ILMN Q3 Deep Dive: Clinical Sequencing Momentum and Cost Discipline Drive Outperformance

Genomics company Illumina (NASDAQ:ILMN) reported Q3 CY2025 results beating Wall Street’s revenue expectations, but sales were flat year on year at $1.08 billion. Its non-GAAP profit of $1.34 per share was 14.7% above analysts’ consensus estimates.

Is now the time to buy ILMN? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Illumina’s third quarter results reflected stable year-over-year revenue and a notable beat on Wall Street’s profit expectations, with positive market reaction following the report. Management attributed the outperformance to accelerating adoption of the NovaSeq X platform, particularly in the clinical segment, and disciplined cost controls. CEO Jacob Thaysen pointed to “high single-digit” growth in clinical sequencing consumables and strong progress in transitioning customers from NovaSeq 6000 to NovaSeq X as key factors. The company also highlighted resilience in China amid ongoing export restrictions.

Looking forward, Illumina’s updated guidance is shaped by ongoing strength in clinical sequencing, continued expansion of the NovaSeq X installed base, and early traction for new multiomics and software offerings. Management emphasized that easing pricing headwinds and stabilization in research markets could support a return to growth, while cost initiatives are expected to further benefit margins. Thaysen stated, “Clinical will continue to be our primary near-term driver of revenue growth as NovaSeq X volume more than offsets conversion pricing headwinds.”

Key Insights from Management’s Remarks

Management credited third quarter performance to robust clinical sequencing demand, successful execution of the NovaSeq X transition, and early contributions from new product launches in multiomics.

• Clinical segment strength: Clinical applications for sequencing drove high single-digit revenue growth in consumables, fueled by broader adoption of comprehensive genomic profiling and new sequencing-intensive tests such as minimal residual disease (MRD) monitoring and therapy selection.
• NovaSeq X transition milestone: The company exceeded its goal for the transition to the NovaSeq X platform, with over 75% of high-throughput sequencing volume and 51% of high-throughput revenue now on the X instrument. This transition boosted consumables demand and showcased the elasticity of customer sequencing needs.
• Research market stabilization: While research segment demand remained muted due to funding uncertainty, management observed stabilization and expects further improvement as pricing headwinds diminish and new grants begin to flow.
• Resilience in China despite restrictions: Illumina maintained revenue stability in China, aided by approval to locally manufacture select instruments for OEM partners. While a long-term resolution is still pending, customer loyalty and demand remained strong.
• Expansion into multiomics and data services: The launch of Illumina Protein Prep and BioInsight marked strategic moves into proteomics and genomic data services, setting the stage for future growth beyond core sequencing.

Drivers of Future Performance

Looking ahead, Illumina’s outlook is anchored by clinical sequencing volume growth, the maturation of its multiomics portfolio, and ongoing cost optimization efforts.

• Clinical sequencing as growth engine: Management expects the clinical segment to remain the main driver of overall company growth, supported by continued NovaSeq X adoption and expanding use of sequencing-intensive clinical assays. The company’s largest clinical customers are projected to grow faster than the average, helping offset slower research segment recovery.
• Multiomics launches and software integration: Upcoming launches of multiomics products—such as Illumina Protein Prep for proteomics and the integrated 5-base solution for genetic and methylation analysis—are expected to broaden the addressable market and generate incremental revenue as research funding stabilizes.
• Margin expansion opportunities: Management identified further margin improvement potential through manufacturing optimization, disciplined operating expense management, and operating leverage as revenue rebounds. Tariff impacts remain a headwind, but initiatives are underway to mitigate these effects over time.

Catalysts in Upcoming Quarters

In future quarters, our analysts will closely monitor (1) continued adoption rates and placement volumes for NovaSeq X instruments, (2) the pace of clinical assay launches and approvals that could expand sequencing volume, and (3) the impact of new multiomics products, such as Illumina Protein Prep, on revenue diversification. Progress on tariff mitigation and resolution of regulatory issues in China will also be key indicators of future performance.

Illumina currently trades at $105.56, up from $99.13 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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