ILMN Q2 2025: Clinical Demand Drives 2% Ex-China Revenue Growth
- Robust NovaSeq X transition: Strong instrument placements—over 90 placements in Q4 and a continued average of 50–60 placements per quarter—underscore customers’ confidence in the NovaSeq X platform, particularly in the clinical market.
- Expanding clinical demand and innovative pipeline: Clinical customers are intensifying investments in key applications like oncology (comprehensive genomic profiling and MRD) and genetic disease testing, while early pipeline announcements (e.g., multiomics solutions) point to significant revenue upside in future quarters.
- Improving margins and cost discipline: Management cited significant operating expense reductions—with a $100 million annualized improvement—and strategic cost initiatives that not only boost profitability but also set up a strong foundation for future growth.
- US Research Funding Constraints: There is ongoing uncertainty in the U.S. research market with academic and government customers delaying projects and managing budgets tightly, which could continue to drag research-related revenue growth and impair overall demand.
- China Market Challenges: Continued export restrictions and regulatory uncertainties in China have already led to a significant decline (approximately 40% drop in instruments business) and pose risks to the region’s revenue growth, despite short-term guidance increases.
- Competitive and Pricing Pressures: Questions raised about how Illumina’s platforms will compete on attributes like turnaround time—especially against competitors like Roche—and the potential need to lower pricing if new threats emerge highlight risks that could compress margins and slow revenue growth in key segments.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total constant currency revenue decline | FY 2025 | no prior guidance (N/A) | -0.5% to -2.5% | no prior guidance |
Total reported revenue | FY 2025 | no prior guidance (N/A) | $4.23 billion to $4.31 billion | no prior guidance |
Greater China revenue | FY 2025 | no prior guidance (N/A) | Approximately $200 million | no prior guidance |
Rest of the world constant currency revenue growth | FY 2025 | no prior guidance (N/A) | 0% to 2% | no prior guidance |
Sequencing consumables growth (rest of the world) | FY 2025 | no prior guidance (N/A) | 13% | no prior guidance |
Sequencing instruments decline (rest of the world) | FY 2025 | no prior guidance (N/A) | 46% year over year | no prior guidance |
Non-GAAP Operating Margin | FY 2025 | no prior guidance (N/A) | 22% to 22.5% | no prior guidance |
Non-GAAP Tax Rate | FY 2025 | no prior guidance (N/A) | Approximately 20% | no prior guidance |
Weighted Average Shares Outstanding (WASO) | FY 2025 | no prior guidance (N/A) | Approximately 157 million shares | no prior guidance |
Non-GAAP EPS | FY 2025 | no prior guidance (N/A) | $4.45 to $4.55 | no prior guidance |
Revenue outside Greater China | Q3 2025 | no prior guidance (N/A) | 12% year-over-year growth on constant currency basis | no prior guidance |
Greater China revenue | Q3 2025 | no prior guidance (N/A) | $35 million to $45 million | no prior guidance |
Total constant currency revenue decline | Q3 2025 | no prior guidance (N/A) | -1.5% to -2.5% | no prior guidance |
Non-GAAP Operating Margin | Q3 2025 | no prior guidance (N/A) | Approximately 22% | no prior guidance |
Non-GAAP Tax Rate | Q3 2025 | no prior guidance (N/A) | Approximately 16% | no prior guidance |
Weighted Average Shares Outstanding (WASO) | Q3 2025 | no prior guidance (N/A) | Approximately 155 million shares | no prior guidance |
Non-GAAP EPS | Q3 2025 | no prior guidance (N/A) | $1.15 to $1.19 | no prior guidance |
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Revenue Outlook
Q: Is Q4 revenue expected to rise?
A: Management indicated that outside China, revenue is forecast to grow by about 2%, driven by seasonal instrument purchases and strong clinical consumable sales. They expect clinical growth to offset research headwinds, suggesting a healthier revenue mix in the coming quarter. -
Guidance Bridge
Q: What drove the raised guidance?
A: Management explained that improved FX effects, an uplift in China revenue by approximately $25M, and better-than-expected consumable orders helped bridge the guidance, despite a decline in instruments, thereby supporting overall guidance. -
Volume & Pricing
Q: How does clinical compare to research volume growth?
A: Management emphasized that clinical demand is outpacing research, with robust volume growth maintaining stable pricing and a healthy pricing cushion, even as U.S. research lags due to funding constraints. -
Clinical Spending
Q: What are the trends in clinical spending?
A: Management noted that clinical customers continue to invest in comprehensive genomic profiling and advanced assays, reinforcing that clinical remains a significant long‑term growth driver, albeit with a gradual, lumpy transition to new platforms. -
Instrument Placements
Q: Will NovaSeq X placements hit targets?
A: Management expects an average of 50–60 placements per quarter as customers steadily transition to the NovaSeq X, particularly in the clinical sector, ensuring a smooth and sustained impact on volumes. -
Competition Dynamics
Q: How is Illumina addressing competitive pressures?
A: Management stressed a strong focus on customer engagement and innovation, aiming to deliver the highest quality sequencing insights even as competitors like Roche are active, thereby maintaining superior turnaround times and service. -
Throughput Growth
Q: Can high throughput GB growth remain above 30%?
A: Management expects high throughput growth to stay above 30%, particularly driven by clinical advances and favorable reimbursement trends, ensuring sustained performance as new pipeline opportunities unfold. -
Academic Trend
Q: What is the trend with academic customers?
A: Management confirmed that the U.S. academic segment is projected to decline by about 15% year-over-year, a trend consistent with earlier guidance due to ongoing funding constraints. -
Pull Forward Orders
Q: Were there noticeable pull forwards in orders?
A: Management observed that Q2 reflected a natural order run-rate with minimal pull forward activity, as customers are now planning orders steadily rather than stockpiling ahead of tariffs or regulatory changes. -
China Consumables
Q: Were China consumable orders pulled forward?
A: Management stated that China consumable shipments are following a regular run-rate, with the raised guidance specific to the current quarter rather than indicating a long-term improvement, given ongoing regulatory issues.
Research analysts covering ILLUMINA.