Q3 2025 Illumina Inc Earnings Call

Speaker #1: Participants are in a listen only mode . After the speakers presentation , we will conduct a question and answer session . Please be advised that today's conference is being recorded .

Operator: 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.

Speaker #1: I would now like to hand the call over to Interim Head of Investor Relations , Brian Blanchett .

Speaker #2: Hello everyone and welcome to Illumina's second quarter 2020 Earnings Call . Today we will review our financial results released after market close and provide commentary before opening for Q&A .

Brian Blanchett: Hello, everyone, and welcome to Illumina's 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 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.

Speaker #2: Our earnings release is available in the Investor Relations section of Illumina comm . Speaking today . Our Jacob Chief Executive Officer and Ankur Dhingra Chief Financial Officer , Jacob will provide an update on Illumina's businesses , followed by anchors review of the company's financials , all financial information shared on this call relates to core Illumina .

Speaker #2: 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 .

Speaker #2: We encourage you to review the GAAP reconciliation of our non-GAAP measures , which can be found in today's release and in the supplemental data available on our website .

Brian Blanchett: We encourage you to review the GAAP 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.

Speaker #2: This call is being .

Speaker #3: Recorded .

Speaker #4: Foreign exchange fluctuations . In addition , all references to China refer to our Greater China region , which also includes Taiwan and Hong Kong .

[Analyst]: Foreign exchange fluctuations. In addition, all references to China refer to our Greater China region, which also includes Taiwan and Hong Kong. This call is being recorded, and the replay will be available in the Investors section of our website. It is our intent that all forward-looking statements 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 Illumina files with the SEC, including our most recent Forms 10-Q and 10-K. With that, I will now turn the call over to Jacob.

Speaker #4: This call is being recorded, and the replay will be available in the investors section of our website. It is our intent that all forward-looking statements made during today's call will be protected under the Private Securities Litigation Reform Act of 1995.

Speaker #4: To better understand the risks and uncertainties that could cause actual results to differ , we refer you to the documents that Illumina filed with the SEC , including our most recent forms 10-q and 10-K .

Speaker #4: With that, I will now turn the call over to Jacob.

Speaker #5: Thank you . Connor , and good afternoon , everyone . In the third quarter , we delivered another strong performance with revenue . non-GAAP operating margin and diluted EPs , all above our guidance range .

Jacob Thaysen: Thank you, Conor, and good afternoon, everyone. In the third quarter, we delivered another strong performance with revenue, non-GAAP operating margin, and diluted EPS all above our guidance range. We reported total revenue of $1.08 billion, and we returned to growth ex-China, up about 2% year-over-year. Non-GAAP operating margin was 24.5%, and non-GAAP diluted EPS was $1.34, both reflecting strong year-over-year expansion and above our guidance. This performance reflects the momentum we're building through the NovaSeq X transition, especially in the clinical markets, where sequencing consumables revenue grew at a high single-digit rate year-over-year. Given this strength, we are raising our total full year 2025 outlook while staying disciplined as we monitor macro and funding dynamics through year-end. In our end markets, clinical continues to accelerate.

Speaker #5: We reported total revenue of $1.08 billion , and we returned to growth Ex-china , up about 2% year over year . non-GAAP operating margin was 24.5% and non-GAAP diluted EPs was $1.34 .

Speaker #5: Both reflecting strong year over year expansion and above our guidance . This performance reflects the momentum we're building through the Novaseq transition , especially in the clinical markets where sequencing consumables , revenue grew at a high single digit rate year over year .

Speaker #5: Given this strength , we are raising our total full year to 2025 . Outlook with staying disciplined as we monitor macro and funding dynamics through year end .

Speaker #5: In our end markets , clinical continues to accelerate . Customers are advancing new assays that demand increasing sequencing capacity and intensity , and the Novaseq is proving to be the ideal solution , delivering higher throughput with the same trusted accuracy and workflow as their existing Novaseq 6000 instruments .

Jacob Thaysen: Customers are advancing new assays that demand increasing sequencing capacity and intensity, and the NovaSeq X is proving to be the ideal solution, delivering higher throughput with the same trusted accuracy and workflow as their existing NovaSeq 6000 instruments. Growing sequencing volumes are more than offsetting transitional pricing effects, driving a sequential and year-over-year increase in consumables revenue. In research, we saw stabilization in demand, even as many labs continue to manage spending carefully in light of regulatory and funding uncertainty. Our teams remain closely engaged with customers to help sustain their work. We were also encouraged by the resilience of our business in Greater China, where revenue came in ahead of our guidance despite ongoing export restrictions. As a reminder, a fraction of our business is served by OEM partners that sell our instruments and consumables into specific customer segments.

Speaker #5: Growing sequencing volumes are more than offsetting transitional pricing effects , driving a sequential and year over year increase in consumables revenue in research , we saw stabilization in demand even as many labs continue to manage spending carefully in light of regulatory and funding uncertainty .

Speaker #5: Our teams remain closely engaged with customers to help sustain their work . We will also encouraged by the resilience of our business in China , where came in ahead of our guidance .

Speaker #5: Despite ongoing expert restrictions . As a reminder , a fraction of our revenue is served by OEM partners that sell our instruments and consumables into specific customer segments .

Speaker #5: We have now received approval to serve those partners through manufacturing of select instruments locally in China . While this marks a measured step forward , we have not yet reached a long term resolution related to our operations in China , but we remain in dialogue with the relevant agencies .

Jacob Thaysen: We have now received approval to serve those partners through manufacturing of select instruments locally in China. While this marks a measured step forward, we have not yet reached a long-term resolution related to our operations in China, but we remain in dialogue with the relevant agencies. Now, turning to our strategy. In Q3, we made significant progress across the three pillars that underpin our long-term financial targets: growing our core sequencing business, scaling into multi-omics, and expanding our services, data, and software capabilities. Together, these pillars are shifting the conversation from cost per gigabase to delivering the highest quality biological insights at the lowest end-to-end cost. Starting with our core sequencing business. In Q3, we had another strong quarter for the NovaSeq X, with more than 55 instruments placed, in line with our goal of 50 to 60 placements per quarter.

Speaker #5: Now , turning to our strategy in Q3 . We made significant progress across the three pillars that underpin our long term financial targets .

Speaker #5: Growing our core sequencing business , scaling into multi-omics and expanding our services , data and software capabilities . Together , these pillars are shifting the conversations from cost per giga base to delivering the highest quality biological insights at the lowest end to end cost .

Speaker #5: Starting with our core sequencing business in Q3 , we had another strong quarter for the Novaseq with more than 55 instruments placed in line with our goal of 50 to 60 placements per quarter .

Speaker #5: Most importantly , we achieved the milestones we have set for our high throughput transition to the Novaseq x . Our goal was to reach approximately 75% of high throughput Gigabases shipped and 50% of high throughput revenue on the X platform by year end .

Jacob Thaysen: Most importantly, we achieved the milestones we have set for our high-throughput transition to the NovaSeq X. Our goal was to reach approximately 75% of high-throughput gigabases shipped and 50% of high-throughput revenue on the X platform by year-end, and we exceeded both here in Q3. Our results highlight the strength and elasticity of sequencing demand. NovaSeq X consumables revenue growth accelerated even as conversion from the NovaSeq 6000 increased, demonstrating that our transition strategy is working. Clinical remains the primary driver, supported by new assay approvals, positive reimbursement decisions, and growing demand for more sequencing-intensive tests, all trends that position us well for sustained growth. As pricing headwinds ease and research and clinical markets stabilize, we believe these dynamics will put us back on track toward our long-term revenue growth targets. Moving to our second pillar, scaling into multi-omics.

Speaker #5: And we exceeded both here in Q3 . Our results highlight the strength and elasticity of sequencing demand . Novaseq consumables . Revenue growth accelerated even as conversion from the Novaseq 6000 increased , demonstrating that our transition strategy is working .

Speaker #5: Clinical remains the primary driver , supported by new assay approvals , positive reimbursement decisions and growing demand for more sequencing intensive tests . All trends that position us well for sustained growth as pricing headwinds ease and research and market stabilize .

Speaker #5: We believe these dynamics will put us back on track toward our long-term revenue growth targets. Moving to our second pillar: scaling into multi-omics.

Speaker #5: Following our announcement , announced acquisition of Somalogic in Q2 , which we continue to expect will close in 2026 . We launched Illumina Protein Prep in Q3 .

Jacob Thaysen: Following our announced acquisition of Salmologic in Q2, which we continue to expect will close in 2026, we launched Illumina Protein Prep in Q3. This co-developed proteomics assay brings the power of NGS to protein analysis through a simple integrated workflow that delivers scale, precision, and accessibility for labs of all sizes. Illumina Protein Prep can measure up to 9,500 proteins per sample and provides highly consistent results in about two and a half days, with minimum hands-on time and at a lower cost per insight. Importantly, Illumina Protein Prep integrates with Dragon and our upcoming Illumina Complete Multi-Omics software suite, extending our end-to-end capabilities from sample prep through data interpretation. Beyond proteomics, earlier this month at ASHG, we expanded our multi-omics portfolio with the launch of our five-base solution, an integrated library prep and software offering that simultaneously reads genetic variances and DNA methylation.

Speaker #5: This co-development proteomics assay brings the power of NGS to protein analysis through a simple integrated workflow that delivers scale, precision, and accessibility for labs of all sizes.

Speaker #5: Illumina's Protein Prep can measure up to 9,500 proteins per sample and provides highly consistent results in about two and a half days with minimal hands-on time and at a lower cost per Incyte.

Speaker #5: Importantly , Illumina Protein Prep integrates with Dragon and our upcoming Illumina Complete Multi-omics software suite , extending our end to end capabilities . From sample prep through data interpretation .

Speaker #5: Beyond proteomics . Earlier this month , at Ashg , we expanded our Multi-omics portfolio with the launch of our five based solution and integrated library prep and software offering that simultaneously reads genetic variances and DNA methylation using proprietary chemistry .

