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Presentation

Illumina, Inc. misses on earnings expectations. Reported EPS is $0.88 EPS, expectations were $1.05.

Operator: Good day, ladies and gentlemen. Welcome to the First Quarter 2026 Illumina, Inc. Earnings Conference Call. At this time, all 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. I would now like to hand the call over to Head of Investor Relations, Conor McNamara.

Conor McNamara: Hello, everyone, and welcome to Illumina, Inc.’s first quarter 2026 Earnings Call. Today, we will review our financial results released after market close and provide prepared remarks before opening the line for Q&A. Our earnings release is available in the Investor Relations section of illumina.com. Joining me today are Jacob Thaysen, Chief Executive Officer, and Ankur Dhingra, Chief Financial Officer. Jacob will begin with an update on Illumina, Inc.’s business followed by Ankur’s review of our financials. We will be discussing certain non-GAAP financial measures, and a reconciliation to GAAP can be found in today’s release and in the supplementary data on our website. Unless stated otherwise, all growth rates are presented on a year-over-year reported basis.

Organic growth adjusts for the impact of currency and acquisitions, and Rest of World organic growth also adjusts for the impact from our Greater China region. A reminder: starting in January 2026, we changed the geographical reporting segments to better align with the respective commercial organizational structure, and the supplementary file on our website shows historical results with the new geographic reporting. This call is being recorded, and the replay will be available on 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 documents that Illumina, Inc.

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.

Jacob Thaysen: Thank you, Conor. Good afternoon, everyone. We are off to a great start in 2026, with Q1 revenue, margin, and EPS all coming in above our guidance range. Our solid performance reflects disciplined execution across the organization along with strength in our clinical markets and growth across all regions excluding China. Our focus on delivering for our customers and shareholders is fueling the sustained success that positions us for continued growth well into the future. We are raising our 2026 guidance to reflect the Q1 outperformance, which we will discuss in more detail later in our prepared remarks. I want to recognize and thank the entire Illumina, Inc. team for how they have managed through a higher-cost environment while maintaining strong operational performance and delivering the quality and reliability our customers expect.

As it relates to Q1, I am going to focus on three areas: our disciplined commercial execution with continued momentum in clinical end markets; product innovation and roadmap updates from our R&D team in the quarter; and progress we are making against our long-term strategy and targets. Overall, I am very pleased with how the company delivered in Q1, giving us more confidence that our strategy is working. Building on momentum from 2025, our team delivered another quarter of solid performance. Highlights from the quarter include: Rest of World organic growth of 3.5%, above the high end of our guidance, driven by strength in sequencing consumables and instruments; approximately 7% growth in Rest of World sequencing consumables, including approximately 20% growth in clinical, reflecting continued adoption of sequencing-based diagnostics and more sequencing-intensive applications; over 80 NovaSeq X placements in the quarter, approximately 20 more than Q1 2025, with year-over-year placements growth in both clinical and non-clinical markets.

New high-volume clinical applications are being built on the NovaSeq X, as the platform becomes more embedded in clinical workflows and supports continued consumables growth over time. We successfully closed the SomaLogic acquisition, with the business performing in line with our expectations in both revenue and profitability. Margins were approximately 150 basis points above guidance, driven by solid revenue performance and disciplined expense management in a higher-cost environment. Overall, these results reflect our consistent execution and how we dedicated resources to best capitalize on a growing and evolving market. The investments Illumina, Inc. has made over the last two decades to make sequencing technology more accessible are driving meaningful impact with continued clinical demand.

Clinical made up more than 65% of our sequencing consumables revenue in the quarter, driven by both the expansion of sequencing-based diagnostics and the increased use of more data-intensive applications. Customers are launching new assays with ongoing progress in reimbursement supporting broader adoption of sequencing in clinical decision making. At the same time, demand for approaches such as comprehensive genomic profiling and whole-genome sequencing is growing. This is driving higher sequencing intensity, an area where the NovaSeq X is playing an increasingly central role as customers scale these applications. We see a long runway of continued growth in our clinical business. In research and academic markets, demand remains cautious as customers navigate funding uncertainty, but we are confident in the long-term opportunity in these end markets, and we continue to invest in leading technologies including proteomics and single cell, with additional offerings in spatial underway.

