Q2 2025 Illumina Inc Earnings Call

Operator: ILLUMINA earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, we will conduct a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the call over to Interim Head of Investor Relations, Brian Blanchett.

Aluminum earnings conference call.

At this time, all participants are in listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session.

Please be advised that today's conference is being recorded.

I would now like to hand the call over to interim head of investor relations, Brian Blanchette.

Brian Blanchett: Hello, everyone, and welcome to ILLUMINA's second quarter of 2025 earnings call. Today, we will review our financial results released after market close and provide commentary before opening for Q&A. Our earnings release is available in the Investor Relations section of illumina.com. Speaking today are Jacob Thaysen, Chief Executive Officer, and Ankur Dhingra, Chief Financial Officer. Jacob will provide an update on ILLUMINA's businesses, followed by Ankur's review of the company's financials. All financial information shared on this call relates to core ILLUMINA. For historical consolidated financials, please refer to our earnings release and SEC filings. Please note that all year-over-year revenue growth rates discussed during the prepared remarks are presented on a constant currency basis to exclude the impact of foreign exchange fluctuations.

Hello everyone and welcome to Luminus' second quarter 2025 earnings call. Today we will review our financial results released after market close and provide commentary before opening for Q&A.

Our earnings release is available in the investor relations section of aluminum.com.

Speaking today are Jacob Thaysen, Chief Executive Officer, and Ankur Dhingra, Chief Financial Officer. Jacob will provide an update on Luminess businesses, followed by Ankur's review of the company's financials.

All financial information shared on this call relates to core aluminum for historical consolidated financials. Please refer to our earnings release and SEC files.

Brian Blanchett: We encourage you to review the gap reconciliation of our non-gap measures, which can be found in today's release and in the supplemental data available on our website. This call is being recorded, and the audio will be archived in our investors' section of our website. It is our intent that all forward-looking statements regarding the financial results and commercial activity made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the document that ILLUMINA files with the Securities and Exchange Commission, including our most recent Forms 10-Q and 10-K. With that, I will now turn the call over to Jacob.

Please note that all year-over-year revenue growth rates discussed during the prepared remarks are presented on a constant currency basis to exclude the impact of board exchange fluctuations.

We encourage you to review the gap reconciliation of our non-GAAP measures, which can be found in today’s release and in the supplemental data available on our website.

This call is being recorded, and the audio will be archived in our investor section of our website. It is our intent that all forward-looking statements regarding the financial results and commercial activity made during today's call will be protected under the Private Securities Litigation Reform Act of 1995.

To better understand the risks and uncertainties, that could cause actual results to differ. We refer you to the documents that aluminum files with the Securities Exchange Commission, including our most, recent forms 10, q and 10K.

Jacob Thaysen: Thank you, Brian, and good afternoon, everyone. In the second quarter, despite a year-over-year decline, we delivered revenue at the high end of our guidance range at approximately $1.06 billion. At the same time, the team's strong execution drove profitability above expectations with a non-gap operating margin of 23.8% and a non-gap EPS of $1.19. Together, these results reflect meaningful progress across the business and reinforce our view that the underlying fundamentals remain robust. In Q2, we saw ongoing adoption of our Noviceeq X platform with greater than 50 placements, increased high-throughput consumable sales, especially among Noviceeq X users as the transition continues to progress. Continued advancement of our innovation roadmap with key updates to our multi-omic strategy, reflecting disciplined execution of our long-term capital deployment plan. We are encouraged by the strength we are seeing in the clinical markets, which now accounts for roughly 60% of total sequencing consumables.

Thank you, Brian and good afternoon, everyone.

In the second quarter despite a year-over-year decline. We delivered Revenue at the high end of our guidance range at approximately 1.06 billion dollars. At the same time, the team's strong execution drove profitability above expectations, will non-gaap operating margin of 23.8% and a non-gaap EPS of $1.19.

Together these results, reflect meaningful, progress across the business and reinforce our view that the underlying fundamentals remain robust in Q2, we saw ongoing adoption of our Novac X platform the greater than 50 placements. Increased High throughput consumable sales, especially among Noble seek X uses as the transition continues to progress.

Continued advancement of our innovation roadmap with key updates to our multi-omic strategy reflecting disciplined execution of our long-term capital deployment plan.

Jacob Thaysen: Clinical has proven more resilient and, in some areas, is exceeding expectations, reinforcing our confidence in the durability of clinical demand. We're seeing this momentum across multiple clinical applications. In oncology, adoption continues to grow for comprehensive genomic profiling, and we are seeing increased interest in sequencing-intensive applications like minimal residual disease, which sets us up well for future clinical growth. In genetic disease testing, growth continues to be driven by expanding national genome programs and broader adoption of whole genome and whole exome sequencing for rare diseases. In reproductive health, we are seeing growth in NIPT sample volumes, particularly in the US, as more customers complete validation and ramp up clinical testing. We continue to believe the long-term clinical opportunity remains significant, with NGS adoption increasing as genomics becomes standard of care for therapy selection, early detection, monitoring, and expands into other disease types.

We are encouraged by the strengths. We are seeing in the clinical markets, which now accounts for roughly 60% of total sequencing. Consumables

Clinical has proven more resilient and in some areas is exceeding expectations. Reinforcing our confidence in the durability of clinical demand

We seeing this momentum across multiple clinical applications in oncology adoption continues to grow for comprehensive genomic profiling.

And we are seeing increased interest in sequencing-intensive applications like minimal residual disease, which sets us up well for future clinical growth.

In genetic disease testing, growth continues to be driven by expanding national genome programs and broader adoption of whole genome and whole exome sequencing for rare diseases.

In reproductive Health, we are seeing growth in nipt Sample volumes, particularly in the US as more customers, complete validation and ramp up clinical testing.

We continue to believe the long-term clinical opportunity remains significant, with NDS adoption increasing as genomics becomes the standard of care for therapy selection, early detection, monitoring, and expands into other disease types.

Jacob Thaysen: While clinical demand has been encouraging, the research environment, particularly in the US, remains constrained amid ongoing NIH funding uncertainty. As expected, demand from this segment remains soft in Q2, with some labs delaying projects or holding off on hiring due to concerns about the future grant availability. In the meantime, we're actively working with our customers to help them navigate this period. Separately, in China, our ability to export instruments is still restricted. We continue to engage with regulators to identify solutions that support our long-term sustainable presence in the country, and we will keep you updated on any material developments. As we navigate these near-term market dynamics, our focus remains on disciplined execution and laying the foundation for long-term success. The focus underpins our commitment to achieving our financial targets and delivering high single-digit revenue growth and expanding non-gap operating margin to 26% by 2027.

While clinical demand has been encouraging, the research environment, particularly in the US remains constrained amid ongoing NIH funding on certainty.

As expected the man from this segment remains soft in Q2 with some Labs delaying projects or holding off on hiring due to concerns about the future Grand availability.

In the meantime, we actively working with our customers, to help them navigate this period.

Solutions that supports our long-term sustainable presence in the country and we will keep you updated on any material developments.

As we navigate these near-term market dynamics, our Focus remains on disciplined execution, and laying the foundation for long-term success.

Jacob Thaysen: We are advancing towards these targets by delivering across our three key drivers: growing our core sequencing business, including continued progress with Noviceeq X transition, scalable entry into multi-omics to complement our sequencing platforms, and expanding our services, data, and software offerings to provide more integrated customer solutions. Together, these priorities support our broader strategy and vision for the industry of shifting from a cost-per-gigabyte model to delivering the highest quality biological insight at the lowest end-to-end cost. Now, I would like to focus on the progress we're making in our multi-omics driver, which is centered on delivering differentiated solutions that integrate with our sequences. We've already announced our capabilities in single cell, crystal-based perturbseq, and spatial analysis. And in June, we took another step forward in proteomics with our announced acquisition of Somalogic from Standard BioTools.

The focus on the pins, our commitment to achieving our financial targets and delivering high single-digit revenue growth, and expanding non-GAAP operating margin to 26% by 2027.

We are advancing towards these targets by delivering across our three key drivers.

Growing our core sequencing business, including continual progress, the know seek extension.

Scalable entry into multi-omics to complement our sequencing platforms.

...and expanding our services, data, and software offerings to provide more integrated customer solutions.

Together, these priorities support our broader strategy and vision for the industry of shifting from cost per gigabyte model to delivering the highest quality biological Insight at the lowest end to-end cost.

Now, I'd like to focus on the progress we're making in our multiomics driver.

Which is centered on delivering differentiated solutions that integrate with our sequences.

We've already announced our capabilities in single-cell crystal-based perturb CHiC and spatial analysis.

Jacob Thaysen: This acquisition expands our presence in affinity-based proteomics, a small but fast-growing segment of the broader proteomics market, and builds on the exclusive commercial relationship we have had with Somalogic since 2021. Somalogic is a key player in high-throughput proteomics. Their SomaScan assay can analyze over 9,500 unique human proteins from small biological samples, delivering deep, actionable insights for drug discovery, diagnostics, and health monitoring. What sets their technology apart is its proprietary somamer binding regions, highly precise affinity regions that bind to specific proteins with unmatched sensitivity, scalability, and repositability. This approach delivers broader coverage than other methods while reducing the time and cost of deeper proteomics analysis. Bringing Somalogic into ILLUMINA builds on our existing long-standing partnership. As our collaboration progressed, our conviction in their technology deepened, and we saw a clear opportunity to accelerate innovation by integrating their capabilities into our innovation engine.

And in June, we took another step forward in POM with our announced acquisition of Sumo Logic from Standard Bio Tools.

This acquisition, expands our presence in Affinity based pollox a small but fast growing segment of the broader proteomics market and builds on the exclusive commercial relationship we have had with theological since 2021.

Similar logic is a key player in high throughput proteomics.

There's so much scan as they can analyze over 9,500 unique, human proteins from small, biological samples, delivering deep actionable insights. But doctors Discovery, Diagnostics and health monitoring.

What sets their technology apart is? Its proprietary. Some may have binding regions, highly precise Affinity regions. That bind to specific proteins, with unmatched, sensitivity, scalability, and reproducibility.

This approach delivers broader coverage than other methods by reducing the time and cost of debt proteomics analysis.

Bringing somalogic into alumina Builds on our existing long-standing partnership.

