Illumina outlines path to high single-digit revenue growth and 20% margins by 2027 amid NovaSeq X acceleration

Earnings Call Insights: Illumina, Inc. (ILMN) Q3 2025

MANAGEMENT VIEW

* CEO Jacob Thaysen reported, "In the third quarter, we delivered another strong performance with revenue, non-GAAP operating margin and diluted EPS all above our guidance range. We reported total revenue of $1.08 billion, and we returned to growth ex China, up about 2% year-over-year. Non-GAAP operating margin was 24.5% and non-GAAP diluted EPS was $1.34, both reflecting strong year-over-year expansion and above our guidance."
* Thaysen emphasized the momentum from the NovaSeq X transition, especially in clinical markets, noting sequencing consumables revenue grew at a high single-digit rate year-over-year. "Given this strength, we are raising our total full-year 2025 outlook with staying disciplined as we monitor macro and funding dynamics through year-end."
* Thaysen highlighted, "In Q3, we had another strong quarter for the NovaSeq X with more than 55 instruments placed in line with our goal of 50 to 60 placements per quarter. Most importantly, we achieved the milestones we have set for our high-throughput transition to the NovaSeq X. Our goal was to reach approximately 75% of high-throughput gigabases shipped and 50% of high-throughput revenue on the X platform by year-end, and we exceeded both here in Q3."
* The company launched Illumina Protein Prep in Q3 and introduced BioInsight, a new business focused on leveraging genomic and multiomics data for drug discovery and research. Thaysen stated BioInsight will initially target large-scale data generation partnerships, with longer-term plans to monetize data, software, and AI-enabled services.
* Thaysen added, "We remain focused on disciplined execution and building our momentum from Q3. Clinical will continue to be our primary near-term driver of revenue growth as NovaSeq X volume more than offsets conversion pricing headwinds."
* CFO Ankur Dhingra stated, "In Q3, our business outside of China returned to growth, an important milestone towards our long-term goals. We made significant progress in the NovaSeq X transition with over 75% volume and over 50% revenue now transitioned to X. High-throughput consumables had strong growth in our clinical business, driven by continued expansion of X. Revenue exceeded the top end of our guidance range, was roughly flat globally and grew approximately 2% year-over-year ex China."

OUTLOOK

* Dhingra raised full-year 2025 revenue guidance for Greater China by $20 million to approximately $220 million. For the rest of the world, revenue growth is projected between 0.5% and 1.5% on a constant currency basis, unchanged at midpoint. Total Illumina constant currency revenues are anticipated to decline in the range of minus 0.5% to minus 1.5%.
* Reported Illumina revenue is now expected in the range of $4.27 billion to $4.31 billion, up $20 million at the midpoint relative to last guidance.
* Sequencing consumables growth outside China is now guided at 2.5% to 3%, an increase from prior guidance of 1% to 3%. Sequencing instruments are expected to decline between minus 6% and minus 4%.
* The company increased non-GAAP operating margin guidance by 60 basis points at the midpoint to a range of 22.75% to 23%. Non-GAAP diluted EPS guidance was raised by $0.20 at the midpoint to a range of $4.65 to $4.75, reflecting 13% growth year-over-year at midpoint.
* Thaysen stated, "We are confident in our ability to achieve high single-digit revenue growth and 20% non-GAAP operating margins by 2027, excluding Greater China."

FINANCIAL RESULTS

* Third quarter revenue was $1.08 billion, roughly flat year-over-year and ahead of the top end of guidance. Excluding China, revenue grew approximately 2% year-over-year. Greater China revenue was $52 million.
* Sequencing consumables revenue was $747 million, up about 3% excluding China. High-throughput volumes continued to grow, especially in clinical, with double-digit revenue growth outside of China.
* Sequencing instruments revenue reached $107 million, up approximately 3% year-over-year and 6% ex China, driven by adoption of MiSeq 100 and strong NovaSeq X placements. In Greater China, instrument sales were down approximately 54% due to export restrictions.
* Non-GAAP gross margin for Q3 was 69.2%, with tariffs impacting margins by roughly 220 basis points year-over-year. Non-GAAP operating expenses were $484 million, down approximately 6% year-over-year. Non-GAAP operating margin was 24.5%, expanding 190 basis points year-over-year. Non-GAAP earnings per diluted share of $1.34 grew 18% year-over-year.
* Cash flow provided by operations was $284 million. Free cash flow was $253 million. Share repurchases totaled $120 million in Q3.

