Sign in

You're signed outSign in or to get full access.

II

ILLUMINA, INC. (ILMN)·Q2 2025 Earnings Summary

Executive Summary

  • ILMN delivered revenue at the high end of guidance and expanded profitability: Q2 2025 revenue $1.06B (-3% YoY), GAAP operating margin 20.2%, non-GAAP operating margin 23.8%, GAAP EPS $1.49, non-GAAP EPS $1.19; cash from operations $234M, FCF $204M .
  • Management raised FY25 guidance: constant-currency revenue decline improved to (-2.5%)–(-0.5%) from (-3%)–(-1%), non-GAAP operating margin to 22%–22.5% from 21.5%–22.0%, and non-GAAP EPS to $4.45–$4.55 (incl. ~$0.10 tax benefit from new U.S. R&D expensing law) .
  • Q2 beats vs Wall Street: Revenue beat (~$1,059M vs ~$1,052M*) and EPS beat ($1.19 vs ~$1.01*); Q1 also beat both, while Q4 2024 missed on EPS but slightly beat revenue* (S&P Global) .
  • Stock reaction catalysts: raised FY25 EPS/OM guidance; accelerating NovaSeq X consumables and clinical demand (now ~60% of sequencing consumables); and strategic multiomics expansion (SomaLogic acquisition; TSO 500 v2 launch) .

What Went Well and What Went Wrong

What Went Well

  • Continued ramp in NovaSeq X and clinical demand: “continued ramp in X consumables… accelerating growth in clinical, our largest customer segment” (CEO) ; high-throughput consumables grew YoY/seq; NovaSeq X consumables up >10% sequentially; clinical ~60% of sequencing consumables .
  • Margin expansion and cost discipline: non-GAAP gross margin 69.4% (flat YoY, +200bps seq), non-GAAP operating margin 23.8% (+160bps YoY); OpEx down ~6% YoY on Operating Excellence actions (CFO) .
  • Guidance raised on revenue (GC region), margin, EPS; Q3 color provided for continued operating execution (CFO) .

What Went Wrong

  • Research end-market headwinds: U.S. academic/government funding constraints weighed on demand; instruments revenue down ~18% YoY; mid-throughput weakness; extended customer decision times (CFO) .
  • Tariff headwinds: Net ~110bps gross margin impact in Q2; broader FY impact discussed despite mitigation efforts (CFO) .
  • China restrictions: on “unreliable entities list” leading to inability to export instruments; Greater China revenue down $12M YoY (to $63M) and cited as near-term uncertainty (CFO/CEO) .

Financial Results

Core P&L vs Prior Periods and Estimates

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$1,104 $1,041 $1,059
GAAP Gross Margin %65.9% 65.6% 65.6%
Non-GAAP Gross Margin %67.4% 67.4% 69.4%
GAAP Operating Margin %15.8% 15.8% 20.2%
Non-GAAP Operating Margin %19.7% 20.4% 23.8%
GAAP Diluted EPS ($)$0.73 $0.82 $1.49
Non-GAAP Diluted EPS ($)$0.95 $0.97 $1.19

Segment/Product Mix (reported)

MetricQ4 2024Q1 2025Q2 2025
Product Revenue ($MM)$939 $880 $912
Service & Other Revenue ($MM)$165 $161 $147

Q2 2025 Operating KPIs

KPIQ2 2025
Sequencing Consumables Revenue ($MM)$740
Sequencing Instruments Revenue ($MM)$96
Sequencing Service & Other Revenue ($MM)$136
Greater China Revenue ($MM)$63
High-throughput GB Output Growth (YoY)>30%
NovaSeq X: Share of High-throughput GBs~69%
NovaSeq X: Share of High-throughput Consumables Revenue~44%
Cash from Operations ($MM)$234
Free Cash Flow ($MM)$204
Share Repurchases ($MM; shares/avg price)$380; ~4.5M @ ~$84.66

Estimates vs Actuals (S&P Global)

MetricQ4 2024Q1 2025Q2 2025
Consensus Revenue ($MM)1,103.45*1,036.90*1,051.87*
Actual Revenue ($MM)1,104 1,041 1,059
Consensus EPS ($)0.923*0.939*1.011*
Actual EPS (Non-GAAP) ($)0.86 0.97 1.19

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Constant Currency Revenue GrowthFY 2025(-3%) to (-1%) (-2.5%) to (-0.5%) Raised
Non-GAAP Operating MarginFY 202521.5%–22.0% 22%–22.5% Raised
Non-GAAP Diluted EPSFY 2025$4.20–$4.30 $4.45–$4.55 (incl. ~$0.10 tax benefit) Raised
Reported RevenueFY 2025$4.18–$4.26B $4.23–$4.31B Raised
Greater China RevenueFY 2025$165–$185M ~$200M (midpoint +$25M) Raised
Q3 Outside GC Revenue Growth (cc)Q3 2025N/A+1% to +2% YoY New detail
Q3 GC RevenueQ3 2025N/A$35–$45M New detail
Q3 Non-GAAP Operating MarginQ3 2025N/A~22% New detail
Q3 Non-GAAP Tax RateQ3 2025N/A~16% New detail
Q3 WASOQ3 2025N/A~155M New detail
Q3 Non-GAAP EPSQ3 2025N/A$1.15–$1.19 New detail

