Good day, ladies and gentlemen. Welcome to the Second Quarter 2025 Illumina Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the call over to Interim Head of Investor Relations, Brian Blanchett. Hello, everyone, and welcome to Illumina's Second Quarter 2025 Earnings Call. Today, we will review our financial results released after market close and provide commentary before opening for Q&A. Our earnings release is available in the Investor Relations section of illumina.com. Speaking today are Jacob Thaysen, Chief Executive Officer; and Ankur Dhingra, Chief Financial Officer. Jacob will provide an update on Illumina's businesses, followed by Ankur's review of the company's financials. All financial information shared on this call relates to Core Illumina. For historical consolidated financials, please refer to our earnings release and SEC filings. Please note that all year-over-year revenue growth rates discussed during the prepared remarks are presented on a constant currency basis to exclude the impact of foreign exchange fluctuations. We encourage you to review the GAAP reconciliation of our non-GAAP measures, which can be found in today's release and in the supplemental data available on our website. This call is being recorded, and the audio will be archived in our Investors section of our website. It is our intent that all forward-looking statements regarding the financial results and commercial activity 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 the documents that Illumina files with the Securities and Exchange Commission, including our most recent Forms 10-Q and 10-K. With that, I will now turn the call over to Jacob.

Thank you, Brian, and good afternoon, everyone. In the second quarter, despite a year-over-year decline, we delivered revenue at the high end of our guidance range at approximately $1.06 billion. At the same time, the team's strong execution drove profitability above expectations with a non-GAAP operating margin of 23.8% and a non-GAAP EPS of $1.19. Together, these results reflect meaningful progress across the business and reinforce our view that the underlying fundamentals remain robust. In Q2, we saw ongoing adoption of our NovaSeq X platform with greater than 50 placements; increased high-throughput consumable sales, especially among NovaSeq X users as the transition continues to progress; continued advancement of our innovation roadmap with key updates to our multi-omic strategy, reflecting disciplined execution of our long-term capital deployment plan. We are encouraged by the strength we are seeing in the clinical markets, which now accounts for roughly 60% of total sequencing consumables. Clinical has proven more resilient and in some areas is exceeding expectations, reinforcing our confidence in the durability of clinical demand. We're seeing this momentum across multiple clinical applications. In oncology, adoption continues to grow for comprehensive genomic profiling, and we are seeing increased interest in sequencing-intensive applications like minimal residual disease, which sets us up well for future clinical growth. In generic disease testing, growth continues to be driven by expanding national genome programs and broader adoption of whole genome and whole exome sequencing for rare diseases. In reproductive health, we are seeing growth in NIPT sample volumes, particularly in the U.S. as more customers complete validation and ramp up clinical testing. We continue to believe the long-term clinical opportunity remains significant with NGS adoption increasing as genomics become standard of care for therapy selection, early detection, monitoring and expands into other disease types. While clinical demand has been encouraging, the research environment, particularly in the U.S., remains constrained amid ongoing NIH funding uncertainty. As expected, demand from this segment remained soft in Q2 with some labs delaying projects or holding off on hiring due to concerns about the future grant availability. In the meantime, we're actively working with our customers to help them navigate this period. Separately, in China, our ability to export instruments is still restricted. We continue to engage with regulators to identify solutions that support our long-term sustainable presence in the country, and we will keep you updated on any material developments. As we navigate these near-term market dynamics, our focus remains on disciplined execution and laying the foundation for long-term success. This focus underpins our commitment to achieving our financial targets and delivering high single-digit revenue growth and expanding non-GAAP operating margin to 26% by 2027. We are advancing towards these targets by delivering across our three key drivers: growing our core sequencing business, including continued progress with NovaSeq X transition; scalable entry into multiomics to complement our sequencing platforms; and