Illumina Bets on Clinical Demand for Growth as Research Funding Uncertainty Persists

Key Points

• Clinical demand and consumables are Illumina’s main growth engines. Executives said the 2027 growth framework still depends largely on clinical demand, consumables, and the X sequencing business; new products and pharmaceutical services could add 1–2 percentage points.
• Illumina exceeded third-quarter expectations and raised its full-year revenue and earnings outlook, with clinical consumables growing at a mid-teens rate. Research demand remains weaker, as grant uncertainty is making academic customers cautious about longer-term purchases.
• New offerings and AI are longer-term opportunities, not yet major growth drivers. Executives cited spatial, single-cell, and proteomics products, while saying genomic-data and AI opportunities are developing over several years; cancer early detection is not yet meaningful to results.

Illumina NASDAQ: ILMN expects clinical demand and sequencing consumables to remain central to its growth strategy, even as research customers continue to face uncertainty over grant funding, executives said at a UBS discussion.

CEO Jacob Thaysen said the company remains on the trajectory outlined in its 2024 strategy, which envisioned mid-single-digit growth in 2026 and high-single-digit growth in 2027. He cautioned, however, that he was not providing 2027 guidance.

Illumina exceeded expectations in the third quarter and raised its full-year outlook for both revenue and earnings, Thaysen said. He added that clinical consumables had grown in the mid-teens, while the research market remained weaker despite sequential improvement.

Consumables Expected to Drive Growth

CFO Ankur Dhingra said the company’s framework for reaching high-single-digit growth in 2027 still depends primarily on clinical demand and growth in consumables and the X sequencing business. New products and pharmaceutical services are expected to contribute an additional 1 to 2 percentage points of growth, he said.

After elevated instrument placements throughout 2026, Dhingra said instrument sales were not expected to drive the step-up in growth the following year. Instead, a larger installed base 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 instruments in the second quarter and 80 in the third. Thaysen said he expected elevated placements in the fourth quarter, although the comparison would be against more than 100 placements in the prior-year period.

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

Research Funding and Pricing

In the academic market, Thaysen said grants have been flowing through the system and that there is an expectation funding next year could be around this year’s level. Individual researchers, however, remain uncertain about whether they will receive grants at their usual levels, making them hesitant to commit to longer-term purchases such as instruments.

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

On pricing, Thaysen said the substantial headwind from price reductions associated with the X platform launch is largely behind the company, although some effect remains in clinical markets. He said Illumina is increasingly focused on reducing the cost of customers’ entire workflows, including laboratory preparation, automation and software, rather than sequencing alone.

New Products and AI Opportunities

Dhingra pointed to single-cell and spatial products, biopharma demand and the acquired SomaLogic proteomics business as potential contributors to growth. Thaysen said an NGS-based Soma assay is already on the market and that a kitted assay is expected to contribute to growth next year.

Thaysen also said demand for Illumina’s StrataMap spatial assay has exceeded the company’s early expectations. The company is working to introduce the product to academic researchers and sees interest in its proteomics and single-cell offerings.

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 as well as emerging AI customers, but characterized the demand as a pathway developing over several years.

Thaysen said the Billion Cell Atlas has seven partners and that standardized, reproducible data across multiple types of biology could help develop AI models. He said the opportunity remains in its early stages but predicted it would become a growth driver over the next few years.

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

About Illumina (NASDAQ:ILMN)

Illumina, Inc. develops and supplies technologies used to analyze genetic variation and biological function. Its products include next-generation sequencing systems, microarrays, reagents and consumables, as well as software and related services that help customers generate and interpret genomic data. The company's technology is used in applications such as medical and population research, genetic testing, drug development, and agricultural and environmental studies. Its customers include academic and government research institutions, hospitals and clinical laboratories, biotechnology and pharmaceutical companies, and other organizations around the world.

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