These markets serve as an important entry point for new technologies, helping to drive long-term clinical adoption over time. Customer interest in our new product offerings remains robust, and as funding uncertainties start to ease, we expect to see a return to growth in research and academic markets. This quarter, we also saw our innovation strategy come through clearly in how we are expanding the value of our platform for our customers. At AGBT, we focused on how our end-to-end workflow approach is helping customers unlock new discoveries and generate deeper insights with the quality and reliability that only Illumina, Inc. can offer. Our approach is becoming an important shift in how customers evaluate solutions, not just at the instrument level, but across the full workflow.

We highlighted several examples of this at AGBT. We launched TruePath, enabling whole-genome sequencing with deeper insight while eliminating traditional library prep, reducing hands-on time to about ten minutes. Customers are showing significant interest, particularly in areas like rare disease, where some are using it to simplify the standard of care by consolidating multiple types of tests into a single TruePath workflow. This is helping them get to answers faster and with greater confidence compared to the traditional approach. Several customers are already in various stages of clinical studies using TruePath, and we expect customer demand to continue increasing in the coming quarters. We also saw very high engagement around our spatial transcriptomics offering, which is a good example of how we innovate with our customers to address their needs.

Early access users have shown that the offering can generate data in highly challenging sample types, such as lymphatic tissue, that has previously been difficult to study. We remain on track to launch later this year and look forward to bringing this capability to the market. At the same time, we are continuing to expand what customers can do on the NovaSeq X. We introduced our 18-month roadmap, including new 14B and 35B flow cells, staggered flow cell runs, and our ability to improve data quality with the Q70 performance. These innovations on the X will offer more flexibility, increased throughput, and improved overall workflow efficiency for our customers. These introductions and platform improvements are driving higher NovaSeq X placements and increased demand.

Even three years after we shipped our first X instrument, we exited the quarter with a solid backlog, giving us confidence to raise our full-year instrument outlook. As we step back and look at the quarter, the most important takeaway is that our strategy is working. We are increasing the value of the NovaSeq X through continuous innovation, which is showing up in our financial results as customers scale and expand what they run on the platform. As sequencing moves further into clinical and research settings, customers are running more samples, generating more data, and relying on more sequencing-intensive applications. This is where the NovaSeq X continues to play a central role. As we expand what customers can do on the platform, we are enabling them to do more with the systems that they already have and support more complex applications over time.

It gives them confidence that they can use their Xs well into the future to drive their own success. As our customers succeed, the success shows up in our results. We are also extending this into data and AI with BioInsight, which we introduced late last year to help customers accelerate discovery. A key program within BioInsight is the billion cell atlas, which we introduced earlier this year to better understand how genes drive disease through perturbed [inaudible]. We are seeing growing interest from partners, with different companies looking to participate. With hundreds of millions of cells already generated, customers are starting to see insights that can support AI-driven models and drug discovery. Turning to our outlook. Building on the strong start of this year, we are updating our outlook relative to the guidance we provided in Q4.

Importantly, the current end-market dynamics we are seeing are consistent with what we expected going into 2026. Clinical continues to lead while research and applied remain more cautious. Our first quarter performance came in ahead of expectations, and we are raising our full-year revenue outlook. This is driven by the strength in our business and how it carries into the rest of the year. We are also raising our operating margin expectations and EPS outlook, reflecting the Q1 outperformance and higher revenue. We also remain on track toward our 2027 targets, and the investments we are making in R&D and product innovation position us to deliver high single-digit revenue growth, continued margin expansion, and double-digit to teens EPS growth for years to come.

I want to thank the entire Illumina, Inc. team, our customers, and all our stakeholders for another excellent quarter. I also want to thank our three outgoing board members for their years of service and contribution to Illumina, Inc. I am very proud of how Illumina, Inc. has progressed since I joined the company in 2023, especially given the dynamic macro environment we have been operating in. With that, I will hand it over to Ankur to walk through the financial details before we move to Q&A.

Ankur Dhingra: Thank you, Jacob. And good afternoon, everyone. I will walk through our first quarter financial results, provide additional color on revenue, expenses, earnings, and our balance sheet and capital deployment, and then discuss our updated outlook. Before I get into the details of the financial performance, let me provide a high-level view of how the first quarter played out. During the first quarter, Illumina, Inc.’s revenue of $1.09 billion came in $20 million above the midpoint of our guidance, driven primarily by better-than-expected instrument sales as we placed more than 80 NovaSeq X instruments in the quarter, above our targeted range of 50 to 60 per quarter. Clinical consumable sales also came in at the high end of our expectations for the quarter.

