Illumina(ILMN) - 2026 Q2 - Quarterly Results

Financial Highlights and Outlook Illumina reports strong Q2 2025 results exceeding guidance and raises its full-year 2025 financial outlook Second Quarter 2025 Performance Illumina reported second-quarter 2025 results that exceeded guidance, despite a 3% year-over-year revenue decline to $1.06 billion, driven by strong X consumables sales and clinical segment growth, achieving GAAP operating margin of 20.2% and non-GAAP operating margin of 23.8% - CEO Jacob Thaysen highlighted that results exceeded guidance, driven by the ramp in X consumables and accelerating growth in the clinical customer segment, with a focus on operational excellence leading to margin expansion[3] Core Illumina Q2 2025 Financial Results (GAAP vs. Non-GAAP) | Dollars in millions, except per share amounts | Q2 2025 (GAAP) | Q2 2024 (GAAP) | Q2 2025 (Non-GAAP) | Q2 2024 (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,059 | $1,092 | $1,059 | $1,092 | | Gross Margin | 65.6% | 68.0% | 69.4% | 69.4% | | Operating Profit | $214 | $442 | $252 | $242 | | Operating Margin | 20.2% | 40.5% | 23.8% | 22.2% | | Net Income | $235 | $66 | $187 | $174 | | Diluted EPS | $1.49 | $0.41 | $1.19 | $1.09 | - Total revenue for Q2 2025 was $1.06 billion, representing a 3% decrease from Q2 2024 on both a reported and constant currency basis[5] Q2 2025 Cash Flow Summary | Metric | Amount (in millions) | | :--- | :--- | | Cash provided by operations | $234 | | Capital expenditures | $30 | | Free cash flow | $204 | Fiscal Year 2025 Outlook The company raised its full-year 2025 guidance, now expecting a constant currency revenue decline between 0.5% and 2.5%, with non-GAAP operating margin projected at 22% to 22.5% and non-GAAP diluted EPS forecasted in the range of $4.45 to $4.55 Updated Fiscal Year 2025 Guidance | Metric | Previous Guidance | Updated Guidance | | :--- | :--- | :--- | | Total company constant currency revenue decline | (3%) to (1%) | (2.5%) to (0.5%) | | Non-GAAP operating margin | 21.5% - 22.0% | 22.0% - 22.5% | | Non-GAAP diluted EPS | $4.20 - $4.30 | $4.45 - $4.55 | - The increase in the non-GAAP diluted EPS forecast includes an approximate $0.10 benefit from recent legislation allowing U.S.-based R&D spending to be tax-deductible[5] Capital Allocation and Strategic Initiatives The company executed significant share repurchases and advanced strategic growth through a key acquisition and new product launches Capital Allocation During the second quarter, Illumina repurchased 4.5 million shares for $380 million, with approximately $800 million remaining under its current share repurchase authorization, and plans to continue repurchases throughout the year - In Q2 2025, the company repurchased approximately 4.5 million shares of its stock for $380 million, at an average price of $84.66 per share[5][7] - The company has approximately $800 million remaining in its share repurchase authorization at the end of the quarter and intends to repurchase more shares over the course of the year[7] Strategic and Operational Highlights Key strategic developments include entering a definitive agreement to acquire SomaLogic, expected to close in the first half of 2026, alongside launching new products like TruSight Oncology 500 v2, PromoterAI, and DRAGEN v4.4 software, and receiving regulatory approval in Japan for its TSO Comprehensive assay - Entered into a definitive agreement to acquire SomaLogic from Standard BioTools, with the transaction expected to close in the first half of 2026, pending regulatory approval[5][13] - Recent product and technology launches include: - TruSight Oncology 500 version 2 (TSO 500 v2) for cancer research - PromoterAI, a new AI algorithm for deciphering pathogenic genetic variants - DRAGEN™ v4.4 software for secondary analysis in oncology and multiomics[13] - Received approval from Japan's Ministry of Health, Labour and Welfare (MHLW) for TruSight™ Oncology (TSO) Comprehensive as a Class III/IV Medical Device[13] Consolidated Financial Statements This section presents the company's condensed consolidated balance sheets, statements of operations, and cash flows for the reported periods Condensed Consolidated Balance Sheets As of June 29, 2025, Illumina's total assets were $6.09 billion, a decrease from $6.30 billion at the end of fiscal 2024, primarily due to reduced cash and cash equivalents, while total liabilities decreased to $3.83 billion and stockholders' equity fell to $2.26 billion Condensed Consolidated Balance Sheets (in millions) | | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Total current assets | $2,641 | $2,746 | | Total assets | $6,087 | $6,303 | | Total current liabilities | $1,461 | $1,547 | | Total liabilities | $3,829 | $3,930 | | Stockholders' equity | $2,258 | $2,373 | | Total liabilities and stockholders' equity | $6,087 | $6,303 | - Cash and cash equivalents decreased from $1.127 billion at the end of 2024 to $934 million at the end of Q2 2025[19] Condensed Consolidated Statements of Operations For the three months ended June 29, 2025, Illumina reported total revenue of $1.06 billion and a net income of $235 million, or $1.49 per diluted share, a significant turnaround from a $1.99 billion net loss in the prior-year period