Jacob Thaysen: Using proprietary chemistry and our new Dragon algorithm, five-base preserves both variant and methylation information in a single workflow, delivering accurate single-base resolution while reducing complexity and cost. Turning to our third pillar, expanding our services, data, and software capabilities. Earlier this month, we introduced BioInsight, a new business created to accelerate the use of genomic and multi-omics data in drug discovery and research. BioInsight brings together our population sequencing programs, data partnerships, and software and AI capabilities under one structure, creating a more strategic platform to collaborate with governments, biopharma, and research institutions. By combining advances in sequencing, economics, and AI, BioInsight enables customers to generate and interpret data at greater scale, positioning Illumina to capture new opportunities in this fast-growing space.

Speaker #5: And our new Dragon algorithm . Five based both variant and methylation information in a single workflow , delivering accurate single base resolution while reducing complexity and cost .

Speaker #5: Turning to our third pillar , expanding our services , data and software capabilities . Earlier this month , we introduced Bio Insight , a new business created to accelerate the use of genomic and multi-omics data in drug discovery and research .

Speaker #5: Bio insights bring together our population sequencing programs , data partnerships and software and AI capabilities under one structure . Creating a more strategic platform to collaborate with governments , biopharma and research institutions .

Speaker #5: By combining advances in sequencing, economics, and AI, bio insights enable customers to generate and interpret data at greater scale, positioning Illumina to capture new opportunities.

Speaker #5: In this fast growing space . In the near term , Biocide will focus on large scale data generation partnerships with longer term plans to further monetize data , software , and AI enabled services .

Jacob Thaysen: In the near term, BioInsight will focus on large-scale data generation partnerships with longer-term plans to further monetize data, software, and AI-enabled services, adding another layer of growth that supports our long-term financial targets. Together, these initiatives show how we are executing on our strategy, expanding Illumina's reach from sequencing to multi-omics and from data generation to biological insights. They reflect an innovation roadmap that is delivering for customers today while setting the stage for what comes next. Throughout the quarter and at ASSG, I met with many customers. Their enthusiasm for our recent launches and upcoming solutions like Constellations was clear. These discussions are one of many ways we gather customer feedback, and we continuously integrate those insights into our roadmap. Customer focus and understanding are core to how we operate, and my own conversations are an extension of that discipline.

Speaker #5: Adding another layer of growth that supports our long term financial targets . Together , these initiatives show how we are executing on our strategy , expanding Illumina's reach from sequencing to multi-omics and from data generation to biological insights .

Speaker #5: They reflect an innovation roadmap that is delivering for customers today . While setting the stage for what comes next . Throughout the quarter and ASG , I met with many customers .

Speaker #5: Those enthusiasm for our recent launches and upcoming solutions like constellation's were clear . These discussions are one of many ways we gather customer feedback , and we continuously integrate those insights into our roadmap .

Speaker #5: Customer focus and understanding our core to how we operate . And my own conversations are an extension of that discipline . We are focused on what matters most to them .

Jacob Thaysen: We are focused on what matters most to them, making sequencing easier, more accessible, and more affordable, which helps us build stronger partnerships and better solutions. As a result, customers are expanding into new sequencing-intensive applications, broadening the reach and impact of our technology. At ASSG, these conversations reaffirmed our leadership position, built on end-to-end solutions, the quality and consistency of our data, and proven reliability and service, and highlighted the trust customers place in Illumina as a long-term partner. That feedback strengthened our conviction in the path ahead and our ability to extend our leadership for years to come. Looking ahead, we remain focused on disciplined execution and building our momentum from Q3. Clinical will continue to be our primary near-term driver of revenue growth, as NovaSeq X volume more than offsets conversion pricing headwinds.

Speaker #5: Making sequencing easier , more accessible , and more affordable , which helps us build stronger partnerships and better solutions . As a result , customers are expanding into new sequencing intensive applications , broadening the reach and impact of our technology .

Speaker #5: At ASG , these conversations reaffirmed our leadership position built on end to end solutions . The quality and consistency of our data and proven reliability and service , and highlighted the trust customers place in Illumina as a long term partner .

Speaker #5: That feedback strengthened our conviction in the path ahead and our ability to extend our leadership for years to come. Looking ahead, we remain focused on disciplined execution, and building our momentum from Q3 clinical will continue to be our primary near-term driver of revenue growth.

Speaker #5: As Novaseq volume , more than offsets conversion pricing headwinds . We also anticipate a gradual return to growth in our research business as pricing headwinds abate and end market stabilize .

Jacob Thaysen: We also anticipate a gradual return to growth in our research business as pricing headwinds abate and end markets stabilize. Together, these dynamics position us well going into 2026, giving us confidence in our ability to achieve high single-digit revenue growth and 20% non-GAAP operating margins by 2027, excluding Greater China. With that, I'll turn it over to Ankur Dhingra to walk through our Q3 results and outlook before we move to Q&A.

Speaker #5: Together , these dynamics persist as well . Going into 2026 , giving us confidence in our ability to achieve high single digit revenue growth and 20% non-GAAP operating margins by 2027 .

Speaker #5: Excluding Greater China . With that , I'll turn it over to Anker to walk through our Q3 results and outlook before we move to Q&A .

Speaker #6: Thank you . Jacob , and good afternoon , everyone . I will give you an overview of our third quarter financial results . Provide more color about revenue , expenses , earnings and capital deployment .

Ankur Dhingra: Thank you, Jacob, and good afternoon, everyone. I will give you an overview of our third-quarter financial results, provide more color about revenue, expenses, earnings, and capital deployment, and then speak about our outlook going forward. Before I get into the details of the financial performance, let me give you a high-level view of how the third quarter played out. In Q3, our business outside of China returned to growth, an important milestone towards our long-term goals. We made significant progress in the NovaSeq X transition, with over 75% volume and over 50% revenue now transitioned to X. High-throughput consumables had strong growth in our clinical business, driven by continued expansion of X. Revenue exceeded the top end of our guidance range, was roughly flat globally, and grew approximately 2% year-over-year ex-China. Non-GAAP operating margin expanded by 190 basis points to 24.5%. Non-GAAP diluted EPS of $1.34 grew $0.20 year-over-year.

Speaker #6: And then speak about our outlook going forward . Before I get into the details of the financial performance , let me give you a high level view of how the third quarter played out in Q3 .

Speaker #6: Our business , outside of China returned to growth and important milestone towards our long term goals . We made significant progress in the novaseq transition with over 75% volume and over 50% revenue .

Speaker #6: Now transition to ex high throughput consumables had strong growth in our clinical business , driven by continued expansion of ex revenue exceeded the top end of our guidance range was roughly flat globally and grew approximately 2% year over year .

Speaker #6: Ex China non-GAAP operating margin expanded by 190 basis points to 24.5% , and non-GAAP diluted EPs of $1.34 grew $0.20 year over year .

Speaker #6: Now, let me provide you details of our financial performance. Third quarter revenue of $1.08 billion, roughly flat year over year on both a constant currency and reported basis.

Ankur Dhingra: Now, let me provide you details of our financial performance. Third-quarter revenue of $1.08 billion was roughly flat year-over-year on both a constant currency and reported basis, and ahead of the top end of our guidance range. Revenue, excluding China, which makes up 95% of our revenue, grew approximately 2% year-over-year. Greater China revenue was $52 million. Sequencing consumables revenue was $747 million, roughly flat year-over-year, and up about 3%, excluding China, both on reported and constant currency basis. High-throughput volumes continue to grow as customers across research and clinical take advantage of the NovaSeq X instruments. In clinical, momentum remains strong, with double-digit revenue growth outside of China, driven by broader adoption of comprehensive genomic profiling and growing use of sequencing-intensive applications like MRD. In research and applied, consumable sales declined high single digits outside of China, reflecting continued funding uncertainty and pricing dynamics tied to the X transition.

Speaker #6: And ahead of the top end of our guidance range . Revenue excluding China , which makes up 95% of our revenue , grew approximately 2% year over year .

Speaker #6: Greater China revenue was $52 million. Sequencing consumables revenue was $747 million, roughly flat year over year and up about 3% excluding China.

Speaker #6: Both on reported and constant currency basis . High throughput volumes continue to grow as customers across research and clinical take advantage of the Novaseq Ex instruments in clinical momentum remains strong , with double digit revenue growth outside of China , driven by broader adoption of comprehensive genomic profiling and growing use of sequencing .

Speaker #6: Intensive applications like MRD in research and applied consumables. Sales declined high single digits outside of China, reflecting continued funding uncertainty and pricing dynamics.

Speaker #6: Tied to the Ex transition to give investors better visibility into these dynamics , we have added new disclosures for revenue outside China , showing instruments and consumables revenue and also consumables revenue growth by clinical and research segments .

Ankur Dhingra: To give investors better visibility into these dynamics, we have added new disclosures for revenue outside China, showing instruments and consumables revenue, and also consumables revenue growth by clinical and research segments. This can be found on slide 10. The X transition progressed significantly in Q3. Roughly 78% of volumes and 51% of revenue in Q3 was sequenced on X. 91% of research volumes were sequenced on X. The clinical X transition has progressed to roughly 64% of volumes in the quarter. Our customers are taking advantage of X's capabilities to increase content on their assays, expand into new indications, and take whole genome-based approaches, as you may have seen with several product launches and approvals in the last few months across therapy selection, MRD, and genetic disease indications.

Speaker #6: This can be found on slide ten . The Ex transition progressed significantly in Q3 , roughly 78% of volumes and 51% of revenue in Q3 was sequenced on ex , 91% of research volumes were sequenced on ex .

Speaker #6: The clinical ex transition has progressed roughly 64% of volumes in the quarter . Our customers are taking advantage of access capabilities to increase content on their essays , expand into new indications , and taking whole genome based approaches .