The higher revenue flowed through to margins and EPS, with non-GAAP diluted EPS approximately $0.10 above the midpoint of our guidance. Now turning to the details. During the first quarter, Illumina, Inc.’s revenue of $1.09 billion was up 4.8% year over year and 1.2% on an organic basis, with currency and acquired revenue each contributing just under two percentage points to our reported growth rate. Rest of World organic growth was 3.5%. Sequencing consumables revenue of $726 million was up 4% year over year, with Rest of World organic growth of 5%, roughly in line with our expectations. High-throughput volume drove most of the revenue growth as the NovaSeq X installed base continues to expand and utilization increased year over year. Clinical sequencing consumable demand continues to expand, growing 20% ex-China for the second consecutive quarter.

Continued expansion of clinical volumes for our customers, as well as adoption of information-rich, sequencing-intensive tests in new trials, is driving robust demand in clinical market applications. We see significant growth opportunities in clinical markets as we enable customers to expand their applications across the Illumina, Inc. ecosystem. This includes simplified access to expanded information sets through offerings like FiveBase and TruePath. Sequencing consumables in research and applied declined 12% ex-China, reflecting continued uncertainty in the funding environment during the quarter. While macro commentary about the funding environment appears to be stable to improving, year-to-date trends have remained consistent with our expectations for 2026.

As of Q1, approximately 82% of volumes and 55% of revenue have transitioned to NovaSeq X. Ninety percent of research and applied volume is now on the X, and we are well positioned for a return to revenue growth when that market returns to a more normalized activity level. Seventy-six percent of clinical volume is now on the X, and we expect 80% to 85% will be on X by the end of 2026. On sequencing activity, total sequencing GB output on our connected high- and mid-throughput instruments once again grew greater than 30% year over year, with clinical growth well above that. Sequencing instruments revenue of $118 million was up 9% year over year in Q1 and up 10% on a Rest of World organic basis, driven by increased sales of 80 NovaSeq X instruments in Q1, with demand remaining strong for the platform, especially within clinical where we saw several multiunit orders in the quarter.

In fact, during Q1, we were supply constrained on the number of NovaSeq X units that were placed, as the demand continues to remain very robust. High-throughput instrument placements in research also grew year over year. Sequencing service and other revenue of $151 million was up 7% year over year and up 5% on a Rest of World organic basis. As we scale up BioInsight, the timing of strategic partnerships and data deals can be lumpy in this segment. Microarrays business was down 20% on a Rest of World organic basis, largely due to specific large customers in the direct-to-consumer segment. Moving to the rest of the P&L. Non-GAAP gross margin of 68.2% for the first quarter was up 80 basis points year over year, driven by cost efficiencies and higher revenue, partly offset by tariffs.

Non-GAAP operating expenses were $506 million, up 3% year over year, and largely reflect the addition of the SomaLogic team. Non-GAAP operating margin was 21.9% in Q1, expanding approximately 150 basis points year over year, reflecting increased operating leverage from our improved cost structure. Looking below the line, non-GAAP other expense, which is largely comprised of net interest expense, was $15 million, and the non-GAAP tax rate was 20.5%. Our average diluted shares were approximately 154 million, down 5 million year over year, reflecting share repurchases throughout the year. Altogether, non-GAAP EPS of $1.15 per diluted share grew approximately 19% year over year and came in about $0.10 above the midpoint of the guidance range we provided in February.

Moving to cash flow, balance sheet, and capital allocation items for the quarter. Cash flow provided by operations was $289 million for the quarter. Capital expenditures were $38 million, and free cash flow was $251 million for Q1. In Q1, we repurchased 2 million shares of Illumina, Inc. stock for approximately $242 million at an average price of $120.08 per share. At quarter-end, we had approximately $400 million remaining on our current share repurchase authorization, and we intend to continue to repurchase shares opportunistically. We also announced today that Illumina, Inc.’s Board of Directors has authorized an additional $1.5 billion in share repurchases. During the quarter, we closed the acquisition of SomaLogic on January 30 for a net cash payment of $363 million, plus potential royalties and milestone payments.

Subsequent to quarter-end, we paid the first milestone of $25 million for the achievement of certain 2025 targets. We ended the quarter with approximately $1.16 billion in cash, cash equivalents, and short-term investments, and gross leverage of approximately 1.5 times gross debt to last-twelve-months EBITDA. Overall, we had a great start to 2026, allowing us to raise our full-year guidance and reinforce our confidence in the progress we are making towards our long-range targets. Now moving to guidance for the year 2026. Starting with revenue. We are raising our reported revenue guidance by $20 million to reflect our Q1 outperformance and now expect revenue of $4.52 billion to $4.62 billion. Acquired revenue is still expected to contribute 1.5 to 2 points of growth, and currency is expected to add approximately 1% of growth.