Q&A

* Puneet Souda, Leerink: Asked about China in 2026, competitive impact at ASHG, and clinical growth sustainability. Thaysen responded, "We are taking this right now, quarter-by-quarter. It will be too early for us to go in and give you a view on '26."
* Douglas Schenkel, Wolfe: Questioned 2026 revenue framework and margin expansion durability. Thaysen indicated it is too early for 2026 guidance but highlighted confidence in margin expansion, while Dhingra noted, "I do anticipate additional margin expansion coming both from cost action, but also most certainly, much stronger operating leverage."
* Vijay Kumar, Evercore: Inquired about consumables growth drivers and margin expansion goals. Thaysen confirmed no pull-forward in academic/government segments; Dhingra said, "Bulk of the overperformance, rest of the world came from clinical side there on the consumable side."
* Tycho Peterson, Jefferies: Asked about research funding, earnings growth despite China/Roche headwinds, and gross margin levers. Thaysen stated confidence in earnings growth for 2026; Dhingra clarified tariff impact on gross margins and split in consumables growth.
* Additional questions focused on NovaSeq X transition, clinical momentum, research funding, and R&D spending discipline.

SENTIMENT ANALYSIS

* Analysts displayed a neutral to slightly positive tone, focusing on sustainability of clinical growth, China uncertainties, competitive threats, and margin expansion. Questions about 2026 guidance were pressing but acknowledged management's discipline.
* Management maintained a confident and optimistic tone in prepared remarks, shifting to cautious and measured responses in Q&A, frequently stating it is "too early" to provide specific 2026 guidance. Phrases such as "we are confident" and "we believe" signaled continued conviction, while repeated deferral on forward-looking specifics indicated caution.
* Compared to the previous quarter, management’s tone remains confident about operational progress, with increased clarity on margin expansion but continued caution on macro and China-related uncertainties. Analyst tone was consistent with prior quarter, pressing for forward-looking details and competitive positioning.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full-year 2025 was raised, with revenue and EPS outlooks both increased relative to Q2. NovaSeq X transition accelerated, with higher volumes and revenue now on the platform compared to last quarter’s milestones.
* Strategic focus intensified on multiomics (Illumina Protein Prep launch) and data/AI services (BioInsight launch), compared to Q2’s emphasis on platform launches and the SomaLogic acquisition.
* Analysts continued to probe on China, competitive landscape, and sustainability of clinical growth, mirroring Q2 themes but with greater focus on transition execution and upcoming launches.
* Management demonstrated greater confidence in achieving long-term margin targets, while maintaining prudence on near-term macro and funding headwinds.

RISKS AND CONCERNS

* Management cited ongoing regulatory and export restrictions in China and the need for continued dialogue with authorities.
* Research and applied markets remain muted due to funding uncertainty and cautious spending, especially in the U.S. academic segment.
* Tariffs continue to impact gross margin, though mitigation efforts are underway.
* Analysts raised concerns about the sustainability of clinical growth rates, competitive threats from new platform entrants, and the need for predictable research funding.

FINAL TAKEAWAY

Illumina’s third quarter 2025 call highlighted strong operational execution, with the NovaSeq X transition ahead of schedule and clinical segment growth driving improved financials. Management raised its full-year outlook, citing robust clinical demand, disciplined cost control, and strategic advances in multiomics and data services. While macroeconomic and China-specific uncertainties remain, the company emphasized its long-term targets of high single-digit revenue growth and 20% margins by 2027, supported by continued innovation and operational leverage.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ilmn/earnings/transcripts]

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