10-K – 2026-02-12 – ilmn-20251228.htm

Core Illumina R&D expense decreased by $21 million, or 2%, in 2025 primarily due to decreases in employee-related compensation costs, including share-based compensation expense related to our optimization efforts, and a decrease in outside professional services, partially offset by an increase in restructuring charges of $14 million .
Core Illumina SG&A expense increased by $186 million, or 21%, in 2025. In 2024, we recognized a net gain on our contingent consideration liabilities, primarily related to the GRAIL CVRs, of $315 million. Excluding this impact, SG&A expense decreased in 2025 primarily due to a decrease in acquisition-related costs, which included $53 million of expenses incurred related to the Spin-Off of GRAIL, a decrease in restructuring charges of $32 million , primarily due to lease and other asset impairments recognized in 2024, decreases in employee-related compensation costs, including share-based compensation expense related to optimization efforts, and a decrease in outside professional services. These decreases were partially offset by a $19 million non-cash donation to the Illumina Foundation.
The decrease in GRAIL R&D and SG&A expense in 2025 was due to the Spin-Off in Q2 2024.
GRAIL goodwill and intangible impairment in 2024 consisted of goodwill impairment of $1,466 million and an IPR&D intangible asset impairment of $420 million. Core Illumina goodwill and intangible impairment in 2024 consisted of an IPR&D intangible asset impairment. See note 4. Intangible Assets, Goodwill and Acquisitions for additional details.
Core Illumina legal contingency and settlement in 2024 primarily consisted of a gain of $489 million resulting from the reversal of the EC fine accrual, and related accrued interest, following the European Commission’s decision to withdraw its previously imposed fine. See note 8. GRAIL Spin-Off for additional details.

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Other Income (Expense)

2025-2024

Dollars in millions 2025 2024 Change % Change
Interest income $ 40   $ 46  $ (6) (13) %
Interest expense (101) (100) (1) 1 
Other income (expense), net
340   (292) 632  (216)
Total other income (expense), net (1)
$ 279   $ (346) $ 625  (181) %

_____________
(1) Total other income (expense), net in 2024 primarily relates to Core Illumina segment.

Interest income consisted primarily of interest earned on our money market funds. Interest expense consisted primarily of interest on our outstanding term debt. The increase in other income (expense), net in 2025 was primarily due to net gains (realized and unrealized) recognized on our strategic investments of $328 million in 2025 compared to net losses of $312 million recognized in 2024 , which primarily related to our retained investment in GRAIL for both periods. This increase was par tially offset by a $15 million gain on our Helix contingent value right in 2024.

Provision for Income Taxes

2025-2024

Dollars in millions 2025 2024 Change % Change
Income (loss) before income taxes $ 1,086 $ (1,179) $ 2,265  (192) %
Provision for income taxes 236 44 192  436 
Net income (loss) $ 850 $ (1,223) $ 2,073  (170) %
Effective tax rate 21.7% (3.8)%

In 2025, the variance from the U.S. federal statutory tax rate of 21% was primarily due to the release of a valuation allowance of $74 million against certain deferred tax assets in Singapore. This was partially offset by the implications of the U.S. tax legislation that was signed on July 4, 2025, which included changes to no longer require capitalization of U.S. based research and development expenses. While the changes from the recent U.S. tax legislation were favorable, based on available evidence, the increased U.S. tax deductions resulted in a determination that it is more likely than not the future realization of deferred tax assets associated with certain U.S. foreign tax credits may not be achieved. Therefore, a valuation allowance of $62 million was recorded against the deferred tax assets associated with certain U.S. foreign tax credits. The income tax rate in 2025 was favorably impacted by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as Singapore.

In 2024, the variance from the U.S. federal statutory tax rate of 21% was primarily due to the $308 million income tax expense impact from the impairment of goodwill, which is nondeductible for tax purposes, $90 million income tax expense impact of GRAIL pre-acquisition net operating losses on GILTI, the utilization of U.S. foreign tax credits, and the Pillar Two global minimum top-up tax, and the $52 million income tax expense impact of capitalizing research and development expenses for tax purposes. The income tax rate in 2024 was favorably impacted by the $99 million income tax expense impact of the reversal of the European Commission fine related to the GRAIL acquisition, which is excluded from taxable income, and by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore.
Our future effective tax rate may vary from the U.S. federal statutory tax rate due to the mix of earnings in tax jurisdictions with different statutory tax rates and the other factors discussed in the risk factor “We are subject to risks related to taxation in multiple jurisdictions” in Risk Factors within the Business & Market Information section of this report, including future tax legislation that changes existing tax policies, laws, regulations, or rates.

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LIQUIDITY AND CAPITAL RESOURCES
As of December 28, 2025, we had $1,418 million in cash and cash equivalents, of which $444 million was held by foreign subsidiaries. Cash and cash equivalents increased by $291 million from the prior year due to factors described in the “Cash Flow Summary” below. Our primary source of liquidity, other than holdings of cash, cash equivalents, and investments, has been cash flows from operations and, from time to time, issuances of debt. In 2025, we received net proceeds from the issuance of our 2030 Term Notes of $495 million, and repaid $500 million for our 2025 Term Notes. Our ability to generate cash from operations, supplemented with the issuance of debt and/or liquidation of our short-term investments, provides us with the financial flexibility we need to meet operating, investing, and financing needs. In 2025, we received proceeds from net sales of our strategic investments of $103 million. As of December 28, 2025, we had $215 million remaining in short-term investments, comprised of marketable equity securities. Subsequent to December 28, 2025 and through February 11, 2026, we received additional proceeds of approximately $104 million from subsequent sales of our short-term strategic investments .
In November 2025, we issued $500 million aggregate principal amount of 2030 Term Notes. We received net proceeds of $495 million. The 2030 Term Notes, which mature on December 12, 2030, accrue interest at a rate of 4.750% per annum, payable semi-annually on June 12 and December 12 of each year, beginning on June 12, 2026. We may redeem for cash all or any portion of the 2030 Term Notes, at our option, at any time prior to maturity.
In September 2024, we issued $500 million aggregate principal amount of 2026 Term Notes, which mature on September 9, 2026 and accrue interest at a rate of 4.650% per annum, payable semi-annually in March and September of each year. In December 2022, we issued $500 million aggregate principal amount of 2025 Term Notes and $500 million aggregate principal amount of 2027 Term Notes. The 2025 Term Notes matured and were repaid in cash on December 12, 2025. The 2027 Term Notes mature on December 13, 2027 and accrue interest at a rate of 5.750% per annum, payable semi-annually in June and December of each year. In March 2021, we issued $500 million aggregate principal amount of 2031 Term Notes, which mature on March 23, 2031, and accrue interest at a rate of 2.550% per annum, payable semi-annually in March and September of each year. We may redeem for cash all or any portion of the 2026, 2027, or 2031 Term Notes, at our option, at any time prior to maturity.
In January 2023, we entered into the Revolving Credit Agreement, which provides us with a $750 million senior unsecured five-year revolving credit facility, including a $40 million sublimit for swingline borrowings and a $50 million sublimit for letters of credit. The credit facility matures, and all amounts outstanding become due and payable in full, on January 4, 2028, subject to two one-year extensions at our option, the consent of the extending lenders, and certain other conditions. As of December 28, 2025, there were no outstanding borrowings.
On June 22, 2025, we entered into a Stock Purchase Agreement (the Purchase Agreement) with Standard BioTools to acquire SomaLogic and other specified assets for $350 million in cash, subject to customary adjustments. The Purchase Agreement further provides for, in connection with the revenues generated from certain products and services, (i) royalty streams and (ii) up to $75 million in potential milestone payments to Standard BioTools. The transaction was completed on January 30, 2026. See note 13. Subsequent Events for further details.
As of December 28, 2025, the fair value of our contingent consideration liability related to GRAIL was $54 million, of which $52 million was included in other long-term liabilities. The contingent value rights entitle the holders to receive future cash payments on a quarterly basis (Covered Revenue Payments) representing a pro rata portion of certain GRAIL-related revenues (Covered Revenues) each year through August 2033. This reflects a 2.5% payment right to the first $1 billion of revenue each year for 12 years. Revenue above $1 billion each year is subject to a 9% contingent payment right during this same period. In 2025, we paid $1.3 million in aggregate Covered Revenue Payments related to aggregate Covered Revenues for the period Q4 2024 through Q3 2025 of $142 million.
In August 2024, our Board of Directors authorized a share repurchase program, which canceled and superseded all prior and available repurchase authorizations, to repurchase up to $1.5 billion of our outstanding common stock. The repurchases may be completed through open market purchases, pursuant to Rule 10b5-1 or Rule 10b-18, or through an accelerated share repurchase program. Authorizations to repurchase up to $643 million of our outstanding common stock remained available as of December 28, 2025. Subsequent to December 28, 2025 and through February 11, 2026, we repurchased an additional approximate 264,000 shares of our common stock for approximately $32 million. We intend to continue to repurchase incremental shares over the course of 2026.
We had $3 million, $33 million, and $25 million, respectively, remaining in capital commitments to three investment funds as of December 28, 2025 that are callable through April 2026, July 2029, and December 2034, respectively.
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Our other short-term and long-term material cash requirements, from known contractual obligations as of December 28, 2025, include operating lease liabilities, uncertain tax positions, and amounts due under our executive deferred compensation plan, as discussed in the Consolidated Financial Statements section of this report.
We anticipate our current cash, cash equivalents, and short-term investments, together with cash provided by operations and available borrowing capacity under the Revolving Credit Facility, are sufficient to fund our near-term capital and operating needs for at least the next 12 months, including the SomaLogic acquisition that was completed on January 30, 2026 and funded from cash on hand. See note 13. Subsequent Events for further details. Operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our primary short-term needs for capital, which are subject to change, may include:
• support of commercialization efforts related to our current and future products;
• acquisitions of equipment and other fixed assets for use in our current and future manufacturing and research and development facilities;
• the continued advancement of research and development efforts;
• potential strategic acquisitions and investments;
• repayment of debt obligations;
• repurchases of our outstanding common stock; and
• the evolving needs of our facilities, including costs of leasing and building out facilities.
We expect that our revenue and results of operations, as well as the status of each of our new product development programs, will significantly impact our cash management decisions. Our future capital requirements and the adequacy of our available funds will depend on many factors, including:
• our ability to successfully commercialize and further develop our technologies and create innovative products in our markets;
• scientific progress in our research and development programs and the magnitude of those programs;
• competing technological and market developments; and
• the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings.
Cash Flow Summary

In millions 2025 2024 2023
Net cash provided by operating activities $ 1,079   $ 837  $ 478 
Net cash used in investing activities (55) (178) (231)
Net cash used in financing activities (744) (570) (1,210)
Effect of exchange rate changes on cash and cash equivalents 11   (10) — 
Net increase (decrease) in cash and cash equivalents $ 291   $ 79  $ (963)