expanding our services, data and software offerings to provide more integrated customer solutions. Together, these priorities support our broader strategy and vision for the industry of shifting from cost per gigabase model to delivering the highest-quality biological insight at the lowest end-to-end cost. Now I'd like to focus on the progress we're making in our multiomics driver, which is centered on delivering differentiated solutions that integrate with our sequences. We've already announced our capabilities in single-cell, CRISPR-based Perturb-Seq and spatial analysis. And in June, we took another step forward in proteomics with our announced acquisition of SomaLogic from Standard BioTools. This acquisition expands our presence in affinity-based proteomics, a small but fast-growing segment of the broader proteomics market and builds on the exclusive commercial relationship we have had with SomaLogic since 2021. SomaLogic is a key player in high-throughput proteomics. Their SomaScan Assay can analyze over 9,500 unique human proteins from small biological samples, delivering deep, actionable insights for drug discovery, diagnostics and health monitoring. What sets their technology apart is its proprietary SOMAmer binding reagents, highly precise affinity reagents that bind to specific proteins with unmatched sensitivity, scalability and reproducibility. This approach delivers broader coverage than other methods while reducing the time and cost of deeper proteomics analysis. Bringing SomaLogic into Illumina builds on our existing long-standing partnership. As our collaboration progressed, our conviction in their technology deepened, and we saw a clear opportunity to accelerate innovation by integrating their capabilities into our innovation engine. With Illumina's expertise in product development and global commercial reach, we will scale their technology faster, expand customer adoption and achieve greater operational efficiencies. SomaLogic is a strong strategic fit for Illumina. Their technology, when paired with our platforms, offers a highly scalable and cost-efficient solution for proteomics discovery. By more deeply integrating proteomics into our ecosystem, we're expanding our ability to deliver greater biological insights through our end-to-end workflows. This enhances the value proposition of the NovaSeq X and creates the potential to extend SomaLogic technology into other multi-omic applications such as single cell and spatial. With this addition, we are advancing towards a more comprehensive multiomics portfolio, spanning DNA, RNA, methylation and now proteomics. We expect the transaction to close in the first half of 2026 after obtaining the necessary regulatory approvals, and we are looking forward to welcoming the SomaLogic team to Illumina and expanding the impact of proteomics together. As we advance key elements of our multi-omic strategy, we're also seeing strong momentum across our recent platform launches. One example is the MiSeq i100 Plus, our latest benchtop sequencer. Since launching late last year, we placed more than 500 instruments and are now seeing customers order additional units after just a few months of use. Customer feedback on the MiSeq i100 platform remains very positive. Customers are calling it a game changer, highlighting faster turnaround times, ease of use and room temperature shipping and storage of reagents, all features that make sequencing more accessible for labs operating in a wide range of resource settings. This reduces reliance on centralized labs, shortens diagnosis turnaround time and gives customers greater autonomy for running oncology, infectious disease and other clinical applications. These features are especially attractive to labs adopting NGS for the first time as well as those in emerging markets. The MiSeq i100 platform currently supports 18 proven workflows, including 9 fully integrated from library prep through analysis. This level of integration reflects a broader shift in how we approach innovation, grounded in deeper customer insights and close collaboration throughout development. MiSeq i100 sets a new standard for the future of Illumina innovation, optimizing for complete end-to-end workflows that lower barriers to adoption and deliver high-quality insights at scale. Before I hand it over to Ankur, I want to briefly share our views on the remainder of 2025. We are encouraged by the momentum in our Q2 results, the progress of our innovation roadmap, and we remain focused on disciplined execution. However, we continue to approach the second half of the year with caution given the ongoing funding uncertainties in the U.S. research market. That said, we are raising our guidance for total company revenue growth as well as total reported revenue, non-GAAP operating margin and non-GAAP EPS, reflecting strong execution and operating discipline across the organization.