Speaker #6: As you may have seen with several product launches and approvals in the last few months , across therapy selection and genetic disease indications , now that we have achieved this transition milestone , we thought it would be helpful to illustrate the conversion patterns with our clinical customers .

Ankur Dhingra: Now that we have achieved this transition milestone, we thought it would be helpful to illustrate the conversion patterns with our clinical customers. On slide 12, we look at the 40 customers that have fully transitioned to X as of Q3, and we see how elasticity of demand played out. For this group of customers, volume offset price in year one, and then revenue and volume both accelerated in year two. We continue to be in deep dialogue with our clinical customers about their growth trajectory and their 6K to X transition plans. These plans support a view of continued revenue growth in 2026 and beyond. Specifically, business with our largest customers is projected to grow faster than the overall company average rate, at least over our strategic plan period.

Speaker #6: On slide 12 , we look at the 40 customers that have fully transitioned to ex as of Q3 , and we see how elasticity of demand played out for this group of customers .

Speaker #6: Volume offset price in year one . And then revenue and volume both accelerated in year two . We continue to be in deep dialogue with our clinical customers about their growth trajectory and their six K to ex transition plans .

Speaker #6: These plans support a view of continued revenue growth in 2026 and beyond . Specifically , business with our largest customers is projected to go faster than the overall company average rate , at least over our strategic plan period .

Speaker #6: Taken together with the range of new assays coming to market and these discussions with our customers gives us confidence that clinical demand will remain strong as the ex transition advances on sequencing activity .

Ankur Dhingra: Taken together with the range of new assays coming to market and these discussions with our customers, it gives us confidence that clinical demand will remain strong as the X transition advances. On 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 a more muted growth from our research customers. Moving to sequencing instruments, revenue of $107 million was up approximately 3% year-over-year in Q3 and 6% ex-China on both a reported and constant currency basis, driven by the broad adoption of the MiSeq i100 in the low-throughput space. NovaSeq X placements were strong, at over 55 in Q3. In line with recent trends, over 50% of Xs placed in Q3 were to clinical customers.

Speaker #6: 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 a more muted growth from our research customers moving to sequencing instruments .

Speaker #6: Revenue of $107 million was up approximately 3% year over year in Q3 and 6% Ex-china on both a reported and constant currency basis , driven by the broad adoption of the I100 in the low throughput space .

Speaker #6: Novaseq placements were strong at over 55 . In Q3 , in line with recent trends , over 50% of excess placed in Q3 were to clinical customers in Greater China .

Ankur Dhingra: In Greater China, our instruments business was down approximately 54% due to restrictions on exportation of instruments into China. Sequencing service and other revenue of $147 million was down approximately 3% year-over-year, below our expectations. The decrease was mainly due to the timing of certain strategic partnership revenues. Moving to the rest of Illumina P&L, non-GAAP gross margin of 69.2% for the third quarter. Tariffs impacted gross margins by roughly 220 basis points on a year-over-year basis. Non-GAAP operating expenses were $484 million, which is down approximately 6%, or $33 million year-over-year, reflecting results of multi-year cost reduction programs while prioritizing key growth investments. Non-GAAP operating margin was 24.5% in Q3, expanding 190 basis points year-over-year. Non-GAAP operating profit grew approximately 9% year-over-year, reflecting increased operating leverage from the improved cost structure.

Speaker #6: Our instruments business was down approximately 54% due to restrictions on the exploitation of instruments into China. Sequencing service and other revenue of $147 million was down approximately 3% year over year, below our expectations.

Speaker #6: The decrease was mainly due to the timing of certain strategic partnership revenues . Moving to the rest of Illumina , PNL , non-GAAP gross margin of 69.2% for the third quarter , tariffs impacted gross margins by roughly 220 basis points on a year over year basis .

Speaker #6: non-GAAP operating expenses were $484 million , is down approximately 6% , or $33 million year over year , reflecting results of multi-year cost reduction programs .

Speaker #6: While prioritizing key growth investments . non-GAAP operating margin was 24.5% in Q3 , expanding 190 basis points year over year . non-GAAP operating profit grew approximately 9% year over year , reflecting increased operating leverage from the improved cost structure .

Speaker #6: Looking at our results below the line , non-GAAP other expense , which is largely comprised of net interest expense , was $13 million and non-GAAP tax rate was slightly higher than expectations at 18.6% .

Ankur Dhingra: Looking at our results below the line, non-GAAP other expense, which is largely comprised of net interest expense, was $13 million, and non-GAAP tax rate was slightly higher than expectations at 18.6%. We continue to assess long-term tax structure optimization to balance U.S. R&D benefits with efficient credit utilization across jurisdictions. Our average diluted shares were approximately 154 million, roughly 3 million lower than last quarter, driven by an increased level of share repurchases, net of dilution from employee equity awards. Altogether, the non-GAAP earnings per diluted share of $1.34 grew 18% year-over-year and came in well above our guidance range. Moving to cash flow, balance sheet, and capital allocation items for the quarter, cash flow provided by operations was a robust $284 million. Capital expenditures were $31 million, and free cash flow was $253 million.

Speaker #6: We continue to assess long term tax structure optimization to balance US R&D benefits with efficient credit utilization across jurisdictions . Our average diluted shares for approximately 154 million , roughly 3 million lower than last quarter , driven by an increased level of share repurchases , net of dilution from employee equity awards .

Speaker #6: All together , the non-GAAP earnings per diluted share of $1.34 grew 18% year over year and came in well above our guidance range .

Speaker #6: Moving to cash flow, balance sheet, and capital allocation items for the quarter. Cash flow provided by operations was a robust $284 million, capital expenditures were $31 million, and free cash flow was $253 million.

Speaker #6: In Q3 , we repurchased approximately 1.24 million shares of Illumina stock at an average price of $97.10 per share , for a total of $120 million at quarter end , we had $684 million remaining on our share repurchase authorization , and we intend to continue to repurchase shares opportunistically .

Ankur Dhingra: In Q3, we repurchased approximately 1.24 million shares of Illumina stock at an average price of $97.10 per share for a total of $120 million. At quarter end, we had $684 million remaining on our share repurchase authorization, and we intend to continue to repurchase shares opportunistically. Additionally, last quarter, we entered into a definitive agreement with Standard BioTools to acquire Somalogic and other specified assets. We are working with regulatory authorities to obtain clearance and still expect the deal to close in the first half of 2026. We ended the quarter with roughly $1.28 billion in cash, cash equivalents, and short-term investments, and gross leverage of approximately 1.6x gross debt to last 12 months EBITDA. Now, moving to guidance for the year 2025. As you may have seen in the press release, we are increasing our guidance for 2025.

Speaker #6: Additionally , last quarter , we entered into a definitive agreement with Standard Biotools to acquire Somalogic and other specified assets . We are working with regulatory authorities to obtain clearance and still expect the deal to close in the first half of 2026 .

Speaker #6: We ended the quarter with roughly $1.28 billion in cash . Cash equivalents and short term investments and gross leverage of approximately 1.6 x gross debt to last 12 months .

Speaker #6: EBITDA now moving to guidance for the year 2025 . As you may have seen in the press release , we are increasing our guidance for 2025 , starting with revenue .

Ankur Dhingra: Starting with revenue, we're raising our revenue guidance for Greater China region by $20 million to approximately $220 million for the year. For the rest of the world, we're projecting revenue growth between 0.5% and 1.5% on a constant currency basis, unchanged at midpoint. Hence, we now anticipate total Illumina constant currency revenues to decline in the range of -0.5% to -1.5%. On a reported basis, that equates to Illumina revenue in the range of $4.27 billion to $4.31 billion, up $20 million at the midpoint relative to last guidance. Now shifting into our product assumptions for the rest of the world, excluding China, we now expect sequencing consumables growth between 2.5% and 3%, towards the higher end of our prior guidance of 1% to 3%. This increase reflects strong performance in Q3, driven by sequencing consumables volume growth from our clinical customers.

Speaker #6: We are raising our revenue guidance for Greater China region by $20 million to approximately $220 million for the year . For the rest of the world , we're projecting revenue growth between 0.5% and 1.5% on a constant currency basis , unchanged at midpoint .

Speaker #6: Hence , we now anticipate total Illumina constant currency revenues to decline in the range of -0.5% , -1.5% on a reported basis . That equates to Illumina revenue in the range of $4.27 billion to $4.31 billion , up $20 million at the midpoint relative to last guidance .

Speaker #6: Now , shifting into our product assumptions for the rest of the world , excluding China , we now expect sequencing consumables growth between 2.5% and 3% towards the higher end of our prior guidance of 1% to 3% .

Speaker #6: This increase reflects strong performance in Q3 , driven by sequencing consumable volume growth from our clinical customers . We are reiterating our guidance range for sequencing instruments decline of minus six point percent to -4% .

Ankur Dhingra: We are reiterating our guidance range for sequencing instruments, decline of -6.5% to -4%. The offset is in services related timing of certain strategic partnership revenues. Moving down the P&L, reflecting our strong execution and results, as well as increased revenue expectation from China, we are increasing our non-GAAP operating margin guidance by approximately 60 basis points at the midpoint to a range of 22.75% to 23%. We now expect full year 2025 non-GAAP tax rate to be approximately 20.5%, and our full year 2025 weighted average shares outstanding of roughly 156 million shares to reflect our Q3 repurchases. Bringing it all together, we're raising our non-GAAP diluted EPS guidance by $0.20 at the midpoint to a range of $4.65 to $4.75, reflecting 13% growth year-over-year at midpoint.

Speaker #6: The offset is in services related to the timing of certain strategic partnership revenues. Moving down the P&L, reflecting our strong execution and results, as well as increased revenue expectations from China, we are increasing our non-GAAP operating margin guidance by approximately 60 basis points at the midpoint to a range of 22.75% to 23%.