This places our guidance towards the upper end of previously stated growth rate targets, including 2% to 4% Rest of World organic growth. The overall end-market demand remains consistent with what we expected exiting 2025: continued strong demand growth in clinical markets and funding uncertainty in research and applied markets. For Rest of World organic sequencing revenue growth, we continue to expect low- to mid-single-digit growth in consumables, with clinical growing double-digit to mid-teens and research and applied declining mid- to high-single digits. We are raising our instrument guide to flat to low single-digit growth year over year, driven by very strong NovaSeq X demand. As I mentioned, we were supply constrained in Q1 and have a very strong pipeline for NovaSeq X instrument placements, especially in the clinical end markets.

We are also increasing our profitability expectations for the year, reflecting the overperformance in Q1. Accordingly, we now expect operating margins between 23.4% and 23.6%, up 10 basis points from our prior guidance at the midpoint. This represents approximately 140 basis points of year-over-year margin expansion versus 2025 excluding the impact of acquisitions. Similarly, we are raising the top and bottom of our 2026 EPS range by $0.10 and now expect non-GAAP diluted EPS of $5.15 to $5.30. Excluding the impact of the SomaLogic acquisition, this represents EPS growth of 12% at the midpoint. Moving to Q2 2026 guidance. We expect Rest of the World organic revenue growth of 4% to 6% and reported revenue of $1.12 billion to $1.14 billion, with non-GAAP EPS of $1.20 to $1.25.

Given the strong demand and pipeline for NovaSeq X, we are investing to scale the supply of NovaSeq X units and expect the team will continue to make progress through Q2 and into Q3 as well. Our guide assumes operating margins of approximately 22%, reflecting a higher mix of instruments revenue and related investments, near-term inflationary pressures related to freight costs and higher cost of electronic components, and a full quarter of SomaLogic as well. Regarding the inflationary pressures, we are taking several mitigating actions to fully offset the impact during the year, and this is reflected in implied margin improvement for the rest of the year. Our solid Q1 performance and rapidly growing clinical installed base provide a good setup going into the second half of the year, and as these Xs come online, they will add to the consumables revenue stream.

This improved outlook also gives us confidence in the progress we are making towards achieving our long-range targets for revenue, margin, and EPS growth by 2027. Excluding the impact of acquisitions, our guidance implies approximately 350 basis points of margin expansion by the end of 2026, representing meaningful progress towards the 500 basis point target by 2027. This reflects the underlying improvement in our operating model while navigating a dynamic, inflationary macro environment. In closing, I want to thank the Illumina, Inc. team for their continued focus and disciplined execution throughout the quarter. We are off to a great start in 2026, and I am extremely encouraged by the progress we have made in returning Illumina, Inc. to long-term sustainable revenue and earnings growth.

Thank you for joining our call today. We will now open the call for questions.

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Operator: A 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 back into the queue. We will now pause a moment to assemble the queue. Thank you. First question will come from the line of Vijay Kumar with Evercore ISI.

Vijay Kumar: Hi, Ankur and Jacob. Thank you for taking my question, and congrats on a clean print here. Maybe high level, my one question, sticking to the guidance here. Simplistically, you beat Q1, came in above the high end of your organic assumption, instruments coming in better, clinical coming in better. You have raised instrument guidance for the year. I am curious why the organic for the year was not raised. Is there some cautiousness that you are baking in, and what would those cautiousness be? Why cannot clinical sustain 20%? I am just curious on the guided assumptions.

Jacob Thaysen: Hey, Vijay. This is Jacob, and thank you very much. We agree we are off to a great start here in 2026 with a strong performance in Q1. As you mentioned, we continue to see very strong momentum in the clinical business, and, in fact, we do believe that will continue, not only in the rest of the year but also into the coming year. So we are very excited about that continued momentum. As mentioned also, we had a strong Q4 in instrument placements, and we continued that strength here into Q1 and have a strong pipeline for the coming quarters. We feel really good about where we are sitting. We know when we are placing instruments, they will start to generate consumables revenue approximately six months after they install, so there is definitely a lot of optimism on how we can see the second half of the year also.

