Illumina(ILMN) - 2026 Q3 - Quarterly Report

Revenue Performance - Revenue for YTD 2025 decreased by 3% to $3,184 million compared to $3,268 million in YTD 2024, primarily due to a decrease in service and other revenue from GRAIL and Core Illumina[130] - Total consolidated revenue for YTD 2025 was $3,184 million, down $84 million or 2.6% from YTD 2024[133] - Total revenue for the three months ended September 28, 2025, was $1,084 million, a slight increase from $1,080 million in the same period last year[18] - Product revenue reached $927 million, compared to $914 million in the prior year, while service and other revenue decreased to $157 million from $166 million[18] - Revenue from Core Illumina consumables increased by 1% to $2,395 million in YTD 2025, driven by demand for high-throughput consumables[133] - Instruments revenue decreased by 5% to $324 million in YTD 2025, primarily due to fewer shipments of high- and mid-throughput sequencing instruments[133] - Revenue in the Greater China region decreased by $23 million and $41 million in Q3 2025 and YTD 2025, respectively, due to regulatory challenges[133] Profitability and Margins - Gross margin increased to 66.3% in YTD 2025 from 65.3% in YTD 2024, driven by the Spin-Off of GRAIL[130] - Core Illumina's gross profit decreased by $12 million, or 2%, in Q3 2025 compared to Q3 2024, with a year-to-date (YTD) decrease of $70 million, or 3%[135] - Consolidated gross margin for Q3 2025 was 67.6%, down from 68.9% in Q3 2024, and YTD gross margin decreased from 67.6% to 66.3%[135] Operating Income and Expenses - Income from operations for YTD 2025 was $606 million, a significant improvement from a loss of $1,008 million in YTD 2024, primarily due to a decrease in operating expenses[130] - Core Illumina's income from operations for Q3 2025 was $227 million, a significant decline from $741 million in Q3 2024, and YTD income from operations decreased to $606 million from $1,298 million[115] - Operating expenses decreased significantly in YTD 2025, primarily due to a reduction in GRAIL operating expenses[130] - Total consolidated operating expense was $506 million in Q3 2025, compared to $4 million in Q3 2024, reflecting a significant increase[138] Taxation - The effective tax rate for YTD 2025 was 27.2%, compared to (3.2)% in YTD 2024, influenced by recent U.S. tax legislation changes[130] - The effective tax rate for Q3 2025 was 31.8%, significantly higher than 2.1% in Q3 2024, primarily due to changes in U.S. tax legislation[146] Cash and Investments - Cash, cash equivalents, and short-term investments totaled $1,278 million at the end of Q3 2025, with approximately $501 million held by foreign subsidiaries[130] - Cash and cash equivalents as of September 28, 2025, totaled $1,050 million, a decrease of $77 million from December 29, 2024[149] - Net cash provided by operating activities for YTD 2025 was $758 million, up from $473 million in YTD 2024[159] - The company invested $93 million in capital expenditures and $63 million in strategic investments during YTD 2025[161] Share Repurchase and Equity - A new share repurchase program was authorized to repurchase up to $1.5 billion of outstanding common stock, with approximately $684 million remaining available as of September 28, 2025[154] - A total of 1,236 thousand shares were repurchased from June 30, 2025, to September 28, 2025, at an average price of $97.10 per share[173] - The approximate dollar value of shares that may yet be purchased under the program is $684,405 thousand[173] Acquisitions and Strategic Initiatives - Illumina entered into a Stock Purchase Agreement to acquire SomaLogic for $350 million, expected to close in the first half of 2026[125] - The company is in the process of acquiring SomaLogic, Inc. and certain assets from Standard BioTools Inc., with expectations regarding regulatory approvals and integration[10] Research and Development - Research and development expenses totaled $229 million, compared to $253 million in the prior year, indicating a reduction in R&D spending[18] - Core Illumina's research and development (R&D) expense decreased by $24 million, or 9%, in Q3 2025, and by $4 million, or 1%, YTD 2025[138] Legal and Regulatory Challenges - The company is currently involved in multiple securities class actions related to its acquisition of GRAIL, with ongoing litigation and motions to dismiss being filed[105][106] - The company faces uncertainties regarding its inclusion on the "unreliable entities list" by regulatory authorities in China, affecting its ability to export sequencing instruments[11] - The company is monitoring potential reductions in funding for the National Institutes of Health (NIH), which could negatively impact demand for its products[11] Other Financial Metrics - Net income for Q3 2025 was $150 million, a decrease of $555 million or 79% compared to Q3 2024[144] - Net income for the nine months ended September 28, 2025, was $516 million, a significant improvement compared to a net loss of $1,410 million for the same period in 2024[26] - The company reported a basic earnings per share of $0.98, down from $4.43 in the same quarter last year[18]