Speaker #6: We now expect full year 2025 non-GAAP tax rate to be approximately 20.5% , and our full year 2025 weighted average shares outstanding of roughly 156 million shares to reflect our Q3 repurchases .

Speaker #6: Bringing it all together , we're raising our non-GAAP diluted EPs guidance by $0.20 at the midpoint to a range of $4.65 to $4.75 , reflecting 13% growth year over year .

Speaker #6: At midpoint . This guidance implies that for Q4 2025 , we expect our year over year revenue growth in rest of the world .

Ankur Dhingra: This guidance implies that for Q4 2025, we expect our year-over-year revenue growth in the rest of the world ex-China to step up to 4%, and China contributing $33 million in Q4. As we close out 2025, we are quite encouraged by the momentum we've built, from the successful NovaSeq X transition and the continued strength of our clinical business to the progress we've made preparing for multi-omics launches across single-cell, spatial, and proteomics. Looking ahead to 2026, we see three key trends. First, in clinical, we expect dynamics similar to this year: strong volume growth and continued transition to X. Second, in research and applied, we anticipate conditions to remain muted, consistent with the latter half of 2025, with pricing headwinds easing now that 91% of high-throughput volume has transitioned to X.

Speaker #6: Ex-china to step up to the 4% , and China contributing $33 million in Q4 . As we close out 2025 , we are encouraged by the momentum we've built from the successful Novaseq transition and the continued strength of our clinical business , the progress we've made preparing for Multiomics launches across single cell spatial and proteomics .

Speaker #6: Looking ahead to 2026 , we see three key trends . First , in clinical , we expect dynamics similar to this year strong volume growth and continued transition to ex second in research and applied .

Speaker #6: We anticipate conditions to remain muted consistent with the latter half of 2025 with pricing headwinds easing now that 91% of high throughput volume has transitioned to ex and third are planned , 2026 Multiomics launches will begin contributing to growth as and when research and markets recover .

Ankur Dhingra: Third, our planned 2026 multi-omics launches will begin contributing to growth as and when research and markets recover. Altogether, we expect the end markets in 2026 to look similar to the second half of 2025. We'll provide detailed 2026 guidance when we report our Q4 results. In closing, I want to once again express my sincere appreciation to the Illumina team for their continued focus and disciplined execution throughout this year. This quarter was extremely encouraging as we returned to growth and made significant progress towards our short and long-term goals. Thank you for joining our call today. I'll now invite the operator to open the line for Q&A.

Speaker #6: All together, we expect the end markets in 2026 to look similar to the second half of 2025. We'll provide detailed 2026 guidance when we report our Q4 results.

Speaker #6: In closing , I want to once again express my sincere appreciation to the Illumina team for their continued focus and disciplined execution throughout this year .

Speaker #6: This quarter was extremely encouraging as we returned to growth and made significant progress towards our short and long term goals . Thank you for joining our call today .

Speaker #6: I'll now invite the operator to open the line for Q&A . .

Speaker #1: 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 .

Brian Blanchett: 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 comes from Puneet Souda with Leerink. Please unmute and ask your question.

Speaker #1: 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 .

Speaker #1: We will now pause a moment to assemble the queue. Thank you. Our first question comes from Puneet Sudha with Leerink. Please unmute and ask your question.

Speaker #7: Yeah . Hi guys . Thanks for the question . Here . If I could just wrap my questions into one . Thanks for the details on the 33 million for China that you're implying versus the full year .

[Analyst]: Yeah, hi guys. Thanks for the question here. If I can, I'll just wrap my questions into one. Thanks for the details on the $33 million for China that you're implying versus the full year. I'm just trying to understand how should we think about China and sort of 2026? You seem to be isolating China as you are moving forward. Maybe if you could provide some color there. A bigger question here is what's competitively has been announced at ASHG? Is that leading to any freezing on the research and applied side of the market? I appreciate you providing more color on the clinical. The last part, if I may, clinical growth, 12%. Thank you for that. How should we expect that for the full year and 2026 if you could? Thank you so much.

Speaker #7: I'm just trying to understand how how , how should we think about China and sort of 26 you seem to be isolating China as as you are moving forward .

Speaker #7: Maybe if you could provide some color there and then , you know , a bigger question here is what what's competitively has been announced at Ashg is that leading to any freezing on the research and applied side of the market ?

Speaker #7: I appreciate you providing more color on the clinical . And then the last part , if I may , clinical growth 12% . Thank you for that .

Speaker #7: How should we expect that for the full year in 26 ? If you could ? Thank you so much .

Speaker #5: Hi . This is Jacob . So thanks for that one question , which I think had a few smaller parts . But let me start with with the China setup .

Jacob Thaysen: Hi, Puneet. This is Jacob. Thanks for that one question, which I think had a few smaller parts. Let me start with the China setup. First of all, I'm very pleased with the performance in China. As you know, we still haven't resolved the situation in China, but we made a good step forward here by now being able to serve our OEM partners so they can serve their customers in China with instruments. I'm really pleased about that. I'm also very happy to see how Jenny, our General Manager in China, and the Illumina team continue to serve our customer in a challenging environment. They show real resilience in this. Of course, what we're also seeing, and we continue to be very pleasantly surprised about, is how much our customers do want to continue to work with Illumina.

Speaker #5: First of all , I'm very pleased with the performance in China . As you know , we still haven't resolved the situation in China , but we made a good step forward here by now , being able to serve our OEM partners so they can serve their customers in China .

Speaker #5: So I'm with instruments . So I'm really pleased about that . I'm also very happy to see how Jenny , our general manager in China and and the Illumina team continues to serve our customer in a in a challenging environment .

Speaker #5: They've shown really resilience in this . And and of course , what we're also seeing and we continue to be very pleasantly surprised about is , is how how well or how much our customers do want to continue to work with Illumina .

Speaker #5: They continue to see the high quality and innovations and and they want to see us stay in the market . We we are taking this right now , quarter by quarter .

Jacob Thaysen: They continue to see the high quality and innovations, and they want to see us stay in the market. We are taking this right now quarter by quarter. It's too early for us to go in and give you a view on 2026. Clearly, we need to find a way to resolve the situation, and we continue to work with the regulators in China to find a solution for that.

Speaker #5: We are too early for us to go in and give you an view on on 26 . But but clearly , again , we need to find a way to resolve the situation .

Speaker #5: And we continue to work with the regulators in China to to find a solution for that .

Speaker #1: Your next question will come from Doug Schenkel with Wolfe Research .

Brian Blanchett: Your next question will come from Doug Schenkel with Wolfe.

Speaker #8: Hey , good afternoon guys . Two questions . So the first , as I think about 2026 , based on how you described trends in your prepared remarks , there's three things that really jump out to me .

Ankur Dhingra: Hey, good afternoon, guys. Two questions. The first, as I think about 2026, based on how you described trends in your prepared remarks, there's three things that really jump out to me. One, it seems plausible that research revenue could be flat to down low singles next year in a somewhat stable funding environment given the state of the transition to the X. Two, clinical revenue should grow, but maybe mid-single digits to high single digits as volumes grow and customers continue to transition to the X, keeping in mind the slide that you presented on three-year precedent with clinical customers. Third, China could be a 50 to 100 basis point headwind to growth. When I pull those three things together, mathematically, it gets me to low single-digit revenue growth, at least as a starting point for next year. I'm just wondering if that's a reasonable framework.

Speaker #8: One , it seems plausible that research revenue could be flat to down low singles next year in a somewhat stable funding environment , given the state of the transition to the ex two clinical revenue should grow .

Speaker #8: But maybe mid-single digits to high single digits as volumes grow and customers continue to transition to the Ex , keeping in mind the slide that you presented on three year precedent with clinical customers .

Speaker #8: And then third , China could be , a , you know , 50 to 100 basis point headwind to growth . So like when I pull those three things together mathematically , it gets me to low single digit revenue growth , at least as a starting point for next year .

Speaker #8: I'm just wondering if that's a reasonable framework . And then the second thing is , operationally , you have managed to expand margin about 50 basis points year to date in a period where total revenue is down a couple points , including a close to 25% year over year decline in high margin .

Ankur Dhingra: The second thing is, operationally, you have managed to expand margin about 50 basis points year to date in a period where total revenue is down a couple of points, including a close to 25% year-over-year decline in high-margin China revenue. It's been really impressive. I'm just wondering, what does this mean as the margin outlook or the margin outlook as the environment normalizes? On one hand, you could argue you already pulled forward a lot of operating levers to get to these levels. On the other hand, the fact that you've accelerated operating efforts the way you have could lead to pretty material flow-through when revenue starts to pick up again. I just, Ankur, it would be great to just know how you're thinking about this. Thank you.

Speaker #8: China revenue . So it's been really impressive . I'm just wondering , what does this mean as the margin outlook for the margin outlook as the environment normalizes ?

Speaker #8: Because on one hand , you could argue you already pulled forward a lot of operating leverage to get to these levels . On the other hand , the fact that you've accelerated operating efforts the way you have could lead to pretty material flow through when revenue starts to pick up again .

Speaker #8: So I just anchor . It would be great to just know how you're thinking about this . Thank you .

Speaker #5: All right doc , thank you for for the questions . And let me start again on 26 . As I said before , we're not going to go in and give guidance .

Jacob Thaysen: All right, Doug, thank you for the questions. Let me start again on 2026. As I said before, we're not going to go in and give guidance. We do think it's highly appropriate to wait until we have a better sense for what will happen over the next quarter here and how the market evolves and also the regulatory space, of course, from a China perspective. That said, I think that the framework you're putting out, looking at clinical being the driver of growth in next year also, where we are seeing more muted environment for research. I think we are seeing it more like a second-half environment. As we see it right now, it's stabilizing, but still soft. We think there will be some contribution from some of our new launches of our multi-omics products here.

Speaker #5: We do think it's highly appropriate to to wait until we have a better sense for how what will happen over the next quarter .