As our collaboration progressed, our conviction in that technology deepened, and we saw a clear opportunity to accelerate innovation by integrating their capabilities into our innovation engine.

Jacob Thaysen: With ILLUMINA's expertise in product development and global commercial reach, we will scale their technology faster, expand customer adoption, and achieve greater operational efficiencies. Somalogic is a strong strategic fit for ILLUMINA. Their technology, when paired with our platforms, offers a highly scalable and cost-efficient solution for proteomics discovery. By more deeply integrating proteomics in our ecosystem, we expand our ability to deliver greater biology insight through our end-to-end workflows. This enhances the value proposition of the Noviceeq X and creates the potential to extend Somalogic's technology into other multi-omic applications, such as single cell and spatial. With this addition, we are advancing towards a more comprehensive multi-omics portfolio, spanning DNA, RNA, methylation, and now proteomics. We expect the transaction to close in the first half of 2026.

With aluminum expertise in product development and global commercial reach, we will scale that technology faster, expand customer adoption, and achieve greater operational efficiencies.

Sologic is a strong strategic fit for Illumina.

That technology when paired with our platforms offer, a highly scalable and cost efficient solution for proteomics, Discovery by more deeply integrating products. In our ecosystem, we expanding our ability to deliver greater biology Insight through our end-to-end workflows

This enhances the value proposition of the Nova X and creates the potential to extend similar logic technology into other multi-omic applications such as single-cell and spatial.

With this edition, we are advancing 2 boards and a more comprehensive multiomics portfolio, spanning DNA, RNA, methylation, and now proteomics.

Jacob Thaysen: After obtaining the necessary regulatory approvals, we are looking forward to welcoming the Somalogic team to ILLUMINA and expanding the impact of proteomics together. As we advance key elements of our multi-omics strategy, we are also seeing strong momentum across our recent platform launches. One example is the MySeq i100+, our latest benchtop sequencer. Since launching late last year, we placed more than 500 instruments and are now seeing customers order additional units after just a few months of use. Customer feedback on the MySeq i100+ platform remains very positive. Customers are calling it a game changer, highlighting faster turnaround times, ease of use, and room temperature shipping and storage of reagents. All features that make sequencing more accessible for labs operating in a wide range of resource settings.

We expect the transaction to close in the first half of 2026. After obtaining the necessary regulatory approvals. We are looking forward to welcoming the sumatic team to alumina and expanding the impact of proteomics together.

As we advance key elements of our multiomics strategy, we also seeing strong momentum across our recent platform. Launches 1 example is in my I 100 plus our latest benchtop sequencer.

Since launching late last year, we placed more than 500 instruments and are now seeing customers order additional units after just a few months of use.

Customer feedback under my i100 platform remains very positive.

Storage Arrangements.

Jacob Thaysen: This reduces reliance on centralized labs, shortens diagnosis turnaround time, and gives customers greater autonomy for running oncology, infectious disease, and other clinical applications. These features are especially attractive to labs adopting NGS for the first time, as well as those in emerging markets. The MySeq i100+ platform currently supports 18 proven workflows, including nine fully integrated from library prep through analysis. This level of integration reflects a broader shift in how we approach innovation, grounded in deeper customer insights and close collaboration throughout development. MySeq i100+ sets a new standard for the future of ILLUMINA innovation, optimizing for complete end-to-end workflows that lower barriers to adoption and deliver high-quality insights at scale. Before I hand it over to Ankur, I want to briefly share our views on the remainder of 2025.

All features that make sequencing more accessible collapse operating in a wide range of resource settings.

This reduces the lines on centralized labs, shortens diagnosis turnaround time, and gives customers greater autonomy for running oncology, infectious disease, and other clinical applications.

These features are specially attractive to Labs adopting NDS for the first time as well as those in Emerging Markets.

The myc. I 100 platform currently supports 18 proven workflows, including 9 fully integrated from library prep through analysis.

This level of integration reflects a broader shift in how we approach innovation grounded in deeper customer insights and close collaboration throughout development.

Mystic i100 sets a new standard for the future of alumina innovation, optimizing for complete end-to-end workflows at lower barriers to adoption and delivering high-quality insights at scale.

Jacob Thaysen: We are encouraged by the momentum in our Q2 results, the progress of our innovation roadmap, and we remain focused on discipline execution. However, we continue to approach the second half of the year with caution, given the ongoing funding uncertainties in the US research market. That said, we are raising our guidance for total company revenue growth, as well as total reported revenue, non-gap operating margin, and non-gap EPS, reflecting strong execution and operating discipline across the organization. I will now turn it over to Ankur to provide more detail on our results and outlook before we move into Q&A.

Before I hand it over to an, I want to briefly share our views on the remainder of 2025.

We encouraged by the momentum in our Q2 results. The progress of our Innovation roadmap and we remain focused on discipline execution. However, we continue to approach the second half of the Year precaution, given the ongoing funding uncertainties in the US research Market.

That said, we are raising our guidance for total company revenue growth as well as total reported revenue, non-GAAP operating margin, and non-GAAP EPS, reflecting strong execution and operating discipline across the organization.

I will now turn it over to Ankur to provide more detail on our results and outlook, before we move into Q&A.

Ankur Dhingra: Thank you, Jacob, and good afternoon, everyone. I will give you an overview of our second quarter financial results, provide more color about revenue, expenses, earnings, and developments on our balance sheet and capital deployment, and then speak about our outlook going forward. Before I get into the details of the financial performance, let me provide a high-level view of how the second quarter played out. In Q2, we made further progress on our long-range goals and delivered results exceeding our expectations for the quarter. Revenue, although lower year-over-year, came in at the high end of our guidance range, driven by strength in high-throughput consumables. We saw strong organic margin expansion and EPS of $1.19, which well exceeded the top of our guidance range. As expected, research customers, especially the US academic and government customers, continue to manage their budgets tightly in the face of funding constraints.

Thank you. Jacob and good afternoon everyone.

I will give you an overview of our second quarter, Financial results, provide more color about Revenue, expenses earnings and developments on our balance sheet and capital deployment.

And then, let's discuss our outlook going forward.

Before I get into the details of the financial performance, let me provide a high-level view of how the second quarter played out.

In Q2, we made further progress on our long-range goals and delivered results, exceeding our expectations for the quarter.

Revenue, although lower year-over-year came in at the high end of our guidance range driven by strength in high throughput consumables.

We saw strong organic margin expansion.

and EPS of a 1/19 cents which well, exceeded the top of our guidance range,

As expected, research customers—especially US academic and government customers—continue to manage their budgets tightly in the face of funding constraints.

Ankur Dhingra: The trends in Q2 were generally in line with what we saw in the latter part of Q1. On the other hand, our clinical customers continue to invest in expanding their portfolio and scaling current on-market tests. Our Greater China business was slightly better than the guide, and our customers in Greater China continue to be very engaged and supportive of ILLUMINA's differentiated technology. Sales of consumables have held up well, and we remain in discussion with the relevant authorities. Now, let me provide you details of the financial performance. Second quarter revenue of $1.06 billion was down approximately 3% year-over-year on both constant currency and reported basis. Greater China revenue of $63 million was slightly ahead of expectations and represented a $12 million decline from the second quarter of 2024. Excluding Greater China, ILLUMINA revenue was down approximately 2% on a constant currency basis.

The trends in Q2 were generally in line with what we saw in the later part of Q1.

On the other hand, our clinical customers continue to invest in expanding their portfolio.

And scaling current on Market tests.

Our Greater China business was slightly better than the guidance.

And our customers included, China continued to be very engaged and supportive voluminous differentiated technology.

sales of consumables have held up, well,

And we remain in discussion with the relevant authorities.

Now, let me provide you details of the financial performance.

Second quarter revenue of 1.06 billion was down approximately 3%. Year-over-year on both constant currency and reported basis.

Greater China revenue of $63 million was slightly ahead of expectations.

And represented a $12 million decline from the second quarter of 2024.

Ankur Dhingra: Sequencing consumables revenue of $740 million was approximately flat year-over-year and up approximately 6% sequentially on a reported basis. High-throughput consumables grew both sequentially and year-over-year, including a greater than 10% sequential growth in Noviceeq X consumables revenue. Strong growth in the clinical segment, which now represents roughly 60% of our total sequencing consumables, was primarily driven by broader adoption of comprehensive genomic profiling and increased momentum in sequencing-intensive applications like mRD, which sets us up well for future growth. The X transition continues to progress. As we've reported, over 80% of the sequencing volumes for our research customers have already transitioned to X, with these customers continuing to face budget constraints. Our clinical customers continue with the transition, working through validation and balancing their investments between on-market tests versus development of new tests. The clinical X transition has progressed to roughly 55% in the quarter.

Excluding greater China illuminate. Revenue was down approximately 2% on a constant currency basis.

Sequencing. Consumables revenue of 740 million was approximately flat year-over-year and up approximately 6%. Sequentially on a reported basis High, throughput consumables, grew both sequentially and year-over-year including a greater than 10% sequential growth in Novac X consumables Revenue.

The X transition continues to progress.

As we've reported over 80% of the sequencing volumes, our research customers have already transitioned to X.

With these customers continuing to face budget, constraints.

Our clinical customers continue with the transition, working through validation and balancing that Investments between on Market tests versus development of new tests.

A clinical test transition has progressed to roughly 55% in the quarter.

Ankur Dhingra: In Q2, roughly 69% of high-throughput gigabases shipped and approximately 44% of high-throughput consumables revenue was on the Noviceeq X series. We continue to make progress on the high-throughput transition framework we previously disclosed, and at the current pace, we anticipate that towards the end of 2025, approximately 50% of high-throughput revenue and approximately 75% of GB shipped to be on Noviceeq X series. We expect this to be driven by the clinical segment as customers scale on the Noviceeq X. About sequencing activity, total sequencing GB output on our connected high and mid-throughput instruments grew at a rate of more than 30% year-over-year, driven by robust strength in clinical but more muted growth from our research customers. Although not a predictor of near-term revenue, GB output on connected instruments provides us a directional view of underlying applications' demand and levels of utilization of our connected instruments and consumables.

In Q2, roughly 69% of high-throughput gigabytes is shipped.

And approximately 44% of high-throughput consumables revenue.

