Key Takeaways:
- Q4 Earnings Beat: Illumina delivered Q4 revenue of $1.155 billion on February 5, 2026, beating estimates by $61 million, as clinical consumables grew 20% ex-China and adjusted EPS of $1.35 beat the $1.23 estimate by $0.12, driving non-GAAP operating margin expansion of 400 basis points to 23.7%.
- SomaLogic Acquisition: Illumina completed the $350 million acquisition of SomaLogic on January 30, 2026, adding aptamer-based proteomics to its sequencing ecosystem, with the deal expected to contribute 1.5%–2.0% to FY2026 revenue growth while diluting EPS by $0.18 and operating margins by 100 basis points.
- Price Target: Based on 6% revenue growth, 26% operating margins, and a 23x exit multiple, Illumina stock could reach $158 by December 2028 from $117 today.
- Return Profile: Illumina implies 36% total upside from $117 to $158 over 2.9 years, equating to an 11% annualized return supported by $931 million in FY2025 free cash flow and $643 million remaining on the share repurchase authorization.
Breaking Down the Case for Ilumina, Inc.
Illumina (ILMN) completed the $350 million acquisition of SomaLogic last week, adding proteomics to its sequencing ecosystem while absorbing $0.18 in EPS dilution and 100 basis points of operating margin compression against its 2026 guidance of $5.05–$5.20 adjusted EPS.
On February 5, Q4 revenue of $1.155 billion beat estimates by $61 million as clinical consumables surged 20% ex-China, NovaSeq X placements exceeded 100 units for the quarter, and non-GAAP EPS of $1.35 cleared the $1.23 consensus by $0.12.
FY2025 revenue of $4.34 billion declined 0.7% on gross profit of $2.96 billion at 68% margins, yet operating income of $0.87 billion held at 20% margins as SG&A fell to $1.16 billion and R&D contracted to $0.87 billion through disciplined multi-year cost reduction.
CEO Jacob Thaysen stated on the Q4 2025 earnings call that “the momentum we have built going into 2026 gives me high confidence that the strategy we put in place in 2024 to return to long-term growth is working,” grounding confidence in 20% clinical consumables growth and 890 active NovaSeq X instruments.
CMS reimbursement for TruSight Oncology Comprehensive at $2,990 per test, secured last month directly expands the addressable clinical market and supports the double-digit to mid-teens clinical consumables growth assumption embedded in FY2026 guidance.
Free cash flow of $931 million in FY2025 funded the $350 million SomaLogic acquisition from cash on hand, leaving $1.63 billion in cash and $643 million in remaining share repurchase capacity at a gross leverage ratio of 1.6x.
The investment tension centers on whether Illumina sustains clinical consumables momentum at double-digit to mid-teens growth while absorbing SomaLogic dilution and navigating NIH funding uncertainty, against a backdrop of $117 current stock price, 23x exit multiple, and 11% annualized return through December 2028 that requires operating margins to expand to 26% by 2027.
What the Model Says for Illumina Stock
The $350 million SomaLogic acquisition closed January 30, 2026, adds 1.5%–2.0% to FY2026 revenue growth while absorbing $0.18 in EPS dilution and 100 basis points of operating margin compression, constraining the near-term earnings base the model requires to sustain margin expansion toward 26% by 2027.
The model’s assumption sets 5.5% revenue growth, 25.5% operating margins, and a 23.2x exit multiple, producing a $158 target price by December 2028, with the margin assumption representing a 1,220 basis point expansion above FY2025’s 13.3% GAAP operating margin and sitting above the FY2026 EBIT margin estimate of 23.3%.
The market assumption for the forward P/E as of February 17, 2026, stands at 23x, compressed from 27x at December 2025, as the stock declined from $135 to $117 following SomaLogic dilution disclosure and NIH funding uncertainty, and the model’s 23.2x exit sits in line with the current market assumption.
The model delivers 35.8% total upside and an 11.2% annualized return from $117, sitting above the standard 10% equity hurdle rate, as $643 million in remaining share repurchase authorization and $931 million in FY2025 free cash flow support the earnings expansion needed to sustain the return.
The model signals a Buy, as an 11.2% annualized return clears the 10% equity hurdle rate, and the $158 target by December 2028 is supported by 20% clinical consumables growth ex-China and 890 active NovaSeq X instruments already driving the volume ramp.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for Illumina stock:
1. Revenue Growth: 5.5%
Illumina stock delivered -0.7% revenue growth in fiscal 2025 to $4.34 billion as China instrument sales collapsed 55% from export restrictions and research market funding uncertainty weighed on academic consumables, yet the post-GRAIL spin-off simplification no longer provides a structural revenue tailwind.
The fiscal 2026 revenue estimate of $4.54 billion reflects 4.4% growth, slightly below the model’s assumption, as clinical consumables grew 20% ex-China in Q4 and SomaLogic adds 1.5%–2.0% of inorganic revenue, yet research and applied consumables are guided to decline mid-to-high single digits.
The 5.5% model’s assumption through December 2028 rests on clinical consumables sustaining double-digit to mid-teens growth as NovaSeq X adoption expands, China instrument sales recovering toward $210–$220 million annually, and SomaLogic’s proteomics platform capturing biopharma demand without integration friction.