Overall, we are pleased about that. Now, we are only one quarter into the year, so I think it is that we are leaning in by raising both the top line and the bottom line very early in the year. I think we are signaling all the right things here. Ankur?

Ankur Dhingra: Thanks, Jacob. Vijay, what I would add is we are raising the revenue guidance. It is going up by $20 million, which is roughly about half a point. My comment that we are now really looking towards the higher end of the range rather than the midpoint reflects that. Still within the range that we talked about, so decimal points move; hence, the percentage is what it is. There is nothing else more than that.

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

Puneet Souda: Hi, Jacob and Ankur. Thanks for taking my question, and congrats on the momentum here in instrumentation. That was pretty impressive. Just trying to understand within that mix how much of it is coming from clinical versus research, what you are seeing in the momentum in research among these customers, and what does it mean as they incorporate these instruments. There will be a transition. There will be an initial impact from 6K pricing to X pricing for consumables within those labs. How are you thinking about that impact, and is that incorporated into the guide? Maybe just give us more on this instrumentation strength you are seeing and how to think about the instrumentation for Q2 and the full year. Thank you.

Jacob Thaysen: Thanks, Puneet. That was one question with many sub-questions here, so let me try to address a few of them. Overall, as you mentioned, we are very pleased with the placements we did here in Q1 and also in Q4. We continue to see that momentum. It speaks to our customers seeing that when they buy an X, we will continue to drive innovation, so they know that Illumina, Inc. will be behind them and ensuring that they continue to drive new insights from those instruments, both in the clinical space and in the research space, and we will continue to do that. We showed up very well at AGBT to prove what we are doing with innovations on the platform, so our customers clearly are purchasing the X platforms to drive more business on it.

We are growing both research and clinical placements, but if you look into clinical, which is more than 60% of the placements, it is much more additional incremental placement than necessarily conversion of the 6K. I think you will start to see that drive immediately in growth on the top line. From a research position, we continue to see large projects and a lot of single-cell projects run on the X, but we are not seeing any substantial change in mix of where research is going right now. We are excited by some of the new innovations we are coming out with over the next period of time. Spatial is one that will drive additional upside at the end of this year and into 2027. As we also reminded, we have now converted most of our access in the research business.

So when this market comes back, we are not seeing the price headwind as we did before, and thereby we will see growth coming that way.

Ankur Dhingra: The only thing I would add from a pricing transition perspective: no change in assumptions as we have talked. We expect clinical transition to continue, and all of those price assumptions are already built into the guide.

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

Tycho Peterson: Sticking within instruments, can you quantify the backlog? You said you are supply constrained. I know we will get it in the 10-Q, but are you able to say how much you could not ship? And then, as we think about the roadmap, Jacob, the question of freezing the market comes up. Can you talk about how we get comfortable that, over the next 18 months, that is not an issue with the roadmap you have laid out?

Jacob Thaysen: I would start by saying that our placements of instruments show that there is no freezing of any market that we are participating in at this point. We feel really good about that. We also feel good about our funnel of instruments over the next period of time. Our roadmap, as we presented at AGBT, shows we are both innovating on the X—coming out with new flow cells—and also, as I mentioned, spatial, TruePath, and our FiveBase is starting to take momentum. We feel really good about both the clinical opportunity and what we can offer into the research space when that is coming back. We do not see any substantial change in the competitive environment as we sit here right now. We know there is a lot of noise out there. We are looking forward to compete when they finally get to the market.

Ankur Dhingra: And, Tycho, on the instrumentation specifics, very strong demand. The pipeline is very robust. You will see on the 10-Q our performance obligations are up more than 20% year over year, and a lot of that is both in instruments and in consumables. I am expecting our Q2 placements could be close to the levels that we have seen in Q1, and the pipeline for the remainder of the year looks robust as well. As we mentioned, we are scaling up. The demand looks quite robust, and, as Jacob said, quite a bit of this demand is coming from new trials and new tests.

Operator: Our next question will come from Doug Schenkel with Wolfe Research.

Madeline: Hi. Thanks for taking my question. This is Madeline on for Doug. Just a quick one on the operating margin. I think Q2 operating margin came in a little bit lower than the Street. You called out some specific headwinds, including investment to scale the supply, which should continue into Q3. How should we think about the margin progression throughout the year, and what does the ramp between that Q2 margin and the year-end exit rate look like?