Was on the Nova seek X Series.

We continue to make progress on the high. Throughput transition framework. We previously disclosed.

And at the current Pace, we anticipate that towards the end of 2025 approximately, 50% of high, throughput revenue and approximately 75% of GB is shipped to be a Nova seek X Series.

We expect this to be driven by the clinical segment as customers scale on the Nova CeX.

About sequencing activity.

Total sequencing GD. Output on our connected high and mid, throughput instruments grew at a rate of more than 30% year-over-year.

By robust strength in clinical.

But more muted growth from our research customers.

Although not a predictor of near-term revenue, GB output on connected instruments provides us a directional view of underlying applications demand and levels of utilization of our connected instruments and consumables.

Ankur Dhingra: Sequencing instruments revenue of $96 million was down approximately 18% year-over-year in Q2, as we saw the effect of constrained budgets from our high and mid-throughput research customers. The funnel pipelines held, but we saw extended decision times amongst our customers. Approximately 60% of the Xs placed in Q2 were to clinical customers. On the low-throughput side, MySeq i100+ launch continues to progress quite well, and our customers have had positive reviews for the platform and are excited about the MySeq 100 base model launch next month. In Greater China, our instruments business was down approximately 40% due to restrictions on exportation. Sequencing service and other revenue of $136 million was down approximately 5% year-over-year, in line with expectations. The decrease was mainly due to the timing of certain strategic partnership revenues last year related to the AGD consortium.

sequencing instruments revenue of 96 million was done approximately 18% year-over-year in Q2

As we saw the effect of constrained budgets from a high and mid, throughput research customers.

The funnel pipelines held.

But we saw extended decision times amongst our customers.

Approximately 60% of the excess placed in Q2 were to clinical customers.

On the low. Throughput side mic. I 100 plus launch continues to progress quite well.

And our customers have had positive reviews for the platform.

And are excited about the myc, 100 base model launched next month.

In Greater China, our instruments business was done approximately 40% due to restrictions on exportation.

Sequencing service and other revenue of 136 million was down approximately 5% year-over-year in line with expectations.

Ankur Dhingra: Excluding those items, our core services and informatics business grew high single digits. Moving to the rest of ILLUMINA P&L, non-gap gross margin was 69.4% for the second quarter, which increased 200 basis points quarter over quarter and remained stable year-over-year. We experienced favorable product mix in our sequencing business, driven by high consumables revenue mix. Additionally, our ongoing operating excellent action plan initiatives contributed to improved gross margin performance this quarter. Tariffs had a partial impact this quarter, with a net impact of approximately 110 basis points on our gross margin in Q2. Non-gap operating expenses were $484 million, which is down approximately 6% or $32 million year-over-year. This reflects the effect of actions we've taken towards our long-range commitments of expanding margins while prioritizing key growth investments. As a result of our discipline, we did not experience the typical seasonal rise in OPEX that occurs post Q1.

The decrees were mainly due to the timing of certain strategic partnership revenues last year related to the AGD Consortium.

Excluding those items, our core services and informatics business grew high single digits.

Moving to the rest of Illumina.

Non-gaap gross margin was 69.4% for the second quarter.

Which increased 200 basis points, quarter over quarter and remained stable year-over-year.

We experienced favorable product mix in our sequencing business driven by high consumables Revenue, mix

Additionally, our ongoing operating expenses and action plan initiatives contributed to improved gross margin performance this quarter.

Tariffs had a partial impact this quarter, with the net impact of approximately 110 basis points on our gross margin in Q2.

Non-gaap operating expenses were 484 million which is down approximately 6% or 32 million year-over-year.

As we've taken towards a long range commitments with expanding margins, while prioritizing key growth Investments.

As a result of our discipline, we did not experience the typical seasonal rise in Opex that occurs post-Q1.

Ankur Dhingra: Non-gap operating margin was 23.8% in Q2, which increased 160 basis points year-over-year. Operating profit grew approximately 4% year-over-year on lower revenue, reflecting increased operating leverage from the improved cost structure. Looking at our results below the line, non-gap other expense, which is largely comprised of net interest expense, was $10 million, and non-gap tax rate was 22.2%. Note that the recent tax legislation had no impact on our Q2 tax rate as it was enacted after quarter end. Our average diluted shares were approximately 157 million, approximately 2 million lower than last quarter, driven by an increased level of share repurchases, net of dilution from employee equity awards. Altogether, non-gap EPS of $1.19 per diluted share grew 9% year-over-year and came in well above our guidance range. Moving to cash flow, balance sheet, and capital allocation items for the quarter.

Non-GAAP operating margin was 23.8% in Q2.

Which includes 160 basis points year-over-year.

Growth approximately 4% year-over-year on Lower Revenue.

Reflecting increased operating leverage from the improved cost structure.

Looking at our results below the line.

Non-gaap other expense which is largely comprised of net. Interest, expense was $10 million and non-gaap tax rate was 22.2%.

Was enacted after quarter end.

Our average diluted shares were approximately 157 million, about 2 million lower than last quarter, driven by an increased level of share repurchases, net of dilution from employee equity awards.

All together, non-GAAP EPS for $0.19 per diluted share grew 9% year-over-year and came in well above our guidance range.

Ankur Dhingra: Cash flow provided by operations was a robust $234 million. Capital expenditures were $30 million, and free cash flow was $204 million. In Q2, we repurchased approximately 4.5 million shares of ILLUMINA stock for $380 million at an average price of approximately $85 per share. We intend to continue to repurchase incremental shares over the course of the year as part of our approximate $800 million authorization remaining at the end of the quarter. Additionally, we entered into a definitive agreement with Standard BioTools, under which ILLUMINA will acquire Somalogic and other specified assets for $350 million in cash, payable at closing, plus up to $75 million in near-term performance-based milestones and royalties. We expect the deal to close in the first half of 2026, subject to regulatory approvals.

Moving to cash flow, balance sheet, and capital allocation items for the quarter.

Cash flow provided by operations for the robust $234 million.

Capital expenditures, for 30 million and free cash flow was 204 million.

In Q2, we repurchased a approximately 4, and a half million, shares of Illumina stock for 380 million at an average price of approximately 85 dollars per share.

We intend to continue to repurchase incremental shares over the course of the year as part of our approximate $800 million authorization remaining at the end of the quarter.

Additionally, we entered into a definitive agreement with Standard BioTools under which Illumina will acquire SomaLogic and other specified assets for $350 million in cash payable at closing.

Plus up to 75 million in near-term performance, space milestones and loyalties.

We expect the deal to close in the first half of 2026 is subject to regulatory approvals.

Ankur Dhingra: We remain hyper-focused on maximizing our growth opportunities through capital allocation initiatives with high conviction in their contribution margins to our long-term strategic plan. We ended the quarter with approximately $1.16 billion in cash, cash equivalents, and short-term investments and gross leverage of approximately 1.7x gross dead to last 12 months EBIT. Now moving to guidance for the year 2025. As you may have seen in the press release, we have raised our operating margin and EPS expectations for 2025 and are holding the rest of the world's constant currency revenue growth at the range we provided in May. We've also increased our revenue expectations from China. Let me provide further details. Starting with revenue, we're raising our revenue guidance for the Greater China region by $25 million at the midpoint to approximately $200 million for the year.

We remain hyper-focused on maximizing our growth opportunities through capital allocation initiatives.

With high conviction in their contribution margins to a long-term strategic plan.

We ended the quarter with approximately 1.16 billion dollars in cash. Cash equivalents and short-term investments in Cross. Leverage of approximately 1.7 x cross dead to last 12 months of beta.

Now, moving to guidance for the year 2025.

as you may have seen in the press release, we have raised our operating margin and EPS expectations for 2025

And are holding a rest of the world, constant currency Revenue growth at the range, we provided in May.

We've also increased our Revenue expectations from China.

Let me provide for the details.

Starting with the revenue.

We're raising our revenue guidance for the Greater China region by $25 million at the midpoint to approximately $200 million for the year.

Ankur Dhingra: Although we remain restricted to export instruments into the country, we have seen resilience in consumables purchases and strong customer support that we believe will extend at least in part through Q3. For the rest of the world, we are reiterating our revenue guidance of growth between 0% to 2% on constant currency. Hence, we now anticipate total ILLUMINA constant currency revenue decline to be in the range of minus 0.5% to minus 2.5%. Including FX changes, we now expect reported ILLUMINA revenue in the range of $4.23 to $4.31 billion. Now shifting into our product assumptions. For the rest of the world, we now expect sequencing consumables growth between 1% and 3%, up from flat to 2%, driven by strong sequencing activity from our clinical customers and aligning our guidance with our reported revenue to include the impact of pricing actions.

Although we remain restricted to export instruments into the country, we have seen resilience in consumables, purchases, and strong customer support.

that we believe will extend at least in part through Q3.

For the rest of the world, we are reiterating our revenue guidance of growth between 0% to 2% on a constant currency basis.

Hence, we now anticipate total aluminum constant currency revenue decline, debating in the range of minus 0.5% to minus 2.5%.

Including FX changes. We now expect to reported aluminum Revenue in the range of 4.23 to 4.31 billion.

Now shifting into our product assumptions.

The rest of the world.

We now expect sequencing consumables growth between 1% and 3%.

Up from flat to 2% driven by strong sequencing activity from our clinical customers.

and aligning our Guidance, with our reported Revenue to include the impact of pricing actions,

Ankur Dhingra: We're lowering our expectations for the rest of the world's sequencing instruments to a decline between 4% and 6% year-over-year, including the impact of pricing actions. This decrease is largely due to conservatism from our research customers that we saw towards the end of Q2. Although we still expect demand for Noviceeq X instruments to slightly increase and low-throughput growth driven by placements of the MySeq i100, we have seen weakness in mid-throughput. Now moving down the P&L, as previously communicated, the ILLUMINA team is making good progress on our operational excellence initiatives and lowering our cost base. Our cost discipline, as well as increased revenue driven by Greater China outperformance and favorable FX rates, has allowed us to raise our operating margin guidance by approximately 50 basis points to a range of 22% to 22.5%.

With lowering our expectations, for the rest of the world's sequencing instruments, to a decline between 4% and 6% year-over-year.

Including the impact of placing actions.

This decreases largely due to conservatism from our research customers that we saw towards the end of Q2.