Any stall in whole-genome sequencing adoption among clinical customers, combined with NIH funding uncertainty compressing research consumables further and China remaining on the Unreliable Entities List, compounds revenue shortfalls faster than the 890-instrument installed base can absorb, as each 1% revenue miss on $4.5 billion represents $45 million in lost top-line scale.
This sits above the 1-year revenue growth of -0.7%, as clinical momentum at 20% ex-China in Q4 and SomaLogic’s inorganic contribution structurally lift the growth rate above fiscal 2025’s contraction, and sustaining 5.5% through 2028 requires the research market to stabilize as NIH fund flows resume.
2. Operating Margins: 25.5%
Illumina stock reported 13.3% GAAP operating margins in fiscal 2024 on $0.40 billion in operating income, yet FY2025 margins expanded to 20% on $0.87 billion as SG&A fell to $1.16 billion and R&D contracted to $0.87 billion through multi-year cost reduction programs.
The 25.5% model’s assumption sits 230 basis points above FY2025’s non-GAAP 23.1% EBIT margin level, consistent with the FY2026 EBIT margin estimate of 23.3%, as the 130 basis point operating margin expansion guided for 2026 excluding SomaLogic establishes the expansion trajectory toward the 2027 long-range target of 26%.
Reaching 25.5% by December 2028 requires SG&A expenses to continue declining as a percentage of revenue below the current $1.16 billion level, SomaLogic’s 100 basis point dilution to reverse through integration synergies, and tariff headwinds of 205 basis points on gross margins to moderate as supply chain adjustments take hold.
The market assumption for the forward P/E as of February 17, 2026, stands at 23x, compressed from 27x at December 2025, as SomaLogic dilution and NIH funding uncertainty compressed investor willingness to pay above 25x, creating a sentiment discount the model’s 25.5% margin assumption must validate through clinical volume execution.
Any failure in SomaLogic integration, combined with tariff headwinds persisting above 200 basis points on gross margins and research consumables declining beyond mid-to-high single digits, collapses operating margins back toward the 14% three-year average faster than clinical growth recovers, as each 100 basis point margin shortfall on $4.5 billion represents $45 million in missed operating income.
This sits above the 1-year operating margin of 23.1%, as the model embeds continued SG&A discipline and SomaLogic synergies layering onto the 180 basis point expansion achieved in fiscal 2025, and reaching 25.5% requires the research market to stabilize while proteomics integration delivers margin-accretive revenue mix.
3. Exit P/E Multiple: 23.2x
The 23.2x exit multiple capitalizes Illumina stock’s normalized net income at December 2028 under conditions of 5.5% revenue growth and 25.5% operating margins, treating the multiple as a terminal earnings anchor for a genomics sequencing platform with 890 installed NovaSeq X instruments and a structurally expanding clinical consumables base.
The model already embeds 25.5% operating margin expansion and 5.5% revenue growth through fiscal 2028, meaning the 23.2x exit multiple does not require additional credit for BioInsight monetization or spatial transcriptomics commercialization, as both are already absorbed in the earnings trajectory.
The market assumption for the forward P/E as of February 17, 2026, stands at 23x, compressed from 27x at December 2025, as SomaLogic dilution disclosure and NIH funding uncertainty reduced investor willingness to pay above 25x, and the model’s 23.2x exit sits in line with the current market assumption, anchoring on normalized sentiment rather than peak-year premiums.
If NIH funding disruption extends beyond 2026 or SomaLogic integration costs exceed the $0.18 EPS dilution initially disclosed, earnings compression below the 25.5% margin assumption pushes the sustainable multiple toward the 17x–18x range observed at the September 2025 forward P/E, and the $158 target collapses toward the Street’s low target of $80.
This sits above the 1-year historical P/E of 22.1x, as the model embeds operating margin expansion toward the 2027 long-range target of 26% and clinical consumables compounding above the current 20% ex-China growth rate, and sustaining 23.2x through December 2028 requires both margin delivery and SomaLogic dilution reversal without NIH funding pressure extending into research consumable declines beyond FY2026.
What Happens If Things Go Better or Worse?
Illumina stock’s trajectory through December 2030 turns on whether clinical consumables sustain their NovaSeq X-driven momentum, whether SomaLogic’s proteomics platform converts biopharma interest into recurring revenue, and whether NIH funding resumes enough to stabilize the research market that has contracted for three consecutive years.
- Low Case: If NIH funding remains constrained and SomaLogic integration stalls while China instrument sales stay limited, revenue grows around 5.3% and net income margins stay near 21% → 6.9% annualized return.
- Mid Case: ith clinical consumables compounding at double-digit to mid-teens growth and SomaLogic adding incremental biopharma revenue as guided, revenue growth near 5.9% and margins improving toward 22% → 11.5% annualized return.
- High Case: If whole-genome sequencing adoption accelerates across oncology and genetic disease, BioInsight monetization with AstraZeneca, Merck, and Eli Lilly scales ahead of schedule, and research recovers, revenue reaches about 6.4% and margins approach 23% → 15.6% annualized return.
How Much Upside Does Illumina Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