Speaker #5: Here and and how the market evolves and also the regulatory space . Of course , from from a China perspective , that said , I think that the the framework you're putting out , looking at at clinical being being the driver of growth in next year , also where we are seeing more muted environment for for for research .

Speaker #5: And I think we are we seeing it more like a second half environment as we see it right now stabilizing but still soft .

Speaker #5: And then we think there will be some contribution from from some of our new launches of , of of our Multi-omics products here .

Speaker #5: How we think about it right now , we are not taking I wouldn't I wouldn't take China into the consideration at this point of time for for in our framework , that's too early to see where this is .

Jacob Thaysen: How we think about it right now, we are not taking, I wouldn't take China into the consideration at this point of time in our framework. It's too early to see where this is, where China is going. I would say overall on how we are operating the company and how disciplined the team has been on executing, I feel good about the opportunity we have to further expand our margins. I feel really good about, as I mentioned in my prepared remarks, moving towards our goal of 26% in 2027 and above going forward.

Speaker #5: Where China is going . I would say overall , on the how we are operating the company and how disciplined the team has been on executing .

Speaker #5: I feel good about the opportunity we have to further expand our our margins , and I feel really good about , as I mentioned in my prepared remarks , moving towards our goal of 26% in 27 and above going forward .

Speaker #6: Yeah , on the on the margin side , good question . Doug . Very pleased with the performance , especially as some of the result of the actions that we've been taking coming through here in this quarter as well .

Ankur Dhingra: Yeah, on the margin side, good question, Doug. Very pleased with the performance, especially as some of the result of the actions that we've been taking coming through here in this quarter as well. I'm pleased with 190 basis point operating margin expansion during the quarter. We've taken a lot of cost-structured actions. Looking forward, there are still several plays that are yet to reflect the full benefit in our P&L, especially in our gross margins, where we continue to work with optimizing our manufacturing footprint. On the OpEx side, our sense is we've put in a lot of structural plays in move. Some of those have to play out, but at the same time, we are making growth investments as well.

Speaker #6: And we're pleased with 190 basis point operating margin expansion during the quarter . So we've taken a lot of cost structure actions . I'm looking forward .

Speaker #6: There are still several plays that are yet to reflect the full benefit in our PNL , especially in our in our gross margins where we continue to work with optimizing our manufacturing footprint and and on the OpEx side , our senses , we've put in a lot of structural plays in move .

Speaker #6: Some of those have to play out , but at the same time , we are making growth investments as well . So going forward , I do anticipate .

Ankur Dhingra: Going forward, I do anticipate additional margin expansion coming both from cost action, but also most certainly much stronger operating leverage given where we are from a cost-structure perspective.

Speaker #6: Additional margin expansion coming both from cost action , but also most certainly much stronger operating leverage given where we are from a from a cost structure perspective .

Speaker #1: Your next question will come from Vijay Kumar with Evercore ISI .

Brian Blanchett: Your next question will come from Vijay Kumar with Evercore ISI.

Speaker #9: Hey guys . Thanks for taking my question and congrats on a nice print here . Two two quick ones , Jacob , anchor for both of you on consumables .

[Analyst]: Hey guys, thanks for taking my question. Congrats on a nice sprint year. Two quick ones, Jacob, Ankur, for both of you. On consumables, I thought the expectations for the quarter was something like $720 million, $725 million-ish, given China headwinds. I recognize China came in better. Was there any pull forward in academic and government segments? How would you, when you look at the consumables growth of 3%, what is macro versus this transition impact? If you could just parse that out. Ankur, for you, I think in the past you've said 500 basis points of margin expansion. Is that still relevant off of current levels, given you guys have executed enough margins? Thank you.

Speaker #9: I thought the expectations for the quarter was something like seven 2725 ish , given China headwinds , I recognize China came in better .

Speaker #9: Was there any pull forward in academic and government segments like how would you you know , when you look at the consumables growth of 3% rate , what was what is macro versus the transition impact ?

Speaker #9: If you could just parse that out , an encore for you , I think in the past you've said 500 basis points of margin expansion .

Speaker #9: Is that still relevant given off of current levels , given you guys have executed in margins ? Thank you .

Speaker #5: So , Vijay , thanks for the question . And yes , we we are excited about Q3 . We think and consumables were definitely a highlight of the quarter .

Jacob Thaysen: Vijay, thanks for the question. Yes, we are excited about Q3. We think consumables were definitely a highlight of the quarter. Also, it continues to see momentum. What you're seeing is how the quarter played out. There has not been any pull forward either from Greater China or what we've seen from NIH. We're very pleased to see that the grants are starting to flow again, but there was no catch-up effect from actually spending from NIH customers, so to say, grant receivers. We're not seeing that at this point of time. We are, of course, hopeful that more will happen. I think it will take time for this to stabilize even further.

Speaker #5: Also , it continues to see momentum . What you're seeing is is how the quarter played out . There has not been any pull forward either from China or what we've seen from NIH .

Speaker #5: We're very we're very pleased to see that that the grants are starting to flow again . But it did not . There was no catch up effect from actually spending from from NIH customers .

Speaker #5: So to say grant receivers . So we're not seeing that at this point of time . But we are of course , hopeful that that more will happen .

Speaker #5: But I think I think it will take time for this to stabilize , even , even further .

Speaker #6: Yeah . So the only thing I would add , bulk of the overall performance , rest of the world came from clinical side .

Ankur Dhingra: Yeah, the only thing I would add, bulk of the overall performance for the world came from clinical side there on the consumable side. Very robust demand there. On the margin expansion, the 500 basis point was the goal we had set ourselves when we had the analyst day last year with a starting point where our base was much closer to about 21% or so. We're marching towards, in aggregate, getting to that 500 basis points over time. As I've said, the business, the way it is at close to 69%, 75%, 70% gross margin, we do hire long-term opportunity in that space. We'll talk about it once we achieve our first milestone and then go from there.

Speaker #6: There on the consumable side . So very robust demand there . And then on the on the margin expansion , the 500 basis point was the was the goal we had set ourselves when we had the Analyst Day last year with a starting point where our base was much closer to about 21% or so .

Speaker #6: So we're marching towards , in aggregate , getting to that 500 basis points over time . But as I've said , the business , the way it is at the close to 69 , 75 , 70% gross margin , we do hire long term opportunity in that space .

Speaker #6: But we'll talk about it once we achieve our first milestone and then go from there .

Speaker #1: Your next question will come from Tycho Peterson with Jefferies .

Brian Blanchett: Your next question will come from Tycho Peterson with Jefferies.

Speaker #10: Hey , thanks . A couple of quick ones . So as we think about research being muted next year , per your comments , how are you thinking about multi-year grants ?

[Analyst]: Hey, thanks. A couple of quick ones. As we think about research being muted next year, per your comments, how are you thinking about multi-year grants? On the flip side, allowing labs to potentially tap into indirect funds for capital equipment and also pent-up demand, that's the first question. I also understand you don't want to talk about 2026 a lot, but can you grow earnings in your view, given China and Roche headwinds? Maybe for Ankur, on the consumables for this quarter, how much of the beat was China and tariff surcharges? You didn't really explain gross margins, down 130 bps year over year. Can you maybe touch on that? Was that all pricing? What are the levers that you're implementing to offset? You said there's some GM levers coming.

Speaker #10: And then on the flip side , allowing labs to potentially tap into indirect funds for capital equipment and also pent up demand . So that's the first question .

Speaker #10: I also understand you don't want to talk about 26 a lot , but can you grow earnings in your view , given China and Roche , you know , headwinds .

Speaker #10: And then and maybe Francoeur on the consumables for this quarter . How much of the beat you know was China . And tariff surcharges .

Speaker #10: And then what you didn't really explain gross margins . You know down 130 basis points year over year . Can you maybe touch on that .

Speaker #10: Was that all pricing and what are the levers that you're implementing to offset . You said there's some levers coming .

Speaker #5: Okay . So the first question was .

Jacob Thaysen: Okay, so the first question was research. I think still there's a lot of ins and outs on both single-year grants and multi-year grants. I think what we've seen right now is that while grants have been granted, we have not seen many of the researchers starting to spend the money yet. I think if you think about academic researchers right now, usually they might get several grants during the year. It's not the one grant that drives necessarily the decision. It's the predictability of the grants coming also. I think that's a little bit what we are still, and what the academic market is still waiting to see, is the new predictability. Can they expect that grants are also flowing in 2026? I think there is a little bit of that uncertainty that has to play through before we start to see a more normal situation.

Speaker #6: The research .

Speaker #5: Research 26 . So I think still , you know , there's a lot of of ins and outs on , on , you know , both single year grants and multi-year grants .

Speaker #5: I think what we're seeing right now is that while grants has been has , has been granted , we have not seen the , the , the many of the research has done to spend the money yet .

Speaker #5: And I think if you think about a academic researchers right now , usually they might get several grants during a year . So it's not the one grant that drives and necessarily decision .

Speaker #5: It's the predictability of the grants coming also . And I think that's a little bit what we are still and what the market on the academic market is still waiting to see is the the new predictability .

Speaker #5: Can they can they expect that grants are also flowing ? 26 . So I think there is a little bit of that uncertainty that has to play through before we start to see a more , you know , normal , normal situation .

Speaker #5: So we will definitely be ready to respond . And I'm actually quite pleased with our lineup in Multiomics . Also , that will be very relevant for this type of customers .

Jacob Thaysen: We will definitely be ready to respond. I'm actually quite pleased with our lineup in multi-omics also that will be very relevant for this type of customers when the funding is coming back. We are very confident and believe we can grow our earnings also in 2026. I think we've proven that here in 2025. It's been a lot of headwinds from many different angles. I think you can definitely see that we have been able to do so. That brings my confidence for what we can do in 2026 also very high.

Speaker #5: When the when the funding is is coming back , we are very confident and believe we can grow our earnings also in in in 26 .

