Illumina, Inc. (ILMN) Earnings & Analysis

Latest quarter

Illumina reported Q2 FY2026 revenue of $1.2 billion, above the consensus of $1.1 billion, and adjusted EPS of $1.31, above the $1.23 consensus. Revenue rose from $1.1 billion a year earlier, while diluted EPS declined to $1.35 from $1.49.

CFO Ankur Dhingra said sequencing-consumables revenue reached $775 million, up 5% year over year, as a larger NovaSeq X installed base supported more high-throughput use. He said clinical sequencing-consumables revenue grew 15% excluding China, while research and applied consumables declined 7% in rest-of-world markets. Sequencing-instrument revenue increased 31% to $125 million, driven by NovaSeq X and MySeq i100 sales.

Illumina reported gross margin of 66.4%, compared with 65.6% a year earlier, and operating margin of 21.1%, compared with 20.2%. Free cash flow was $161.0 million, down from $197.0 million. Dhingra said operating cash flow was below its usual trend because of tax-payment timing and higher inventory acquired to secure components for coming quarters.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On the Q2 call, CEO Jacob Thaysen said clinical demand was driving growth as customers expanded capacity for sequencing applications. CFO Ankur Dhingra said Illumina placed over 95 NovaSeq instruments during the quarter, including multiple-unit orders from large clinical customers. He said approximately 83% of volumes and 59% of revenue had transitioned to NovaSeq X as of Q2.

Asked about the pace of placements, Thaysen said clinical customers were building their installed bases for volumes they could see ahead. He expected placements to remain elevated in the second half, though they could vary from quarter to quarter. Dhingra said recent placements would contribute modestly to consumables revenue in 2026, with most of the benefit expected in 2027 because clinical customers typically take at least six to nine months to reach normalized usage.

Dhingra said research and applied consumables declined in rest-of-world markets and that it was too early to predict an end-market recovery. Asked about different instrument categories, Thaysen said mid-throughput demand was more sensitive to the macroeconomic environment. He described low-throughput placements as continuing after the MySeq i100 launch.

On costs, Thaysen told analysts that memory and freight expenses had risen more than anticipated. He said Illumina was sharing some increases with customers and pursuing operational measures to offset them. Dhingra said most higher memory costs were already reflected in Q2 gross margin and that the company had secured supply for several quarters.

Asked about the margin progression into Q3, Dhingra pointed to a higher consumables mix and cost actions, with further actions expected in Q4. Thaysen also said Illumina had begun earning revenue from its Billion Cell Atlas and had added three pharma partners after quarter-end, bringing the total to six.

Guidance

In its October update, Illumina raised its FY2026 revenue outlook, excluding tariff refunds, to $4.64-$4.66 billion from $4.60-$4.64 billion. It raised its non-GAAP diluted EPS outlook to $5.40-$5.45 from $5.30-$5.40 and set its non-GAAP operating-margin outlook at 23.6%, compared with its prior range of 23.4%-23.6%.