Jacob Thaysen: Thank you. Let me start here. It is Jacob. Taking a step back to what Illumina, Inc. has been able to achieve over the last few years, we have had a tremendous improvement in our margins. As you probably recall, in 2024 we laid out our strategy of building back to high single-digit growth in 2027. You can see we are stepping into that with the latest growth last year, and now we are starting to have mid-single-digit growth, and we will now enter into high single-digit growth for next year. So we are on a great trajectory in the top line to get to that. On the operating margin, we are also showing great progress. There are some puts and takes in each quarter. As Ankur mentioned, there are some inflationary pressures in the rest of the year here, which we are going to offset. That is what you see reflected in our short-term and longer-term guide. Ankur?

Ankur Dhingra: Q2 specifically has a few items. Relative to year over year, we have a much higher instrument mix. We do have inflationary pressure from things like component cost and freight, etc., as well as we will have the full quarter of SomaLogic in our financials. Having said that, we have a series of mitigating actions that have started taking place here in Q2, but we anticipate that the effects will become visible from Q3 and into Q4. Hence, we feel good about the ramp in the operating margin in the second half versus the first half.

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

Daniel Brennan: Great. Thank you. In the past, you have shared some color regarding the X customers that had early converted versus those that were in the middle of converting in the slide deck. Given where we stand today in the conversion, can you maybe unpack a little bit the guide this year, particularly on the clinical side, and how we should think about those two cohorts? Might there be some acceleration as you see that conversion get later in the cycle? Thank you.

Jacob Thaysen: Dan, I think there is still a distribution of different types of customers. As we have mentioned previously, there are customers that have decided to stay on the 6K platform for a longer period of time. These are the clinical customers that have regulated assays sitting on those and FDA-approved assays that either feel they are well served by the 6K platform or that it takes much longer time to transition. So that is some of the laggards on the transition. For many others, they are in the process or already have transitioned. There will always be a number of customers and assays that will be sitting on the former platform at least for a while. Therefore, as Ankur mentioned in the prepared remarks, by the end of this year we feel like we have fundamentally transitioned the business that will transition.

Then there will be a long tail of transition going forward. Overall, we see the clinical business as an opportunity for growth. We do not see any acceleration in that business for the time being.

Operator: Our next question will come from Patrick Donnelly with Citi.

Patrick Donnelly: Thank you for taking the questions. Maybe one on the research and applied markets. I think you are still talking about that down mid- to high-single digits for the year. The consumables look like they were down 12% in the quarter against a pretty easy comp. Can you talk about what you are hearing from customers there? Is there an expectation for some improvement in that market as you go through the year as budgets get set? How are you feeling about that market? And then just a quick housekeeping for Ankur: where is the SomaLogic revenue showing up? Is it instruments, consumables? Just want to make sure I am tracking that. Thank you.

Jacob Thaysen: Thank you, Patrick. Let me start on the research space. We are pleased to see alignment from D.C. around the commitment to NIH funding, and we do believe that while funding has slowed in the beginning of the year, it will pick up during the year. That is a great headline. Now, as we also talked about last quarter and why we are more conservative on the research business in 2026, one thing is to have released grants, but the other is to have it all translate into spending the money on tools and consumables. There is definitely some cautiousness with our customers before they truly understand how those grants are getting allocated and how many grants they are getting, so there will be some cautiousness in that space for a little while. We do believe that we should see some improvement during the year. That said, we have not built much of that into our guide right now, so I consider that more of an upside.

Ankur Dhingra: Patrick, one thing I would add on that market is remember, we transitioned more than 90% of the volume for that end market, and our pricing compare should keep getting better for that market throughout the year as well. On SomaLogic, from our reporting perspective, it is mostly in the microarrays.

Operator: Your next question will come from Subbu Nambi with Guggenheim.

Subhalaxmi Nambi: Thank you for taking this question. Given you have seen 20% clinical growth for two consecutive quarters now, would it be fair to assume continued momentum throughout the year? Any reason for us to believe that the guide you are assuming on the lower end—academia down mid-single digits but clinical in the low double digits—and on the higher end—academia down low single digits but clinical in the teens—could change beyond the higher end of your guide?

Jacob Thaysen: As you mentioned, we are very pleased with the momentum we have seen in clinical clearly over the last two quarters, and actually also through 2025. Since we are transitioning more and more of the consumables revenue over to the X platform, the price headwind is getting behind us, and we continue to see strong growth. At this point, we still feel like mid-teens growth is a strong performance for the clinical market. Could it be even higher than that? That could be upside to our guide.