Speaker #5: And I think we've proven that here in Q3 2025. It's been a lot of headwinds from many different angles, and I think you can definitely see that we have been able to do so.

Speaker #5: So that brings my confidence for what we can do in 26 . Also very high .

Speaker #6: Okay . Let me address the other two parts up there . One on the on the gross margin side down 130 basis points , almost 220 basis points is from tariffs , which we'll talk about .

Ankur Dhingra: Okay, let me address the other two parts there. One on the gross margin side, down 130 basis points, almost 220 basis points is from tariffs, which we'll talk about. We're working towards mitigating some of those. The remainder base gross margin was up about 90 basis points accordingly. The base business is continuing to do very well. We're working towards over time finding a way to mitigate the impact coming from tariffs. Your question about the beat on sequencing consumables, so roughly half and half in Greater China and outside Greater China, most of the outside Greater China is in clinical markets. The surcharge was exactly where we guided it to be. It came in right at the forecast.

Speaker #6: We're working towards mitigating some of those . The remainder base gross margin was up about 90 basis points accordingly . So the base business is continuing to do very well .

Speaker #6: And we're working towards over time find a way to mitigate the impact coming from tariffs . Your question about the beat on consumables .

Speaker #6: So roughly half and half in China and outside China , most of the outside China is in clinical . The the surcharge was exactly where we guided it to be .

Speaker #6: It came in right at the forecast .

Speaker #1: Your next question will come from Dan Leonard with UBS . Dan , you may unmute your line and ask a question .

Brian Blanchett: Your next question will come from Dan Leonard with UBS. Dan, you may unmute your line and ask your question.

Speaker #11: Apologies for that one . One question on the growth and clinical consumables . That double digit growth rate did that include any positive lumpiness in there , or do you view that as more a run rate ?

[Analyst]: Apologies for that. One question on the growth in clinical consumables. That double-digit growth rate, did that include any positive lumpiness in there, or do you view that as more run rate?

Speaker #5: Hey Dan , thanks for that question . We are very pleased again with with the performance for Q3 and also definitely the the clinical performance , as you also saw in the in the prepared remarks , but also in the slide that we had a very strong movement going from 44% of revenue on the high throughput on the DX now up to 51 .

Jacob Thaysen: Hey, Dan, thanks for that question. We are very pleased again with the performance for Q3 and also definitely the clinical performance. As you also saw in the prepared remarks, and also in the slide, we had a very strong movement going from 44% of revenue on the high-throughput on the X now up to 51%, and at the same time, also moving a lot of volume. I think it really speaks to that when we are even with the shift and the transitioning that we can grow in even when we have a fast transitioning. That's what you're seeing. There's no specific lumpiness in this. I wouldn't count on that this is the run rate from now on, but I do believe that we'll continue to have strong growth in the clinical space.

Speaker #5: At the same time , also moving a lot of volume . So I think it really speaks to that when we are even with the shift and the transitioning that we can grow in , in , even when we have a fast transitioning , that's what you're seeing .

Speaker #5: It's there's no specific lumpiness in this . I wouldn't I wouldn't count on on that , that this is the run rate from now on .

Speaker #5: But but I do believe that that will continue to have strong growth in the in the clinical space .

Speaker #1: Your next question will come from Patrick Donnelly with Citi .

Brian Blanchett: Your next question will come from Patrick Donnelly with Citi.

Speaker #12: Hey , guys . Thank you for taking the questions . Maybe one I know Roche has been mentioned a few times . We'd love just your guys perspective on the competitive environment .

Operator: Hey guys, thank you for taking the questions. Maybe one, I know Roche has been mentioned a few times. Would love just your guys' perspective on the competitive environment. Jacob and Ankur, I know you were both up at ASHG talking to a lot of customers, seeing the product. Can you just give us your perspective on the competitive landscape, what factor that plays into 2026, and just how you're thinking about any pressure or freezing that that could offer to the market, particularly on the clinical side? Thank you guys so much.

Speaker #12: You know , Jacob and Ankur , I know you were both up at Ashg talking to a lot of customers , seeing seeing the product .

Speaker #12: So can you just give us your perspective on the competitive landscape ? What factor that plays into 26 and just how you're thinking about any pressure or freezing that that could , that could offer to the market , particularly on the clinical side ?

Speaker #12: Thank you guys so much .

Speaker #5: Yeah . Thanks . Thanks for the question . And as I mentioned before , you know , we we've always had competition in this space .

Jacob Thaysen: Yeah, Patrick, thanks for the question. As I mentioned before, we've always had competition in this space. We definitely have a lot of competition right now. I love it. I think competition is great for us and how we think, how we push ourselves, and how we thereby also become a better partner for our customers. What I also see out there is that most of our competitors are trying to compete and differentiate on one dimension only. In reality, as you also mentioned here, we've been in conversation with many of our customers, and our customers are much more sophisticated than looking at one single dimension. They are actually looking at multi-dimension as highest quality of data combined with the best workflow and lowest end-to-end cost.

Speaker #5: We definitely have a lot of competition right now . And I love it . I think competition is great for us . And how we think , how we push ourselves and how we thereby also become a better partner for our customers .

Speaker #5: But I also see out there is that most of our competition competitors are trying to compete and differentiate on one dimension only . But in reality , as you also mentioned here , we've been conversation with many of our customers and our customers are much more sophisticated than looking at one single dimension .

Speaker #5: They are actually looking at multi-dimensional as highest quality of data , combined with the best workflow and lowest end to end cost . And as I see it , and I think also our customer is resonates with our customers , is that Illumina is really the only one that delivering across all these dimensions and continue to innovate also .

Jacob Thaysen: As I see it, and I think also it resonates with our customers, Illumina is really the only one that's delivering across all these dimensions and continues to innovate also. I feel really good where we are and the competitive situation.

Speaker #5: So I feel really good where we are and the competitive situation .

Speaker #1: Your next question will come from Mason Carrico with Stephens .

Brian Blanchett: Your next question will come from Mason Kariko with Stephens.

Speaker #13: Hey , thanks for taking my question here . Assuming similar market trends next year , how sustainable is the 50 to 60 X's per quarter moving forward ?

[Analyst]: Hey, thanks for taking my question here. Assuming similar market trends next year, how sustainable is the 50 to 60 NovaSeq X's per quarter moving forward? What does the pipeline look like today? Maybe assuming we get a flattish NIH budget, do you think NovaSeq X placements could remain stable around these levels?

Speaker #13: What the pipeline look today and maybe assuming we get a flattish NIH budget , do you think X placements could remain stable around these levels ?

Speaker #5: Yeah . Mason . So thanks for that question . We started the year coming out and guided towards the 5060 placements per quarter .

Jacob Thaysen: Yeah, Mason, thanks for that question. We started the year coming out and guided towards 50, 60 placements per quarter. Remember in 2026, 2025, when we provided this guidance, what happened afterwards was, of course, our challenging situation in Greater China, combined with the challenges in NIH and funding. Yet we have still been able to deliver on that algorithm. I also expect here that Q4 will look stronger than the average of the year, which is usually true. We always have a stronger instrument placement in Q4. I think, and what I see is that I don't see any reason why that trend wouldn't continue into next year, but at this point, it's too early to actually give you specifics on exactly how we think about that range.

Speaker #5: And remember in 2625 we provided this guidance . What happened afterwards was of course our challenging situation in China , combined with the with the challenges in NIH and funding .

Speaker #5: And yet we have still been able to deliver on on that on that algorithm . And I also expect here that that Q4 will look stronger than the than the average of the of the year , which is usually do we always have a stronger instrument placements in Q4 ?

Speaker #5: So I think and what I see is that I don't see no reason why any reason why that trend wouldn't continue into next year .

Speaker #5: But at this point , it's true . Too early to actually give you specifics on exactly how we think . Think about that range .

Speaker #5: Yeah .

Speaker #6: Mason , from an end markets , if you look at the overall sequencing demand , we still see significant number of sequencing intensive applications that are both in the clinical as well as well as in research space that are building and continuing to build traction in the momentum here .

Ankur Dhingra: Yeah. Mason, from an end markets perspective, if you look at the overall sequencing demand, we still see a significant number of sequencing-intensive applications that are both in the clinical as well as in research space that are building and continuing to build traction and momentum here. We do see a several-year further expansion of the sequencing ecosystem, which should translate into X placements as well.

Speaker #6: So, we do see several years of further expansion of the sequencing ecosystem, which actually should translate into X placements as well.

Speaker #1: Your next question will come from Catherine Schultz with R.W. Baird .

Brian Blanchett: Your next question will come from Katherine Schultz with RW Baird.

Speaker #14: Hey guys . Thanks for the question . Maybe in research , maybe in research and applied , you know , it looks like the novaseq transition is almost complete .

[Analyst]: Hey guys, thanks for the question. Maybe in research and applied, it looks like the NovaSeq X transition is almost complete there. Just curious, how has the gigabyte output looked in that customer group this year, just as we try to think about underlying activity levels? Are you baking in any government shutdown impact for the fourth quarter?

Speaker #14: There . Just curious , how has gigabyte output looked in that customer group ? This year ? Just as we try to think about underlying activity levels and then related , are you baking in any government shutdown impact for the fourth quarter ?

Speaker #5: Yeah . Catherine . So I'll start by the first one looking at at the at the transition here . And we were very pleased .

Jacob Thaysen: Yeah, Katherine, I'll start by the first one of looking at the transition here. We're very pleased, but also as expected, that the NovaSeq X would transition much faster in the research and academic environment. As you might know, what is happening there is that when a researcher has finished up their project on the 6K, when they get the new project, they can immediately start on the X and do a bigger single-cell project or whatever else they are working on in that particular research environment. That's very different from the clinical space where you have to validate, and you have to make sure that it works on the new platform before we move over. We're very used to, and we expected that research applied would move much faster. Now that the transition is done, we see that the pricing headwind is, of course, reducing.