Thank you, Jacob, and good afternoon, everyone. I will give you an overview of our second quarter financial results, provide more color about revenue, expenses, earnings and developments on our balance sheet and capital deployment and then speak about our outlook going forward. Before I get into the details of the financial performance, let me provide a high-level view of how the second quarter played out. In Q2, we made further progress on our long-range goals and delivered results exceeding our expectations for the quarter. Revenue, although lower year-over-year, came in at the high end of our guidance range, driven by strength in high-throughput consumables. We saw strong organic margin expansion and EPS of $1.19, which well exceeded the top of our guidance range. As expected, research customers, especially the U.S. academic and government customers, continue to manage their budgets tightly in the face of funding constraints. The trends in Q2 were generally in line with what we saw in the latter part of Q1. On the other hand, our clinical customers continue to invest in expanding their portfolio and scaling current on-market tests. Our Greater China business was slightly better than the guide, and our customers in Greater China continue to be very engaged and supportive of Illumina's differentiated technology. Sales of consumables have held up well, and we remain in discussion with the relevant authorities. Now let me provide you details of the financial performance. Second quarter revenue of $1.06 billion was down approximately 3% year-over-year on both constant currency and reported basis. Greater China revenue of $63 million was slightly ahead of expectations and represented a $12 million decline from the second quarter of 2024. Excluding Greater China, Illumina revenue was down approximately 2% on a constant currency basis. Sequencing consumables revenue of $740 million was approximately flat year-over-year and up approximately 6% sequentially on a reported basis. High-throughput consumables grew both sequentially and year-over-year, including a greater than 10% sequential growth in NovaSeq X consumables revenue. Strong growth in the clinical segment, which now represents roughly 60% of our total sequencing consumables, is primarily driven by broader adoption of comprehensive genomic profiling and increased momentum in sequencing-intensive applications like MRD, which sets us up well for future growth. The X transition continues to progress. As we've reported, over 80% of the sequencing volumes for our research customers have already transitioned to X, with these customers continuing to face budget constraints. Our clinical customers continue with the transition, working through validation and balancing their investments between on-market tests versus development of new tests. The clinical X transition has progressed to roughly 55% in the quarter. In Q2, roughly 69% of high-throughput gigabases shipped, and approximately 44% of high-throughput consumables revenue was on the NovaSeq X series. We continue to make progress on the high-throughput transition from what we previously disclosed. At the current pace, we anticipate that towards the end of 2025, approximately 50% of high throughput revenue and approximately 75% of gigabases shipped will be a NovaSeq X series. We expect this to be driven by the clinical segment as customers scale on the NovaSeq X. About sequencing activity: Total sequencing gigabase output on our connected, high- and mid-throughput instruments grew at a rate of more than 30% year-over-year, driven by robust strength in clinical, but more muted growth from our research customers. Although not a predictor of near-term revenue, gigabase output on connected instruments provides us a directional view of underlying applications demand and levels of utilization of our connected instruments and consumables. Sequencing instruments revenue of $96 million was down approximately 18% year-over-year in Q2 as we saw the effect of constrained budgets from our high- and mid-throughput research customers. The funnel pipelines held, but we saw extended decision times amongst our customers. Approximately 60% of the NovaSeq X placed in Q2 were to clinical customers. On the low-throughput side, MiSeq i100 Plus launch continues to progress quite well. Our customers have had positive reviews for the platform and are excited about the MiSeq 100 base model launch next month. In Greater China, our instruments business was down approximately 40% due to restrictions on exportation. Sequencing service and other revenue of $136 million was down approximately 5% year-over-year in line with expectations. The decrease was mainly due to the timing of certain strategic partnership revenues last year related to the AGD consortium. Excluding those items, our core services and informatics business grew by high single digits. Moving to the rest of Illumina P&L, non-GAAP gross margin was 69.4% for the second quarter, which increased by 200 basis points quarter-over-quarter and remained stable year-over-year. We experienced favorable product mix in our sequencing business driven by high consumables revenue mix. Additionally, our ongoing operating excellence action plan initiatives contributed to improved gross margin performance this quarter. Tariffs had a partial impact this quarter with a net impact of approximately 110 basis points on our gross margin in Q2. Non-GAAP operating expenses were $484 million, which is down approximately 6% or $32 million year-over-year. This reflects the effect of actions we've taken towards our long-range commitments of expanding margins while prioritizing key growth investments. As a result of our discipline, we did not experience the typical seasonal rise in OpEx that occurs post Q1. Non-GAAP operating margin was 23.8% in Q2, which increased 160 basis points year-over-year. Operating profit grew approximately 4% year-over-year on lower revenue, reflecting increased operating leverage from the improved cost structure. Looking at our results below the line, non-GAAP other