ILLUMINA, INC.
For the period ended Sep 27, 2026. Filed Oct 30, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 27, 2026 · Filed Oct 30, 2026
Extracted filing text, with the paragraph anchors used by the comparison.
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Item 2. Results of Operations
RESULTS OF OPERATIONS
To enhance comparability, the following table sets forth unaudited condensed consolidated statement of operations data for the specified reporting periods, stated as a percentage of total revenue.(1)
| Q3 2026 | Q3 2025 | YTD 2026 | YTD 2025 | |
|---|---|---|---|---|
| Revenue: | ||||
| Product revenue | 83.8% | 85.5% | 84.2% | 85.4% |
| Service and other revenue | 16.2 | 14.5 | 15.8 | 14.6 |
| Total revenue | 100.0 | 100.0 | 100.0 | 100.0 |
| Cost of revenue: | ||||
| Cost of product revenue | 17.6 | 24.6 | 22.6 | 25.0 |
| Cost of service and other revenue | 7.3 | 6.3 | 7.1 | 7.2 |
| Amortization of acquired intangible assets | 1.6 | 1.5 | 1.6 | 1.5 |
| Total cost of revenue | 26.5 | 32.4 | 31.3 | 33.7 |
| Gross profit | 73.5 | 67.6 | 68.7 | 66.3 |
| Operating expense: | ||||
| Research and development | 21.6 | 21.1 | 21.8 | 22.9 |
| Selling, general and administrative | 24.9 | 25.5 | 24.4 | 24.4 |
| Total operating expense | 46.5 | 46.6 | 46.2 | 47.3 |
| Income from operations | 27.0 | 21.0 | 22.5 | 19.0 |
| Other income (expense): | ||||
| Interest income | 1.1 | 0.8 | 0.9 | 0.9 |
| Interest expense | (2.1) | (2.3) | (2.1) | (2.4) |
| Other (expense) income, net | (2.6) | 0.9 | (1.1) | 4.7 |
| Total other (expense) income, net | (3.6) | (0.6) | (2.3) | 3.2 |
| Income before income taxes | 23.4 | 20.4 | 20.2 | 22.2 |
| Provision for income taxes | 3.9 | 6.5 | 3.6 | 6.1 |
| Net income | 19.5% | 13.9% | 16.6% | 16.1% |
(1)Percentages may not recalculate due to rounding.
Revenue
| Dollars in millions | Q3 2026 | Q3 2025 | Change | % Change | YTD 2026 | YTD 2025 | Change | % Change |
|---|---|---|---|---|---|---|---|---|
| Consumables | $841 | $816 | $25 | 3% | $2,490 | $2,395 | $95 | 4% |
| Instruments | 105 | 111 | (6) | (5) | 355 | 324 | 31 | 10 |
| Total product revenue | 946 | 927 | 19 | 2 | 2,845 | 2,719 | 126 | 5 |
| Service and other revenue | 183 | 157 | 26 | 17 | 535 | 465 | 70 | 15 |
| Total revenue | $1,129 | $1,084 | $45 | 4% | $3,380 | $3,184 | $196 | 6% |
We recognized a reduction to total revenue of $37 million in Q3 2026 and YTD 2026 for IEEPA tariff refunds we expect to credit to customers, which had an impact across all products and services. Total revenue in YTD 2026 was also impacted, across all products and services, by a decrease in revenue from our Greater China region of $20 million primarily due to our inclusion on the unreliable entities list.
Consumables revenue increased in Q3 2026 and YTD 2026 primarily due to greater demand for high-throughput consumables, supported by continued growth of the NovaSeq X installed base, partially offset by a $30 million reduction for tariff refunds to be credited to customers and a decrease in mid-throughput consumables.
Instruments revenue decreased in Q3 2026 primarily due to a $4 million reduction for tariff refunds to be credited to customers. Excluding this impact, instruments revenue remained relatively flat in Q3 2026. Instruments revenue increased in YTD 2026 primarily driven by higher NovaSeq X and MiSeq i100 shipments, partially offset by a decrease in mid-throughput instruments and the impact of customer tariff refunds.
Service and other revenue increased in Q3 2026 and YTD 2026 primarily due to revenue attributable to SomaLogic, which we acquired in January 2026, and increases in revenue from our informatics solutions, genotyping services, and extended maintenance service contracts, partially offset by a $3 million reduction for customer tariff refunds.
Gross Margin
| Dollars in millions · Q3 2026 · Q3 2025 · Change · % Change · YTD 2026 · YTD 2025 · Change · % Change | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Gross profit | $830 | $733 | $97 | 13% | $2,321 | $2,111 | $210 | 10% | ||
| Gross margin | 73.5% | 67.6% | 68.7% | 66.3% | ||||||
Gross margin increased in Q3 2026 primarily due to a net benefit of $42 million related to IEEPA tariff refunds (consisting of a $79 million reduction to cost of revenue for expected recoveries, offset by $37 million to be refunded to customers). Excluding this net benefit, gross margin in Q3 2026 was relatively flat.
