What happened

In response an upbeat second-quarter report and bullish guidance, shares of Illumina (NASDAQ:ILMN), a leading provider of genetic testing equipment, rose Wednesday morning. The stock was up by 13.3% as of 12:11 p.m. EDT.

So what

Here's are the highlights from Illumina's second quarter:

  • Revenue increased 10% to $662 million. This result easily topped the $642 million in revenue that Wall Street had predicted, and was also comfortably ahead of management's guidance of 7% revenue growth.
  • Gross margin fell 510 basis points to 65.5%. 
  • Net income grew 7% to $128 million.
  • Adjusted EPS fell 5% year over year to $0.82. That decline is primarily attributable to changes in taxes related to stock-based compensation. However, the result also was better than management's guidance range and easily exceeded the $0.69 in EPS that market watchers had expected. 

Management credited the strong Q2 performance to huge demand for the company's new NovaSeq platform. Those results also allowed management to raise its guidance for rest of 2017:

  • Revenue is now expected to grow by 12%. 
  • GAAP earnings per share are now forecast to land between $5.36 and $5.46, which represents a $0.10 increase to both ends of the range.
  • Non-GAAP earnings per diluted are still expected to be in the range of $3.60 to $3.70.

Given the better-than-expected quarterly results and upbeat guidance, it is easy to understand why shares are soaring today.

picture of a novaseq machine.

Image source: Illumina.

Now what

Illumina's investors should breathe a little bit easier now that they know the transition to that new NovaSeq platform is going well. Based on management's call for 12% revenue growth for the year, it appears that its legacy consumers are still ordering supplies for its legacy HiSeq platform at a healthy rate rather than delaying as they wait to upgrade to the NovaSeq platform. 

With the NovaSeq series launch off to such a strong start, Illumina continues to look well positioned to thrive over the long term. As old and new customers alike rush to adopt this new platform, Illumina's financial statements should continue to march in the right direction for years to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.