expense, which is largely comprised of net interest expense, was $10 million and non-GAAP tax rate was 22.2%. Note that the recent tax legislation had no impact on our Q2 tax rate as it was enacted after quarter end. Our average diluted shares were approximately 157 million, approximately 2 million lower than last quarter, driven by an increased level of share repurchases, net of dilution from employee equity awards. Altogether, non-GAAP EPS of $1.19 per diluted share grew 9% year-over-year and came in well above our guidance range. Moving to cash flow, balance sheet and capital allocation items for the quarter. Cash flow provided by operations was a robust $234 million. Capital expenditures were $30 million, and free cash flow was $204 million. In Q2, we repurchased approximately 4.5 million shares of Illumina stock for $380 million at an average price of approximately $85 per share. We intend to continue to repurchase incremental shares over the course of the year as part of our approximate $800 million authorization remaining at the end of the quarter. Additionally, we entered into a definitive agreement with Standard BioTools, under which Illumina will acquire SomaLogic and other specified assets for $350 million in cash payable at closing, plus up to $75 million in near-term performance-based milestones and royalties. We expect the deal to close in the first half of 2026, subject to regulatory approvals. We remain hyper-focused on maximizing our growth opportunities through capital allocation initiatives with high conviction in their contribution margins to a long-term strategic plan. We ended the quarter with approximately $1.16 billion in cash, cash equivalents and short-term investments and gross leverage of approximately 1.7 times gross debt to last 12 months EBITDA. Now moving to guidance for the year 2025. As you may have seen in the press release, we have raised our operating margin and EPS expectations for 2025 and are holding the rest of the world constant currency revenue growth at the range we provided in May. We've also increased our revenue expectations from China. Let me provide further details. Starting with revenue, we're raising our revenue guidance for the Greater China region by $25 million at the midpoint to approximately $200 million for the year. Although we remain restricted to export instruments into the country, we have seen resilience in consumables purchases and strong customer support that we believe will extend at least in part through Q3. For the rest of the world, we are reiterating our revenue guidance of growth between 0% to 2% on constant currency. Hence, we now anticipate total Illumina constant currency revenue decline to be in the range of minus 0.5% to minus 2.5%. Including FX changes, we now expect reported Illumina revenue in the range of $4.23 billion to $4.31 billion. Now shifting into our product assumptions. For the rest of the world, we now expect sequencing consumables growth between 1% and 3%, up from flat to 2%, driven by strong sequencing activity from our clinical customers and aligning our guidance with our reported revenue to include the impact of pricing actions. We're lowering our expectations for rest of the world sequencing instruments to a decline between 4% and 6% year-over-year, including the impact of pricing actions. This decrease is largely due to conservatism from our research customers that we saw towards the end of Q2. Although we still expect demand for NovaSeq X instruments to slightly increase and low-throughput growth driven by placements of the MiSeq i100, we have seen weakness in the throughput. Now moving down the P&L. As previously communicated, the Illumina team is making good progress on our operational excellence initiatives and lowering our cost base. Our cost discipline as well as increased revenue driven by Greater China outperformance and favorable FX rates has allowed us to raise our operating margin guidance by approximately 50 basis points to a range of 22% to 22.5%. Furthermore, earlier this month, new legislation was passed that allows U.S.-based R&D spend to be tax-deductible. Given the scale of Illumina's large U.S. R&D base, we anticipate this bill having a positive effect on our tax rate for 2025 and beyond. We now expect our FY '25 tax rate to be approximately 20%. Given our increased level of share repurchases, we now expect FY '25 WASO of approximately 157 million shares. Bringing it all together, these developments have allowed us to raise our EPS guidance by $0.25 at the midpoint to a range of $4.45 to $4.55. Approximately $0.10 of this improvement is from tax changes, approximately $0.10 from China and the remainder from FX and operating margin improvements. To summarize, at the midpoint, our revised FY '25 guidance reflects an increase in revenue of $50 million, an increase in operating margin of 50 basis points and an increase in EPS of $0.25. Now moving to the third quarter of 2025. For the third quarter, we expect revenue outside the Greater China region to grow between 1% and 2% year-over-year on a constant currency basis and revenue in the Greater China region between $35 million and $45 million. Together, we anticipate total Illumina constant currency revenue decline to be in the range of 1.5% to 2.5%. We expect non-GAAP operating margin of approximately 22%, non-GAAP tax rate to be approximately 16%, WASO of approximately 155 million shares and non-GAAP earnings per share in the range of $1.15 to $1.19. For Q4, this implies an uptick in revenue, roughly half coming from usual seasonality in instrument purchases. We expect the remainder to come from a combination of data service offerings like AGD and new products like our proteomics solution. In closing, I want to express my continued appreciation to the Illumina team for their relentless focus on execution and delivering another quarter of progress towards our short- and long-term goals, which is allowing us to raise the guidance for the year. Thank you for joining our call today. I will now invite the operator to open the line for Q&A.