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Operating Activities
Net cash provided by operating activities in 2025 consisted of net income of $850 million, plus net adjustments of $382 million, less net changes in operating assets and liabilities of $153 million. The primary adjustments to net income included share-based compensation of $275 million, depreciation and amortization of $270 million, deferred income taxes of $119 million, intangible impairment of $23 million, and non-cash charitable contribution of $19 million, offset by net gains on investments of $328 million and change in fair value of contingent consideration of $18 million. Cash flow impact from changes in operating assets and liabilities were primarily driven by increases in accounts receivable, operating lease assets and liabilities, net, other long-term liabilities, other assets, and inventory.
Net cash provided by operating activities in 2024 consisted of a net loss of $1,223 million, plus net adjustments of $2,543 million, less net changes in operating assets and liabilities of $483 million. The primary adjustments to net loss included goodwill and intangible impairment of $1,889 million, share-based compensation expense of $370 million, depreciation and amortization expense of $354 million, net loss on strategic investments of $312 million, and property and equipment and right-of-use asset impairment of $46 million, offset by change in fair value of contingent consideration liabilities of $315 million and deferred income taxes of $112 million. Cash flow impact from changes in net operating assets and liabilities were primarily driven by decreases in accrued liabilities and inventory, offset by increases in accounts receivable, operating lease right-of-use assets and liabilities, net, and other long-term liabilities.
Investing Activities
Net cash used in investing activities totaled $55 million in 2025. We primarily invested $148 million in capital expenditures, primarily for investments in facilities, offset by net sales of strategic investments of $103 million.
Net cash used in investing activities totaled $178 million in 2024. We invested $128 million in capital expenditures, net of proceeds received from sales, primarily associated with investments in facilities, paid $81 million for an acquisition, net of cash acquired, and other intangible assets, and purchased strategic investments, net of distributions, of $52 million. This was offset by the receipt of $83 million related to the settlement of our Helix contingent value right.
Financing Activities
Net cash used in financing activities totaled $744 million in 2025. We used $742 million to repurchase our common stock, $500 million to repay our 2025 Term Notes that matured, and $40 million to pay taxes related to net share settlement of equity awards. This was offset by net proceeds received from the issuance of our 2030 Term Notes of $495 million and proceeds from the sale of shares under our employee stock purchase plan of $44 million.
Net cash used in financing activities totaled $570 million in 2024. We deconsolidated cash of $968 million for the GRAIL Spin-Off, repaid our delayed draw term loan of $750 million, used $116 million to repurchase our common stock, and used $32 million to pay taxes related to net share settlement of equity awards, offset by net borrowings on the Delayed Draw Credit Facility of $744 million, net proceeds received from issuance of our 2026 Term Notes of $497 million, and proceeds received from the sale of shares under our employee stock purchase plan of $56 million.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Management bases its estimates on historical experience, market and other conditions, and various other assumptions it believes to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, the estimation process is, by its nature, uncertain given that estimates depend on events over which we may not have control.
Although imposed tariffs, reductions in the U.S. government’s funding of the National Institutes of Health, our inclusion on the unreliable entities list by regulatory authorities in China, as well as macroeconomic factors such as inflation, exchange rate fluctuations, and concerns about an economic downturn present additional uncertainty, we continue to use the best information available to inform our critical accounting estimates. If market and other conditions change from those that we anticipate, our financial statements may be materially affected. In addition, if our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material effect on our consolidated financial statements.
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We believe the following critical accounting policies and estimates have a higher degree of inherent uncertainty and require our most significant judgments. In addition, had we used estimates different from any of these, our consolidated financial statements could have been materially different from those presented. Members of our senior management have discussed the development and selection of our critical accounting policies and estimates, and our disclosure regarding them, with the audit committee of our board of directors. Our accounting policies are more fully described in note 1. Organization and Significant Accounting Policies in the Consolidated Financial Statements.
Revenue Recognition
Our revenue is generated from the sale of products and services. Product revenue consists of sales of instruments and consumables used in genetic analysis. Service and other revenue consists of revenue generated from genotyping and sequencing services, instrument service contracts, development and licensing agreements, and, prior to the Spin-Off of GRAIL in 2024, cancer detection testing services related to the GRAIL business.
We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts.
Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon customer acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business prior to the Spin-Off, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied.
Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less.
In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are generally consistent with the terms of direct sales to customers.
Inventory Valuation
Inventory is stated at the lower of cost or net realizable value. We regularly review inventory for excess and obsolete products and components, taking into account product life cycles, quality issues, historical experience, and usage forecasts. We record write-downs of inventory for potentially excess, obsolete, or impaired goods in order to state inventory at net realizable value. We make assumptions about future demand, market conditions, and the release of new products that may supersede old ones. However, if actual market conditions are less favorable than anticipated, additional inventory write-downs could be required.
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Contingencies
We are involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters. In connection with these matters, we assess, on a regular basis, the probability and range of possible loss based on the developments in these matters. A liability is recorded in the consolidated financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review outstanding legal matters to determine the adequacy of the liabilities accrued and related disclosures in consideration of many factors, which include, but are not limited to, past history, scientific and other evidence, and the specifics and status of each matter. We may change our estimates if our assessment of the various factors changes and the amount of ultimate loss may differ from our estimates, resulting in a material effect on our business, financial condition, results of operations, and/or cash flows.
Business Combinations
Under the acquisition method of accounting, we allocate the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. The fair values assigned, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, are based on estimates and assumptions determined by management. These valuations require us to make estimates and assumptions, especially with respect to intangible assets. We record the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill. Costs that we incur to complete the business combination, such as legal and other professional fees, are expensed as they are incurred.
In connection with certain acquisitions, contingent consideration can be earned by the sellers upon completion of certain future performance milestones. In these cases, a liability is recorded on the acquisition date, as a component of accrued liabilities and/or other long-term liabilities, for an estimate of the acquisition-date fair value of the contingent consideration. We generally use a Monte Carlo simulation or an income approach to estimate the fair value of contingent consideration. Estimates and assumptions used in a Monte Carlo simulation include forecasted revenues, a revenue risk premium, a revenue volatility estimate, an operational leverage ratio and a counterparty credit spread. An income approach utilizes inputs such as anticipated future cash flows, risk-free adjusted discount rates, and nonperformance risk, as well as management judgment regarding the probability of achieving certain future milestones. Future changes in our estimates could result in expenses or gains. Changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in selling, general and administrative expense.
We typically use a discounted cash flow method to value acquired intangible assets. This method requires management judgment to forecast future operating results and establish residual growth rates and discount factors. The estimates we use to value and amortize intangible assets are consistent with the plans and estimates that we use to manage our business and are based on available historical information and industry estimates and averages. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges. In addition, we have estimated the economic lives of the acquired assets, which are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expense could be accelerated or extended. We capitalize in-process research and development (IPR&D) with an indefinite life until completion or abandonment of the associated research and development efforts. Upon reaching the end of the research and development project (i.e., upon commercialization), the IPR&D asset is amortized over its estimated useful life. If the research and development project is abandoned, the IPR&D asset is expensed in the period of abandonment.
If the initial accounting for a business combination is incomplete by the end of a reporting period that falls within the measurement period (not to exceed one year from the date of acquisition), we report provisional amounts in our consolidated financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. We record these adjustments to the provisional amounts with a corresponding offset to goodwill. Any adjustments identified after the measurement period are recorded in the consolidated statements of operations.
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Goodwill and Intangible Assets with Indefinite Lives — Impairment Assessment
Goodwill and other intangible assets with indefinite useful lives (i.e., IPR&D) are not amortized, however they are tested annually for impairment, in the second quarter of our fiscal year, and whenever events or changes in circumstances indicate that it is more likely than not that the fair value is less than the carrying value. Events that would indicate impairment and trigger an interim impairment test include, but are not limited to, current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate or operational performance of the business, and an adverse action or assessment by a regulator.
We perform our goodwill impairment analysis at the reporting unit level, which aligns with our reporting structure and availability of discrete financial information. During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting units are less than the carrying amounts, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and our overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair values of our reporting units are less than the carrying amounts, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair values of the reporting units with the carrying values, including goodwill. If the carrying amounts of the reporting units exceed the fair values, we record an impairment loss based on the difference. If a quantitative assessment is performed, the evaluation includes management estimates of cash flow projections based on internal future projections and/or use of a market approach by looking at market values of comparable companies. Key assumptions include, but are not limited to, future revenue growth, operating margins, capital expenditures, terminal growth rates and discount rates. We also consider our market capitalization as a part of our analysis. We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test.
The IPR&D impairment test is performed by comparing the fair value of the asset to its carrying amount. When testing indefinite-lived intangibles for impairment, we may assess qualitative factors to determine whether it is more likely than not that the asset is impaired. Alternatively, we may bypass this qualitative assessment and perform a quantitative impairment test. We estimate the fair value of IPR&D using a discounted cash flow model, which requires the use of significant estimates and assumptions, including, but not limited to, estimating the timing of future cash flows, growth rates, and discount rates. If the IPR&D is impaired, the carrying value of the IPR&D is written down to the revised fair value with the related impairment charge recognized in the period in which the impairment occurs.
Intangible Assets and Other Long-Lived Assets — Impairment Assessment
We perform regular reviews to determine if an event has occurred that may indicate the carrying values of our intangible assets with finite lives and other long-lived assets are impaired. If indicators of impairment exist, we assess the recoverability of the asset or asset group by determining whether the carrying amount exceeds the undiscounted expected future cash flows. If the asset or asset group is not recoverable, we estimate the fair value of the assets and record an impairment loss if the carrying value exceeds the fair value. Factors that may indicate potential impairment include a significant decline in our stock price and market capitalization compared to net book value, significant changes in the ability of an asset to generate positive cash flows and the pattern of utilization of a particular asset.
In order to estimate the fair values of identifiable intangible assets with finite lives and other long-lived assets, we estimate the present value of future cash flows from those assets. The key assumptions that we use in our cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows, the time value of money, and other factors that a willing market participant would consider. Management judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving those cash flows.
We review our operating lease right-of-use (ROU) assets for impairment whenever events or changes in circumstances indicate the carrying value of the ROU asset may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. We consider a triggering event to reassess an ROU asset’s asset group to have occurred if we exit a portion of or the full facility or enter into a sublease. Factors that may indicate potential impairment include a significant decrease in the market price of an underlying leased asset group. If we conclude the carrying value of the assets or asset group will not be recovered, we estimate the fair value of the asset or asset group and record an impairment in an amount equal to the excess of the carrying value over fair value. We estimate the present value of future cash flows from the asset or asset group in order to determine fair value. There is uncertainty in the projected future cash flows used in our impairment review analysis, which requires the use of estimates and assumptions.
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Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. For example, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of our reporting units, we may be required to record future impairment charges for purchased intangible assets with finite lives. Impairment charges could materially decrease our future results of operations and result in lower asset values on our balance sheet.
Income Taxes
Our provision for income taxes, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect our best assessment of estimated future taxes to be paid. Judgments and estimates based on interpretations of existing tax laws or regulations in the United States and the numerous foreign jurisdictions where we are subject to income tax are required in determining our provision for income taxes. Changes in tax laws, regulations, or statutory tax rates (including the implementation of global minimum tax rates in certain jurisdictions), and estimates of our future taxable income could impact the deferred tax assets and liabilities provided for in the consolidated financial statements and would require an adjustment to the provision for income taxes.
Deferred tax assets are regularly assessed to determine the likelihood they will be recovered from future taxable income. A valuation allowance is established when we believe it is more likely than not the future realization of all or some of a deferred tax asset will not be achieved. In evaluating our ability to recover deferred tax assets within the jurisdiction which they arise, we consider all available positive and negative evidence. Factors reviewed include the cumulative pre-tax book income for the past three years, scheduled reversals of deferred tax liabilities, our history of earnings and reliability of our forecasts, projections of pre-tax book income over the foreseeable future, and the impact of any feasible and prudent tax planning strategies.
We recognize the impact of a tax position in our consolidated financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Tax authorities regularly examine our returns in the jurisdictions in which we do business and we regularly assess the tax risk of our return filing positions. Due to the complexity of some of the uncertainties, the ultimate resolution may result in payments that are materially different from our current estimate of the tax liability. These differences, as well as any interest and penalties, will be reflected in the provision for income taxes in the period in which they are determined.
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QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk
Our current investment policy with respect to our cash, cash equivalents and short-term investments focuses on maintaining acceptable levels of interest rate risk and liquidity. To achieve these objectives, our policy allows us to maintain a portfolio of cash equivalents and short-term investments in a variety of securities, including money market funds, U.S. Treasury debt and corporate debt securities. Our policy also limits the amount of credit exposure to any one issuer and type of instrument. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. As of December 28, 2025, our cash equivalents consisted primarily of U.S. government money market funds that invest in very liquid investments, namely, cash, government securities and purchase agreements that are collateralized fully with government securities. U.S. government money market funds provide same day liquidity and have a net asset value of $1.00. We have historically maintained a relatively short average maturity for our investment portfolio, and we believe a hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our interest-sensitive financial instruments. Other than convertible notes and SAFEs, we held no debt securities as of December 28, 2025.
In November 2025, we issued $500 million of 4.750% notes due 2030. In September 2024, we issued $500 million of 4.650% notes due 2026. In December 2022, we issued $500 million of 5.800% notes due 2025, which matured and were repaid in December 2025, and $500 million of 5.750% notes due 2027. In March 2021, we issued $500 million of 2.550% notes due 2031. We carry the notes at the principal amount, less unamortized discount and debt issuance costs, on our consolidated balance sheets. As the notes have fixed annual interest rates, we do not have economic interest rate exposure or financial statement risk associated with changes in interest rates. The fair value of the notes, however, may fluctuate when interest rates change. See note 5. Debt and Other Commitments for more information.
Foreign Currency Exchange Risk
We conduct a portion of our business in currencies other than our U.S. dollar functional currency. These transactions give rise to cash flows and monetary assets and liabilities that are denominated in currencies other than the U.S. dollar; the value of these amounts are exposed to changes in currency exchange rates from the time the transactions are forecasted or originated until the time the cash settlement is converted into U.S. dollars. Our foreign currency exposures are primarily concentrated in the euro, Japanese yen, Australian dollar, Canadian dollar, Singapore dollar, Chinese Yuan Renminbi, and British pound. We use forward exchange contracts to manage these foreign currency risks and to hedge portions of our foreign currency exposure associated with forecasted revenue transactions. We only use derivative financial instruments to reduce foreign currency exchange rate risks; we do not hold any derivative financial instruments for trading or speculative purposes. The counterparties to these forward exchange contracts expose us to credit-related risks in the event of their non-performance. We mitigate this risk by actively monitoring credit ratings and only selecting major financial institutions as counterparties. Additionally, our risk of credit-related loss is limited to the fair value of these financial contracts, which were not material to our financial position.
Our forward exchange contracts used to manage foreign currency risks related to monetary assets and liabilities have terms of one month or less. Realized and unrealized gains or losses on the fair value of these financial contracts are included in the determination of net income (loss), as they have not been designated for hedge accounting. These contracts, which settle monthly, effectively fix the exchange rate at which these specific monetary assets and liabilities will be settled, so that gains or losses on the forward contracts offset the gains or losses from changes in the value of the underlying monetary assets and liabilities. As of December 28, 2025, the total notional amounts of outstanding forward contracts in place for these foreign currency purchases was $510 million. Our forward exchange contracts used to hedge portions of our foreign currency exposure associated with forecasted revenue transactions have terms of up to 24 months. These derivative financial instruments are designated as cash flow hedges. Gains and losses on these financial contracts, which settle monthly, are generally recorded to revenue in the same period the underlying hedged transactions are recorded. As of December 28, 2025, the total notional amounts of outstanding forward contracts in place for these foreign currency purchases was $707 million.
47

RECENT ACCOUNTING PRONOUNCEMENTS

For a summary of recent accounting pronouncements applicable to our consolidated financial statements refer to note 1. Organization and Significant Accounting Policies within the Consolidated Financial Statements section of this report, which is incorporated herein by reference.

