Should You Continue to Hold ILMN Stock in Your Portfolio?

Illumina Inc. ILMN is well-poised to grow in the coming quarters owing to its strategic execution against growing the core sequencing business, expanding multiomics and developing services, data and software capabilities. Ongoing momentum in clinical end markets is boosting sequencing consumables d…

Illumina Inc. ILMN is well-poised to grow in the coming quarters owing to its strategic execution against growing the core sequencing business, expanding multiomics and developing services, data and software capabilities. Ongoing momentum in clinical end markets is boosting sequencing consumables demand. Higher-than-expected NovaSeq X placements and continued transition to the platform further strengthen the outlook. Yet, China remains a drag on Illumina’s growth, while input-cost volatility can limit incremental margin upside over the next several quarters.

Over the past year, this Zacks Rank #3 (Hold) stock has surged 87%, well ahead of the industry’s 23.8% growth and the S&P 500 composite’s rise of 22.8%.

The renowned biotechnology company has a market capitalization of $27.82 billion. ILMN’s earnings yield of 2.8% is well ahead of the industry’s -14.9% yield. In the trailing four quarters, it surpassed estimates on all occasions, delivering an average surprise of 12.2%.

Let’s delve deeper.

Tailwinds Behind ILMN Stock

Sharpened Focus on Core Genomics: Following the spin-off of GRAIL in June 2024, Illumina has continued to center its strategy on the core sequencing franchise while scaling into adjacent multiomics and data offerings. The company remains focused on returning to durable growth and higher profitability, aiming for high-single-digit revenue growth by 2027, along with double-digits to teens annual earnings per share (EPS) growth, anchored by its roadmap of growing the core sequencing business, expanding multiomics and building services, data and software capabilities.

First-quarter 2026 results reinforced that direction, with revenues, margins and non-GAAP EPS exceeding guidance. Management also raised full-year 2026 guidance, now expecting revenues in the range of $4.52-$4.62 billion and non-GAAP diluted EPS in the range of $5.15-$5.30, alongside a modest step-up in the non-GAAP operating margin outlook between 23.4% and 23.6%.

NovaSeq X Placements and Transition Progress: Illumina’s core sequencing business remains anchored by NovaSeq X. First-quarter 2026 placements exceeded 80 units, around 20 more than the prior-year quarter and above the company’s targeted quarterly range. Demand remains strong for the platform, especially with clinical. Management noted supply constraints in meeting first-quarter placement demand while exiting the quarter with a backlog that supported a higher full-year instrument outlook.

Transition progress also continued, with approximately 82% of volumes and 55% of revenues transitioned to NovaSeq X in the first quarter, and roughly 90% of research and applied volume now on the platform. Management continues to plan for average quarterly NovaSeq X placements of 50 to 60 through 2026 while investing to scale supply given the current pipeline.

Clinical Demand Remains the Key Driver: Illumina continues to benefit from the broader adoption of NGS-based testing, with clinical markets now representing the majority of sequencing consumables revenues in first-quarter 2026. Management cited continued adoption of sequencing-based diagnostics and growing use of sequencing-intensive tests, including comprehensive genomic profiling and whole genome sequencing, as drivers of higher sequencing intensity.

Clinical sequencing consumables demand grew 20%, excluding China, for the second consecutive quarter, and management continues to expect most clinical volumes to transition to NovaSeq X by the end of 2026. Over time, the mix shift toward higher-throughput clinical workflows should remain supportive for consumables growth even as research demand stays uneven.

What Ails ILMN?

Setbacks in China Market: Illumina continues to face constrained demand in Greater China amid ongoing regulatory and geopolitical uncertainty, keeping the region out of step with the rest of the business. In first-quarter 2026, Greater China revenues were $52 million, down 27.8% year over year. With Illumina still operating under uncertainty tied to its status with Chinese authorities and the resulting friction on commercial activity, visibility on a sustained recovery in China remains limited and can weigh on overall growth and operating leverage.

Macroeconomic Pressures Remain a Concern: Illumina continues to operate in a higher-cost environment shaped by tariffs and supply-chain inflation, which can affect both demand and margins. In the first quarter of 2026, tariffs were a partial offset to underlying cost efficiencies and revenue leverage.

Second-quarter guidance calls for an operating margin of around 22%, reflecting a higher instrument mix, near-term inflationary impacts tied to freight and higher electronic component costs, and incremental costs from a full quarter of SomaLogic. Management expects mitigation actions to offset these cost items over the balance of the year, but ongoing volatility in trade policy and input costs can still create uneven quarterly performance and limit visibility for customers facing tighter budgets.

ILMN Stock Estimate Trend

The Zacks Consensus Estimate for ILMN’s 2026 EPS has increased 0.4% to $5.19 in the past 30 days.

The Zacks Consensus Estimate for the company’s 2026 revenues is pegged at $4.56 billion. This suggests a 5.1% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Globus Medical GMED, Align Technology ALGN and Integra LifeSciences IART.

Globus Medical has an earnings yield of 6.2% compared to the industry’s negative 3% yield. Its earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 26.3%. GMED shares have rallied 35.4% against the industry’s 10.6% decline over the past year.

GMED carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology, sporting a Zacks Rank #1, has an estimated long-term earnings growth rate of 10.3% compared with the industry’s 5.5% growth. Shares of the company have dipped 6.3% against the industry’s 9.6% growth. ALGN’s earnings outpaced estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 7.8%.

Integra LifeSciences, carrying a Zacks Rank #2, has an earnings yield of 13.7% against the industry’s negative 3% yield. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 16.7%. IART shares have rallied 33.8% against the industry’s 10.5% decline over the past year.

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report