primarily due to a large goodwill and intangible impairment charge related to GRAIL Condensed Consolidated Statements of Operations (in millions, except per share amounts) | | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenue | $1,059 | $1,112 | | Gross profit | $695 | $721 | | Income (loss) from operations | $214 | $(1,637) | | Net income (loss) | $235 | $(1,988) | | Diluted earnings (loss) per share | $1.49 | $(12.48) | - The results for Q2 2024 and YTD 2024 included the results for GRAIL, which was spun off on June 24, 2024, with Q2 2024 results heavily impacted by a $1.886 billion goodwill and intangible impairment charge[21] Condensed Statements of Cash Flows In Q2 2025, net cash provided by operating activities was $234 million, a significant increase from $80 million in the prior-year period, resulting in $204 million in free cash flow after capital expenditures, while net cash used in financing activities was $371 million, largely due to share repurchases Consolidated Statements of Cash Flows and Free Cash Flow (in millions) | | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $234 | $80 | | Net cash used in investing activities | $(49) | $(41) | | Net cash used in financing activities | $(371) | $(225) | | Net decrease in cash and cash equivalents | $(179) | $(188) | | Free cash flow | $204 | $48 | - Core Illumina's free cash flow was $204 million in Q2 2025, compared to $213 million in the prior year period, showing more stability when excluding the impact of GRAIL in the prior year[25] Supplemental Financial Information (Non-GAAP) This section provides supplemental non-GAAP financial measures, including constant currency revenue and reconciliations to GAAP results Constant Currency Revenue On a constant currency basis, Core Illumina's revenue for Q2 2025 was $1.054 billion, representing a 3% decline compared to the prior year, with six-month constant currency revenue at $2.104 billion, a 2% year-over-year decline, adjusting for foreign exchange rate fluctuations and hedging Core Illumina - Constant Currency Revenue (in millions) | | Three Months Ended | % Change | Six Months Ended | % Change | | :--- | :--- | :--- | :--- | :--- | | Reported Revenue (Q2 2025 vs Q2 2024) | $1,059 vs $1,092 | (3)% | $2,100 vs $2,148 | (2)% | | Constant Currency Revenue (Q2 2025 vs Q2 2024) | $1,054 vs $1,088 | (3)% | $2,104 vs $2,141 | (2)% | Reconciliation of GAAP to Non-GAAP Measures The company provides detailed reconciliations of its GAAP to non-GAAP results, with Q2 2025 non-GAAP diluted EPS at $1.19 compared to GAAP diluted EPS of $1.49, primarily adjusted for acquisition-related costs, intangible impairments, and strategic investment gains, resulting in non-GAAP operating profit of $252 million Q2 2025 Reconciliation of GAAP and Non-GAAP Diluted EPS | | Amount per share | | :--- | :--- | | GAAP diluted earnings per share | $1.49 | | Cost of revenue adjustments | $0.25 | | R&D expense adjustments | $0.03 | | SG&A expense adjustments | $(0.04) | | Other (income) expense, net adjustments | $(0.65) | | Provision for income taxes adjustments | $0.11 | | Non-GAAP diluted earnings per share | $1.19 | Q2 2025 Reconciliation of GAAP and Non-GAAP Operating Profit (in millions) | | Amount | | :--- | :--- | | GAAP operating profit | $214 | | Cost of revenue adjustments | $40 | | R&D costs adjustments | $4 | | SG&A costs adjustments | $(6) | | Non-GAAP operating profit | $252 | - Key adjustments between GAAP and Non-GAAP results for Q2 2025 include $16 million for amortization of intangible assets, a $23 million intangible asset impairment, and a $102 million net gain on strategic investments[34][39] Disclosures This section outlines the company's use of non-GAAP financial measures and provides forward-looking statements with associated risk factors Use of Non-GAAP Financial Measures The company explains its use of non-GAAP financial measures as supplementary to GAAP, believing these metrics, which exclude items like amortization of acquired intangibles and currency effects, help investors better assess operating performance and are used by the board to evaluate management performance and determine compensation - Management excludes certain items in non-GAAP measures to assist investors in analyzing and assessing past and future operating performance[14] - Non-GAAP metrics are key components used by the company's board of directors to measure management's performance and determine significant elements of their compensation[14] Forward-Looking Statements This section contains a standard safe harbor statement, warning that actual results could differ materially from forward-looking statements due to various risk factors, including market growth changes, the ability to complete and integrate the SomaLogic acquisition, regulatory uncertainty in China, potential tariffs, and challenges in launching new products - Key risks that could cause actual results to differ from projections include: - The ability to complete and integrate the proposed acquisition of SomaLogic - Uncertainty regarding the impact of being on China's "unreliable entities list" and export restrictions - Tariffs and other trade protection measures - Challenges inherent in developing and launching new products and services[16]