48

CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 )
50

Consolidated Balance Sheets
52

Consolidated Statements of Operations
53

Consolidated Statements of Comprehensive Income (Loss)
54

Consolidated Statements of Stockholders’ Equity
55

Consolidated Statements of Cash Flows
56

Notes to the Consolidated Financial Statements
57

1. Organization and Significant Accounting Policies
57

2. Revenue
67

3. Investments and Fair Value Measurements
68

4. Intangible Assets, Goodwill and Acquisitions
71

5. Debt and Other Commitments
74

6. Stockholders’ Equity
76

7. Supplemental Balance Sheet Details
80

8. GRAIL Spin-Off
82

9. Legal Proceedings
84

10. Income Taxes
86

11. Employee Benefit Plans
91

12. Segment and Geographic Information
91

13. Subsequent Events
93

49

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Illumina, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Illumina, Inc. (the Company) as of December 28, 2025 and December 29, 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 28, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 28, 2025 and December 29, 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2025, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 28, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 11, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

50

Valuation of Excess and Obsolete Inventory

Description of the Matter The Company's inventories totaled $564 million as of December 28, 2025. As explained in Note 1 and Note 7 to the consolidated financial statements, the Company assesses the valuation of inventory each reporting period. Obsolete inventory or inventory in excess of management's estimated usage requirement is written down to its estimated net realizable value if those balances are determined to be less than cost.

Auditing management's estimates for excess and obsolete inventory involved subjective auditor judgment because the estimates rely on a number of factors that are affected by market and economic conditions. In particular, the excess and obsolete inventory calculations are subject to potential significant changes in assumptions about future demand, market conditions, and the release of new products that may supersede old ones.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated and tested the design and operating effectiveness of internal controls over the Company's excess and obsolete inventory valuation process, including management's assessment of the assumptions stated above and manual input and analysis of certain data underlying the excess and obsolete inventory valuation.    
 
Our audit procedures included, among others, evaluating the significant assumptions stated above and the accuracy and completeness of the underlying manual inputs provided by supply chain and operations management personnel used to value excess and obsolete inventory. We compared the balance of on-hand inventories to usage forecasts and historical usage and evaluated whether adjustments to forecasted usage were required for specific product considerations, such as new product introductions, technological changes or alternative uses. We also assessed the historical accuracy of management's estimates and performed sensitivity analyses over the significant assumptions to evaluate the changes in the excess and obsolete inventory estimates that would result from changes in the underlying assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2000.

San Diego, California
February 11, 2026
51

ILLUMINA, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except par value)

December 28,
2025 December 29,
2024
ASSETS
Current assets:    
Cash and cash equivalents $ 1,418   $ 1,127  
Short-term investments 215   93  
Accounts receivable, net 854   735  
Inventory, net 564   547  
Prepaid expenses and other current assets 238   244  
Total current assets 3,289   2,746  
Property and equipment, net 759   815  
Operating lease right-of-use assets 370   419  
Goodwill 1,113   1,113  
Intangible assets, net 210   295  
Deferred tax assets, net 454   567  
Other assets 449   348  
Total assets $ 6,644   $ 6,303  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:    
Accounts payable $ 240   $ 221  
Accrued liabilities 846   827  
Term debt, current portion 499   499  
Total current liabilities 1,585   1,547  
Operating lease liabilities 486   554  
Term debt 1,490   1,490  
Other long-term liabilities 360   339  
Commitments and contingencies
Stockholders’ equity:  
Preferred stock, $ 0.01  par value, 10 million shares authorized; no shares issued and outstanding at December 28, 2025 and December 29, 2024
—   —  
Common stock, $ 0.01  par value, 320  million shares authorized; 201  million shares issued and 153  million outstanding at December 28, 2025; 200  million shares issued and 159  million outstanding at December 29, 2024
2   2  
Additional paid-in capital 7,822   7,525  
Accumulated other comprehensive (loss) income ( 10 ) 22  
Accumulated deficit ( 392 ) ( 1,242 )
Treasury stock, at cost; 48  million shares and 41  million shares at December 28, 2025 and December 29, 2024, respectively
( 4,699 ) ( 3,934 )
Total stockholders’ equity 2,723   2,373  
Total liabilities and stockholders’ equity $ 6,644   $ 6,303  

See accompanying notes to consolidated financial statements.

52

ILLUMINA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)

  Years Ended
December 28,
2025 December 29,
2024 December 31,
2023
Revenue:      
Product revenue $ 3,709   $ 3,656   $ 3,787  
Service and other revenue 634   716   717  
Total revenue 4,343   4,372   4,504  
Cost of revenue:
Cost of product revenue 1,107   1,017   1,177  
Cost of service and other revenue 300   367   392  
Amortization of acquired intangible assets 66   127   191  
Total cost of revenue 1,473   1,511   1,760  
Gross profit 2,870   2,861   2,744  
Operating expense:
Research and development 967   1,169   1,354  
Selling, general and administrative 1,086   1,092   1,612  
Goodwill and intangible impairment —   1,889   827  
Legal contingency and settlement 10   ( 456 ) 20  
Total operating expense 2,063   3,694   3,813  
Income (loss) from operations 807   ( 833 ) ( 1,069 )
Other income (expense):
Interest income 40   46   58  
Interest expense ( 101 ) ( 100 ) ( 77 )
Other income (expense), net 340   ( 292 ) ( 29 )
Total other income (expense), net 279   ( 346 ) ( 48 )
Income (loss) before income taxes 1,086   ( 1,179 ) ( 1,117 )
Provision for income taxes 236   44   44  
Net income (loss) $ 850   $ ( 1,223 ) $ ( 1,161 )
Earnings (loss) per share:
Basic $ 5.47   $ ( 7.69 ) $ ( 7.34 )
Diluted $ 5.45   $ ( 7.69 ) $ ( 7.34 )
Shares used in computing earnings (loss) per share:
Basic 155   159   158  
Diluted 156   159   158  

See accompanying notes to consolidated financial statements.
53

ILLUMINA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
 

  Years Ended
  December 28,
2025 December 29,
2024 December 31,
2023
Net income (loss) $ 850   $ ( 1,223 ) $ ( 1,161 )
Unrealized (loss) gain on cash flow hedges, net of deferred tax ( 32 ) 23   ( 4 )
Total comprehensive income (loss) $ 818   $ ( 1,200 ) $ ( 1,165 )

See accompanying notes to consolidated financial statements.

54

ILLUMINA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)

Accumulated
Retained
Additional Other
Earnings Total
  Common Stock Paid-In Comprehensive (Accumulated
Treasury Stock Stockholders’
  Shares Amount Capital Income (Loss) Deficit)
Shares Amount Equity
Balance as of January 1, 2023 198   $ 2   $ 9,207   $ 3   $ 1,142   ( 40 ) $ ( 3,755 ) $ 6,599  
Net loss —  —  —  —  ( 1,161 ) —  —  ( 1,161 )
Unrealized loss on cash flow hedges, net of deferred tax —  —  —  ( 4 ) —  —  —  ( 4 )
Issuance of common stock, net of repurchases 1   —  64   —  —  —  ( 37 ) 27  
Share-based compensation —  —  275   —  —  —  —  275  
Reclassification of liability-classified awards
—  —  9   —  —   —  —  9  
Balance as of December 31, 2023 199   2   9,555   ( 1 ) ( 19 ) ( 40 ) ( 3,792 ) 5,745  
Net loss —  —  —  —  ( 1,223 ) —  —  ( 1,223 )
Unrealized gain on cash flow hedges, net of deferred tax —  —  —  23   —  —  —  23  
Issuance of common stock, net of repurchases 1   —  51   —  —  ( 1 ) ( 142 ) ( 91 )
Share-based compensation —  —  318   —  —  —  —  318  
Spin-Off of GRAIL (see Note 8 )
—  —  ( 2,399 ) —  —  —  —  ( 2,399 )
Balance as of December 29, 2024 200   2   7,525   22   ( 1,242 ) ( 41 ) ( 3,934 ) 2,373  
Net income —   —   —   —   850   —   —   850  
Unrealized loss on cash flow hedges, net of deferred tax —   —   —   ( 32 ) —   —   —   ( 32 )
Issuance of common stock, net of repurchases 1   —   22   —   —   ( 7 ) ( 765 ) ( 743 )
Share-based compensation —   —   275   —   —   —   —   275  
Balance as of December 28, 2025 201   $ 2   $ 7,822   $ ( 10 ) $ ( 392 ) ( 48 ) $ ( 4,699 ) $ 2,723  

See accompanying notes to consolidated financial statements.
55

ILLUMINA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
  Years Ended
December 28,
2025 December 29,
2024 December 31,
2023
Cash flows from operating activities:      
Net income (loss) $ 850   $ ( 1,223 ) $ ( 1,161 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation expense 203   224   235  
Amortization of intangible assets 67   130   197  
Share-based compensation expense 275   370   380  
Deferred income taxes 119   ( 112 ) ( 33 )
Net (gains) losses on strategic investments ( 328 ) 312   40  
Change in fair value of contingent consideration liabilities ( 18 ) ( 315 ) ( 24 )
Goodwill and intangible impairment
23   1,889   827  
Property and equipment and right-of-use asset impairment 4   46   100  
Non-cash charitable contribution
19   —   —  
Gain on Helix contingent value right —   ( 15 ) ( 10 )
Other 18   14   17  
Changes in operating assets and liabilities:
Accounts receivable ( 108 ) ( 25 ) ( 40 )
Inventory ( 17 ) 19   ( 20 )
Prepaid expenses and other current assets ( 8 ) ( 14 ) 11  
Operating lease right-of-use assets and liabilities, net ( 34 ) ( 32 ) ( 16 )
Other assets ( 21 ) ( 15 ) 5  
Accounts payable 2   ( 4 ) ( 44 )
Accrued liabilities —   ( 440 ) 15  
Other long-term liabilities 33   28   ( 1 )
Net cash provided by operating activities 1,079   837   478  
Cash flows from investing activities:  
Net purchases of property and equipment
( 148 ) ( 128 ) ( 195 )
Net sales (purchases) of strategic investments
103   ( 52 ) ( 6 )
Cash paid for acquisitions and intangible assets, net of cash acquired ( 10 ) ( 81 ) ( 30 )
Cash received for Helix contingent value right —   83   —  
Net cash used in investing activities ( 55 ) ( 178 ) ( 231 )
Cash flows from financing activities:  
Common stock repurchases ( 742 ) ( 116 ) —  
Taxes paid related to net share settlement of equity awards ( 40 ) ( 32 ) ( 40 )
Proceeds from issuance of common stock 44   56   67  
Payments on contingent consideration liabilities ( 1 ) ( 1 ) ( 1 )
Proceeds from debt, net of issuance costs 495   1,241   ( 1 )
Payments on debt obligations ( 500 ) ( 750 ) ( 1,235 )
GRAIL cash deconsolidated as a result of spin-off —   ( 968 ) —  
Net cash used in financing activities ( 744 ) ( 570 ) ( 1,210 )
Effect of exchange rate changes on cash and cash equivalents 11   ( 10 ) —  
Net increase (decrease) in cash and cash equivalents 291   79   ( 963 )
Cash and cash equivalents at beginning of year 1,127   1,048   2,011  
Cash and cash equivalents at end of year $ 1,418   $ 1,127   $ 1,048  
Supplemental cash flow information:  
Cash paid for interest $ 95   $ 83   $ 73  
Cash paid for income taxes (see Note 10 )
$ 73   $ 105   $ 65  
Cash paid for operating lease liabilities $ 114   $ 132   $ 123  
Purchases of property and equipment included in accounts payable and accrued liabilities
$ 22   $ 4   $ 12  
GRAIL net assets, excluding cash and cash equivalents, deconsolidated as a result of spin-off $ —   $ 1,770   $ —  

See accompanying notes to consolidated financial statements.
56

ILLUMINA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unless the context requires otherwise, references in this report to “Illumina,” the “Company,” “we,” “us,” and “our” refer to Illumina, Inc. and its consolidated subsidiaries.

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Business Overview
We are a provider of sequencing- and array-based solutions, serving customers in the research, clinical and applied markets. Our products are used for applications in the life sciences, oncology, reproductive health, agriculture and other emerging segments. Our customers include leading genomic research centers, academic institutions, government laboratories, and hospitals, as well as pharmaceutical, biotechnology, commercial molecular diagnostic laboratories, and consumer genomics companies .
On June 24, 2024, we completed the separation (the Spin-Off) of GRAIL into a new public company through the distribution of 26,547,021 shares of GRAIL common stock to Illumina stockholders on a pro rata basis. The distribution reflected approximately 85.5 % of the outstanding common stock of GRAIL as of 5:00 p.m. New York time on June 13, 2024, the record date for the distribution (the Record Date). We retained approximately 14.5 % of the shares of GRAIL common stock immediately following the Spin-Off. The disposition of GRAIL did not meet the criteria to be reported as a discontinued operation and accordingly, GRAIL’s assets, liabilities, results of operations and cash flows have not been reclassified. Refer to note 8 . GRAIL Spin-Off for additional details.
Basis of Presentation
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) and include our accounts, our wholly-owned subsidiaries, and majority-owned or controlled companies. All intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation.
Variable Interest Entities (VIEs)
We evaluate our ownership, contractual and other interests in entities that are not wholly-owned to determine if these entities are VIEs, and, if so, whether we are the primary beneficiary of the VIE. In determining whether we are the primary beneficiary of a VIE and therefore required to consolidate the VIE, we apply a qualitative approach that determines whether we have both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of, or the rights to receive benefits from, the VIE that could potentially be significant to that VIE. We continuously perform this assessment, as changes to existing relationships or future transactions may result in the consolidation or deconsolidation of a VIE. As of December 28, 2025, there were no VIEs for which we were the primary beneficiary and for which we were required to consolidate.
Use of Estimates
The preparation of the consolidated financial statements requires that management make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and disclosures of contingent assets and liabilities. Although imposed tariffs, reductions in the U.S. government’s funding of the NIH, our inclusion on the unreliable entities list by regulatory authorities in China, as well as macroeconomic factors such as inflation, exchange rate fluctuations, and concerns about an economic downturn present additional uncertainty, we continue to use the best information available to inform our critical accounting estimates. Actual results could differ from those estimates.
Fiscal Year
Our fiscal year is the 52 or 53 weeks ending the Sunday closest to December 31, with quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, September 30, and December 31. References to 2025, 2024, and 2023 refer to fiscal years ended December 28, 2025, December 29, 2024, and December 31, 2023, respectively, which were all 52 weeks.
57