Speaker #5: And but also as expected that that the Novaseq would , would transition much faster in the , in the research and academic environment .

Speaker #5: As you can , as you might know , is that what is happening there is that when , when , when a researcher have have finished up their project on this six K , they when they get the new project , they can immediately start on , on the X and do a bigger single cell project or , or whatever else they are working on in the , in that in that particular research environment , that's very different from the from clinical space where you have to validate and , and you have to make sure that it works on the new , on the new platform before you move over .

Speaker #5: So , so we're very used to and we expected that research applied would move much faster . And now the transition done . We we see that that the pricing headwind is of course reducing .

Speaker #5: So we are we of course encouraged about the future . That said , there's still of course concerns about NIH funding . And there will be muted for for the time being .

Jacob Thaysen: We are, of course, encouraged about the future. That said, there's still, of course, concerns about NIH funding, and they'll be muted for the time being. Maybe, Ankur, you can say a little more to this.

Speaker #5: So maybe uncle , you can speak a little more .

Speaker #6: To Catherine in terms of actual GB volume growth . The as you may have probably worked through with our where our research revenue growth and consumables has been the the GBS have grown both in clinical and in research during the quarter .

Ankur Dhingra: Yeah, Katherine, in terms of actual GB volume growth, as you may have probably worked through with our research, revenue growth in sequencing consumables has been, the GBs have grown both in clinical markets and in research during the quarter. Clinical was much, much stronger. The growth rate in research has come down relative to what the historical growth rates have been, but it is still growing. Now, the overall funding environment has played out with the actual demand in that space, and the activity has become muted, but the GB still grew, albeit below the 30% kind of number that we've talked about.

Speaker #6: Clinical was much , much stronger . The growth rate in research has come down relative to what the historical growth rates have been , but it is still growing now .

Speaker #6: The overall funding environment has played out where the actual demand in that space and the activity has , has become muted . But the GB still grew , albeit below the 30% kind of number that we've talked about .

Speaker #1: Your next question will come from Kyle Mixon with Canaccord .

Brian Blanchett: Your next question will come from Kyle Mikson with Canaccord.

Speaker #15: Hey guys . Thanks for the questions . Congrats on the print and obese . All the updates really good job here . So yeah anchor for you on the quarterly R&D expenses declined .

[Analyst]: Hey guys, thanks for the questions. Congrats on the print and all the updates. Really good content out here.

Jacob Thaysen: Thank you, Kyle.

[Analyst]: Yeah, Ankur, for you on the quarterly R&D expenses declined a bunch quarter to quarter. It's like the lowest, did below $230 million for the first time since 2021. Wondering if this is a new run rate or will grow from here and how much of it relates to the recent or the upcoming launches of new products as well as your efforts to remain competitive, obviously, too. Just one quick one on the clinical. That looks like it's accelerating. What's specifically driving that? Are there other catalysts that could unlock further growth? Thanks.

Speaker #15: You a bunch quarter over quarter . Like the lowest did below 230 million for the first time since 2021 . Wondering if that's if this is a new run rate or will it grow from here ?

Speaker #15: And how much of it relates to the recent or the upcoming launches of new products , as well as your efforts to remain competitive ?

Speaker #15: Obviously too , and then just one quick one on the clinical that looks like it's accelerating . You know what specifically driving that .

Speaker #15: And there are other other catalysts that could unlock further growth . Thanks .

Speaker #5: Yeah Kyle . So let me start on this is Jacob on the R&D . And I'm very pleased with how Steve , our CTO and the R&D team , is driving a disciplined execution of of the R&D and the portfolio .

Jacob Thaysen: Yeah, Kyle, let me start on this. This is Jacob on the R&D end. I'm very pleased with how Steve, our CTO, and the R&D team is driving a disciplined execution of the R&D and the portfolio. We also, at the same time, are very disciplined on how we spend our money and how we think about optics going forward. I think that's the result you're seeing. What I'm really pleased about is that I continue to see improved productivity in the R&D organizations also. I'm excited about what we have in our portfolio and what will come out over the next few years. Some of that we have talked about. A lot we haven't really shared as of yet. Much more to come.

Speaker #5: And , and but we also at the same time , we're very disciplined on how we spend our money and how we think about opex going forward .

Speaker #5: And I think that's the result you're seeing . But but what I'm really pleased about is that I continue to see improved productivity in the R&D organizations also .

Speaker #5: So I'm excited about what we have in , in , in our portfolio and what will come out over the next few years .

Speaker #5: Some of that we have talked about a lot. We haven't really shared as of yet. So much more to come.

Speaker #6: Yeah . Thanks , Jacob . On the on your second question , Kyle , the okay . The clinical acceleration during the during the year , the they think about it in two ways .

Ankur Dhingra: Yeah, thanks, Jacob. On your second question, Kyle. The clinical acceleration during the year, think about it in two ways. We've talked about the number of X placements and more than 50% of the Xs being placed in the clinical over the last several quarters and a significant number placed during the last quarter. Talked about the validation of Xs in the clinical takes a little bit longer than what it has in the research environment. What we believe we are seeing the effect of is a lot of our large customers launching and getting approval for several new tests, even in early detection, definitely in therapy selection, also in MRD, and in genetic disease. Even if you just line up the number of tests that have been approved in the last two, three quarters alone, you will see the significant new activity that is getting added.

Speaker #6: We've talked about the number of x placements and more than 50% of the X is being placed in the clinical over the last several quarters in a significant number place during the last quarter .

Speaker #6: Talked about the the validation of X's in the clinical takes a little bit longer than what it has in the research environment . So the what what we believe we are seeing , the effect of is a lot of our large customers launching and getting approval for several new tests in some , even in early detection , definitely in therapy selection .

Speaker #6: Also in MRD and in genetic disease , even if you just line up the number of tests that have been approved in the last two , three quarters alone , you will see the significant new activity that is getting added .

Speaker #6: Right . And a lot of these larger , highly intensive tests have been enabled on X , given the amount of sequencing intensity , some of these new tests so we think it's the clinical market is is building momentum .

Ankur Dhingra: A lot of these larger, highly intensive tests have been enabled on X, given the amount of sequencing intensities on these new tests. We think the clinical market is building momentum, and there is legs to this momentum going forward as well. The actual growth rates in itself will pan out the way they would pan out, but there's a lot of good fundamental momentum building in that business.

Speaker #6: And there is legs to this momentum going forward as well . The actual growth rates in itself will will pan out the way they would pan out .

Speaker #6: But there's a lot of good fundamental momentum building in that business .

Speaker #5: Yeah . And I also remind that we did a lot of a lot of experiments in Q4 . And Q1 in 25 years in Q4 and 24 , and that's playing out now .

Jacob Thaysen: Yeah, also a reminder we did a lot of NovaSeq X placements in Q4 and Q1 in 2025 here and Q4 in 2024. That's playing out now. You can see that many of those went into the clinical markets, and that's where you start to see volume coming from also these placements.

Speaker #5: You can see that many of those went into the clinical space , and that's where you start to see volume coming from . Also , these placements .

Speaker #1: Your next question will come from Jack Meehan with Nephron Research .

Brian Blanchett: Your next question will come from Jack Meehan with Nephron Research.

Speaker #16: Good afternoon everyone . Hello . You've given a lot of very helpful comments . Around 2026 . Framing thoughts . In the past , you've talked about a goal of double digit EPs growth .

Operator: Good afternoon, everyone. You've given a lot of very helpful comments around 2026 framing thoughts. In the past, you've talked about a goal of double-digit EPS growth. I was just curious with the building blocks that you've laid out for us, just your confidence that you think you can deliver on that next year. Thanks.

Speaker #16: I was just curious with the building blocks that you've laid out for us , just your confidence that you think you can deliver on that next year .

Speaker #16: Thanks .

Speaker #5: Hey Jack , good to hear from you . And yeah , thank . Yeah , we continue to , as I mentioned also in the call , we continue to of course , we were not guiding at when we were at our earnings or our our investor set up here last summer .

Jacob Thaysen: Hey, Jack, good to hear from you. Yeah, we continue. As I mentioned also in the call, we continue to, of course, we were not guiding when we were at our investor setup here last summer. We were not providing too much detail on the EPS as far as I recall. It was more on the operating margin where we said we were going from 500 basis points up to 26%. With that also comes, of course, strong EPS growth. We're confident we can continue to grow the EPS in that range that you were talking about also here. Now, it's too early again for us to give specific guidance for next year, but we believe we can continue to do so. I think we have proven very well in very tough environments that we've seen both in 2024 and here in 2025 that we have expanded the EPS.

Speaker #5: We were not providing too much detail on the EPs as far as I recall . It was more on the operating margin where we said we were going to , where we were going from 500 basis points up to to 26% , but with that also comes of course strong EPs growth .

Speaker #5: So we we confident we continue to grow the EPs in in that range . You were talking about also here now we're not it's too early again for us to give a specific guidance for next year .

Speaker #5: But we we believe we can continue to do so . And we I think we have proven very well in in very tough environments that we've seen both in 24 and here in 25 , that that we have expanded the EPs .

Speaker #5: And our aim is to continue to do so in , in the same level . Anchor .

Jacob Thaysen: Our aim is to continue to do so in the same level. Ankur?

Speaker #6: Yeah . Thanks , Jacob . Jack . Yes , we still have several levers that we continue to work on from an overall earnings expansion perspective .

Ankur Dhingra: Yeah, thanks, Jacob. Jack, yes, we still have several levers that we continue to work on from an overall earnings expansion perspective. Clearly, getting the OpEx cost structure to a level where we have much stronger operating leverage was an important point, and we feel we're getting close to that. Keeping discipline on that spending is one crucial aspect. We still continue to work on several of the programs that we've outlined before, and the results of some of those are yet to play out in the P&L. We've talked about setting up our core centers of excellence in Singapore. We've talked about centers of excellence in India. We've talked about continuing to work on the gross margin on our instruments. These are all levers that we continue to play and still have additional value to be driven.