Gross margin increased in YTD 2026 primarily due to the net benefit of $42 million related to tariff refunds recognized in Q3 2026 and a $23 million intangible asset impairment recognized in Q2 2025. Excluding these impacts, gross margin decreased in YTD 2026 primarily due to an increased sales mix shift toward lower-margin products and higher freight costs resulting from the Middle East conflict.
Operating Expense
| Dollars in millions | Q3 2026 | Q3 2025 | Change | % Change | YTD 2026 | YTD 2025 | Change | % Change |
|---|---|---|---|---|---|---|---|---|
| Research and development | $244 | $229 | $15 | 7% | $736 | $728 | $8 | 1% |
| Selling, general and administrative | 281 | 277 | 4 | 1 | 826 | 777 | 49 | 6 |
| Total operating expense | $525 | $506 | $19 | 4% | $1,562 | $1,505 | $57 | 4% |
R&D expense increased in Q3 2026 and YTD 2026 primarily due to:
| + | increase in employee-related compensation costs |
|---|---|
| - | decrease in restructuring charges of $15 million in YTD 2026 for employee separation costs |
| - | increase in government incentive benefits of $7 million in YTD 2026 |
SG&A expense increased in Q3 2026 and YTD 2026 primarily due to:
| + | increase in employee-related compensation costs |
|---|---|
| + | increase in legal expenses related primarily to various IP litigation matters |
| - | decrease in restructuring charges of $23 million in YTD 2026 for employee separation costs |
| - | increase in government incentive benefits of $8 million and $22 million, respectively |
| - | higher net gain recognized on contingent consideration liabilities |
Other Income (Expense)
| Dollars in millions | Q3 2026 | Q3 2025 | Change | % Change | YTD 2026 | YTD 2025 | Change | % Change |
|---|---|---|---|---|---|---|---|---|
| Interest income | $12 | $9 | $3 | 33% | $31 | $30 | $1 | 3% |
| Interest expense | (24) | (25) | 1 | (4) | (71) | (75) | 4 | (5) |
| Other (expense) income, net | (29) | 9 | (38) | (422) | (38) | 148 | (186) | (126) |
| Total other (expense) income, net | $(41) | $(7) | $(34) | 486% | $(78) | $103 | $(181) | (176)% |
Interest income consisted primarily of interest on our money market funds. Interest expense consisted of interest on our outstanding term debt. The change in other (expense) income, net in Q3 2026 and YTD 2026 was primarily due to net losses recognized on our strategic investments in 2026 compared to net gains in Q3 2025 and YTD 2025.
Provision for Income Taxes
| Dollars in millions · Q3 2026 · Q3 2025 · Change · % Change · YTD 2026 · YTD 2025 · Change · % Change | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Income before income taxes | $264 | $220 | $44 | 20% | $681 | $709 | $(28) | (4)% | ||
| Provision for income taxes | 44 | 70 | (26) | (37) | 120 | 193 | (73) | (38) | ||
| Net income | $220 | $150 | $70 | 47% | $561 | $516 | $45 | 9% | ||
| Effective tax rate | 16.4% | 31.8% | 17.6% | 27.2% | ||||||
Our effective tax rate was 16.4% and 17.6% in Q3 2026 and YTD 2026, compared to 31.8% and 27.2% in Q3 2025 and YTD 2025, respectively. The variance from the U.S. federal statutory tax rate of 21% for YTD 2026 was primarily due to prior year tax return adjustments. The tax rate in Q3 2026 and YTD 2026 was favorably impacted by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore.
In Q3 2025 and YTD 2025, the variance from the U.S. federal statutory tax rate of 21% was primarily due to the implications of the U.S. tax legislation that was signed on July 4, 2025, which included changes to no longer require capitalization of U.S. based research and development expenses. While the changes from this U.S. tax legislation were favorable, based on the available evidence, the increased U.S. tax deductions resulted in a determination that it is more likely than not the future realization of deferred tax assets associated with certain U.S. foreign tax credits may not be achieved. Therefore, a valuation allowance of $42 million was recorded as a one-time adjustment in Q3 2025 against the deferred tax assets associated with certain U.S. foreign tax credits that were generated in prior years that were not previously utilized. The tax rate in Q3 2025 and YTD 2025 was favorably impacted by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore.
Our future effective tax rate may vary from the U.S. federal statutory tax rate due to the mix of earnings in tax jurisdictions with different statutory tax rates and the other factors discussed in the risk factor “We are subject to risks related to taxation in multiple jurisdictions” described in “Risk Factors” within the Business & Market Information section of our Annual Report on Form 10-K for the fiscal year ended December 28, 2025.
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