Although we still expect demand for Nova X instruments to slightly increase, and load throughput growth driven by placements of the MiSeq I100, we have seen weakness in throughput.

Now, moving down the pnl.

As previously communicated, the Illuminati team is making good progress on our operational excellence initiatives and lowering our cost base.

Ankur Dhingra: Furthermore, earlier this month, new legislation will pass that allows US-based R&D spend to be tax deductible. Given the scale of ILLUMINA's large US R&D base, we anticipate this bill having a positive effect on our tax rate for 2025 and beyond. We now expect our FY25 tax rate to be approximately 20%. Given our increased level of share repurchases, we now expect a FY25 WASL of approximately 157 million shares. Bringing it all together, these developments have allowed us to raise our EPS guidance by $0.25 at the midpoint to a range of $4.45 to $4.55. Approximately $0.10 of this improvement is from tax changes, approximately $0.10 from China, and the remainder from FX and operating margin improvements.

Our cost discipline as well as increased Revenue driven by greater China outperformance. And favorable FX States has allowed us to raise our operating margin guidance by approximately 50 basis points to arrange of 22% to 22 and a half percent.

For the more earlier this month, new legislation were passed. That allows us-based R&D, spend to be tax deductible.

Given the scale of Illumina's large U.S. R&D base, we anticipate this bill having a positive effect on our tax rate for 2025 and beyond.

5 tax rate to be approximately 20%.

Given our increased level of share repurchases, we now expect FY 2025 to be approximately 157 million shares.

Bringing it all together, these developments have led us to raise that EPS guidance by $0.25 at the midpoint to a range of $4.45 to $4.55.

Approximately 10 cents of this Improvement is from tax changes.

Proxy 10 cents from China in the remainder from FX and operating margin improvements.

Ankur Dhingra: To summarize, at the midpoint, our revised FY25 guidance reflects an increase in revenue of $50 million, an increase in op margin of 50 basis points, and an increase in EPS of $0.25. Now moving to the third quarter of 2025. For the third quarter, we expect revenue outside the Greater China region to grow between 1% and 2% year-over-year on a constant currency basis, and revenue in the Greater China region between $35 and $45 million. Together, we anticipate total ILLUMINA constant currency revenue decline to be in the range of 1.5% to 2.5%. We expect non-gap operating margin of approximately 22%, non-gap tax rate to be approximately 16%, WASL of approximately 155 million shares, and non-gap earnings per share in the range of $1.15 to $1.19. For Q4, this implies an uptick in revenue, roughly half coming from usual seasonality in instrument purchases.

To summarize.

At the midpoint, our revised fi25 guidance, reflects an increase, in revenue of $50 million, and increase in up Margin of 50 basis points, and an increase in EPS of 25 cents.

Now, moving to the third quarter of 2025.

for the third quarter, we expect Revenue outside the greater China region.

To grow between 1% and 2% year-over-year on a constant currency basis.

And revenue in Greater China region between 35 and 45 million.

Together, we anticipate total Illumina constant currency revenue to decline to be in the range of 1.5% to 2.5%.

We expect non-gaap operating margin of approximately 22%.

Non-gaap tax rate to be approximately 16%.

Vaso of approximately 155 million shares.

And non-gaap earnings per share in the range of 1.15 cents to 1.19 cents.

For Q4, this implies an uptick in revenue.

Ankur Dhingra: We expect the remainder to come from a combination of data service offerings like AGD and new products like our proteomic solution. In closing, I want to express my continued appreciation to the ILLUMINA team for their relentless focus on execution and delivering another quarter of progress towards our short and long-term goals, which is allowing us to raise the guidance for the year. Thank you for joining our call today. I will now invite the operator to open the line for Q&A.

Roughly half coming from usual, seasonality in instrument purchases.

We expect the remainder to come from a combination of data services, offerings like AGD, and new products like a proteomic solution.

In closing, I want to express my continued appreciation to the alumina team for their Relentless. Focus on execution and delivering another quarter of progress towards our short and long-term goals, which is allowing us to raise the guidance for the year.

Thank you for joining our call today.

I will now invite the operator to open the line for Q&A.

Operator: At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. To give as many analysts as possible the opportunity to ask a question, please limit yourself to one question. If you have additional questions, please raise your hand again to be put into the queue. We will now pause a moment to assemble the queue. Thank you. Our first question will come from Vijay Kumar with Evercore. Please unmute and ask your question.

At this time, if you would like to ask a question, please click on the raise hand button which can be found on the black bar at the bottom of your screen.

To give as many analysts as possible the opportunity to ask a question, please limit yourself to one question. If you have additional questions, please raise your hand again to be put into the queue.

We will not pause a moment to assemble the queue. Thank you.

Our first question will come from Vijay Kumar with evercore, please unmute, and ask your question.

Analysts: Hey, guys. Thanks for taking my question. Congrats on the French here and execution. Just maybe my one question is on the guide change. If you could just give us a bridge here, right? Looks like instruments came down by $25 million, China up $25, maybe some was at max. What else? Like, did consumables change, or is there anything else changing on microarrays? I think you mentioned new products here, Ankur, and maybe, Jacob, you can talk about new products and pipeline. How big of a deal is this? I feel like the Street has not given enough attention on pipeline, but could this be more meaningful next year? Thank you.

Um, hey guys, thanks for taking my question and, uh, congrats on the print here and execution. Just maybe my one question is on the guide change. If you could just give us a bridge here, right? It looks like instruments came down by $20 million, China up $25 million. Maybe some of that was factored in. What else, like, did consumables change? Um, you know, is there anything else changing on microarrays? I think you mentioned new products.

Jacob Thaysen: Vijay, thank you very much, and yeah, thank you for your acknowledgment of our great quarter here. So you're absolutely right. We have a lot in our pipeline. And in fact, I did see the feedback from our early access customers here recently on both Constellation, on 5Base, and on our spatial solutions. And I would say we got very, very strong feedback from all three products. Our customers are very happy to get access to this before. As you reminded me earlier, we would probably more be launching it and get feedback from customers. Now we're engaging with them very early so we can get feedback on it, but they can also start to be excited about it and start to think about publication, but also making grants. So that is something that we believe will start to have an impact here already in '26.

Um, um, Encore and maybe Jacob, you can um, uh, talk about new products and pipeline. How big of a deal is, is I feel like the street has, uh, has uh, has not given enough attention on Pipeline but, uh, could this be more meaningful next year? Thank you.

We did, thank you very much. And, uh, yeah, thank you for your acknowledgement of our great quarter here. So, um, you have to write, we have a lot in our pipeline. Um, and in fact I did uh, did the sea the feedback from our Early Access customers here recently on both constellation, uh, on 5 bass and on on our spatial Solutions and I would say we got very very strong feedback from all 3 products, our customers.

Jacob Thaysen: So we do believe that this will be an addition of growth starting from '26 and onwards. Ankur?

Very happy to get access to this before as you reminded me earlier, we were probably more be launching it and get feedback from customers. Now we engaging with them very early, so we can get feedback on it. But they can also start to be excited about it and start to think about publications but also making grants so so that that is something that we believe will start to have an an impact here, already in 26. Um, so we do believe that that this will be an addition of of growth starting from 26 and onwards.

Ankur Dhingra: Yeah, thanks, Jacob, and thanks, Vijay, as well. So to your question about the ins and outs for the guide here, let me tell you, let me parse it into two different ways based on the question you were asking. So one is the guide's up because of FX, as well as increase in China in aggregate. If you think about it from the rest of the world perspective, we are reducing our expectations on the instrumentation side based on just what we've seen in Q2 overall, and primarily coming from the research market and the way we've seen the pipeline work through during the quarter. But at the same time, the offset for that instrumentation is in consumables for the rest of the world.

Ankur Dhingra: So we are increasing our expectations for the consumables business, which came in quite well in Q2, and as we see the pipeline for the rest of the year as well. The second part on your question was around services. The two parts to that, one is we've talked about these data services business. If you recall last year, for the full year, we had about, say, $80 to $90 million full-year business in that data services side coming from our AGD consortium, which was slightly heavily weighted towards the first half of the year last year, which is, if you recall, I made a commentary during our earnings call last quarter to say that comparison becomes favorable for us in the back half of this year.

Um, based on um, just what we've seen in Q2, um, overall, um, and primarily coming from the research Market, um, and the way we've seen the pipeline work through during the quarter, but at the same time, the offset for that instrumentation is in consumables for the rest of the world. So we are increasing our expectations for the consumables business, which came in, um, quite well in Q2. And as we see the pipeline for the rest of the year as well.

Ankur Dhingra: We are anticipating some business in that space and potentially some of the new services that we're looking to launch here in the back half of the year. And if all goes well, we will talk about it when we get to our '26 guidance about what we anticipate from those services then.

Uh, the second partner. Um, on your question, was that on Services? Um uh the 2 parts to that 1 is we've talked about these data services business. If you recall last year, um, for the full year we had about about, say, 80 to 90 million dollars, fully your business. Um, in that data services side coming from our EGD Consortium, um, which was slightly heavily, uh, weighted towards the first half of the year last year. Um, which is if you recall, I made a commentary during our learning score, last quarter. Um, to say that comparison becomes favorable for us in the back half of this year. Um, we are anticipating some business in that space, um, and potentially some of the new services that that, uh, we're looking to launch here in the back half of the year. Um, and that is, if all goes, well, uh, we will talk about it when we when we get to our 26 guidance about what we anticipate from those Services back.

Operator: Your next question will come from Subhu Nambi with Guggenheim. Please go ahead.

Your next question will come from subu nambi with Guggenheim please. Go ahead.

Speaker 6: Hey, guys. Thank you for taking my question. Have you guys seen any change in customer behavior in anticipation of competition? How are you preparing for that possibility? As we look at the rules platform, one attribute that seems hard for you to match based on the current engineering is probably turnaround time. So building off of Vijay's question, is there something in the pipeline that would allow you to be more competitive with a high-throughput platform when it comes to turnaround time?

Hey guys. Uh, thank you for taking my question. Um, have you guys seen any change in customer behavior in anticipation of competition? How are you preparing for that possibility? As we look at the Rouge platform, 1, attribute, that seems hard for you to match based on the current engineering is probably turnaround time. So building off of VJs question, is there something in the pipeline that would allow you to be more competitive with a high throughput platform when it comes to turnaround time.

