Illumina's (NASDAQ:ILMN) first-quarter results were full of exclamation points -- at least from an investor's perspective. Revenue jumped nearly 31% year over year. Adjusted earnings per share more than doubled. The company's operating cash flow increased 52% over the prior-year period. Illumina's results were so good that the company boosted its full-year revenue and earnings guidance.

The genomic-sequencing systems leader announces its Q2 earnings results on Monday, July 30. There could be more exclamation points in store, but for now, there are only question marks. Here are three big questions facing Illumina as it heads into its Q2 update.

Three pieces of colored paper with question marks on them

Image source: Getty Images.

1. Will the consumables "air pocket" finally hit?

The best news from Illumina's Q1 results was the impressive growth in sequencing consumables revenue. However, Illumina executives have warned of the possibility that consumables revenue could be "lumpy" in some quarters. Illumina CFO Sam Samad mentioned at the Bank of America Merrill Lynch Health Care Conference in May that some "air pockets" could be encountered.

These references to "lumpy" consumables growth and "air pockets" relate to the transition from customers on Illumina's older high-throughput HiSeq systems to its new NovaSeq system. The potential challenge is that customers could purchase significantly fewer HiSeq consumables before they ramp up NovaSeq consumables purchases. If this happens to occur in the same quarter, Illumina's revenue could miss Wall Street estimates.

So far since the launch of NovaSeq early last year, consumables growth hasn't been lumpy at all. Could the consumables "air pocket" finally hit in the second quarter? It's entirely possible. However, HiSeq consumables revenue in Q1 dropped $20 million from 2017 Q4 without causing Illumina to skip a beat. My hunch is that the company will again report strong overall consumables revenue growth for Q2.

2. Can the microarray business defy historical seasonality trends?

In Illumina's Q1 earnings conference call, Sam Samad said that the company expected "a seasonal decline" in its microarray business in the second quarter. But I wouldn't be surprised if Illumina's microarray business bucks the historical seasonality trends.

There's a different dynamic in consumer genomics, which drives Illumina's microarray revenue, than there has been in the past. 2017 was a breakout year for consumer genomics, with a huge surge in the number of samples genotyped or sequenced. I'm not sure that past seasonal trends will have as big of an effect going forward.

Also, one of Illumina's major consumer genomics customers, 23andMe, received Food and Drug Administration approval in March 2018 for the first direct-to-consumer genetic test for cancer risk. Although the genetic variants that can be tested are more prevalent in individuals with Ashkenazi Jewish descent -- a small percent of the population -- 23andMe received a significant amount of publicity from the FDA approval, which could have generated higher levels of testing in Q2. If so, that would be positive for Illumina. 

3. What impact did Trump's trade talk and actions make?

President Trump's speeches, tweets, and actions on tariffs have raised concerns about a trade war, particularly one with China. With Illumina seeing 38% shipment growth in the Greater China region during the first quarter, could the prospects of an escalating trade skirmish have impacted Illumina in Q2? Maybe -- but the company could have been helped.

That might seem counterintuitive at first. However, keep in mind that the initial Chinese tariffs issued in response to the new U.S. tariffs (none of which impacted Illumina at all) didn't go into effect until early July -- after the end of the second quarter. But the fear that there could be more tariffs on the way that would affect gene-sequencing systems just might have spurred Chinese companies to order NovaSeq systems earlier than they otherwise would have.

Remember also that even in the midst of increasing trade tensions between the U.S. and China, Illumina has gained significant wins in the huge Asian country. In April, Chinese personal genomics company WeiGene announced that it would offer genomic testing using Illumina's microarrays.

Looking ahead

Wall Street analysts expect that Illumina will report revenue of around $786 million and adjusted earnings per share of $1.11 when the company announces its Q2 results. Based on Illumina's history over the past four quarters, it's a pretty good bet that it will beat those estimates.

I look for Illumina to yet again post great quarterly results next week. At least for now, nearly everything appears to be going in its favor.