Table of Contents
ILLUMINA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Functional Currency
The U.S. dollar is the functional currency of our international operations. We re-measure foreign subsidiaries’ monetary assets and liabilities to the U.S. dollar and record the net gains or losses resulting from re-measurement in other income (expense), net in the consolidated statements of operations.
Concentrations of Risk
Customers
We operate in markets that are highly competitive and rapidly changing. Significant technological changes, shifting customer needs, the emergence of competitive products or services with new capabilities, and other factors could negatively impact our operating results. A portion of our customers consist of university and research institutions that management believes are, to some degree, directly or indirectly supported by the United States Government. A significant change in current research funding, particularly with respect to funding of the U.S. National Institutes of Health or targeted cancellations by the U.S. federal government of certain grants or contracts, could have an adverse impact on future revenues and results of operations.
International sales entail a variety of risks, including currency exchange fluctuations, longer payment cycles, and greater difficulty in accounts receivable collection. We are also subject to general geopolitical risks, such as political, social and economic instability, and changes in diplomatic and trade relations. The risks of international sales are mitigated in part by the extent to which sales are geographically distributed. Shipments to customers outside the United States comprised 48 % of total revenue in each of 2025, 2024, and 2023. Customers outside the United States represented 53 % of our gross trade accounts receivable balance as of December 28, 2025 and December 29, 2024.
We had no customers that provided more than 10% of total consolidated revenue in 2025, 2024, and 2023. We perform regular reviews of customer activity and associated credit risks and do not require collateral or enter into netting arrangements. Historically, we have not experienced significant credit losses from accounts receivable.
Financial Instruments
We are also subject to risks related to our financial instruments, including cash and cash equivalents, investments, and accounts receivable. Most of our cash and cash equivalents as of December 28, 2025 were deposited with U.S. financial institutions, either domestically or with their foreign branches. Our investment policy restricts the amount of credit exposure to any one issuer to 5 % of the portfolio or 5 % of the total issue size outstanding at the time of purchase and to any one industry sector, as defined by Clearwater Analytics (Industry Sector Report), to 30 % of the portfolio at the time of purchase. There is no limit to the percentage of the portfolio that may be maintained in debt securities, U.S. government-sponsored entities, U.S. Treasury securities, and money market funds. Historically, we have not experienced significant credit losses from financial instruments.
Suppliers
We require customized products and components that currently are available from a limited number of sources. We source certain key products and components included in our products from single vendors. Historically, we have not experienced significant issues sourcing materials to build our products.
Segments
We report segment information based on the management approach, which designates the internal reporting used by the Chief Operating Decision Maker (CODM) for making decisions and assessing performance as the source of our reportable segments. Our CODM allocates resources and assesses the performance of segments using information about their revenue and net income (loss). Our CODM does not evaluate our segments using asset information.
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ILLUMINA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accounting Pronouncements Adopted in 2025
In December 2023, the FASB issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures . The new standard includes enhanced income tax disclosures, specifically related to the rate reconciliation and income taxes paid for annual periods. The standard was effective for us beginning in fiscal year 2025. We adopted the standard on its effective date in fiscal year 2025 and applied the amendments retrospectively, as permitted, to all prior periods presented in the consolidated financial statements. See note 10. Income Taxes for additional details.
Accounting Pronouncements Adopted in 2024
In December 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures . The new standard requires a company to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the CODM. The standard does not change how an entity identifies its operating segments. The standard was effective for us beginning in fiscal year 2024 and interim periods within fiscal year 2025. We adopted the standard on its effective date in fiscal year 2024 and applied the amendments retrospectively to all prior periods presented in the consolidated financial statements. See note 12. Segment and Geographic Information for additional details.
Accounting Pronouncements Pending Adoption
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures . The new standard requires a company to provide disaggregated disclosures, in the notes to the financial statements, of specified categories of expenses that are included in line items on the face of the income statement. The standard is effective for us beginning in fiscal year 2027 and interim periods within fiscal year 2028, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of ASU 2024-03 on the consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software . The new standard is intended to modernize the recognition and disclosure framework for capitalized internal-use software costs, removing the previous “development” stage model and introducing a more judgment-based approach. The standard is effective for us beginning in our first quarter of fiscal year 2028, with early adoption permitted, and can be applied using a prospective, retrospective, or modified transition approach. We are currently evaluating the impact of ASU 2025-06 on the consolidated financial statements.
In November 2025, the FASB issued ASU 2025-09, D erivatives and Hedging, Hedge Accounting Improvements . The new standard is intended to better align the hedge accounting model with risk management activities. The standard is effective for us beginning in our first quarter of fiscal year 2027, with early adoption permitted, and is applied on a prospective basis. We are currently evaluating the impact of ASU 2025-09 on the consolidated financial statements .
In December 2025, the FASB issued ASU 2025-10, Accounting for Government Grants Received by Business Entities . The new standard provides guidance on the recognition, measurement, and presentation of government grants. The standard is effective for us beginning in our first quarter of fiscal year 2029, with early adoption permitted, and can be applied using a modified prospective, modified retrospective or full retrospective transition approach. We are currently evaluating the impact of ASU 2025-10 on the consolidated financial statements.
Revenue Recognition
Our revenue is generated from the sale of products and services. Product revenue consists of sales of instruments and consumables used in genetic analysis. Service and other revenue consists of revenue generated from genotyping and sequencing services, instrument service contracts, development and licensing agreements, and, prior to the Spin-Off of GRAIL in 2024, cancer detection testing services related to the GRAIL business.
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ILLUMINA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts.
Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer’s acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied.
Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less.
In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers.
Earnings (Loss) per Share
Basic earnings (loss) per share is computed based on the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. In loss periods, basic and diluted loss per share are identical since the effect of potentially dilutive common shares is antidilutive and therefore excluded. Potentially dilutive common shares from equity awards are determined using the average share price for each period under the treasury stock method and proceeds from exercise of equity awards and the average amount of unrecognized compensation expense for equity awards are assumed to be used to repurchase shares. Potentially dilutive common shares issuable upon conversion of convertible notes are determined using the if-converted method.
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The weighted average shares used to calculate basic and diluted earnings (loss) per share were as follows:

  Years Ended
In millions December 28,
2025 December 29,
2024 December 31,
2023
Weighted average shares outstanding
155   159   158  
Effect of potentially dilutive common shares from:
Equity awards 1   —   —  
Weighted average shares used in calculating diluted earnings (loss) per share
156   159   158  

Antidilutive shares:
Equity awards 2   4   3  
Convertible senior notes —   —   1  
Potentially dilutive shares excluded due to antidilutive effect
2   4   4  

Fair Value Measurements
The fair value of assets and liabilities are based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize use of observable inputs and minimize use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:
• Level 1 — Quoted prices in active markets for identical assets or liabilities.
• Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying amounts of financial instruments such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate the related fair values due to the short-term maturities of these instruments.
Cash Equivalents and Investments
Cash equivalents are comprised of short-term, highly-liquid investments with original maturities of 90 days or less.
We have strategic investments in privately-held companies (non-marketable equity securities) and publicly traded companies (marketable equity securities). Our marketable equity securities are measured at fair value. Our non-marketable equity securities without readily determinable market values are initially measured at cost and adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment. Equity investments are classified as current, short-term investments, or noncurrent, recorded in other assets, based on the nature of the securities and their availability for use in current operations. Realized and unrealized gains and losses on our equity investments are recorded in other income (expense), net in the consolidated statements of operations. Our equity investments are assessed for impairment quarterly. Impairment losses, equal to the difference between the carrying value and the fair value of the investment, are recorded in other income (expense), net.
We use the equity method to account for investments through which we have the ability to exercise significant influence, but not control, over the investee. Such investments are recorded in other assets, and our share of net income or loss is recognized on a one quarter lag in other income (expense), net.
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Accounts Receivable
Trade accounts receivable are recorded at the net invoice value and are not interest-bearing. Receivables are considered past due based on the contractual payment terms. We reserve a percentage of our trade receivable balance based on collection history and current economic trends that we expect will impact the level of credit losses over the life of our receivables. These reserves are re-evaluated on a regular basis and adjusted, as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve.
Inventory
Inventory is stated at the lower of cost or net realizable value, on a first-in, first-out basis. Inventory includes raw materials and finished goods that may be used in the research and development process, and such items are expensed as consumed or capitalized as property and equipment and depreciated. Inventory write-downs for slow-moving, excess, and obsolete inventories are estimated based on product life cycles, quality issues, historical experience, and usage forecasts.
Property and Equipment
Property and equipment are stated at cost, subject to review for impairment, and depreciated over the estimated useful lives of the assets, using the straight-line method. Depreciation of leasehold improvements is recorded over the shorter of the lease term or the estimated useful life of the related assets. Maintenance and repairs are expensed as incurred. When assets are sold, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operating expense.
Costs incurred to develop internal-use software during the application development stage are recorded at cost as computer software. Costs incurred in the development of such internal-use software, including external direct costs of materials and services and applicable compensation costs of employees devoted to specific software application development, are capitalized. Costs incurred outside of the application development stage are expensed as incurred.
The estimated useful lives of the major classes of property and equipment are generally as follows:

Buildings and leasehold improvements 4 to 20 years

Machinery and equipment 3 to 5 years

Computer hardware and software 3 to 9 years

Furniture and fixtures 7 years

Leases
We have various non-cancellable operating lease agreements for office, lab, manufacturing, and distribution facilities. These leases have remaining lease terms of 1 year to 13 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms, ranging from 2 years to 20 years. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms, as well as payments for common-area-maintenance and administrative services. We may receive customary incentives from our landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases. Leases are classified as operating or financing at commencement. As of December 28, 2025, we do not have any financing leases.
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Operating lease right-of-use assets and liabilities on our consolidated balance sheets represent the present value of our remaining lease payments over the remaining lease terms, less any impairments recorded for right-of-use assets. We do not allocate lease payments to non-lease components; therefore, fixed payments for common-area-maintenance and administrative services are included in our operating lease right-of-use assets and liabilities. We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable. Operating lease costs consist primarily of the fixed lease payments included in our operating lease liabilities and are recorded on a straight-line basis over the lease terms. We sublease certain real estate to third parties and this sublease income is also recorded on a straight-line basis.
Business Combinations
Under the acquisition method of accounting, we allocate the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. These valuations require us to make estimates and assumptions, especially with respect to intangible assets. We record the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill. Costs that we incur to complete the business combination, such as legal and other professional fees, are expensed as they are incurred.
In connection with certain acquisitions, contingent consideration can be earned by the sellers upon completion of certain future performance milestones. In these cases, a liability is recorded on the acquisition date, as a component of accrued liabilities and/or other long-term liabilities, for an estimate of the acquisition-date fair value of the contingent consideration. These estimates require management judgment, including probabilities of achieving certain future milestones. Changes in the fair value of the contingent consideration subsequent to the acquisition date are recognized in selling, general and administrative expense in our consolidated statements of operations.
If the initial accounting for a business combination is incomplete by the end of a reporting period that falls within the measurement period (not to exceed a year from the date of acquisition), we report provisional amounts in our financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. We record these adjustments to the provisional amounts with a corresponding offset to goodwill. Any adjustments identified after the measurement period are recorded in the consolidated statements of operations.
Goodwill, Intangible Assets and Other Long-Lived Assets
Assets acquired, including intangible assets and capitalized in-process research and development (IPR&D), and liabilities assumed are measured at fair value as of the acquisition date. Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of the net assets acquired. Intangible assets acquired in a business combination that are used for IPR&D activities are considered indefinite lived until the completion or abandonment of the associated research and development efforts. Upon reaching the end of the relevant research and development project (i.e., upon commercialization), the IPR&D asset is amortized over its estimated useful life. If the relevant research and development project is abandoned, the IPR&D asset is expensed in the period of abandonment.
Goodwill and IPR&D are not amortized; however, they are reviewed for impairment at least annually during the second quarter, or more frequently if an event occurs indicating the potential for impairment. Goodwill and IPR&D are considered to be impaired if the carrying value of the reporting unit or IPR&D asset exceeds its respective fair value.
We perform our goodwill impairment analysis at the reporting unit level, which aligns with our reporting structure and availability of discrete financial information. During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting units are less than the carrying amounts, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and our overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair values of our reporting units are less than the carrying amounts, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair values of the reporting units with the carrying values, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, we record an impairment loss based on the difference. We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test.
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The IPR&D impairment test is performed by comparing the fair value of the asset to its carrying amount. When testing indefinite-lived intangibles for impairment, we may assess qualitative factors to determine whether it is more likely than not that the asset is impaired. Alternatively, we may bypass this qualitative assessment and perform a quantitative impairment test. If the IPR&D asset is impaired, the carrying value of the IPR&D is written down to the revised fair value with the related impairment charge recognized in the period in which the impairment occurs.
Our identifiable intangible assets with a finite life are typically comprised of acquired developed technologies, licensed technologies, customer relationships, license agreements, and trade names. The cost of identifiable intangible assets with finite lives is generally amortized on a straight-line basis over the assets’ respective estimated useful lives.
We perform regular reviews to determine if any event has occurred that may indicate that intangible assets with finite useful lives and other long-lived assets are potentially impaired. If indicators of impairment exist, an impairment test is performed to assess the recoverability of the affected assets by determining whether the carrying amount of such assets exceeds the undiscounted expected future cash flows. If the affected assets are not recoverable, we estimate the fair value of the assets and record an impairment loss in an amount equal to the excess of the carrying value over the fair value. Factors that may indicate potential impairment include a significant decline in our stock price and market capitalization compared to the net book value, significant changes in the ability of a particular asset to generate positive cash flows for our strategic business objectives, and the pattern of utilization of a particular asset.
We review our operating lease right-of-use assets for impairment whenever events or changes in circumstances indicate the carrying value of the right-of-use asset may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. We consider a triggering event to reassess a right-of-use asset’s asset group to have occurred if we exit a portion of or the full facility or enter into a sublease. Factors that may indicate potential impairment include a significant decrease in the market price of an underlying leased asset group. If we conclude the carrying value of affected assets will not be recovered, we estimate the fair value of the assets and record an impairment in an amount equal to the excess of the carrying value over the fair value.
Government Incentives
From time to time, we may qualify for or receive government incentives, under defined programs, from various governments, primarily to support our manufacturing and research and development activities. The incentives, which vary in size, have terms of up to five years and are subject to compliance with specified conditions. If conditions are not satisfied, the incentives are subject to reduction, recapture or termination. The government incentives are subject to confidentiality provisions, where applicable. Government incentives are recognized when there is reasonable assurance the conditions of the incentive will be met and the subsidies will be received. We record incentives related to the purchase or construction of assets as deferred income and recognize as a reduction to the related depreciation expense over the estimated useful life of the asset. We record incentives related to operating activities as a reduction of expense over the period necessary to match to the expenditure for which the incentive is intended to compensate. The effect of a change in estimate is recognized in the period in which it is concluded that it is no longer reasonably assured that (i) all of the incentive conditions will be met or (ii) a portion of the subsidies will be received.
We recorded benefits (reductions of expense) for operating-related incentives of $ 13 million and $ 4 million in research and development and selling, general and administrative expense, respectively, in 2025. Grant receivables totaled $ 21 million, as of December 28, 2025, of which the short-term portion of $ 8 million was recorded within prepaid expenses and other current assets and the remaining long-term portion was recorded in other assets. Amounts recognized in our consolidated financial statements in 2025 related to asset-based incentives and cash subsidies received were immaterial. Amounts recognized in 2024 and 2023 for government incentives were immaterial.
Derivative Financial Instruments
We are exposed to foreign exchange rate risks in the normal course of business and use derivative financial instruments to partially offset this exposure. We do not use derivative financial instruments for speculative or trading purposes. Foreign exchange contracts are carried at fair value in other current assets, other assets, accrued liabilities, or other long-term liabilities, as appropriate, on the consolidated balance sheets. The cash flows associated with such foreign exchange contracts, or derivative financial instruments, are classified as cash flows from operating activities in the consolidated statements of cash flows, which is the same category as the hedged transaction.
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We use foreign exchange forward contracts to manage foreign currency risks related to monetary assets and liabilities denominated in currencies other than the U.S. dollar. These derivative financial instruments have terms of one month or less and are not designated as hedging instruments. Changes in fair value of these derivatives are recognized in other income (expense), net, along with the re-measurement gain or loss on the foreign currency denominated assets or liabilities. As of December 28, 2025, we had foreign exchange forward contracts in place to hedge exposures in the euro, Japanese yen, Australian dollar, Canadian dollar, Singapore dollar, Chinese Yuan Renminbi, and British pound. As of December 28, 2025 and December 29, 2024, the total notional amounts of outstanding forward contracts in place for these foreign currency purchases were $ 510 million and $ 477 million, respectively.
We use foreign currency forward contracts to hedge portions of our foreign currency exposure associated with forecasted revenue transactions. These derivative financial instruments have terms up t o 24 m onths and are designated as cash flow hedges. Changes in fair value are recorded as a component of accumulated other comprehensive (loss) income and are reclassified to revenue in the same period the underlying hedged transactions are recorded. We regularly review the effectiveness of our cash flow hedges and consider them to be ineffective if it becomes probable that the forecasted transactions will not occur in the identified period. Changes in fair value of the ineffective portions of our cash flow hedges, if any, are recognized in other income (expense), net. As of December 28, 2025, we had foreign currency forward contracts in place to hedge exposures associated with forecasted revenue transactions denominated in the euro, Japanese yen, Australian dollar, Canadian dollar, and Chinese Yuan Renminbi. As of December 28, 2025 and December 29, 2024, the total notional amounts of outstanding cash flow hedge contracts in place for these foreign currency purchases were $ 707 million and $ 621 million, respectively. We recognized a loss of $ 5  million in revenue in 2025 and recognized gains of $ 15  million and $ 18  million in revenue in 2024 and 2023, respectively . As of December 28, 2025, the fair value of foreign currency forward contracts recorded in total assets and total liabilities was $ 2  million and $ 17  million, respectively. As of December 29, 2024, the fair value of foreign currency forward contracts was $ 27 million, recorded in total assets. Estimated net losses reported in accumulated other comprehensive (loss) income expected to be recognized into earnings within the next 12 months are $ 15 million as of December 28, 2025.
Warranties
We generally provide a one-year warranty on instruments. Additionally, we provide a warranty on consumables through the expiration date, which generally ranges from six to twelve months after the manufacture date. At the time revenue is recognized, an accrual is established for estimated warranty expenses based on historical experience as well as anticipated product performance. We periodically review the warranty reserve for adequacy and adjust the warranty accrual, if necessary, based on actual experience and estimated costs to be incurred. Warranty expense is recorded as a component of cost of product revenue.
Share-Based Compensation
Share-based compensation expense is incurred related to restricted stock, employee stock purchase plan (ESPP), stock options, and, prior to the GRAIL Spin-Off in 2024, cash-based equity incentive awards. Forfeitures are accounted for, as incurred, as a reversal of share-based compensation expense related to awards that will not vest.
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Restricted stock units (RSU) and performance stock units (PSU) are both considered restricted stock. The determination of the amount of share-based compensation expense for our PSU requires the use of certain estimates and assumptions that affect the amount of share-based compensation expense recognized in our consolidated statements of operations. The fair value of restricted stock and performance stock units that do not include a market condition is determined by the closing market price of our common stock on the date of grant. PSU that do not include a market condition represent a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period. At each reporting period, we reassess the probability of the achievement of such corporate performance goals and any increase or decrease in share-based compensation expense resulting from an adjustment in the estimated shares to be released is treated as a cumulative catch-up in the period of adjustment. The fair value of performance stock units that include a market condition is determined on the date of grant using a Monte Carlo simulation, which includes assumptions for expected volatility, risk-free interest rate and dividend yield. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Share-based compensation expense is recognized based on the fair value on a straight-line basis over the requisite service periods of the awards. Compensation expense for PSU that include a market condition is recognized over the requisite service period regardless of whether the market conditions are achieved.
The Black-Scholes-Merton option-pricing model is used to estimate the fair value of stock purchased under our ESPP and stock options granted. The model assumptions include expected volatility, term, dividends, and the risk-free interest rate. The expected volatility is generally determined by weighing the historical and implied volatility of our common stock. The historical volatility is generally commensurate with the estimated expected term. The implied volatility is calculated from the implied market volatility of exchange-traded call options on our common stock. The expected term is generally based on historical forfeiture experience, exercise activity, and on the terms and conditions of the stock awards. The expected dividend yield is determined to be 0 % given that we have never declared or paid cash dividends on our common stock and do not anticipate paying such cash dividends. The risk-free interest rate is based upon U.S. Treasury securities with remaining terms similar to the expected term of the share-based awards.
Cash-based equity incentive awards were classified as liability awards, as such awards were to be settled in cash. In connection with the Spin-Off of GRAIL, these awards were assumed by GRAIL. For purposes of valuation and performance measurement of the awards, GRAIL’s stand-alone value calculation, as estimated by GRAIL based on its analysis and on input from independent valuation advisors and analyses, was used. The fair value of the awards was recorded over the respective vesting periods of the awards, with recognition of a corresponding liability recorded in accrued liabilities in the consolidated balance sheets. The awards were remeasured to fair value at each reporting date until the awards were settled, with changes in fair value recognized in share-based compensation expense.
Shipping and Handling Expenses
Shipping and handling expenses are included in cost of product revenue.
Research and Development
Research and development expenses include personnel expenses, contractor fees, facilities-related costs, material costs, and license fees. Expenditures relating to research and development are expensed in the period incurred.
Advertising Costs
Advertising costs are expensed as incurred and were $ 37 million in 2025 and 2024 and $ 36 million in 2023.
Restructuring
We measure and accrue liabilities associated with employee separation costs, which primarily consist of severance pay and other separation costs such as outplacement services and benefits, at fair value as of the date the plan is approved and when such costs are reasonably estimable. The fair value measurement of restructuring related liabilities requires certain assumptions and estimates to be made, such as the retention period of certain employees. It is our policy to use the best estimates based on facts and circumstances available at the time of measurement, review the assumptions and estimates periodically, and adjust the liabilities when necessary.
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Income Taxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and credit carryforwards. Deferred tax assets and liabilities are determined using the enacted tax rates in effect for the years in which those tax assets are expected to be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date.
Deferred tax assets are regularly assessed to determine the likelihood they will be recovered from future taxable income. A valuation allowance is established when we believe it is more likely than not the future realization of all or some of a deferred tax asset will not be achieved. In evaluating the ability to recover deferred tax assets within the jurisdiction which they arise, we consider all available positive and negative evidence. Factors reviewed include the cumulative pre-tax book income for the past three years, scheduled reversals of deferred tax liabilities, history of earnings and reliable forecasting, projections of pre-tax book income over the foreseeable future, and the impact of any feasible and prudent tax planning strategies.
The impact of a tax position is recognized in the consolidated financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions will be reflected in income tax expense.

2. REVENUE

Our revenue is generated from the sale of products and services. Product revenue consists of sales of instruments and consumables used in genetic analysis. Service and other revenue consists of revenue generated from genotyping and sequencing services, instrument service contracts, development and licensing agreements, and prior to the Spin-Off of GRAIL on June 24, 2024, cancer detection testing services related to the GRAIL business.
Revenue by Source

2025 2024 2023
In millions Sequencing Microarray Total Sequencing Microarray Total Sequencing Microarray Total
Consumables $ 2,939   $ 288   $ 3,227   $ 2,858   $ 297   $ 3,155   $ 2,790   $ 293   $ 3,083  
Instruments 465   17   482   484   17   501   685   19   704  
Total product revenue 3,404   305   3,709   3,342   314   3,656   3,475   312   3,787  
Service and other revenue 581   53   634   651   65   716   637   80   717  
Total revenue $ 3,985   $ 358   $ 4,343   $ 3,993   $ 379   $ 4,372   $ 4,112   $ 392   $ 4,504  

Revenue by Geographic Area

Based on region of destination (in millions) 2025 2024 2023
Americas (1)
$ 2,406   $ 2,441   $ 2,521  
Europe 1,264   1,185   1,140  
Greater China (2)
243   308   384  
Asia-Pacific, Middle East and Africa (3)
430   438   459  
Total revenue $ 4,343   $ 4,372   $ 4,504  

_____________
(1) Americas revenue included United States revenue of $ 2,243  million, $ 2,288  million, and $ 2,359  million in 2025, 2024, and 2023, respectively.
(2) Region includes revenue from China, Taiwan, and Hong Kong.
(3) Region includes revenue from Russia and Turkey.
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Contract Assets and Liabilities
Contract assets, which consist of revenue recognized and performance obligations satisfied or partially satisfied in advance of customer billing, as of December 28, 2025 and December 29, 2024, were $ 21 million and $ 16 million, respectively, all of which were short-term and recorded in prepaid expenses and other current assets.

Contract liabilities, which consist of deferred revenue and customer deposits, as of December 28, 2025 and December 29, 2024, were $ 346 million and $ 327 million, respectively, of which the short-term portions of $ 270 million and $ 260 million, respectively, were recorded in accrued liabilities and the remaining long-term portions were recorded in other long-term liabilities. Revenue recorded in 2025 included $ 244 million of previously deferred revenue that was included in contract liabilities as of December 29, 2024.
Remaining Performance Obligations
We regularly enter into contracts with multiple performance obligations. These contracts are believed to be firm as of the balance sheet date. However, we may allow customers to make product substitutions as we launch new products. The timing of shipments depends on several factors, including agreed upon shipping schedules, which may span multiple quarters. Most performance obligations are generally satisfied within approximately six months after the contract execution date. As of December 28, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 738 million, of which approximately 77 % is expected to be converted to revenue in 2026, approximately 13 % in the following twelve months , and the remainder thereafter.