Our first question will come from Vijay Kumar with Evercore.

Congratulations on a strong quarter and solid execution. I have one question regarding the guidance change. Could you provide some clarity? It seems like instruments decreased by $25 million while China increased by $25 million, and possibly some of that is due to foreign exchange. Were there any changes in consumables? Is there anything else shifting with microarrays? Ankur, you mentioned new products, and Jacob, could you discuss the new products and pipeline? How significant is this? I feel like the market hasn't sufficiently noted the pipeline, but could this become more impactful next year?

Vijay, thank you very much, and thank you for your acknowledgment of our great quarter here. So you're absolutely right. We have a lot in our pipeline. And in fact, I did see the feedback from our early access customers recently on both constellation, on 5-base and on our spatial solutions. And I would say we have got very, very strong feedback from all three products. Our customers are very happy to get access to this before. As you reminded me earlier, we will probably more be launching it and get feedback from customers. Now we're engaging with them very early so we can get feedback on it, but they can also start to be excited about it and start to think about publication, but also making grants. So that is something that we believe will start to have an impact here already in '26. So we do believe that this will be an addition of growth starting from '26 and onwards.

Yes. Thanks, Jacob. And thanks Vijay as well. So to your question about the ins and outs for the guide here, let me parse it into two different ways based on the question you were asking. So one is the guide is up because of FX as well as an increase in China in aggregate. If you think about it from the rest of the world perspective, we are reducing our expectations on the instrumentation side based on what we've seen in Q2 overall and primarily coming from the research market and the way we've seen the pipeline work through during the quarter. But at the same time, the offset for that instrumentation is in consumables for the rest of the world. So we are increasing our expectations for the consumables business, which came in quite well in Q2 and as we see the pipeline for the rest of the year as well. The second part of your question was around services. There are two parts to that. One is we've talked about these data services business. If you recall last year, for the full year, we had a business in that data services side coming from our AGD consortium, which was slightly heavily weighted towards the first half of the year last year, which is, if you recall, I made a commentary during our earnings call last quarter to say that comparison becomes favorable for us in the back half of this year. We are anticipating some business in that space and potentially some of the new services that we're looking to launch here in the back half of the year. And if all goes well, we will talk about it when we get to our '26 guidance about what we anticipate from those services then.

Have you guys seen any change in customer behavior in anticipation of competition? How are you preparing for that possibility? As we look at the Roche platform, one attribute that seems hard for you to match based on the current engineering is probably turnaround time. So building off of Vijay's question, is there something in the pipeline that would allow you to be more competitive with a high-throughput platform when it comes to turnaround time?