Ankur Dhingra: Based on the business and the momentum at this point, we are not seeing any signs of potential deceleration in that market. There is good momentum there.

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

Kyle Mikson: Hey, guys. Thanks for the questions. Nice quarter. As a follow-up to the seemingly modest 2026 revenue guidance increase here, did you update the guidance range to reflect competition launching this summer? Now that we have pricing from them—the $150 per genome and the attractive pricing for accounting applications—are you expecting more of a headwind and gave yourself some cushion, perhaps, on this new range?

Jacob Thaysen: I am actually quite pleased with the guide increase we did. After one quarter, we went out and raised our guide. I think that is something to be proud of and shows, again, our commitment to the year and where we believe the business is going. As we also said last quarter, we are very confident in our position from a competitive perspective. What we are seeing in the first half competitively—I do not think that dynamic is changing a lot in the second half. We feel good about where we are. We have built in how we think the business is going to develop, and that is what you see reflected in our guide.

Operator: Your next question will come from Dan Arias with Stifel.

Dan Arias: Hi, guys. Thanks for the questions here. Jacob, maybe just a follow-up to that point you were making. The 35B flow cell that is coming—obviously, that is relevant to this competitive conversation. I imagine you have customers asking what an apples-to-apples cost comparison would be to that $150 price point. What is the cost per G or the cost per genome that you are going to quote to folks who are assessing run economics and trying to understand how things are going to shake out going forward?

Jacob Thaysen: I think there is still a lot of opportunity in the space we are in. If you look into the clinical space—think about the rare disease business going from exome into genome—that will require 15 times more sequencing intensity. When we have conversations with customers who run a lot of exome and want to translate into genome, we have no problem having a great conversation about elasticity and how we can drive profitable growth for us and continue to lower their cost per gigabase for them, so both of us have a strong win-win situation. That is just one example. For us, that conversation is based on an elasticity game where if we provide very aggressive pricing, we also see very aggressive volume growth. That is a conversation we continue to have. On the 35B pricing, we are not ready at this point to go out and talk about pricing. We will do that when we are closer to the actual launch.

Operator: Next question will come from Catherine Schultz with Baird.

Catherine Schultz: Hey, guys. Thanks for the question. Really encouraging numbers on X placements. Congrats on the strong start to the year. Could you spend some time talking about what you are seeing on the low- and mid-throughput side of the portfolio from a placement standpoint?

Jacob Thaysen: Yes, thank you. If we start with low throughput, as a reminder, we launched our MiSeq i100 a little more than a year ago, and we saw very strong placements in 2025—more than 1 thousand placements—and we continue to see that momentum into 2026. There is a lot of good progress and momentum in the MiSeq i100 business and placements. In mid throughput, that has been more challenging due to the macro environment, where we are seeing both the MiSeq i100 taking a part of the low end of that business and customers transitioning up to the high-throughput part of that business. In the middle layer, we are also seeing that these customers are more sensitive to the macro environment, stalling some investments and waiting for a different type of environment.

Many of them are not in production mode of sequencing and thereby are looking for more flexibility. While we see good performance in that market, we believe that when the market turns—especially in this segment—it will start to grow even better for us.

Operator: Your next question will come from Casey Woodring with JPMorgan.

Casey Woodring: Thank you for taking my questions. Two quick follow-ups to some of the earlier ones. Did you quantify the headwind from inflationary pressures—things like memory chips and freight—that you are planning to offset this year? And then on the NovaSeq X placements, you placed 80 in the quarter. It sounds like you expect a similar level in Q2, if I heard that right. How should we think about X placements in the back half?

Jacob Thaysen: Let me start on how we have dealt with some of the curveballs that have been thrown towards Illumina, Inc. and the market generally over the last few years. If you follow our performance and how we have dealt with different types of cost challenges, the Illumina, Inc. team has done a great job finding ways to compensate. We continue to drive very strong focus on operational discipline. This is the engine running here. You can see that when we get this headwind in front of us, we find ways through it. The team is quite excited about that. There is a lot of energy going into ensuring we can deliver on our commitments. I am very pleased with the performance from the team.

Ankur Dhingra: Yes, that is within the range that we can action, and we are taking a lot of actions towards mitigating this as well. On the Xs, yes, you are right. I mentioned about similar to Q1 levels in Q2 as well, and as it looks right now, the pipeline for the back half also looks fairly robust. All in all, for the full year, we expect to come in reasonably above the range that we had provided at the start of the year.