3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
Strategic Investments
Marketable Equity Securities
Our short-term investments consist of marketable equity securities, primarily our retained investment in GRAIL subsequent to the Spin-Off. As of December 28, 2025 and December 29, 2024, the fair value of our marketable equity securities totaled $ 215 million and $ 93 million, respectively.
Gains (losses) recognized in other income (expense), net on marketable equity securities were as follows:

In millions 2025 2024 (1)
2023
Net gains (losses) recognized during the period
$ 315   $ ( 310 ) $ ( 2 )
Less: Net gains (losses) recognized during the period on securities disposed of during the period
150   —   ( 2 )
Net unrealized gains (losses) recognized during the period on securities still held at the reporting date
$ 165   $ ( 310 ) $ —  
_____________
(1) Subsequent to the Spin-Off of GRAIL, we recognized a loss of $ 309 million in 2024 on our retained investment.
Non-Marketable Equity Securities
As of December 28, 2025 and December 29, 2024, non-marketable equity securities, without readily determinable fair values, included in other assets, were $ 58 million and $ 26 million, respectively.
Venture Funds
We invest in three venture capital investment funds (the Funds), which are accounted for as equity-method investments. The aggregate carrying amount of the Funds, included in other assets, was $ 235 million and $ 201 million as of December 28, 2025 and December 29, 2024, respectively. We recorded net gains of $ 22  million and $ 5  million in 2025 and 2024, respectively, and a net loss of $ 33  million in 2023, in other income (expense), net.
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Our commitments to the Funds are as follows:

Dollars in millions
Capital commitments
Callable through date
Remaining callable as of December 28, 2025

Fund I
$ 100   April 2026 $ 3  
Fund II
$ 150   July 2029 $ 33  
Fund III
$ 60   December 2034 $ 25  

Fair Value Measurements
The following table presents the hierarchy for assets and liabilities measured at fair value on a recurring basis:

December 28, 2025 December 29, 2024
In millions Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:
Money market funds (cash equivalents) $ 1,173   $ —   $ —   $ 1,173   $ 931   $ —   $ —   $ 931  
Marketable equity securities 215   —   —   215   93   —   —   93  
Other investments
—   —   32   32   —   —   17   17  
Deferred compensation plan assets —   79   —   79   —   70   —   70  
Total assets measured at fair value $ 1,388   $ 79   $ 32   $ 1,499   $ 1,024   $ 70   $ 17   $ 1,111  
Liabilities:
Contingent consideration liabilities $ —   $ —   $ 54   $ 54   $ —   $ —   $ 73   $ 73  
Deferred compensation plan liabilities
—   72   —   72   —   65   —   65  
Total liabilities measured at fair value $ —   $ 72   $ 54   $ 126   $ —   $ 65   $ 73   $ 138  

Marketable equity securities are measured at fair value based on quoted trade prices in active markets. We elected the fair value option for other investments, primarily convertible notes, which are included in other assets. Fair value is derived using a probability-weighted scenario approach with changes in fair value recognized in other income (expense), net. Deferred compensation plan assets consist primarily of investments in life insurance contracts carried at cash surrender value, which reflects the net asset value of the underlying publicly traded mutual funds. We corroborate the fair value of our holdings, comparing valuations obtained from our investment service provider to valuations reported by our asset custodians, validating pricing sources and models, and reviewing key model inputs.
Contingent Consideration Liabilities
We reassess the fair value of contingent consideration related to acquisitions on a quarterly basis, with changes in the fair value subsequent to the acquisition date, recognized in selling, general and administrative expense.
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Changes in the estimated fair value of our contingent consideration liabilities were as follows:

In millions
Balance as of January 1, 2023 $ 412  
Change in estimated fair value ( 24 )
Cash payments ( 1 )
Balance as of December 31, 2023 387  
Acquisition 2  
Change in estimated fair value ( 315 )
Cash payments ( 1 )
Balance as of December 29, 2024 73  

Change in estimated fair value ( 18 )
Cash payments ( 1 )
Balance as of December 28, 2025 $ 54  

The fair value of our contingent consideration liability related to GRAIL was $ 54  million and $ 71  million as of December 28, 2025 and December 29, 2024, respectively, of which $ 52  million and $ 70  million, respectively, was included in other long-term liabilities, with the remaining balances included in accrued liabilities. The contingent value rights issued as part of the acquisition entitle the holders to receive future quarterly cash payments (Covered Revenue Payments) representing a pro rata portion of certain GRAIL-related revenues (Covered Revenues) each year for a 12 -year period through August 2033. As defined in the Contingent Value Rights Agreement , this reflects a 2.5 % payment right to the first $ 1  billion of revenue each year for 12 years. Revenue above $ 1  billion each year will be subject to a 9 % contingent payment right during this same period. Covered Revenues for the periods Q4 2024 through Q3 2025, Q4 2023 through Q3 2024, and Q4 2022 through Q3 2023 were $ 142  million, $ 117  million, and $ 85  million, respectively, driven primarily by sales of GRAIL’s Galleri test. Covered Revenue Payments for such periods were $ 1.3 million, $ 1.1 million, and $ 803,000 , respectively, which were paid in 2025, 2024, and 2023, respectively.
We use a Monte Carlo simulation to estimate the fair value of our GRAIL contingent consideration. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues for GRAIL, a revenue risk premium, a revenue volatility estimate, an operational leverage ratio and a counterparty credit spread. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Subsequent to the GRAIL Spin-Off, we no longer have access to GRAIL management’s forecasts. Therefore, we rely on information made public by GRAIL and information published in analyst reports to estimate forecasted revenues through August 2033. To estimate the liability as of December 28, 2025, we selected a revenue risk premium of 3 %. Given volatility in GRAIL’s market capitalization, the revenue risk premium is derived from reconciling forecasted revenues for GRAIL to GRAIL’s market capitalization, primarily using a 60 -day trailing average, and consideration of a Capital Asset Pricing Model and comparable company betas.
The assumptions used in estimating the fair value of our contingent consideration liability related to GRAIL are inherently subject to uncertainty and we note that small changes in these assumptions could have a significant impact on the concluded value. For example, an increase or decrease of 20%, in each year, to the forecasted revenues would have resulted in an increase of $ 16  million and a decrease of $ 15  million, respectively, in the liability as of December 28, 2025. Additionally, an increase or decrease of 250 basis points to the selected revenue risk premium would have resulted in a decrease of $ 10  million and an increase of $ 12  million, respectively. We expect high levels of volatility in the GRAIL contingent consideration liability are possible in future periods.
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Helix Contingent Value Right
In conjunction with the deconsolidation of Helix Holdings I, LLC (Helix) in April 2019, we received a contingent value right with a 7-year term that entitled us to consideration dependent upon the outcome of Helix’s future financing and/or liquidity events. We elected the fair value option to measure the contingent value right received from Helix. Changes in the estimated fair value are recognized in other income (expense), net. We estimated the fair value of the contingent value right using a Monte Carlo simulation. Estimates and assumptions used in the Monte Carlo simulation included probabilities related to the timing and outcome of future financing and/or liquidity events, assumptions regarding collectability and volatility, and an estimated equity value of Helix. These unobservable inputs represented a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. In July 2024, we received cash of $ 83 million to settle the contingent value right early.
Changes in the Helix contingent value right were as follows:

In millions
Balance as of January 1, 2023 $ 58  
Change in estimated fair value 10  
Balance as of December 31, 2023 68  
Change in estimated fair value 15  
Cash received to settle
( 83 )

Balance as of December 29, 2024 and as of December 28, 2025
$ — 

4. INTANGIBLE ASSETS, GOODWILL AND ACQUISITIONS
Intangible Assets

  December 28, 2025 December 29, 2024
In millions Gross
Carrying
Amount Accumulated
Amortization Intangible Assets,
Net Gross
Carrying
Amount Accumulated
Amortization Intangible Assets,
Net
Developed technologies $ 436   $ ( 335 ) $ 101   $ 465   $ ( 305 ) $ 160  
Licensed technologies 234   ( 143 ) 91   234   ( 114 ) 120  
License agreements 24   ( 14 ) 10   19   ( 13 ) 6  
Customer relationships 16   ( 14 ) 2   16   ( 14 ) 2  
Database 12   ( 6 ) 6   12   ( 5 ) 7  
Trade name 2   ( 2 ) —   2   ( 2 ) —  

Total intangible assets, net $ 724   $ ( 514 ) $ 210   $ 748   $ ( 453 ) $ 295  

We regularly perform reviews to determine if an event has occurred that may indicate identifiable intangible assets are potentially impaired. During 2025, we performed a recoverability test when the planned use of a finite-lived intangible asset changed, resulting in an impairment charge of $ 23  million recorded in cost of product revenue. We concluded the carrying value of the intangible asset exceeded its estimated fair value, which was determined using a discounted cash flow model that included estimates and assumptions for projected future cash flows. The estimates and assumptions used in our assessment of fair value represent Level 3 measurements as they are supported by little or no market activity and reflect our own assumptions in measuring fair value.
As a result of the Fluent BioSciences acquisition in 2024, we recorded a developed technology asset of $ 42  million, with a useful life of 7 years, and a customer relationship asset of $ 2  million, with a useful life of 11 years. We finalized the allocation of the purchase price in 2025 with no material adjustments to provisional amounts.
The estimated future annual amortization of intangible assets is shown in the following table. Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors.
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In millions Estimated Annual Amortization
2026 $ 55  
2027 53  
2028 50  
2029 21  
2030 14  
Thereafter 17  
Total $ 210  

Goodwill

In millions
Balance as of December 31, 2023 (1)
$ 2,545  
Impairment ( 1,466 )
Acquisition 34  

Balance as of December 29, 2024 and as of December 28, 2025
$ 1,113  

_____________
(1) The balance as of December 31, 2023 includes accumulated impairment of $ 4,626 million related to the GRAIL reporting unit.
Goodwill is reviewed for impairment annually, during the second quarter, or more frequently if an event occurs indicating the potential for impairment. We performed our annual assessment in Q2 2025, noting no impairment.
2024 Impairment of Goodwill
In May 2024, we performed our annual goodwill impairment test for our two reporting units: Core Illumina and GRAIL. Prior to the Spin-Off of GRAIL in June 2024, our reporting units included Core Illumina and GRAIL. We performed a quantitative test for both reporting units. GRAIL’s carrying value exceeded its fair value, estimated as $ 580  million, and we recorded a goodwill impairment of $ 1,466  million. There was no impairment noted for Core Illumina.
To determine the fair value of GRAIL as of May 2024, we utilized enterprise value estimates of GRAIL, as estimated by investment bankers for purposes of determining pricing for the Spin-Off. Estimates and assumptions used to derive the investment bankers’ enterprise value estimates included estimated revenues for a two year period based on assumed growth rates and implied revenue multiples for comparable companies. These estimates and assumptions represent a Level 3 measurement as they are supported by little or no market activity and reflect our own assumptions in measuring fair value. An increase in estimated enterprise values for GRAIL of 100% would still have resulted in a full impairment of goodwill. In prior periods, we used a combination of both an income (discounted cash flow) and market approach to determine the fair value of GRAIL. The income approach utilized estimated cash flows for GRAIL based on a long-range plan, for a 15 year period, which contemplated FDA approval. Based on this approach, in Q3 2023, we estimated the fair value of GRAIL to be $ 3.6  billion and using this same approach in Q4 2023 suggested no further decrement in fair value. Initial analyst coverage of GRAIL from December 2023 into the spring of 2024 suggested that GRAIL could be valued between $ 3  billion and $ 4  billion. By May 2024, prior to the consummation of the GRAIL Spin-Off, additional information about GRAIL had become available in GRAIL’s amended Form 10 filings and a publicly available management presentation, which included updated disclosure about GRAIL’s business and anticipated near term financial trends. Prior to the consummation of the GRAIL Spin-Off, the amount of GRAIL’s Disposal Funding, $ 974  million, was also disclosed. Analyst and banker valuation estimates then began to estimate fair values between $ 400  million and $ 770  million, consistent with the impairment recorded in Q2 2024.
To determine the fair value of Core Illumina, we used a combination of both an income and market approach consistent with prior periods. The income approach utilized estimated discounted cash flows for the reporting unit, while the market approach utilized comparable company information. Estimates and assumptions used in the income approach included projected cash flows and a discount rate and represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value.
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We evaluated GRAIL’s IPR&D intangible asset for potential impairment, in May 2024, as part of our annual test. We also concluded that the when-issued trading activity for GRAIL’s common stock, in June 2024, represented a triggering event that required an additional impairment test be performed. The carrying value of the IPR&D asset exceeded its estimated fair value and we recorded an impairment of $ 420  million in Q2 2024. The fair value of GRAIL’s IPR&D was determined by the income approach, using a discounted cash flow model. Estimates and assumptions used in the income approach, which represent a Level 3 measurement, included projected cash flows and a discount rate of 46.5 %. The discount rate was derived from reconciling GRAIL’s long-range plan, which contemplated FDA approval and estimated cash flows for a 15 year period, to observed market values of GRAIL based on when-issued trading activity. An increase of 300 basis points to the discount rate used in our analysis would have resulted in additional impairment of $ 20  million. There is substantial risk inherent in forecasting revenues and spend associated with research and development, including assumptions around the timing and level of resources and investment to be made, which were made more challenging in light of the Spin-Off and related Disposal Funding.
We performed a recoverability test for GRAIL’s definite-lived intangible assets, which included developed technology and trade name, noting no impairment. No impairment was noted for Core Illumina definite-lived intangible assets.
2023 Impairment of Goodwill
In Q3 2023, we concluded that the sustained decrease in the Company’s stock price and overall market capitalization during the quarter was a triggering event indicating the fair values of our reporting units might be less than their carrying amounts and that an interim impairment test was required. Based on our analysis, we concluded GRAIL’s carrying value exceeded its fair value and recorded a goodwill impairment of $ 712  million, primarily due to the decrease in the Company’s consolidated market capitalization and a higher discount rate selected for the fair value calculation of GRAIL. There was no impairment for Core Illumina, as its fair value exceeded its carrying value.
We performed our interim goodwill impairment test using a combination of both an income and a market approach to determine the fair value of each reporting unit. The income approach utilized the estimated discounted cash flows for each reporting unit, while the market approach utilized comparable company information. Estimates and assumptions used in the income approach included projected cash flows for both GRAIL and Core Illumina and a discount rate for each reporting unit. Discount rates were determined using a weighted average cost of capital for risk factors specific to each reporting unit and other market and industry data. For GRAIL, the selected discount rate was 24.0 %. An increase of 50 to 100 basis points to the discount rate would have resulted in additional impairment of $ 200  million to $ 350  million. The estimates and assumptions used in our assessment represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. In order to further validate the reasonableness of the fair values concluded for our reporting units, a reconciliation to market capitalization was performed by estimating a reasonable implied control premium and other market factors.
In conjunction with our interim goodwill impairment test, we also evaluated GRAIL’s IPR&D intangible asset for potential impairment. We performed our impairment test by comparing the carrying value of the IPR&D intangible asset to its estimated fair value, which was determined by the income approach, using a discounted cash flow model. Estimates and assumptions used in the income approach, which represent a Level 3 measurement, included projected cash flows and a selected discount rate of 19.0 %. Based on our analysis, the carrying value of GRAIL’s IPR&D intangible asset exceeded its estimated fair value and we recorded an impairment of $ 109  million in Q3 2023, primarily due to a decrease in projected cash flows and a higher discount rate selected for the fair value calculation of the IPR&D asset. We also performed a recoverability test for the definite-lived intangible assets assigned to GRAIL, which included developed technology and trade name, and to Core Illumina and noted no impairment.
In Q4 2023, we concluded, among other events, that our formal announcement to divest GRAIL represented a triggering event that required an additional interim impairment test be performed. As a result of our analysis, no impairment was recorded for Core Illumina or GRAIL. The fair value of GRAIL exceeded its carrying value by approximately $ 950  million and the selected discount rate used in the analysis was 23.0 %. An increase of 100 basis points to the discount rate would still have resulted in no impairment for GRAIL. We also performed a recoverability test for the definite-lived intangible assets assigned to GRAIL and Core Illumina and noted no impairment.
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5. DEBT AND OTHER COMMITMENTS
Summary of Term Debt Obligations