Jacob Thaysen: Yeah, so we definitely spend a lot of time thinking about competition, but I would say we spend even more time thinking about our customers, and now we continue to serve them every day. And this is something that I saw coming into this company, is that I think we could do a better job on engaging with our customers, as I mentioned before, engaging them on early access to our technology, sharing the roadmap, and other things. So that's kind of what our main focus is, to make sure that we are always supporting our customers. Now, we continue to innovate. We have the largest focus and the largest budget in this industry from R&D perspective. And as you can anticipate, also, we have a lot of things going on. We have been out there speaking openly about what we are working on in the multi-omic space.

Jacob Thaysen: But clearly, we are not sharing everything. We are doing also on our instrumentations to address what we believe are the main growth markets going forward. So this particularly is in the clinical space, also in the decentralized space. We are looking to the attributes. We are working a lot with our customers to understand also what are the attributes they're looking for. And you're right, there are customer bases that are looking for fast turnaround time. This is a niche market in the NICU where you need to have a very fast service sold out, and you will compromise maybe in the ease of use or even the quality of sequencing. But if you look for the vast majority, here we are looking in where an overnight run is more than reasonable, and you can get all the information you want out.

Yeah so so we definitely spend a lot of time thinking about competition but I would say if you spend even more time thinking about our customers and how we continue to to serve them every day. And uh this is something that I saw coming into this company is that I think we could do a better job on engaging with our customers. As I mentioned before, engaging them on early access to our technology, sharing the road map and other things. So, so that's kind of what our main focus is, um, to make sure that we are always supporting our customers. Um, now, uh, we continue to innovate. We have the largest, uh, uh, focus and the largest budget in this industry with the foreman deep perspective. And there's, as you can anticipate. Also, we have a lot of of things going on. We have been out there speaking openly about what we are working on in the multiomics space. But clearly, we are not sharing everything. We we are doing also on our instrumentations, um, to address.

Jacob Thaysen: So that's the market we're focusing on, and our technology is very powerful to support that part of the business. And in the end, our focus will be the highest quality insight for the lowest end-to-end, independent on what customer we are addressing.

But we believe are the main growth markets going forward. So it's particularly is in the clinical space. Also in the decentralized space, um we are looking to the attributes, we are working a lot with our customers trying to understand. Also, what are the attributes they're looking for? And you're right. There are customer base that that are looking for fast turnaround time. Um, this is a, a niche market in the NICU where you need to have a very fast result out. Um, and you will compromise, maybe, uh, uh, in the ease of use or even the quality of sequencing. Um, but if you look for the vast majority here, we are looking in where an overnight run is more than reasonable and and you can get all the information you, you want out. So that's the market, we focusing on. And our technology is very powerful to support that part of the business. And in the end, I'll Focus will be the highest quality insight for the lowest end to end the independence on what customer we are. Addressing

Operator: Your next question will come from Puneet Sauda with Leerink.

Your next question will come from Punnett Essay with Ling.

Analysts: Yeah, Jacob, Ankur, thanks for taking my questions. So just wondering, did you see any pull forward from the customers in the quarter? We were hearing some of the customers were stocking ahead of the tariffs in during May and April as well. And then just wondering, when you think about the customers on the clinical side, what are you hearing from some of your larger customers? The clinical transition rate here is slow, but this is more in line with what you had expected for the X transition. I mean, just trying to understand, you know, what are some of the larger customers with large fleets of X, large fleets of 6,000 telling you about transition to X? I think the question there is, could that transition happen aggressively, you know, in the second half? And what are you hearing from those customers? Thank you.

Jacob, Banker. Thanks for taking my questions. Um, um. So um just wondering, uh, did you see any pull forward from the customers in the quarter? We were hearing some of the customers were stock stocking ahead of, um, the tariffs, uh, in either, you know, during during May, um, and April as well. Um, and and then just wondering and when you think about the customers on the clinical side, what are you hearing from some of your larger customers? The

Jacob Thaysen: Yeah, so let me start to address the first one about whether we saw any pull forward. We didn't. We saw, and to that extent, a normal quarter. What we do see is that we have increased backlog. That in the beginning when we launched the X, obviously, many customers needed to test out and started to validate, and it was unclear what volume they and when they would shift that over. So in that sense, it was more from hand to mouth, so to say, from an order perspective. Now, many of our customers feel very comfortable in running the X and running that in manufacturing mode or in production mode. And that also means that they can better plan, which is now showing up in a higher backlog. So that is where we expect it to be.

Clinical transition rate here, uh, is slow. But this is more in line with what you had expected for the X transition. I mean, um, just trying to understand, you know, what are some of the larger customers, the large fleets of x uh, large fleets of 6,000 telling you about transition to X? Um, I think the question there is is is could that transition happen aggressively, you know, in the in in the second half and what are you hearing from those customers? Thank you.

Jacob Thaysen: As you mentioned, we continue to see the transition to the X happening. But again, if you go down, if you dig down into the individual customer level, there are, of course, each customer has their plans. They want to validate. They want to make sure they can. And you can see many of our clinical customers are growing very rapidly. So they do not want to compromise that growth. So they are very, you can say, they have a very clear program for when they want to move it over. And there's no cliff happening where everything is moved over in one quarter or another quarter, but it will happen by a customer saying, "Now it's time for us to shift over." And then you will see them, that customer, rapidly move over an assay or a number of assays. So we expect that to happen fluently here.

And is that we have increased backlog that, uh, um, in the beginning, when we launched the X, obviously, many customers needed to test out and started to validate and it was unclear, uh, What, uh, what volume they, and when they would shift that over, so in that sense, it was more from hand to mouth. So, to say, from an order perspective, now, many of our customers feel very comfortable in in running the X and running that in in manufacturing mode or in production mode. And that also means that they can better plan, which, which is is now showing up in a, in a higher, uh, in a higher backlog. So, um, so that is where we expect it to be. Um, we we, as you mentioned, we continue to see the transition to the X happening. Um, but again, if you go down, if you dig down into the individual customer level, there are, of course, each customer have the plans, they want to validate, they want to make sure they can and you can see many of our clinical customers are are growing very rapidly, so they do not want to compromise that growth. So they are very um, you can say uh,

Jacob Thaysen: There will be maybe a quarter that will be a little higher, maybe a quarter that will be a little lower from a transition perspective, but we don't see any cliff happening anytime soon here or at all.

They have a very clear program for when they want to move it over and there's no Cliff happening where everybody. Every everything is moved over in 1 quarter or another quarter but it will happen for our customers saying. Now it's time for us to shift over and then you will see them that customer rapidly, move over and assay or and, and number of assays. So we expect that to happen. Um, fluently here that would be maybe a quarter inch that will, that will be a little higher maybe quarter. That would be a little over from man, from transition perspective, but we don't see any Cliff happening.

um, anytime soon here,

At all.

Operator: Our next question will come from Doug Schenkel with Wolff. If your line is open, please go ahead.

Our next question will come from Doug Shankle with wolf.

Your line is open, please go ahead.

Analysts: Good afternoon. Thank you for taking my question.

Jacob Thaysen: Hey, Doug.

Analysts: So I believe your guidance implies the company will generate about two points of revenue growth in the fourth quarter, excluding China, which would be the highest rate in at least two years, assuming I have that right. So my first question is, well, do I have that right? And if so, what's the significance of that in the context of thinking of some of the pricing issues and other things that you've been working through over the last couple of years? And then secondly, building off of that, and if I may just make three key observations heading into the question. One, exiting 2025, global research will be under 40% of sales, which still could decline given the NIH backdrop in 2026.

Good afternoon. Thank you for taking my question. Um, so

I believe your guidance implies the company will generate about 2 points of Revenue growth in the fourth quarter excluding China, which would be the highest rate in um, at least 2 years. Assuming I have that, right? So um, my first question is well, do I have that right? And if so, what's the significance of that in the context of thinking of, um, some of the pricing issues and other things that you've been working through over the last couple of years?

And then, secondly.

Building off that. And if I met, you know, just make three key observations heading into the question one.

Exiting 2025, Global Research will be under 40% of sales, which, you know, still could decline given the NIH backdrop in 2026.

Analysts: Even recognizing some of the good news we got out of the Senate today, but on a weighted basis, even recognizing maybe it's not going to be as bad as feared, that could be a two to three-point headwind next year. Second, China could remain under pressure, but China could be down to around 2% of sales exiting the year. So whether it's a good guy or a bad guy, it's getting small. And then third, a clear good news, a clear good guy is clinical will be over 60% of sales, growing double digits with much higher volume offset by some pricing. So on a weighted basis, that could grow six points. You got maybe a two to three-point growth headwind when it comes to the research end market.

Um, you know, even recognizing some of the good news we got out of the Senate today, on a weighted basis, even recognizing maybe it's not going to be as bad as feared, that could be a 2 to 3 point headwind next year.

Analysts: Mathematically, when I blend these things, it seems like you should be able to grow core revenue low single digits and maybe even mid-single digits, excluding China, next year. Is this a reasonable framework as we sit here today? And is there anything else you'd want us to contemplate as we're updating our models, whether it's upside contributions from pipeline, some caution when it comes to competition? Anything would be helpful on all of these fronts. Thank you.

Second China could remain Under Pressure but China, you know could be down to around 2% of sales, exiting the year. So whether it's a good guy or a bad guy, it's getting small and then third a clear, good news, a clear. Good guy is clinical will be over, 60% of sales growing double digits with much higher volume offset by some pricing. So on a weighted basis that could grow 6 points. You got maybe a 2 to 3 point growth headwind when it comes to the research and Market mathematically when I blend these things, it it seems like you should be able to grow poor Revenue, low single digits, and maybe even mid single digits, excluding China next year.

Jacob Thaysen: Yes, thanks, Doug. And that was a long question to really ask me whether I'm providing some guidance on '26, which I think is a little too early. We are very much focusing on executing here on the business here for '25, but we do see good momentum. And what I will leave you with here is that we are, as we mentioned also last year when we put out our strategy, is that we expect ourselves and we expect that the X transition is the main driver for growth over the next period of time. And it will be the one that we thereby start to step into growth. And thereby, we expect '26 to look better than '25 and '27 to look better than '26. That's kind of in the logic of things.

