Illumina — Q3 2026 Earnings Summary

Financial Performance:

• Reported revenue for Q3 2026 was $1.13 billion, a 4.2% increase from Q3 2025; revenue excluding tariff refunds was $1.17 billion, representing a 4.7% increase.
• GAAP diluted EPS was $1.43 compared to $0.98 in Q3 2025; non-GAAP diluted EPS was $1.62 compared to $1.34 in Q3 2025.
• Non-GAAP diluted EPS excluding tariff refunds was $1.44.
• GAAP operating margin was 27.0% versus 21.0% in Q3 2025; non-GAAP operating margin was 28.8% versus 24.5% in Q3 2025.
• Non-GAAP operating margin excluding tariff refunds was 25.0%.
• GAAP gross margin was 73.5% compared to 67.6% in Q3 2025; non-GAAP gross margin was 75.3% compared to 69.2% in Q3 2025.
• Non-GAAP gross margin excluding tariff refunds was 69.4%.
• Cash flow provided by operations was $419 million in Q3 2026, up from $284 million in Q3 2025.
• Free cash flow was $378 million in Q3 2026, up from $253 million in Q3 2025.
• Capital expenditures for free cash flow purposes were $41 million in Q3 2026.
• Depreciation and amortization expense was $71 million in Q3 2026.
• Cash, cash equivalents, and short-term investments totaled $1.34 billion at the end of Q3 2026.
• Term debt increased to $1,789 million at the end of Q3 2026 from $1,490 million at the end of the prior fiscal year; the current portion of term debt was $0 compared to $499 million previously.

Guidance and Future Outlook:

• Illumina raised full-year fiscal 2026 total revenue guidance to $4.64–$4.66 billion from a prior range of $4.60–$4.64 billion.
• Fiscal 2026 non-GAAP operating margin guidance was raised to 23.6% from a prior range of 23.4%–23.6%.
• Fiscal 2026 non-GAAP diluted EPS guidance was raised to $5.40–$5.45 from a prior range of $5.30–$5.40.
• Guidance for organic revenue growth greater than 4% and ROW organic revenue growth greater than 5% remains unchanged.
• Management cited healthy clinical demand and robust NovaSeq X placements as drivers for results exceeding prior guidance.

Business Segments and Product Lines:

• Product revenue was $946 million in Q3 2026, up from $927 million in Q3 2025.
• Service and other revenue was $183 million in Q3 2026, up from $157 million in Q3 2025.
• The company noted continued momentum in NovaSeq X placements.
• Management highlighted innovation broadening the value of the Illumina ecosystem and laying the foundation for AI to transform understanding of human biology.

Market and Competitive Landscape:

• ROW (Rest of World, excluding Greater China) organic revenue growth was 4.7% in Q3 2026.
• The company is included on China's Unreliable Entities List, which impacts the Greater China region.
• The company faces uncertainty regarding tariffs imposed or threatened by the U.S. government and its trading partners.

Risks and Challenges:

• Risks include uncertainty regarding the impact of inclusion on China's Unreliable Entities List.
• Uncertainty exists regarding tariffs, related court proceedings, administrative actions, and potential additional refund or relief programs.
• Risks involve the ability to manufacture robust instrumentation and consumables and reliance on third-party suppliers for critical components.
• Potential litigation or other liabilities may arise from previous acquisitions, including the GRAIL acquisition.
• Risks include the ability to obtain regulatory clearance for products and approval from third-party payors for reimbursement.

Management Commentary and Tone:

• Jacob Thaysen, Chief Executive Officer, stated that results were above guidance driven by healthy clinical demand and robust NovaSeq X placements.
• Management expressed confidence in executing strategy to broaden the value of the Illumina ecosystem.
• The tone indicated optimism regarding the role of AI in transforming human biology understanding and improving patient outcomes.

Other Key Points:

• The press release includes reconciliations of GAAP and non-GAAP financial measures, including adjustments for acquisition-related costs, transformational initiatives, strategic investment gains/losses, and tariff refunds.
• Tariff refunds recognized in Q3 2026 included a $79 million benefit as a reduction to cost of revenue and a $37 million reduction to revenue for expected customer credits.
• Acquisition-related costs in Q3 2026 included amortization of intangible assets ($18 million), amortization of inventory fair value step-up for SomaLogic ($2 million), and expenses for SomaLogic and GRAIL acquisitions ($5 million).
• The company held $1.289 billion in cash and cash equivalents at the end of Q3 2026.
• A conference call was scheduled for October 29, 2026, at 1:30 pm Pacific Time.