In millions December 28,
2025 December 29,
2024
Principal amount of 2025 Term Notes outstanding
—   500  
Principal amount of 2026 Term Notes outstanding 500   500  
Principal amount of 2027 Term Notes outstanding 500   500  
Principal amount of 2030 Term Notes outstanding
500   —  
Principal amount of 2031 Term Notes outstanding 500   500  
Unamortized discounts and debt issuance costs ( 11 ) ( 11 )
Net carrying amount of term debt
1,989   1,989  
Less: current portion 499   499  
Term debt, non-current
$ 1,490   $ 1,490  
Fair value of term debt outstanding (Level 2)
$ 1,977   $ 1,940  

Interest expense recognized on our outstanding debt obligations, which included amortization of debt discounts and debt issuance costs, was $ 99  million in 2025 and 2024, respectively, and $ 74  million in 2023.
4.750 % Term Notes due 2030 (2030 Term Notes)
On November 25, 2025, we issued $ 500  million aggregate principal amount of 2030 Term Notes. After deducting discounts and issuance costs, we received net proceeds of $ 495  million. The 2030 Notes, which mature on December 12, 2030, accrue interest at a rate of 4.750 % per annum, payable semi-annually on June 12 and December 12 of each year, beginning on June 12, 2026. We may redeem for cash all or any portion of the 2030 Term Notes, at our option, at any time prior to maturity at make-whole premium redemption prices as defined in the form of the notes.
4.650 % Term Notes due 2026 (2026 Term Notes)
On September 9, 2024, we issued $ 500  million aggregate principal amount of 2026 Term Notes. After deducting discounts and issuance costs, we received net proceeds of $ 497  million, which were used to repay a portion of the outstanding debt under the Delayed Draw Credit Agreement. The 2026 Term Notes, which mature on September 9, 2026, accrue interest at a rate of 4.650 % per annum, payable semi-annually on March 9 and September 9 of each year, beginning on March 9, 2025. We may redeem for cash all or any portion of the 2026 Term Notes, at our option, at any time prior to maturity at make-whole premium redemption prices as defined in the form of the notes.
5.800 % Term Notes due 2025 (2025 Term Notes) and 5.750 % Term Notes due 2027 (2027 Term Notes)
In December 2022, we issued $ 500  million aggregate principal amount of 2025 Term Notes and $ 500  million aggregate principal amount of 2027 Term Notes. The 2025 Term Notes matured and were repaid in cash on December 12, 2025. The 2027 Term Notes, which mature on December 13, 2027, accrue interest at a rate of 5.750 % per annum, payable semi-annually on June 13 and December 13 of each year, beginning in June 2023. We may redeem for cash all or any portion of the 2027 Term Notes, at our option, at any time prior to maturity. Prior to November 13, 2027, the notes are redeemable at make-whole premium redemption prices as defined in the form of the notes. After November 13, 2027, the notes are redeemable at a redemption price equal to 100 % of the principal to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date.
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2.550 % Term Notes due 2031 (2031 Term Notes)
In March 2021, we issued $ 500  million aggregate principal amount of 2031 Term Notes. The notes, which mature on March 23, 2031, accrue interest at a rate of 2.550 % per annum, payable semi-annually on March 23 and September 23 of each year. We may redeem for cash all or any portion of the 2031 Term Notes, at our option, at any time prior to maturity. Prior to December 23, 2030, the notes are redeemable at make-whole premium redemption prices as defined in the form of the notes. After December 23, 2030, the notes are redeemable at a redemption price equal to 100 % of the principal to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date.
Delayed Draw Term Loan due 2025
On June 17, 2024, we entered into a 364 -day delayed draw credit agreement (the Delayed Draw Credit Agreement), which provided us with a senior unsecured term loan credit facility in an aggregate principal amount of up to $ 750  million (the Delayed Draw Credit Facility). On June 20, 2024, we borrowed $ 750  million on the credit facility in order to provide a portion of the Disposal Funding to GRAIL as part of the Spin-Off. The delayed draw term loan incurred interest at a rate of 6.7 %. On September 9, 2024, we repaid the full principal outstanding on the Delayed Draw Credit Facility, as well as accrued interest, in an aggregate amount of $ 761  million and terminated the Delayed Draw Credit Agreement. We recognized a loss on debt extinguishment of $ 5  million in 2024, included in interest expense in the consolidated statements of operations, related to the write-off of unamortized debt issuance costs.
Revolving Credit Agreement
In January 2023, we entered into a credit agreement (the Revolving Credit Agreement), which provides us with a $ 750  million senior unsecured five-year revolving credit facility, including a $ 40  million sublimit for swingline borrowings and a $ 50  million sublimit for letters of credit (the Revolving Credit Facility). Proceeds of the loans under the Revolving Credit Facility may be used to finance working capital needs and for general corporate purposes.
The Revolving Credit Facility matures, and all amounts outstanding become due and payable in full, on January 4, 2028, subject to two one-year extensions at our option, the consent of the extending lenders and certain other conditions. We may prepay amounts borrowed and terminate commitments under the Revolving Credit Facility at any time without premium or penalty. As of December 28, 2025, there were no borrowings or letters of credit outstanding under the credit facility, and we were in compliance with all financial and operating covenants.
Loans under the Revolving Credit Facility will have a variable interest rate based on either the term secured overnight financing rate (SOFR) or the alternate base rate, plus an applicable rate that varies with our debt rating and, in the case of loans bearing interest based on term SOFR, a credit spread adjustment equal to 0.10 % per annum. The Revolving Credit Agreement includes an option for us to elect to increase commitments under the credit facility or enter into one or more tranches of term loans in the aggregate principal amount of up to $ 250  million, subject to consent of the lenders providing the additional commitments or loans and certain other conditions.
The Revolving Credit Agreement contains financial and operating covenants. Pursuant to the Revolving Credit Agreement, we are required to maintain a ratio of total debt to adjusted annual earnings before interest, taxes, depreciation and amortization (EBITDA), calculated based on the four consecutive fiscal quarters ending with the most recent fiscal quarter, of not greater than 3.50 to 1.00 as of the end of each fiscal quarter. Upon the consummation of any Qualified Acquisition (as defined in the Revolving Credit Agreement) and us providing notice to the Administrative Agent, the ratio increases to 4.00 to 1.00 for the fiscal quarter in which the acquisition is consummated and the three consecutive fiscal quarters thereafter. The operating covenants include, among other things, limitations on (i) the incurrence of indebtedness by our subsidiaries, (ii) liens on our and our subsidiaries assets, and (iii) certain fundamental changes and the disposition of assets by us and our subsidiaries. The Credit Agreement contains other customary covenants, representations and warranties, and events of default.
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Leases
As of December 28, 2025, the maturities of our operating lease liabilities were as follows:

In millions
2026 $ 101
2027 106
2028 87
2029 82
2030 80
Thereafter 205
Total remaining lease payments
661
Less: imputed interest ( 97 )
Total operating lease liabilities 564
Less: current portion ( 78 )
Long-term operating lease liabilities $ 486
Weighted-average remaining lease term 7.4 years
Weighted-average discount rate 4.4   %

The components of our lease costs were as follows:

In millions 2025 2024 2023
Operating lease costs
$ 78   $ 93   $ 116  
Sublease income ( 12 ) ( 19 ) ( 20 )
Variable lease costs (1)
20   25   27  
Total lease costs $ 86   $ 99   $ 123  

_____________
(1) Variable lease costs include non-fixed maintenance charges and property taxes.
Purchase Obligations
In the normal course of business, we enter into agreements to purchase goods or services that are not cancelable without penalty, primarily for licensing and supply arrangements. For agreements with variable terms, we do not estimate any obligation beyond minimum quantities or pricing as of the reporting date. Licensing agreements under which we commit to minimum royalty payments, some of which are subject to adjustment, may be terminated prior to expiration of underlying intellectual property under certain circumstances. Total minimum payments for noncancelable purchase obligations as of December 28, 2025 were $ 184 million, more than half of which are due during 2026.

6. STOCKHOLDERS' EQUITY

The 2015 Stock and Incentive Compensation Plan (the 2015 Stock Plan) and the New Hire Stock and Incentive Plan allow for the issuance of stock options, performance stock options, restricted stock units and awards and performance stock units. In Q2 2025, the Company’s stockholders approved an amendment and restatement of the Amended and Restated 2015 Stock Plan to, among other things, increase the maximum number of shares authorized for issuance by 7.9  million shares. In 2024, in connection with the GRAIL Spin-Off, all unvested RSU and PSU were equitably adjusted pursuant to the plan to preserve their intrinsic value and the number of shares reserved for issuance under the 2015 Stock Plan was increased by 160,000 shares. As of December 28, 2025, approximately 11.5 million shares remained available for future grants under the Second Amended and Restated 2015 Stock Plan. There is no set number of shares reserved for issuance under the New Hire Stock and Incentive Plan.
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Restricted Stock
We issue restricted stock units (RSU) and performance stock units (PSU), both of which are considered restricted stock. We grant restricted stock pursuant to the Second Amended and Restated 2015 Stock Plan and satisfy such grants through the issuance of either new shares or shares from treasury stock. RSU are share awards that, upon vesting, will deliver to the holder shares of our common stock. RSU generally vest over a four-year period with equal vesting annually. We issue PSU for which the number of shares issuable at the end of a three-year performance period is based on our performance relative to specified operating margin targets (OM PSU) and PSU with a market condition that vest based on the Company’s relative total shareholder return as compared to a peer group of companies measured over a three-fiscal year performance period (rTSR PSU). Depending on the actual performance over the measurement period, an rTSR PSU award recipient could receive up to 175 % of the granted award. Beginning in 2025, we no longer issue PSU for which the number of shares issuable at the end of a three-year performance period is based on our performance relative to specified earnings per share targets (EPS PSU). Shares issuable under all RSU and PSU awards are subject to continued employment through the vesting period.
Restricted stock activity was as follows:

Restricted
Stock Units
(RSU) Performance
Stock Units
(PSU) (1)
Weighted-Average Grant-
Date Fair Value per Share
Units in thousands RSU PSU
Outstanding at January 1, 2023 1,611   74   $ 311.23   $ 446.74  
Awarded 2,032   39   $ 195.94   $ 239.98  
Vested ( 987 ) —   $ 268.08   $ —  
Cancelled ( 458 ) ( 113 ) $ 253.52   $ 299.98  
Outstanding at December 31, 2023 2,198   —   $ 236.32   $ —  
Awarded 2,788   729   $ 133.73   $ 164.38  
Unvested adjustment for GRAIL Spin-Off
107   12   $ —   $ —  
Vested ( 771 ) —   $ 249.70   $ —  
Cancelled ( 443 ) ( 41 ) $ 195.11   $ 167.68  
Outstanding at December 29, 2024 3,879   700   $ 158.60   $ 164.87  
Awarded 1,812   407   $ 86.70   $ 85.67  
Vested ( 1,307 ) ( 55 ) $ 180.78   $ 247.32  
Cancelled ( 646 ) ( 196 ) $ 142.26   $ 156.52  
Outstanding at December 28, 2025 3,738   856   $ 118.82   $ 123.77  
_____________
(1) For OM and EPS PSU, the number of units reflect the estimated number of shares to be issued at the end of the performance period. For rTSR PSU, the number of units reflect the estimated number of shares to be issued based on performance as of the current reporting period. Awarded units are presented net of performance adjustments.
Pre-tax intrinsic value and fair value of vested restricted stock was as follows:

In millions 2025 2024 2023
Pre-tax intrinsic value of outstanding restricted stock:
RSU $ 504   $ 525   $ 306  
PSU $ 116   $ 95   $ —  

Fair value of restricted stock vested:
RSU $ 146   $ 116   $ 122  
PSU $ 7   $ —   $ — 

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Stock Options
Stock option activity was as follows:

Units in thousands Options Weighted-Average
Exercise Price Performance Stock Options (1)
Weighted-Average
Exercise Price
Outstanding at January 1, 2023 187   $ 319.72   17   $ 85.54  
Exercised ( 8 ) $ 71.09   ( 1 ) $ 16.69  
Cancelled
( 144 ) $ 330.25   —   $ —  
Outstanding at December 31, 2023 35   $ 330.25   16   $ 87.74  
Cancelled ( 35 ) $ 330.25   ( 16 ) $ 87.74  

