range.
Sequencing consumables revenue: Sequencing consumables revenue was $740 million, approximately flat year-over-year and up approximately 6% sequentially on a reported basis; high throughput consumables grew more than 10% sequentially for NovaSeq X.
Clinical segment share: Clinical now accounts for roughly 60% of sequencing consumables, driven by adoption in oncology, MRD, and genome programs.
China revenue: Greater China revenue was $63 million, down $12 million year-over-year but slightly ahead of internal expectations; the company raised full-year revenue guidance for Greater China by $25 million to $200 million for fiscal 2025 (period ending Dec. 31, 2025).
X platform transition: Over 80% of research sequencing volume and roughly 55% of clinical sequencing volume have transitioned to NovaSeq X; 69% of high throughput gigabases shipped and 44% of high throughput consumables revenue are on the X series.
Sequencing instruments revenue: Sequencing instruments revenue was $96 million, down approximately 18% year-over-year due to research budget constraints. Approximately 60% of NovaSeq X placements were to clinical customers.
Sequencing services & other revenue: Sequencing service and other revenue was $130 million, down approximately 5% year-over-year, primarily due to timing in strategic partnership revenues. Core services and informatics grew high single digits year-over-year when excluding these items.
Operational expenditure: Non-GAAP operating expenses were $484 million, down $32 million or 6% year-over-year, reflecting cost discipline and absence of typical post-Q1 seasonal increase.
Cash flow/capital allocation: Free cash flow was $204 million; $380 million was used to repurchase 4.5 million shares at an average price of $85 per share.
Guidance updates: Fiscal 2025 total reported revenue now expected in the $4.23 billion-$4.31 billion range (constant currency decline of 0.5%-2.5%), with non-GAAP EPS guidance for fiscal 2025 raised by $0.25 at the midpoint to $4.45-$4.55 and non-GAAP operating margin guidance for fiscal 2025 raised by 50 basis points to 22%-22.5%.
Multiomics strategy: Announced a $350 million cash acquisition of Somalogic from Standard Biotools, plus up to $75 million in near-term performance-based milestones and royalties; the deal is expected to close in 2026, subject to regulatory approvals, expanding Illumina’s affinity-based proteomics portfolio; transaction expected to close in the first half of 2026.
MiSeq I 100 Plus adoption: More than 500 units have been placed since the launch late last year (MiSeq I 100 Plus), with positive customer feedback emphasizing accessibility and workflow integration.
Q3 outlook: Anticipates non-GAAP EPS of $1.15-$1.19, non-GAAP operating margin of approximately 22%, non-GAAP tax rate of approximately 16%, and a constant currency revenue decline of 0.5%-2.5% is expected for fiscal 2025.
Summary
Illumina(ILMN -7.88%) reported second-quarter financials at the upper end of guidance, highlighted by margin expansion and disciplined cost control, despite a modest top-line contraction. Management raised fiscal 2025 guidance on revenue, non-GAAP EPS, non-GAAP operating margin, and China contribution, reflecting stronger-than-expected clinical consumables demand and improved operational efficiency. The announced acquisition of Somalogic broadens Illumina’s multiomics platform and affirms a pipeline acceleration into 2026 and beyond. Executives emphasized that research market headwinds and China export restrictions remain near-term drags, but the clinical segment mix shift and operational leverage underpin confidence in achieving targeted high single-digit revenue growth and non-GAAP margin expansion by 2027.
CFO Dhingra said, “sequencing GD 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.”
CEO Thaysen stated, “we will scale that technology faster, expand customer adoption, and achieve greater operational efficiencies.” as part of the multiomics portfolio integration.
Management raised fiscal 2025 sequencing consumables growth guidance for the rest of the world to 13% (up from flat to 2%), while lowering instrument revenue expectations to a 4%-6% year-over-year decline, reflecting research demand weakness.
“clinical X transition has progressed to roughly 55%,” according to Dhingra, with the company expecting about 75% of high throughput gigabases to shift to NovaSeq X by year-end 2025, primarily through clinical customers.
The MiSeq I 100 platform supports 18 workflows, nine of which are fully integrated from library prep through analysis, and is targeting both emerging markets and labs new to NGS.
Operational excellence actions led to approximately $100 million in annualized OpEx rate improvements, based on Q2 results, according to Dhingra.
Industry glossary
NIPT: Non-invasive prenatal testing, a sequencing-based test for genetic conditions in pregnancy.
MRD: Minimal residual disease, referring to the detection of small numbers of cancer cells after treatment.
NGS: Next-generation sequencing, high-throughput technology for DNA and RNA sequencing.
Gigabases (GB): A measure of sequencing output equal to one billion base pairs of DNA.
NovaSeq X: Illumina’s latest high-throughput sequencing platform, designed for accelerated genomics workflows.
Somalogic: Provider of high-throughput affinity-based proteomic assays, being acquired by Illumina.
Full Conference Call Transcript
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 fluctuation. 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: 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 with 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. Increased high throughput consumable sales especially among NovaSeq X users as the transition continues to progress.
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