Illumina leans on clinical demand as research funding wavers

By Grace Kim

What growth is Illumina targeting?

Illumina (NASDAQ: ILMN) is targeting mid-single-digit growth in 2026 and high-single-digit growth in 2027, but CEO Jacob Thaysen said the company is not yet providing 2027 guidance.

The targets still match the trajectory Illumina set out in its 2024 strategy, with clinical demand and sequencing consumables (reagents and other supplies used in sequencing) at the center of the plan, executives said at a UBS discussion.

Illumina exceeded third-quarter expectations and raised its full-year outlook for both revenue and earnings, Thaysen said. Clinical consumables grew in the mid-teens, while research stayed weaker despite sequential improvement.

Grants have been flowing through the academic system, and expectations are for next year's funding to be around this year's level, Thaysen said. Individual researchers remain uncertain about receiving grants at their usual levels, making them hesitant to commit to longer-term purchases such as instruments.

CEO Jacob Thaysen said: “You need a few more quarters where they get comfortable” with how grants are allocated. He added that Illumina was “not yet calling a turn in the market.”

Clinical consumables are growing now, while a research recovery needs more quarters of grant clarity.

How will clinical demand carry the 2027 step-up?

CFO Ankur Dhingra said Illumina's high-single-digit 2027 framework depends primarily on clinical demand, consumables and the X sequencing business. Dhingra expects new products and pharmaceutical services to contribute another 1 to 2 percentage points of growth.

Dhingra said instrument placements had been elevated through 2026, but he did not expect instrument sales to drive the growth step-up the following year. A larger installed base (instruments already deployed at customers) should support consumables demand, though clinical customers can take time to bring new instruments to full utilization.

Thaysen said Illumina placed more X instruments over the past 12 months than during the platform's first year after launch. UBS's Doug Schenkel said placements exceeded 95 in the second quarter and 80 in the third. Thaysen expected elevated fourth-quarter placements, but the comparison was against more than 100 in the prior-year period.

Much of the X platform's recent growth reflects customers adding capacity rather than simply replacing older instruments. Some clinical customers moving from the older 6000 platform also developed larger assays instead of transferring existing tests unchanged.

Customer capacity additions, rather than replacement alone, are expanding the consumables opportunity.

What happens to pricing?

Thaysen said Illumina has moved past most of the substantial headwind from price reductions tied to the X platform launch, though some effect remains in clinical markets. The company now focuses on reducing the cost of customers' entire workflows, including laboratory preparation, automation and software, rather than sequencing alone.

Workflow savings could ease residual pricing pressure without relying on higher instrument sales.

Which new products can add growth?

Dhingra identified single-cell and spatial products, biopharmaceutical demand and the acquired SomaLogic proteomics business (protein analysis) as potential contributors. Thaysen said an NGS-based (next-generation sequencing) Soma assay is already on the market, and a kitted assay should contribute to growth next year.

Demand for Illumina's StrataMap spatial assay has exceeded the company's early expectations. Illumina is working to introduce StrataMap to academic researchers, and executives see interest in its proteomics and single-cell offerings.

New products broaden the growth mix, but their contribution remains incremental.

Where do AI and cancer detection fit?

Executives described artificial intelligence and drug development as longer-term opportunities for genomic data and services. Dhingra said Illumina has held discussions with large and small pharmaceutical companies and emerging AI customers, but characterized demand as a pathway developing over several years.

Thaysen said the Billion Cell Atlas has seven partners. Standardized, reproducible data across multiple types of biology could help develop AI models; he called the opportunity early-stage and predicted it could become a growth driver over the next few years.

In clinical testing, cancer early detection is not yet meaningful to Illumina's results, Thaysen said, although he expects it to become a growth driver over time. He also sees room for broader genomic sequencing and adding other measurements, including proteomics, to clinical assays.

AI and cancer detection remain future options rather than material current contributors.

What does Illumina sell?

Illumina, Inc. develops and supplies technologies that analyze genetic variation and biological function. Its portfolio spans next-generation sequencing systems, microarrays, reagents and consumables, software and related services that help customers generate and interpret genomic data.

Customers use the technology in medical and population research, genetic testing, drug development, and agricultural and environmental studies. They include academic and government research institutions, hospitals and clinical laboratories, biotechnology and pharmaceutical companies, and other organizations worldwide.

Illumina's 2027 growth case rests on clinical consumables, not instrument sales.