Illumina(ILMN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Illumina reported Q4 2025 revenue of $1.16 billion, a 5% increase year-over-year on a reported basis and 4% on a constant currency basis [20][22] - Non-GAAP EPS for Q4 was $1.35, reflecting a 42% year-over-year growth [26] - Non-GAAP operating margin expanded to 23.7%, up 400 basis points year-over-year [25] Business Line Data and Key Metrics Changes - Clinical consumables revenue grew 20% in Q4 2025, excluding China, driven by increased adoption of sequencing-based diagnostic tests [5][8] - Sequencing consumables revenue reached $755 million, an 8% increase year-over-year [22] - Research and applied markets consumable sales were roughly flat year-over-year, indicating a stabilization compared to previous quarters [22] Market Data and Key Metrics Changes - Greater China revenue was $55 million, down $25 million from Q4 2024, reflecting ongoing export restrictions [22] - Clinical market growth outside of China was 20%, driven by broader adoption of NGS-based testing [22] - Total sequencing GB output grew over 30% year-over-year, primarily from clinical applications [24] Company Strategy and Development Direction - Illumina's strategy focuses on three pillars: core sequencing, scaling multi-omics, and expanding service data and software capabilities [10][12] - The acquisition of SomaLogic is expected to enhance Illumina's position in the proteomics market, integrating capabilities for deeper biological insights [11][12] - The company aims to introduce new technologies, including spatial transcriptomics and constellation map read technology, in the first half of 2026 [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum built in 2025, expecting organic revenue growth of 2%-4% in 2026, excluding China [17][30] - Clinical consumables are projected to grow double-digit to mid-teens in 2026, while research consumables are expected to decline mid- to high-single digits [30][31] - Management highlighted the importance of adapting to the evolving funding environment in the research sector [44] Other Important Information - The company returned approximately $740 million to shareholders through share repurchases in 2025 [7] - Illumina ended Q4 with approximately $1.63 billion in cash and cash equivalents [28] - The company plans to continue share repurchases opportunistically, with $643 million remaining on its authorization [27] Q&A Session Summary Question: Operating margin guidance and capital deployment - Management confirmed that the guidance includes an assumption of ending the year at 26%-27% operating margin and remains committed to long-term margin targets despite the SomaLogic acquisition [36][38] Question: Clinical performance guidance for 2026 - Management explained that the guidance reflects a cautious approach, considering uncertainties in the research environment, but remains optimistic about clinical growth momentum [42][45] Question: Instrumentation split between research and clinical - Management indicated that over 60% of Q4 instrument placements were clinical, with expectations for this trend to continue into 2026 [50][52] Question: Growth drivers in oncology and genetic applications - Management noted that oncology remains the main growth driver, with increasing use of genetic profiling for various applications [66] Question: Competitive landscape and pricing strategies - Management expressed confidence in Illumina's competitive position and highlighted ongoing discussions with customers regarding pricing and workflow efficiencies [74][76]