Earnings Call Themes & Trends

TopicQ4 2024 (Prior)Q1 2025 (Prior)Q2 2025 (Current)Trend
Multiomics strategy (proteomics, spatial, single-cell)Highlighted broad roadmap, collaborations (NVIDIA, UK Biobank; NovaSeq X updates) Spatial transcriptomics and Perturb-seq early access; proteomics launch H1’25 SomaLogic acquisition to scale proteomics; MiSeq i100 Plus rapid adoption Strengthening; clearer execution path
NovaSeq X transition & utilizationEmphasis on X improvements 68% GBs; 43% high-throughput consumables on X; >60 X placements; backlog up 69% GBs; 44% consumables rev on X; >50 quarterly placements; clinical transition ~55% Continued ramp; clinical-led
Tariffs & supply chainNo explicit tariff impact quantified Detailed FY tariff plan (~$85M gross cost); mitigation actions underway Q2 net ~110bps gross margin impact; pathway to reduce tariff impact into 2026 Headwind moderating longer term
Research funding environmentBaseline Noted U.S. academia/government constraints; research consumables down mid- to high-single digits Continued conservatism; mid-throughput softness and longer cycles Persistent constraint
China regulatory risk“Unreliable entities list” noted Separate GC guidance; instrument export restricted GC revenue slightly better than guide; raised FY GC revenue; uncertainty persists Near-term volatility, managed

Management Commentary

  • CEO: “delivered results that exceeded our guidance, driven by the continued ramp in X consumables, as well as accelerating growth in clinical, our largest customer segment” .
  • CEO on clinical durability: clinical consumables now ~60%; momentum in CGP and MRD; growth in NIPT volumes; long-term opportunity as genomics becomes standard of care .
  • CFO on margins: “Non-GAAP gross margin was 69.4%… increased 200 bps QoQ… tariffs had a net impact of ~110 bps” .
  • CFO on guidance bridge: FY reported revenue to $4.23–$4.31B; GC midpoint +$25M; OM +50bps; EPS +$0.25 (≈$0.10 tax, ≈$0.10 China, remainder FX/OM) .
  • CEO on competition: focus on customer attributes and end-to-end cost of highest-quality insights; no observed demand deferrals tied to competitor announcements .

Q&A Highlights

  • Guide change bridge: instruments down, China up, offset by consumables and data services; pipeline (Constellation, five-base, spatial) could add growth from 2026 (CEO/CFO) .
  • Competition and turnaround time: address niches requiring speed (e.g., NICU) but focus remains delivering highest-quality insights at lowest end-to-end cost (CEO) .
  • Tariff pull-forward: no meaningful pull-forward ex-China; X consumables shelf life limits pull-forward; GC guide raise specific to 2025 (CFO) .
  • NovaSeq X placements trajectory: ~50–60 placements per quarter; potential for more in Q4; not committing to 30B reads; OM improvement mostly cost actions (CEO/CFO) .
  • Mid-throughput softness: project nature, longer cycles, some outsourcing to service providers; MiSeq i100 pushing into low end of mid-throughput; competition steady (CEO) .

Estimates Context

  • Q2 2025: Revenue beat (~$1,059M vs ~$1,052M*) and EPS beat ($1.19 vs ~$1.01*).
  • Q1 2025: Revenue and EPS both modest beats*.
  • Q4 2024: Revenue slight beat, EPS miss*.
    Where estimates may need to adjust: upward for FY25 EPS/OM given raised guidance and tax law benefit; continued caution in research and mid-throughput, offset by clinical strength and X consumables momentum .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Clinical-led resilience is driving consumables and utilization; NovaSeq X transition continues to expand, supporting revenue/margin leverage as mix shifts (consumables vs instruments) .
  • Operating discipline is visible: OpEx down ~6% YoY; OM expansion +160bps YoY; non-GAAP GM 69.4% despite tariff headwinds .
  • Raised FY25 outlook (revenue/OM/EPS) and Q3 guide reinforce near-term confidence; EPS guidance raised to $4.45–$4.55 with explicit tax tailwind .
  • China a managed headwind; Illumina increased FY GC revenue assumptions and continues regulatory engagement; core ex-China (~95%) remains the focus .
  • Strategic multiomics actions (SomaLogic acquisition, TSO 500 v2 launch, DRAGEN updates) bolster differentiation and future growth vectors beyond sequencing .
  • Near-term trading: raise-driven beats and margin expansion are positive catalysts; watch tariff mitigation execution, research funding signals, and Q3 delivery vs guide .
  • Medium-term thesis: clinical adoption, end-to-end workflow integration, and cost structure changes support the path to high single-digit growth and 26% non-GAAP OM by 2027 (management target) .