Speaker #6: The clearly getting the the opex cost structure to a level where we have much stronger operating leverage was an important point , and we feel we're getting close to that .

Speaker #6: So keeping discipline on that spending is one crucial aspect . We're still continue to work on several of the programs that we've kind of outlined before , and the results of some of those are yet to play out in the PNL .

Speaker #6: We've talked about setting up our core centers of excellence in Singapore . We've talked about centers of excellence in India . We've talked about continuing to work on the gross margin on our instruments .

Speaker #6: These are all levers that we that we continue to play and still have additional value to be to be driving and on top of that , as as we return to growth and with a better cost structure , there should be a better operating leverage to .

Ankur Dhingra: On top of that, as we return to growth and with a better cost structure, there should be better operating leverage too. In short, yes, our focus is to continue to expand our earnings going forward. We'll talk about the specifics, of course, for 2026 when we get to the guide.

Speaker #6: So in short , yes , our focus is to continue to expand our earnings going forward . We'll talk about the specifics . Of course , for 2026 when we when we get to the guidance .

Speaker #1: Your next question will come from Tom Stevens with TD Cowen . .

Brian Blanchett: Your next question will come from Conor McNamara with RBC Capital Markets.

Speaker #17: Oh , great . This is Dan Brennan on . How are you . Thanks , guys . Congrats on the quarter . Maybe just a couple .

[Analyst]: Oh, great. This is Dan Brennan on. How are you? Thanks, guys. Congrats on the quarter. Maybe just a couple. I know a few questions have been asked on the X transition. The 900 basis points of sequential increase of volume on the X from 55% to 64%. Could we see another 900 basis points in Q4? How do we think about getting to the research kind of level for the X, which is 90%? How long will that take, do you think? In terms of research, can you just break down a little bit what you're actually seeing from your U.S. academic and government customers? What have those trended year to date in the third quarter? If we do get a flat budget or even a CR, do you think that would be enough to see a nice uptick in spending?

Speaker #17: So I know a few questions have been asked on the transition . But the 900 basis points of sequential increase of volume on the X , you know , from 55 to 64 , like could we see another 900 basis points in for Q and kind of how do we think about getting to the research kind of level for the X , which is 90% like how long will that take do you think ?

Speaker #17: And then, B, in terms of research, can you just break down a little bit like what you're actually seeing from your U.S. academic and government customers?

Speaker #17: Like what are those trended year to date in the third quarter ? And if we do get a flat budget or even like a CR , do you think that would be enough to see like a nice uptick in spending or what are you hearing from customers about what will allow them to spend more ?

[Analyst]: What are you hearing from customers about what will allow them to spend more, the research customers? Thank you.

Speaker #17: You know , the research customers ? Thank you .

Speaker #5: Yeah , Dan , thanks for that . I think , you know , at the last earnings call , we had a lot of conversations with all of you about why the transition was slowing .

Jacob Thaysen: Yeah, Dan, thanks for that. I think at the last earnings call, we had a lot of conversations with all of you about why the transition was slowing. Now we have a conversation about why it's accelerating. First and foremost, what's important is that revenue accelerated with the acceleration of the conversion. We're very pleased with that, and we continue to see that trend will continue. I will caution not to over-interpret the acceleration and deceleration quarter by quarter. The trend is what we want to look at. Where we are in a quarter from now, we will take that and see that. It's one quarter; it's too early to say whether it's how much we are accelerating, whether that's a new line we should go after. Overall, I'm very encouraged where we are. More importantly, I'm encouraged that we continue to grow through an accelerated conversion.

Speaker #5: And now we have a conversation about why it's accelerating . I mean , first and foremost , what's important is that revenue accelerated with the acceleration of the of the conversion .

Speaker #5: So we very pleased with that . And we continue to see that that trend will continue . I , I will caution and overinterpret the acceleration and the acceleration quarter by quarter .

Speaker #5: The trend is what we want to look at . So where we are in a quarter from now , we will take that and see that .

Speaker #5: But, but it's one quarter too early to say whether it's, how much we are accelerating, whether that's a new line you should go after.

Speaker #5: But but overall I'm very encouraged where where we are and more importantly I'm encouraged about that . We continue to growth through an accelerated conversion .

Speaker #5: If we look into the academic , academic environment , as I mentioned before , we are we we are pleased to see that the grants are flowing .

Jacob Thaysen: If we look into the academic environment, as I mentioned before, we're pleased to see that the grants are flowing. I think from now on, it's more about getting predictability in the grant flowing and the predictability that the researchers can actually expect to get also future grants. They are not planning their spending based on one grant. They're spending on what's expected to come over the next few quarters. I think that's the next step. This was a great check mark that we now see that NIH is spending. The next check mark is, of course, we need to have the budget approved, or at least a CR. Finally, of course, we need to see that the grants are flowing regularly. I think that's the steps we have to go through. How long time that's going to take?

Speaker #5: I think it's from now on , it's more and and getting predictability in the grant flowing and predictability that the researchers can actually expect to get .

Speaker #5: Also , future grants , because they are not planning their spending based on one grant they're spending on what is expected to come over the next few quarters .

Speaker #5: So I think that's the next , you know , this was a great check mark that we that we now see that NIH is spending .

Speaker #5: The next check mark is of course , we need to have the the budget approved , or at least a CR . And and finally , of course , we need to see that that the the grants are flowing regularly .

Speaker #5: So I think that's the steps we have to go through . How long time that's going to take ? I don't know exactly , but it's going to move into 26 for sure .

Jacob Thaysen: I don't know exactly, but it's going to move into 2026 for sure.

Speaker #1: Our next question will come from Nambi with Guggenheim .

Brian Blanchett: Our next question will come from Subu Nambi with Guggenheim.

Speaker #18: Hey guys . Thank you for taking my question . First , two quick ones from me . First , it looks to me , uncle , that you are expecting a bit of step up in Q4 instrument revenue outside China .

[Analyst]: Hey, guys. Thank you for taking my question. First, two quick ones from me. First, it looks to me, Ankur, that you're expecting a bit of a step up in Q4 instrument revenue outside Greater China up to $125 million. Do I have that right? It would still be down year over year, but it's a decent sequential step up. What are you assuming relative to historical norms when it comes to budget flush? As a follow-up to Kathryn's question, is that the right way to think about research customers, that most of the NovaSeq X transition is done? I ask because, unlike clinical markets, which you did a nice job addressing in the slides, I would think you get to the other side of the transition and start growing again more quickly. Is that right?

Speaker #18: Up to $125 million. Do I have that right? It would still be down year over year, but it's a decent sequential step up.

Speaker #18: So what are you assuming relative to historical norms when it comes to budget flush . And second , as a follow up to Katherine's question , is that the right way to think about research customers that most of the ICS transition is done ?

Speaker #18: I ask because unlike clinical , which you did a nice job addressing in the slides , I would think you get to the other side of the transition and start growing again .

Speaker #18: More quickly . Is that right ?

Speaker #5: So , so let me let me start here on on . Overall , I think there's nothing uncommon in having a very strong Q4 in instrument placements .

Jacob Thaysen: Let me start here. The overall, I think there's nothing uncommon in having a very strong Q4 in instrument placements. That is the usual way we look at it. I don't consider that as a budget flush, but it's very normal in Q4. We saw that last year, and we've seen that the other years also. Q4 is usually stronger. That's not an Illumina thing. I think that's a lifetime, at least what I know, a lifetime tools industry phenomenon. We're expecting that also for Q4, but we are not building in any specific time of budget flush. Ankur?

Speaker #5: That is that is the usual way we look at it . So I don't consider that as a as a budget flush , but it's very normal in the Q4 .

Speaker #5: And we saw that last year , and we've seen the other years . Also , Q4 is usually stronger , and that's not an Illumina thing .

Speaker #5: I think that's a at least what I know . A life science tools industry phenomenon . So we expecting that also for for Q4 .

Speaker #5: But we are not building in any specific time of of flush budget , flush . Uncle .

Speaker #6: Yeah . Hey , Subbu . Both . Good question . So Jacob's addressed the Q4 instruments . Certainly anticipating in the forecast assumes a pickup up .

Ankur Dhingra: Yeah. Hey, Subu. Both good questions. Jacob's addressed the Q4 instruments. I'm certainly anticipating, and the forecast assumes, a pickup there. Not as big as the 91 placements that we had in Q4 last year. That's not what we're assuming in our forecast, but if that happens, that'd be a nice upside overall. In terms of the research market looking forward, you have it right in the sense the vast majority of the volumes in the research market have transitioned to X, implying that as and when those markets return to growth, or even in a stable environment, the actual pricing headwind should start to dissipate from that and result in a better revenue performance or revenue growth performance. We're also pleased with the series of multi-omics that are getting launched. We feel we're very well positioned as and when those markets return as well.

Speaker #6: They're not as big as the 91 placements that we had in Q4 last year . That's not what we're assuming in our forecast .

Speaker #6: But if that happens , that'll be a nice upside overall in terms of the research market . Looking forward , you have it right .

Speaker #6: The vast majority of our of the volumes in the research market have transitioned to ex , implying that as and when those markets return to growth or even in a stable environment , the actual pricing headwind should start to dissipate from that .

Speaker #6: And resulting in better revenue performance or revenue growth performance. We're also pleased with the series of multi-omics that are getting launched.

Speaker #6: We feel we're very well positioned as and when those markets return as well . So yep , thinking about the right way .

Ankur Dhingra: Yep, thinking about the right way.

Speaker #1: This concludes the Q&A section of the call . I would now like to turn the call back to Conor McNamara for closing remarks .

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

Speaker #4: Thank you for joining us today . A replay of this call will be available in investor section of our website . This concludes our call .

Jacob Thaysen: 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. We look forward to seeing you at upcoming events.

Speaker #4: We look forward to seeing you at upcoming events .

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