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

Jack Meehan: Thank you. Good afternoon, guys. I wanted to keep asking about the NovaSeq X demand. It sounds like it has been robust. Is there more color you can share on the profile of clinical customers—where you are seeing demand as the strongest? Could you elaborate on things like multi-cancer, MRD, therapy selection, women’s health—anything that stands out?

Jacob Thaysen: Thanks for the question. It is almost like saying all of the above, meaning that we see broad interest in the X. We also have large customers—centralized labs here in the U.S.—and you can see that in their numbers. We see a lot of momentum in oncology and a lot of commitment to continue growing in that space. It goes from oncology, rare disease, into NIPT, and across regions. Really great performance in clinical, which speaks to the strength and opportunity in that space going forward.

Operator: Your next question will come from Michael Ryskin with Bank of America.

Michael Ryskin: Hey, thanks for taking the question. Hope you can hear me. Going back to the NovaSeq X again—the placement number is the biggest surprise for us relative to our model. Is there anything you can say in terms of pricing or how you are getting those out the door? Where is the incremental demand coming from? We look at the last two years—you have been pretty steady at, outside of 4Q where you have a nice bolus, doing 50 to 60 per quarter. Now you are jumping to 80 in 1Q and 80 in 2Q, but your instrument revenue number in 1Q was $118 million. We would have expected with 80 placements to do a little bit closer to $125 to $130 million. Is there any discounting going on here? What is driving that big step up in demand?

Jacob Thaysen: Let me start by answering that. First, on the X placements—when you place an X, you do that because you have an opportunity to win a customer base. It is not to have it sitting in a corner; it is really to drive consumables on it. As we mentioned at J.P. Morgan, we showed results that we are around or above $1.3 million of pull-through on the Xs, and we think that will continue to be at that level, if not above. Our focus is to get as many Xs out there so they can drive that growth in consumables over the next many years. That is the most important thing for us. Secondly, when we have customers—and we do—who order five or ten or even beyond that, of course we are giving them volume discounts on the placements, and we think that is reasonable. Again, our main focus is to get Xs out there and drive consumables. We are not putting them out there just to sit in the corner.

Ankur Dhingra: The only thing I would add, Mike, is some of the units within the 80 are also going through a reagent rental or a lease model as well. There are always some units of that kind in there as well, which, of course, have a different revenue recognition pattern.

Operator: Our next question will come from Mason Carrico with Stephens.

Mason Carrico: Thanks, guys. A lot has been asked here, but taking into account recent competitive announcements, could you talk about where you expect Illumina, Inc. to win in spatial? Is this more of a rising-tide-lifts-all-boats, or do you see clear pockets in the market where you think Illumina, Inc. can stand out?

Jacob Thaysen: We are excited about spatial, and we showcased spatial both at ASHG and at AGBT with a lot of interest from our customers. We think there is a lot of value in our spatial solution. Overall, it does raise all boats right now. I also enjoyed the launch of what 10x put out there. I am impressed with what Serge and the team are putting out. I am a big fan of that, and I think it drives much more interest overall in spatial. That said, these are different technologies addressing somewhat different customer segments. There is plenty of room for more than a few players in that space. Illumina, Inc. is here to play. We have developed a lot of our spatial technique together with customers, so we have a good sense for what they are looking for and where our opportunity is. I am pretty sure we have a winner when we come out later in the year with our spatial solution.

Operator: Our final question will come from Kyle Mikson with Canaccord Genuity.

Kyle Mikson: Thanks for the questions again. A follow-up on the slide in the deck about the NovaSeq transition. You have one aspect where the percentage of high-throughput consumables revenue has been stable compared to the fourth quarter at 55%. However, the volume of GB shipped as a percentage—X represents that—has been increasing nicely towards that 80% to 90%. What exactly happened in the first quarter that it moderated a bit? Is that going to inflect going forward, or should we expect 55%—maybe high 50s—to maintain going forward?

Jacob Thaysen: Quarter by quarter, and I think we mentioned this in earlier quarters, it is a little bit dangerous to look at this number too precisely. It is a trend direction, and the quarter-by-quarter can vary a little bit up and down, so I would not put too much into it. What you should see is that we continue to transition our clinical customers very nicely, and as Ankur said, we believe we will have more than 85% of that transition by the end of this year, which is where we then feel the transition is behind us.

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

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

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

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