Is this a reasonable framework? As we sit here today and is there anything else you'd want us to contemplate as we're updating our models? Whether it's, you know, upside contributions from pipeline, some caution when it comes to competition. Um, anything would be helpful on on all of these fronts. Thank you.

Yes, thanks Doc. And that was a, a long, uh, a question to, to really ask me whether I'm providing some guidance on 26 with. I think it's a little too early. We are we very much focusing on executing here on on, on the business here, for, for 25. And uh, but we do see good momentum. And what I will leave you with here is that uh um, we are as we mentioned, also last year, uh, when we put out our strategy is that we expect ourselves. Um, and we expect that the extension is the main driver for growth over the next period of time. And it will be

Jacob Thaysen: As you also mentioned, there's, of course, in and outs, but our main growth driver will be going forward also in the clinical space. And I think that is very much supported by the evidence of all our clinical customers of the result they're showing. And we continue to see that the X will be the main driver of this. We also expect that multi-omics will start to add some at least 1% point of growth here coming into '26, '27, probably more '27 level. So that's where we are today. But we do believe that the future is very exciting. The markets we are serving are large. Yes, there will be in and outs. And we will be focusing on the business that we can fully control, which is, of course, more than 95% of our business, which is outside China.

Still to start to add some at least 1% point of of growth. Uh here coming into 2627 probably more 27 level. So that's where we are today. Um but we are we do believe that uh, that the future is very exciting. The markets we are serving a large. Yes, there will be an ins and outs and, uh, and we will be focusing on our um, our the business that we can fully control, which is, of course, more than 95% of our business, which is outside China,

Operator: Your next question will come from Anne Burstein with Bernstein.

Your next question will come from Eve bursting with Bernstein.

Analysts: Hi there. Good afternoon. Thanks so much for taking the question. Following up on one of your answers, you said that you didn't see any pull forward in advance of tariffs. But what about the China consumables? How much of that, if any, was pulled forward maybe in advance of, you know, from current customers worried about potentially not being able to buy more consumables in the not-so-distant future? And to that point, is it fair to say that your guidance increase for China could be quite specific to 2025 and not necessarily a sign of an improving outlook for 2026?

Hi there. Uh, good afternoon. Thanks so much for taking the question, um, following up, on, on 1 of your answers, you said that you didn't see any pull forward in advance of tariffs. Uh, but what about the China consumables? How much of that if any was pulled forward maybe in advance of of um you know from from current customers worried about potentially not being able to buy more consumables in the not so distant future and to that point is it fair to say that your guidance increase for China could be quite specific to 2025 and not necessarily a sign of an improving outlook for 2026.

Jacob Thaysen: Yeah, look, so let me go back and talk about China, even though I do not like to spend too much time on a very small part of our business. But just to put it in context here is that I'm very pleased with what I see Jenny, our general manager in China, and the Chinese team, what they're doing. They're doing an amazing job to support our customers out there. And I think it speaks volume also that we continue to see a lot of interest from our customers. And I think the feedback we're getting from customers is that they really want us to stay in China based on the high quality we provide, the innovations, and of course, the ecosystem that is very important for the Chinese customers also. So we do see a lot of interest for them.

Jacob Thaysen: But as you also mentioned, overall, under the current circumstances, the situation is unsustainable. So we continue to work very diligently with the regulators to get a resolution. From a pull forward perspective, I think we saw some of that maybe in the first quarter, but we don't see that right now. I think we are more into a natural run rate for the business, and that's also what we have. So we feel good about how we have guided for China. And Ankur?

Yeah, look. So let me let me go back and talk about China. Even though I I do not like to spend too much time on on a very small part of of our of our business. But, but just to put it in context here is that, uh, um, we, I'm very pleased with what I see any, our general manager, in China, and the Chinese team, what they're doing. They're doing amazing job to uh to support our customers out there and it I think it speaks volume. Also that uh we continue to see a lot of interest from our customers. Um and and I think the feedback we get from customers is that they really want us to stay in China, based on the high quality, we provide the Innovations and of course, the ecosystem that that is very important for the Chinese customers also. So we do see a lot of interest for them, but as you ALS mentioned, overall, uh, under the current circumstances, the situation is unsustainable. So we continue to work very diligently with The Regulators to get a resolution. Um, from a pull forward perspective. I think we saw some of that maybe.

Ankur Dhingra: Yeah, Eve, I would add only a couple of things. So thanks, Jacob. Pull forward in the rest of the world outside China, really not much of a pull forward. We did see good orders, just a reminder, for our largest part of the business, which is high-throughput consumables on X. There is a limited shelf life, so the pull forward really cannot be significant. We saw orders for future shipping, but not necessarily a pull forward in shipments during Q2. And to your second part about China, as Jacob said, we are in discussion, but the raise of guidance in China for Q3, you're right. We're not thinking about it for the long term. It is for the current quarter. Our working model there, as Jacob is saying, is we're in discussion with the authorities to get to a constructive resolution here for the long run.

If you want in the first quarter, um, but but I don't we don't see that right now. I think we are more into a natural run rate for for the business, um, and and that's also what we have. So so we feel good about where, how we have guided, uh, for for China and Uncle yah Eve. I would add only a couple things. So thanks Jacob. Um, pull forward in in the rest of the world outside. China. Really, not much of a pull forward. We did see, good orders. Just a reminder for our largest part of the business which is high

To put consumables on X. Um, there is a limited shelf life. Um, so the full full full forward, really cannot be significant. We saw orders for future shipping but not necessarily a pull forward in shipments, um, during Q2. Um, and to your second part about China, as Jacob said, we are in discussion, but the raise of guidance in China for Q3, uh, you're right, we're not thinking about it for the, for the long term. Um, it is for the current quarter are working model there, as Jacob is saying is we're in discussion with the authorities to get to a constructive resolution here for the long run.

Operator: Your next question will come from David Westenberg with Piper Sandler.

Analysts: Hi. Thanks for taking the question, and congrats on a good quarter here. So I want to stay with the clinical cliff. I know that clinical has been a great market, actually, for you the last three years, you know, relative to academics. But you know, maybe there is a little bit of some uncertainty from some investors. So can you talk about spending patterns that you've seen from clinical customers and maybe even isolate some that have had it since the very beginning, the first year, and what their spending has looked like as we look now into Q3? And if there's any granularity in terms of customer transition patterns, like their entire fleet versus a portion of their fleet and how that's kind of impacting spending in clinical.

Your next question will come from David Westenberg with Piper Sandler.

Analysts: And you know, secondly, and just in this transition, you've also mentioned this is clinical, it only went from 43% to 44% of the volume on X. If you have a big jump in X in the back half of the year driven by clinical, why wouldn't that see a revenue drop there? So thank you for taking the question.

Hi. Um, thanks for the tech taking the question and, um, congrats on a good quarter here. Uh, so I want to, uh, stay with the clinical Cliff. I, I know that clinical has been a great Market actually for you the last 3 years, um, you know, relative to to academics. So but, you know, maybe there is a little bit of of some uncertainty from from some investors. So can you talk about spending patterns that you've seen from Clinical customers? Um and maybe even isolate some that have had it since the very beginning the first year and what they're spending has looked like as we look now into Q3 and if there's any granularity in terms of uh customer transition patterns like their entire fleet versus a portion of their Fleet and how that's kind of impacting spending in clinical and, you know, secondly and just in this transition, you've also

Mentioned, this is critical. Uh, you're it only went from 43 to 44% of the, um, of the volume on X. If you have a big jump in X in the back half of the Year driven by clinical, why wouldn't that see a revenue drop their? Uh so thank you for taking the question.

Jacob Thaysen: OK, hey, Dave. So thanks for that. So overall, let me start with just positioning this a little bit, and then we can have Ankur dig in further into the details. But you're absolutely right that the clinical part of our business is very strong. And I truly believe this is continuing to be a strong market force for the foreseeable future, which is quite far out there. The markets are very attractive. We can continue to see a lot of opportunities in the oncology space. As we all know, there's a lot going on in the therapy selection part of it. And we're just opening up for the MRD. And of course, in the end screening will also be meaningful eventually. So there's a long horizon on the opportunity in the clinical oncology space.

Jacob Thaysen: And actually, in the genetic disease testing area also, rare diseases and others, where we see a lot of interest both to expand rare disease testing for a broader part of the population. Rare diseases are not as rare as you would think. And then also shifting into newborn screening, which is going to be a large opportunity going forward. So we absolutely agree that there's big opportunities in the clinical space, and it will be a main driver for ILLUMINA going forward. Now, as you mentioned, down into the details about what a transition looks like, I'll start by saying that overall, most customers, if they have been on the 6K, they are making a decision that when they shift over to the X, that most of the time, they are not only just trying to reduce the cost of the test. They're actually trying to expand the test.

Quite far out there, the markets are very attractive, we can continue to see a lot of of uh, opportunities in inkology space. As we all know, there's a lot going on in on the therapy selection is part of it. But and we just opening up for the MIT and of course in the end screening will also be meaningful eventually. So um, that's a long Horizon on the opportunity in the in the clinical oncology space and actually. In the genetic disease testing area also rare diseases and others where we see a lot of interest both to expand rare disease testing for broader broader part of the population rare diseases is not as as rare you would think. And then also shifting into newborn screening where it's going to be a, a, a a large opportunity going forward. So we absolutely agree that there's big opportunities in in the clinical space and will be a main driver for the alumina uh, going forward. Now, as you mentioned down into the details about what, what a transition looks like. Um, I'll start by saying that overall most customers if they have been on

Jacob Thaysen: This is a very highly competitive environment. So for many of our customers, it's about to stay competitive. And the way you do that is to provide even better assays for your customers. And that is by expanding them and providing more insights. Secondly, there are customers that will stay on the 6K until the end of life, so to say, for the assay, where they feel like they maybe have two years more end of life. And simply from a financial perspective, it doesn't make sense for them to spend the energy and the investment to shift it over to the X. So that's on the highest level of the transition. Ankur, do we have?