Yes. So Subbu, we definitely spend a lot of time thinking about competition. But I would say we spend even more time thinking about our customers and how we continue to serve them every day. And this is something that I saw coming into this company is that I think we could do a better job in engaging with our customers, as I mentioned before, engaging them on early access to our technology, sharing the roadmap and other things. So that's kind of what our main focus is to make sure that we are always supporting our customers. Now we continue to innovate. We have the largest focus and the largest budget in this industry from an R&D perspective. And as you can anticipate, we have a lot of things going on. We have been out there speaking openly about what we are working on in the multiomics space, but clearly, we are not sharing everything we are doing also on our instrumentation to address what we believe are the main growth markets going forward. This particularly is in the clinical space, also in the decentralized space. We are looking to the attributes. We are working a lot with our customers to understand also what are the attributes they're looking for. And you're right, there are customer bases that are looking for fast turnaround time. This is a niche market in the NICU where you need to have very fast results and you will compromise maybe in the ease of use or even the quality of sequencing. But if you look for the vast majority, here, we are looking in where an overnight run is more than reasonable and you can get all the information you want out. So that's the market we are focusing on, and our technology is very powerful to support that part of the business. In the end, our focus will be the highest-quality insight for the lowest end-to-end cost, independent of what customer we are addressing.

So I'm curious, did you notice any advance purchasing from customers during the quarter? We heard that some customers were buying ahead of the tariffs in May and April. Also, when considering your clinical customers, what feedback are you getting from your larger clients? The rate of transition to the new system is slow, which seems in line with your expectations for this change. I'm trying to grasp what some of your larger customers with fleets of 6000 are saying about the transition. Specifically, could this transition occur more rapidly in the latter half of the year? What insights are you receiving from those customers?

Yes. So let me start to address the first one about whether we saw any pull-forward. We didn't. We saw, to that extent, a normal quarter. What we do see is that we have increased backlog that in the beginning when we launched the X, obviously, many customers needed to test out and started to validate. And it was unclear what volume they would shift that over. Many of our customers are now comfortable using the X in both manufacturing and production modes. This increased comfort allows them to plan more effectively, which has resulted in a larger backlog. We anticipate this trend will continue. As you pointed out, the transition to the X is ongoing. However, at the individual customer level, each has its own plans and needs for validation. We are seeing many of our clinical customers experiencing rapid growth. They do not want to compromise that growth. They have a clear plan for when they want to transition. There won't be a situation where everything shifts in one quarter. However, customers will indicate when it's time for them to switch over, and then we expect to see a rapid movement to new assays. We anticipate this transition will occur smoothly. There may be a quarter with a slight increase and another with a slight decrease during the transition, but we do not foresee any significant drop happening anytime soon.

I believe your guidance implies the company will generate about 2 points of revenue growth in the fourth quarter, excluding China, which would be the highest rate in at least 2 years, assuming I have that right. So my first question is, well, do I have that right? And if so, what's the significance of that in the context of thinking of some of the pricing issues and other things that you've been working through over the last couple of years?

Yes, thanks, Doug. That was a lengthy question, essentially asking if I'm providing any guidance for 2026, which I believe is a bit premature. Our primary focus is on executing our plans for 2025, but we are seeing positive momentum. As we mentioned last year with our strategy, we anticipate that the transition to X will be the key driver for growth moving forward, and it will mark the beginning of our growth phase. And thereby, we expect '26 to look better than '25 and '27 to look better than '26. That's kind of in the logic of things. As you also mentioned, there are, of course, ins and outs. But our main growth driver will be going forward also in the clinical space. And I think that is very much supported by the evidence of all our clinical customers of the result they are showing. And we continue to see that the X will be the main driver of this.

Following up on one of your answers, you mentioned that you didn't observe any pull-forward in anticipation of tariffs. However, regarding the China consumables, how much of that, if any, was a pull-forward from current customers who might be concerned about the possibility of not being able to purchase more consumables in the near future? Additionally, is it reasonable to say that your guidance increase for China could be quite specific to 2025 and not necessarily an indication of an improving outlook for 2026?

Yes. Look, Eve, so let me go back and talk about China, even though I do not like to spend too much time on a very small part of our business. But just to put it in context here, I'm very pleased with what I see from Jenny, our General Manager in China, and the Chinese team, what they're doing. They're doing an amazing job to support our customers out there. And I think it speaks volume that we continue to see a lot of interest from our customers. And I think the feedback we're getting from customers is that they really want us to stay in China based on the high quality we provide, the innovations and, of course, the ecosystem that is very important for the Chinese customers as well. So we do see a lot of interest from them. But as you also mentioned, overall, under the current circumstances, the situation is unsustainable. So we continue to work diligently with the regulators to get a resolution. From a pull-forward perspective, I think we noticed some of that in the first quarter. However, we don't observe that at this moment. We believe we're more aligned with a natural run rate for the business, and that's what we have. Therefore, we feel confident about our guidance for China.

