ILMN Q2 Deep Dive: Clinical Demand Cushions Revenue Decline Amid Research Weakness and Margin Pressures

August 13, 2025 at 00:17 AM EDT

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Genomics company Illumina (NASDAQ: ILMN) reported Q2 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 3% year on year to $1.06 billion. Its non-GAAP profit of $1.19 per share was 17.7% above analysts’ consensus estimates.

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

Illumina (ILMN) Q2 CY2025 Highlights:

Revenue: $1.06 billion vs analyst estimates of $1.05 billion (3% year-on-year decline, 1% beat)
Adjusted EPS: $1.19 vs analyst estimates of $1.01 (17.7% beat)
Adjusted EBITDA: $312.3 million vs analyst estimates of $265.1 million (29.5% margin, 17.8% beat)
Management raised its full-year Adjusted EPS guidance to $4.50 at the midpoint, a 5.9% increase
Operating Margin: 20.2%, down from 40.5% in the same quarter last year
Organic Revenue fell 3.4% year on year vs analyst estimates of 3.3% declines (in line)
Market Capitalization: $14.97 billion

StockStory’s Take

Illumina’s second quarter performance in 2025 was met with a significant negative market reaction, as shares declined in response to ongoing revenue contraction and sharply lower operating margins. Management attributed the sales decline primarily to continued weakness in the U.S. research funding environment, where academic and government customers delayed projects due to uncertainty around National Institutes of Health (NIH) grants. CEO Jacob Thaysen highlighted that “the research environment, particularly in the U.S., remains constrained,” and confirmed that while clinical segment demand proved resilient, softness in research spending weighed on overall results.

Looking forward, Illumina’s guidance reflects confidence in the durability of clinical sequencing demand and expanding adoption of its NovaSeq X platform. Management raised its full-year non-GAAP earnings outlook, citing operational discipline, cost controls, and incremental contributions from new product launches such as the MiSeq i100 Plus and planned expansion into multiomics. CFO Ankur Dhingra noted, however, that operating assumptions remain cautious due to “ongoing funding uncertainties in the U.S. research market,” and that growth expectations are anchored by continued clinical momentum, gradual rollout of next-generation platforms, and a disciplined approach to cost management.

Key Insights from Management’s Remarks

Management identified clinical market strength and operational cost actions as key drivers offsetting ongoing research and China headwinds this quarter.

Clinical segment resilience: The clinical segment now accounts for around 60% of sequencing consumables, with strength driven by oncology applications, comprehensive genomic profiling, and growing demand for minimal residual disease (MRD) testing. Management highlighted strong growth in clinical volumes, which helped buffer softer research demand.
NovaSeq X transition progress: Illumina continued to transition both research and clinical customers to its NovaSeq X platform, with over 50 new placements in the quarter. The transition is more advanced among research customers, but clinical users are steadily shifting as they validate new assays and expand test menus.
MiSeq i100 Plus traction: The MiSeq i100 Plus benchtop sequencer, launched late last year, saw over 500 placements and strong early reorder activity. Customers cited faster turnaround, ease of use, and room temperature reagents as differentiators for labs with limited resources or new to next-generation sequencing (NGS).
SomaLogic acquisition to expand multiomics: Illumina announced the planned acquisition of SomaLogic, a provider of high-throughput proteomics solutions. Management views this as a strategic move to integrate proteomics into its multiomics offering, enhancing end-to-end workflows and broadening biological insight for customers.
Cost structure improvements: Operating expenses declined 6% year over year, reflecting actions to streamline operations and prioritize key growth areas. These cost reductions, along with product mix favoring consumables, provided some support to margins despite topline pressures.

Drivers of Future Performance

Illumina’s outlook hinges on stable clinical growth, further NovaSeq X adoption, and cautious expectations for research and China.

Clinical growth anchors outlook: Management expects continued strong volume growth in clinical sequencing, especially from oncology, rare disease, and reproductive health applications. Expanding national genome programs and broader adoption of whole genome sequencing are seen as long-term drivers.
NovaSeq X and product launches: The ongoing transition to NovaSeq X, along with new launches such as the MiSeq i100 and future multiomics offerings, should help offset flat or declining research instrument demand. The planned integration of SomaLogic is anticipated to contribute to revenue in 2026 and beyond.
Research and China remain risks: The company remains cautious on the research market due to persistent NIH funding uncertainties, with management forecasting a 15% annual decline in U.S. academic revenue. Restrictions on instrument exports to China limit growth in that region, and management does not expect current China momentum to persist into 2026.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will focus on (1) the pace of NovaSeq X adoption among clinical customers and associated increases in consumables usage, (2) the rollout and early uptake of the MiSeq i100 and feedback from new labs, and (3) progress on integrating SomaLogic’s proteomics technology and its commercial impact. Monitoring margin trends as operational cost actions take hold will also be a key indicator of execution.

Illumina currently trades at $98, down from $102.81 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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