The 6K. Um, they are making decision, um, that when they shift over to the x that mostly most of the time, they are not only just trying to reduce the cost of the test. They're actually trying to expand the test. This is a very and highly competitive environment. So for many of our customers is about to stay competitive and the way you do that is to provide even better essays for your customers, and that is by expanding them and providing more insights. Um, secondly. Um, there are customers that will stay on

Ankur Dhingra: I think that's fairly put, Jacob. It's not an overnight change. It takes validation, and it's a step-by-step process. And Dave, we've seen in the past as well, the transition quarter to quarter has not been a linear line. It is lumpy. Some moves in a quarter, some doesn't. So I'm not reading a whole lot into this, all to say that we certainly have a big material change coming here within the next couple of quarters either. Our goal still has been that overall the volume, 75% of the volume shifts to X in the back half of the year or in the half two of this year. Based on what we see in this quarter, it might be more towards the latter part of Q4. But then again, it'll be lumpy quarter to quarter.

The 6K until the end of life. So to say, for the essay, uh, where they feel like they maybe have 2 years more end of life and it's simply from a, from a finance perspective. It, it doesn't make sense for them to spend the energy and the investment, to shift it over to the, to the X. So, that's on the highest level of of the transition ankle. Do you have a? I think that's, that's fairly put Jacob. Um, the there's, it's not an overnight change, it takes validation, and it's a, it's a step-by-step process. Um, and Dave, you've seen we've seen in the past, um, as well, the the transition quarter to quarter has not been a linear line, it is Lumpy and some moves in a quarter, some doesn't so, um, I'm not reading a whole lot into this or to say that we certainly have a big material change coming here within the next couple quarters either. Um, our goal still has been that overall. The volume 75% of the volume shifts to X in the back half of the year, um, or they have 2 of this year. Based on what we see in this quarter, it might be more towards that part of Q4. Uh, but

Then again it'll it'll be lumpy quarter to quarter.

Operator: Your next question will come from Tycho Peterson with Jeffries.

Your next question will come from. Tau Peterson with Jeffries.

Analysts: Hey, thanks. Understanding your instrument guidance overall here, how do you think, how should we think about the trajectory of X placements for the rest of the year? I'm asking because with X as the percentage of high-throughput revenues, it only increased by 1%. You went from 43% to 44% this past quarter. So how do we get comfortable you can hit 50% by the end of the year? And then can you also comment on what percentage of customers are now getting 30B reads? You know, I know you introduced software to enable that, but that would have, I would think, some implications on consumable. And then Ankur, just on operating margins, you were much better than expected. Was that all tariff unwind or from the cost-out programs or both?

Hey, thanks. Um, understanding your instrument guidance overall here. How do you think we should think about the trajectory of next placements, you know, for the rest of the year? Um, I'm asking because, you know, with X as a percentage of high super revenues, but it only increased by 1%. You went from 43% to 44% this past quarter. So how do we get comfortable that you can hit 50% by the end of the year? And then can you...

Jacob Thaysen: Thanks.

Analysts: Hey, Tycho, were you asking about the 10B reads or, sorry, what was that question?

Also comment on what percentage of customers are now getting uh, 30 B reads. You know, I know you introduce software to enable that but that would have I would think some implications on consumable. And then on current uh, just on operating margins. Uh, you were much better than expected was, was that all a tariff on wine or or from the cost Out programs or both? Thanks.

Jacob Thaysen: 30B?

Analysts: Yeah, the version 1.3 software release from last year. But the main question is about X placements.

It's like, were you asking about the 10B reads or, sorry? What was that question? 30B.

Jacob Thaysen: Yeah, so let me start there on the X placement. I would like to remind you also that we have very strong placements in Q4 with more than 90 placements and also into Q1 where we also had 60 placements. So many of those customers that purchased and where we installed Xs are still using that, especially in the clinical space where we have the vast majority of instruments being placed, are still using and bringing them into their production. So you will actually see that also have a meaningful impact here in the second half of the year. Now, this won't be a cliff at all, but it will be also you will continue to see the shift of the X transition.

Yeah, the version 1.3 software released from last year, but the main question is about an ex placements.

Jacob Thaysen: For the rest of the year, as we have guided before, we still believe that there is, on an average basis, there's between 50 and 60 instruments being placed per quarter. And there is an opportunity, potential to see more instruments being placed in the fourth quarter, depending on how we see budgets coming to fruition here. On the flow cell itself, you're right that with the 1.3 release of our software, we did a lot of work to improve, and we will continue to do that on our customer experience. And a part of that was also to improve some of the yield in the 25B, but we are not committing to a 30B at this point.

Yes. So so let me start there. On the X placement is that remind also that or like to remind you also that we have very strong placements in Q4 with more than 90 placements. And also into q1 where we, we also have 60 placement. So, um, many of those customers that that purchased and and where we installed X's are still using that, especially in the clinical space where we had the vast majority of instruments being placed are still using and and bringing them into the production. So you as that you are, you will actually see. Um, that also have a meaningful impact here in the second half of the year. Now, this won't be a cliff at all, but it will be also, you will continue to see the shift of of, uh, of the X transition, um, for the rest of the year. We, as we guided before we, we still believe that, um, there is, you know, and on an average basis that between 15 and 60, uh, instrument being placed per per quarter, and there is an opportunity potential to, to see more instrument being placed in in the, in the fourth quarter. Depending on how we, how we see budgets coming coming to full.

Ation here, um, on on the flow cell itself. You write that with a 1.3 release of our software, we did a lot of of work to improve and we will continue to do that on on our um customer experience. And and a part of that was also to improve some of the yield in uh in the 25th to a 30 B at this point.

Ankur Dhingra: And then I'll cover the operating margin side. Tycho, bulk of the operating margin improvement was based on the cost actions that we, some of them from last year and then some based on the actions we took in the early part of the year here, beginning to get reflected in the P&L. The tariff side, we've started work on it and beginning to see a pathway towards reducing the impact of tariffs. Not much of that was in our Q2 results per se. We think in the latter half of the year and certainly early '26, we'll begin to see some of those benefits begin to come through. But not in Q2. As I said during the call, we expect our OPEX to kind of run at that lower level, reflecting almost over $100 million annualized improvement in our OPEX rate now based on what you're seeing in Q2.

Ankur Dhingra: So that's a structural change that we have gone through in our cost structure, which obviously should set us up well for much better operating leverage going forward as revenue returns to growth.

Work was based on the cost actions um that we some of them from last year and then some based on the actions we took in the early part of the Year here. Um beginning to get reflected in the p&l uh the Tariff side. Uh we started work on it and and beginning to see a pathway. Um towards reducing the impact of tariffs, um, not much of that was in our in our Q2 results per se. Uh, we think in the, in the later half of the year and certainly, um, early 26, will begin to see some of those benefits. Begin to come through but not in Q2. Um, as, as I said, during my call we expect our, our Opex to kind of run at that lower level reflecting almost over a hundred million dollar, annualized improvement in our Opex right now um based on what you're seeing in Q2. So that's a, that's a structural change that we have gone through, um, in our cost structure, the job obviously should should set us up. Well, for much better operating leverage going forward as, as Revenue returns to growth.

Operator: Your next question will come from Kyle Nixon with Canaccord.

Your next question will come from Kyle Nixon with canaccord.

Analysts: Yeah, hey, guys. Thanks for the questions. Nice quarter. On the growth framework, Jacob, you talked about in the past, I think, like volume growth in the 20% to 30% range, price decreases as well in the mid-teens. And just was wondering if you could size how much of that volume growth will be from clinical versus research. I know there were some data points and assumptions that were talked about earlier. Just would love to hear your thoughts on that. And then second, you know, do you have the cushion to push price lower if you have to, if and when new competitive threats enter the fold, i.e., that the Roche kind of undoes its pricing? Thanks.

Yeah. Hey guys, thanks for the questions. Nice quarter on the growth framework. Jacob, you talked about, um, in the past I think like following growth in the 20 to 30% range price decreases as well in the mid teens.

It just was wondering if you could size. How much of that volume growth will be from Clinical versus research. I know there was some data points and assumptions that were talked about earlier. Just would love to hear your thoughts on that and then second, um, you know, do you have the cushion to push price lower? If you have to, if and when new competitive threats, enter the fold I that the row kind of unveil its pricing. Thanks,

Jacob Thaysen: Yeah, so we continue to see, as we mentioned also in prepared remarks, we continue to see strong volume growth with our customers. And if you dig a little bit deeper into this quarter, I think it should be obvious also that clinical was stronger than the research segment. So that was as anticipated because of all the ins and outs with NIH and other types of funding right now. But I think that while it's been a little more, a little bigger difference this time around, I think we do expect that we will see clinical growth be stronger on the long horizon simply because the opportunity there is larger. While we do actually think that when we see multi-omics starting to really take off, that that will also start to improve on the research side of things.

Jacob Thaysen: But that might be a few a little further ahead in our strategic planning period here. I think on the pricing perspective, we are still very stable and we are within the expected range of the pricing decline we're seeing. On what we can do on pricing, look, I mean, we want to make sure we always understand our customer and what they need in order to optimize their performance. And we, of course, we're also having a conversation about if there are new applications that can be opened up by differentiating in pricing. So that is something we always will have with our customers. I think there's a saying out there that there might be other, there might be competition that have a lower pricing. But in most circumstances, ILLUMINA have the best cost structure.

Yeah, so so we continue to see as we mentioned, also prepared remarks, we continue to see strong, uh, uh, volume growth with our customers. And and if you take a little bit deeper in to uh, in in in this quarter, I think it should be obvious also, that clinical was stronger than the, uh, research segment. So that was as anticipated, um, because of, of all the ins and outs with the NIH and other types of funding right now. But I think that uh, while it's been a little more, uh a little bigger difference this time around. I think we we do expect that uh we will see clinical growth, be stronger, uh, on the long Horizon simply because the opportunity there is is larger while we do. Actually think that, uh, when when we see a multiomics starting to really take off that that will also start to improve on the, on the research side of things. But that might be a few, a few, um, little further ahead in our strategic planning, period here. Um, I think on on the pricing perspective, we are still very

Jacob Thaysen: So we will always be able to compete if we choose to do so on pricing.