Yes. Eve, I would add only a couple of things. So thanks, Jacob. Pull-forward in the rest of the world outside China, really not much of a pull-forward. We did see good orders for our largest part of the business, which is high-throughput consumables on X. There is a limited shelf life. So the pull-forward really cannot be significant. We saw orders for future shipping but not necessarily a pull-forward in shipments during Q2.

Congratulations on a successful quarter. I want to focus on the clinical market, which has performed well for you over the past three years compared to the academic sector. However, I sense there may be some uncertainty among investors. Can you discuss the spending patterns you've observed from clinical customers, particularly those who've been with you since the beginning? What does their spending look like as we approach Q3? Additionally, could you provide details on customer transition patterns, such as whether they are adapting their entire fleet or just parts of it, and how this is affecting spending in the clinical sector?

Okay. Dave, thanks for that. So overall, let me start by just positioning this a little bit, and then we can have Ankur digging further into the details. But you're absolutely right that the clinical part of our business is very strong. And I truly believe this has continued to be a strong market for us for the foreseeable future, which is quite far out there. The markets are very attractive. We continue to see a lot of opportunities in the oncology space. There is a lot happening, including therapy selection. We are just beginning to address MRD, and over time, screening will also become significant. This presents a lengthy opportunity in the clinical oncology field. Additionally, in the area of genetic disease testing, especially for rare diseases, we are seeing considerable interest in expanding testing to a wider segment of the population.

We completely recognize that there are significant opportunities in the clinical space, which will be a key focus for Illumina in the future. As you pointed out regarding the specifics of the transition, I want to emphasize that for most customers migrating from the 6000 to the X, their decision often goes beyond merely cutting test costs. They are usually looking to broaden the scope of the tests as well. This is a very highly competitive environment. So for many of our customers, it's about staying competitive. And the way you do that is to provide even better assays for your customers. And that is by expanding them and providing more insights. Secondly, there are customers that will stay on the 6000 until the end of life, so to say, for the assay, where they feel like they may have 2 years more end of life. And it's simply from a financial perspective, it doesn't make sense for them to spend the energy and the investment to shift it over to the X. The transition is complex and doesn't happen overnight. It requires validation and involves a gradual process. We've observed in previous instances that the transition from one quarter to the next isn't always smooth. There are fluctuations, with some changes happening in certain quarters while others do not. Therefore, I'm cautious about interpreting this as a significant change on the horizon in the coming quarters. Our goal is still that overall, 75% of the volume shifts to X in the second half of the year. Based on what we see in this quarter, it might occur more towards the later part of Q4. However, it will vary from quarter to quarter.

Given your guidance on instruments, how should we view the trajectory of X placements for the remaining year? The percentage of high throughput revenues from X only rose by 1%, moving from 43% to 44% last quarter. How can we be confident that you will reach 50% by year-end? Additionally, could you provide insight into what percentage of customers are currently achieving 30B reads?

Yes. Let me start by highlighting that we had very strong placements in the fourth quarter with more than 90 placements and continued success into the first quarter, where we achieved 60 placements. Many of the customers who purchased and had Xs installed are still actively using them, particularly in the clinical space, where the majority of the instruments have been placed, and they are consistently integrating them into production. You will see a meaningful impact in the second half of the year. It won't be a sharp decline, but the transition to X will continue. For the remainder of the year, we still believe that, on average, between 50 and 60 instruments will be placed each quarter.

And there is an opportunity, potential to see more instruments being placed in the fourth quarter depending on how we see budgets coming to fruition here. On the flow cell itself, you're right that with the version 1.3 release of our software, we did a lot of work to improve, and we will continue to do that on our customer experience. And a part of that was also to improve some of the yield in the 25B, but we are not committing to a 30B at this point.

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

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