And we, we are within the expected range of of the pricing. The client, we are seeing, um, on what we can do on pricing. Look, I mean we, uh, we want to make sure we always understand our customer and and what, how they can, how what they need in order to optimize their performance. And we, of course, we also having conversation about if there are new applications that can be opened up by differentiating in in pricing. Um, so so that is something we always will have with our customers. Um, I think there's a saying out there, um, that there might be other. Uh, there might be competition that have a lower pricing, um, but in most circumstances Illumina have the best cost structure. So we will always be able to compete if you choose to do. So, on pricing.

Operator: Your next question will come from Dan Arias with Stifel. Star 6 will allow you to unmute, Dan.

Your next question will come from Dan Arias with stifel star 6 will allow you to unmute then.

Analysts: Hi, guys. Thanks for the question. I was having some phone issues. So, Ankur, apologies if you touched on this already, but can you just talk a little bit about GV growth from here in high throughput? Do you think you can stay in that 30% range in 3Q and 4Q? And if so, does that mean that we can still feel OK about that framework for 2026 that you've laid out, sort of mid-20s GV growth and then a mid-teams pricing headwind as an offset? Thanks.

Yeah, hi guys. Thanks for the questions. I was having some issues. So, an apologies, if you, if you touched on it already, but can you just talk a little bit about Divi growth from here and high? Throughput, do you think you can stay in that 30% range in 32 and 42, and if so, does that mean that we can still feel, okay about that framework for 2026, that you've laid out.

Ankur Dhingra: OK, yeah, good question, Dan. So we usually get that as part of the script. I talk about two things. One, generally to talk about the connected instruments. And when we look at our runs on those connected instruments in high throughput, that was above 30% overall. The dynamic that we saw during the quarter was clinical, as we've been talking about, remained quite strong. But we did see some slowdown on the research side, especially in the US broader research side of things, which was as anticipated given everything that's going on in that space from a funding environment perspective. Looking forward, do I anticipate that it can stay above the 30% mark? We think so.

Ankur Dhingra: I think clinical specifically, and also at least the rest of the world outside China, though China hasn't been connected, staying above 30%, there's still several structural support that is coming in terms of especially MRD being a very attractive space. We've also seen during the quarter a good movement on the reimbursement side in the genetic disease side of tests and otherwise. So we are seeing the adoption of whole genome gaining traction even from a reimbursement perspective. So there are good structural developments, especially on the clinical side of things, that can drive the GV growth. On the research side of things, I think our play with the proteomics should be a net new incremental from a sequencing perspective. So as we close the deal or we launch the IPP here, that tool also attempts to bring some of the proteomics into the sequencing side of the business.

Ankur Dhingra: It has always been heavily on the mass spec side as a market. But as we bring that into the sequencing ecosystem, that's another additional area that we're adding into the sequencing ecosystem.

Jacob Thaysen: But Dan, just to take a step at this also, just to highlight is that I think we mentioned this before, and I still stay with this, is that the opportunity in this space is tremendous. And the activity in this space continues to be very, very strong. So I don't see why there would be any reason for not continuing with a very strong growth. Granted, this will shift a little bit quarter to quarter, but if you look at the long horizon, the opportunity in this space is very, very solid. And we're seeing that in both, as we mentioned before, oncology, genetic disease testing. But the next thing that will happen is that you will look into new areas that we haven't really focused on right now, cardiovascular, neurodiseases, and other things. So this will be a long term with very strong growth opportunities.

Several, um, structural support, um, that is coming in terms of specially mrd, being a very attractive space. Uh, We've also seen during the quarter, uh, a good movement on the reimbursement side, um, in the in the genetic disease side of tests. Um, and otherwise, so we are seeing the adoption of whole genome, um, gaining traction of, even, from a reimbursement perspective. So there are good structural, um, developments especially on the clinical side of things, um, that can drive the uh, the the GB growth on the research side of things. Uh, I think are play with. The proteomics should be a net new incremental, uh, from our sequencing perspectives as we close the deal. Or we launched the the IPP here. Uh, that tool also uh, attempts to bring some of the proteomics into the sequencing side of the business. It has always been um, heavily on the mass spec side as a market. But as we as we bring that into the sequencing ecosystem, that's another um additional area that we're adding into the sequence.

Sync the system. But then just just to um, take a step at this. Also just to highlight is that I think we mentioned this before and and I still stay with this is that the opportunity in this space is tremendous. Um and the activity in this space continues to be very, very strong. So I don't, I don't see why that would be any reason for not continuing with a very strong growth. Granted, this will shift a little bit quarter to quarter but if you look at the the longer Horizon, the opportunity in this space is is very, very soft.

It and we're seeing that in both as we mentioned before, oncology genetic disease testing, but they will. The next thing that will happen is that you will look into new areas that we haven't really focused on right now, cardiovascular neuro diseases and other things. So, so this is, this will be a long term with with very strong growth opportunity.

Operator: Your next question will come from Dan Brennan with TD Cowan.

Your next question will come from Dan Brennan with TD Cowen.

Analysts: Great. Thank you for taking the questions. Maybe just a couple. Maybe on the mid-throughput, I think, Ankur, you made a comment when you were updating the guide about mid-throughput trends, maybe not as robust. Could you speak to that, the market, maybe competition? And then on the earnings raise for the R&D expensing, is that just on a go-forward basis, or is that retroactive to the beginning of the year? And just wondering if you kind of baked in the full amount. And then the final point would just be, can you just remind us on the broader US academic kind of customer base, I know you've given us some color in the past, what's kind of assumed now in the full-year guide from a revenue standpoint year over year? And kind of has that changed with the updated guide? Thank you.

Great, thank you for taking the questions. Maybe it's just a couple.

Um maybe on the mid throughput, I think anchor. You made a comment when you were updating the guide about mid throughput Trends. Maybe not as robust as you speak to that. The market may be competition and then on their earnings raised for the R&D expensing is that just on a go forward basis or is that retroactive to to being in the year and just wondering if you kind of baked in the full amount

and then the final point would just be, can you just remind us on the broader us academic? Kind of customer base. And then you've given us some color in the past and what, what, what's kind of the assumed now in the full year? Guide from a revenue standpoint year-over-year, and it kind of has that change with the updated guide. Thank you.

Jacob Thaysen: So Dan, I'll start talking about the mid-throughput here. And just to put in some perspective, most of our high-throughput customers, when they purchase an X, they do that to run high volume and with high utilization. And they do that in a production-like logic. So they know when they buy one that they want to run it every day in and out. When you look into the mid-throughput segment, which are much stronger associated with the research space, I think we have approximately 75% of that business, the 1K, 2K business sitting there. These are more project-based. And thereby also, there's a consideration when there are some conservatives built in for the different companies or even from the academic institutions, they are pushing out the decision to acquire new instruments. And we are seeing that, that the decision-making process is taking longer time.

Jacob Thaysen: We're also seeing that even though they still run the project, we're also seeing that some of that is being outsourced to service providers. So the business is still there, but it shows up in the high-throughput segment. And we do anticipate when the macroeconomic or macro environment will change, that we will see some of those customers go back and want to back to in-source some of their testing because they feel and they want to keep their samples in-house. So at the same time, the MySeq i100 has been super successful here. The launch we placed more than 500 instruments from the start of our launch in the beginning or late 2024. And obviously, it is in the low-throughput area. But it also, with the capacity that can be done in the MySeq i100, is pushing into the, I would call it, low end of the mid-through area.

So then, I I'll start talking about the myth throughput here and just to put some perspective, most of our high throughput customers, uh, they when they purchase an X, they do that to run high volume and with high utilization and they do that in a production like uh, uh logic. So they know when they buy 1 that they want to run it every day in and out. Um, when you look into the myth throughput segments, which are much stronger associated with the research space, I think we have, um, approximately 75% of that business in 1K 2K business, sitting there. Um, these are more Project based and, and thereby also, um, there's a consideration when they are, um, some conservatives built in for the different companies or even from the academic, um, institutions. They are pushing out the decision to acquire new, um, um, instruments. And we are seeing that that the decision-making process is taking longer time. Um, we also seeing that even though they still run the project, we also seeing that, some of that is being outsourced to service providers. So the business is still there but it shows

Up in the highest throughput segment and we do anticipate when the marker economic or macro environment will change that, we will see some of those customers, go back and run it back to insource. Some of the testing because they feel and they want to keep their samples, um, in in-house. So, um, at the same time, um, the mic i100 has that super successful here. The launch be placed more than 500 instruments from the from the start, um, of of our launch in the beginning or a late late 2024 and, and

Jacob Thaysen: So we're also seeing dynamic coming from that end. And then finally, you're right, this space is where we see most competition, but that hasn't really changed. The dynamic in that space hasn't changed over the past quarter. So I wouldn't attribute any of the software you see right now specifically to competition. So that's high level how I see things right now. Ankur?

Obviously, it is in the lawsuit part area, but it also with the capacity that can be done in the, my 100 is pushing into the I would call it low end of the myth through area. So we also seeing, um, Dynamic coming from that end, and then finally, you're right. This space is where we see most competition. But that hasn't really changed the dynamic in that space hasn't changed over the past quarter. So I wouldn't, uh, attribute any of the softwares, you see right now specifically to competition. Um, so

Ankur Dhingra: Yeah, sure. So I'll address the second part of the question there on the academia customer base. So our guide and expectations for that market part of the market remain unchanged. So what we saw in Q2 from a business trend perspective was somewhat similar to what we saw towards the latter part of Q1. So our expectation there, I believe we said 15% decline for the year for that part of the business. In the last call, it's still the same.

And so, what we saw in Q2 from a business Trend perspective was somewhat similar, uh, to what we saw towards the latter part of q1. So, um, our our expectation there. I believe we said 15% decline, uh, for the year for that part of the business. Um, uh, in last call it's still, it's still the same,

Operator: This concludes the Q&A section of the call. I would now like to turn the call back to Brian Blanchett for closing remarks.

Includes the Q&A section of the call. I would now like to turn the call back to Brian, Blanchette for closing remarks.

Speaker 6: Thank you for joining us today. A replay of this call will be available in the investor section of our website. This concludes our call, and we look forward to seeing you at our upcoming events. Thank you.

Thank you for joining us today. A replay of this call will be available in the investor section of our website. This, concludes our call, and we look forward to seeing you at our upcoming events. Thank you.

Operator: This concludes today's call. We thank you for your participation. You may disconnect at this time and have a great day.

This concludes today's call, we thank you for your participation. You may disconnect at this time and have a great day.