Outstanding at December 29, 2024 and December 28, 2025
—  $ —  —  $ — 

_____________
(1) In connection with the GRAIL acquisition, we issued replacement performance stock options to GRAIL employees in 2021. The number of units reflected awards that had been granted and for which it was assumed to be probable that the underlying performance goals would be achieved. In connection with the GRAIL Spin-Off, all outstanding performance stock options were assumed by GRAIL in 2024.
Liability-Classified Awards
Prior to the GRAIL Spin-Off in 2024, we granted cash-based equity incentive awards to GRAIL employees, which were accounted for as liability-classified awards. In connection with the Spin-Off, these awards were assumed by GRAIL. For purposes of valuation and performance measurement of the awards, GRAIL’s stand-alone value calculation, as estimated by GRAIL based on its analysis and on input from independent valuation advisors and analyses, was used. The awards generally had terms of four years and vested in four equal installments on each anniversary of the grant date, subject to continued employment through the vesting period.
Cash-based equity incentive award activity was as follows:

In millions
Outstanding at January 1, 2023 $ 293  
Granted 116  
Vested and paid in cash
( 77 )
Cancelled ( 32 )
Change in fair value ( 8 )
Outstanding at December 31, 2023 292  
Granted 67  
Vested and paid in cash
( 54 )
Cancelled ( 13 )
Change in fair value ( 9 )
Derecognition for GRAIL Spin-Off (1)
( 283 )

Outstanding at December 29, 2024 and December 28, 2025
$ — 
_____________
(1) The estimated liability immediately prior to the Spin-Off, recorded in accrued liabilities, was $ 53  million, which was disposed of as part of GRAIL’s net assets. See note 8. GRAIL Spin-Off for additional details.
We recognized share-based compensation expense for these cash-based equity incentive awards of $ 52  million in 2024, prior to the Spin-Off of GRAIL, and of $ 95  million in 2023.
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Employee Stock Purchase Plan
The 2000 Employee Stock Purchase Plan, or ESPP, permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. The price at which stock is purchased under the ESPP is equal to 85 % of the fair market value of the common stock on the first day of the offering period or purchase date, whichever is lower. The initial offering period commenced in July 2000. During 2025, 2024, and 2023, approximately 0.6 million, 0.5 million, and 0.4 million shares, respectively, were issued under the ESPP. As of December 28, 2025, approximately 11.8 million shares remained available for issuance under the ESPP.
The assumptions used for the specified reporting periods and the resulting estimates of weighted-average fair value per share for stock purchased under the ESPP were as follows:

2025 2024 2023
Risk-free interest rate 3.82 % - 4.94 %
  4.35 % - 5.54 %
0.78 % - 5.54 %

Expected volatility 41 % - 48 %
  41 % - 49 %
41 % - 51 %

Expected term 0.5 - 1.0 year
  0.5 - 1.1 year
0.5 - 1.1 year

Expected dividends 0 % 0 % 0 %
Weighted-average grant-date fair value per share $ 25.94   $ 37.24   $ 49.87  

Share-Based Compensation
Share-based compensation expense, which includes expense for both equity and liability-classified awards, reported in our consolidated statements of operations was as follows:

In millions 2025 2024 2023
Cost of product revenue $ 20   $ 25   $ 29  
Cost of service and other revenue 3   6   7  
Research and development 107   146   155  
Selling, general and administrative 145   194   189  
Share-based compensation expense, before taxes 275   371   380  
Related income tax benefits ( 61 ) ( 83 ) ( 87 )
Share-based compensation expense, net of taxes $ 214   $ 288   $ 293  

As of December 28, 2025, unrecognized compensation cost, related to restricted stock and ESPP shares issued to date, of $ 391 million was expected to be recognized over a weighted-average period of approximately 2.3 years.
Share Repurchases
In August 2024, our Board of Directors authorized a share repurchase program, which canceled and superseded all prior and available repurchase authorizations, to repurchase up to $ 1.5  billion of our outstanding common stock. The repurchases may be completed through open market purchases, pursuant to Rule 10b5-1 or Rule 10b-18, or through an accelerated share repurchase program. Authorizations to repurchase up to $ 643 million of our outstanding common stock remained available as of December 28, 2025. We did not repurchase any shares during 2023.
Share repurchase activity was as follows:

In millions, except shares in thousands
2025 2024
Number of shares repurchased
7,790   904  
Total cost of shares repurchased (1)
$ 748   $ 116  
_____________
(1) Total cost of shares repurchased includes the 1% excise tax imposed as part of the Inflation Reduction Act of 2022, which is calculated based on share repurchases, net of certain share issuances, and was immaterial for all periods presented.
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Subsequent to December 28, 2025 and through February 11, 2026, we repurchased an additional approximate 264,000 shares of our common stock for approximately $ 32 million.

7. SUPPLEMENTAL BALANCE SHEET DETAILS
Accounts Receivable

In millions December 28,
2025 December 29,
2024
Trade accounts receivable, gross $ 861   $ 744  
Allowance for credit losses ( 7 ) ( 9 )
Total accounts receivable, net $ 854   $ 735  

Inventory

In millions December 28,
2025 December 29,
2024
Raw materials $ 254   $ 225  
Work in process 398   404  
Finished goods 45   31  
Inventory, gross 697   660  
Inventory reserve ( 133 ) ( 113 )
Total inventory, net $ 564   $ 547  

Property and Equipment

In millions December 28,
2025 December 29,
2024
Leasehold improvements $ 755   $ 772  
Machinery and equipment 705   683  
Computer hardware and software 493   478  
Furniture and fixtures 43   53  
Buildings 44   44  
Construction in progress 82   39  
Total property and equipment, gross 2,122   2,069  
Accumulated depreciation ( 1,363 ) ( 1,254 )
Total property and equipment, net $ 759   $ 815  

Accrued Liabilities

In millions December 28,
2025 December 29,
2024

Contract liabilities, current portion $ 270   $ 260  
Accrued compensation expenses (1)
249   252  
Accrued taxes payable 107   101  
Operating lease liabilities, current portion 78   79  
Other, including warranties (2)
142   135  
Total accrued liabilities $ 846   $ 827  
_____________
(1) Includes employee separation costs related to restructuring activities.
(2) See table below for changes in the reserve for product warranties.
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Changes in the reserve for product warranties were as follows:

In millions
Balance as of January 1, 2023 $ 18  
Additions charged to cost of product revenue 42  
Repairs and replacements ( 39 )
Balance as of December 31, 2023 21  
Additions charged to cost of product revenue 42  
Repairs and replacements ( 45 )
Balance as of December 29, 2024 18  
Additions charged to cost of product revenue 28  
Repairs and replacements ( 29 )
Balance as of December 28, 2025 $ 17  

Restructuring
In 2023, we implemented a cost reduction initiative that included workforce reductions, consolidation of certain facilities, and other actions to reduce expenses as part of a plan to realign operating expenses while maintaining focus on our innovation roadmap and sustainable long-term growth. In Q1 2025, we implemented an incremental cost reduction initiative that included optimizing stock-based compensation and non-labor spending, as well as workforce reductions, to help mitigate the expected impact of a reduction in revenue and operating income from our Greater China business and the uncertainty in the U.S. government’s funding of the National Institutes of Health.
A summary of the pre-tax restructuring charges is as follows:

In millions 2025 2024 2023 Cumulative charges recorded since inception
Employee separation costs $ 47   $ 12   $ 48   $ 107  
Asset impairment charges (1)
—   46   100   146  
Other costs —   4   4   8  
Total restructuring charges (2)
$ 47   $ 62   $ 152   $ 261  
_____________
(1) For 2024, relates to impairment of right-of-use assets and leasehold improvements for Foster City campus and other property in San Diego.
For 2023, primarily relates to impairment of right-of-use assets and leasehold improvements for our i3 and Foster City campuses.
(2) For 2025, $ 26  million was recorded in SG&A expense, $ 16  million in R&D expense, and remainder in cost of revenue.
For 2024, $ 59  million was recorded in SG&A expense, $ 2  million in R&D expense, and remainder in cost of revenue.
For 2023,$ 122  million was recorded in SG&A expense, $ 24  million in R&D expense, and remainder in cost of revenue.
Total restructuring charges for 2024 and 2023 primarily related to the Core Illumina segment.
In 2024, we recorded right-of-use asset impairments of $ 12  million and $ 19  million related to our campus in Foster City, California and another property in San Diego, California, respectively. In 2023, we recorded right-of-use asset impairments of $ 38  million and $ 21  million related to our i3 campus in San Diego and our campus in Foster City, respectively. The impairments were determined by comparing the fair values of the impacted right-of-use assets to the carrying values of the assets as of the impairment measurement date. The fair values of the right-of-use assets were estimated using the discounted future cash flows method, which includes estimates and assumptions for future sublease rental rates that reflect current sublease market conditions, as well as discount rates. The estimates and assumptions used in our assessments represent Level 3 measurements because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. In 2024, we recorded $ 14  million of leasehold improvement impairments related to our Foster City campus and, in 2023, we recorded $ 16  million and $ 22  million of leasehold improvement impairments related to our i3 and Foster City campuses, respectively. The right-of-use asset and leasehold improvement impairments were recognized in selling, general and administrative expense.
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A summary of the restructuring liability is as follows:

In millions Employee Separation Costs
Other Costs Total
Amount recorded in accrued liabilities as of December 31, 2023
$ 17   $ 1   $ 18  
Expense recorded
12   4   16  
Cash payments ( 24 ) ( 2 ) ( 26 )
Adjustments to accrual ( 3 ) ( 1 ) ( 4 )
Amount recorded in accrued liabilities as of December 29, 2024
2   2   4  
Expense recorded
47   —   47  
Cash payments ( 42 ) ( 2 ) ( 44 )
Adjustments to accrual —   —   —  
Amount recorded in accrued liabilities as of December 28, 2025
$ 7   $ —   $ 7  

Indemnification Liability
In connection with the acquisition of GRAIL, we assumed a performance-based award for which vesting was based on GRAIL’s future revenues and had an aggregate potential value of up to $ 78  million. Prior to the Spin-Off of GRAIL in 2024, it was not probable that the performance conditions associated with the award would be achieved and, therefore, no share-based compensation expense was recognized in the consolidated statements of operations. In connection with the Spin-Off, this award was assumed by GRAIL. For a period of 2.5 years following the Spin-Off, we are obligated to indemnify GRAIL for cash payments that become earned and payable related to this award. The indemnification is accounted for in accordance with ASC 460. As of both December 28, 2025 and December 29, 2024, we recognized a non-contingent liability of $ 1  million related to this indemnification.

8. GRAIL SPIN-OFF

On June 24, 2024, we completed the Spin-Off of GRAIL into a separate, independent publicly traded company through the distribution of 26,547,021 shares of GRAIL common stock to Illumina stockholders on a pro rata basis. The GRAIL common stock distributed in the Spin-Off consisted of approximately 85.5 % of the outstanding common stock of GRAIL as of the Record Date. The Spin-Off was structured as a tax-free spin-off and Illumina stockholders received one share of GRAIL common stock for every six shares of Illumina common stock held on the Record Date. We retained approximately 14.5 % of the shares of GRAIL common stock immediately following the Spin-Off. The disposition of GRAIL did not meet the criteria to be reported as a discontinued operation and accordingly, GRAIL’s assets, liabilities, results of operations and cash flows have not been reclassified.
As part of the Spin-Off, we contributed to GRAIL an amount, in cash, to cover 2.5 years of GRAIL’s operations (the Disposal Funding), which was determined to be $ 974  million, less the cash and cash equivalents held by GRAIL.
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The carrying amounts of GRAIL’s assets and liabilities included as part of the disposal group were as follows:
In millions
Cash and cash equivalents
$ 968  
Accounts receivable, net
13  
Inventory, net
22  
Prepaid expenses and other current assets
27  
Property and equipment, net
80  
Operating lease right-of-use assets
74  
Intangible assets, net (1)
2,201  
Other assets 14  
Accounts payable ( 12 )
Accrued liabilities ( 118 )
Operating lease liabilities ( 62 )
Other long term-liabilities ( 469 )
GRAIL net assets
$ 2,738  
Amount of GRAIL net assets recorded to short-term investments
$ 397  
Amount of GRAIL net assets recorded to additional paid-in capital
$ 2,341  

Additional adjustments recorded to additional paid-in capital as a result of the GRAIL Spin-Off:

Non-contingent indemnification liability (see Note 7 )
1  
Tax adjustment for difference between the book and tax values of our retained investment in GRAIL
57  
Total recorded to additional paid-in capital as a result of the GRAIL Spin-Off
$ 2,399  
_____________
(1) Includes IPR&D with a carrying value of $ 140  million after impairment. Refer to note 4. Intangible Assets, Goodwill and Acquisitions .
See note 12. Segment and Geographic Information for GRAIL’s results of operations, prior to the Spin-Off, included in our consolidated statements of operations for the periods presented within.
In planning for and executing the Spin-Off, we incurred $ 53  million and $ 17  million in separation-related transaction costs in 2024 and 2023, respectively, recognized in selling, general, and administrative expense. The costs primarily related to financial advisory, legal, regulatory and other professional services fees directly related to the Spin-Off.
In connection with the Spin-Off, Illumina and GRAIL entered into various agreements to effect the Spin-Off and provide a framework for GRAIL’s relationship with Illumina after the Spin-Off, including a separation and distribution agreement, an employee matters agreement, a tax matters agreement, an amended supply and commercialization agreement and a stockholder’s and registration rights agreement (the Agreements). The Agreements determine the treatment of the assets, employees, liabilities and obligations (including certain tax-related assets and liabilities) of Illumina attributable to periods prior to, at and after GRAIL’s separation and also govern certain relationships between Illumina and GRAIL after the Spin-Off.
As a result of the European Commission withdrawing its previously imposed fine, we recognized a net gain of $ 481  million in 2024. We recognized a gain of $ 489  million in operating expense, resulting from the reversal of the accrued fine and related accrued interest, offset by a loss of $ 8  million, recognized in other income (expense), net, for the reversal of associated foreign currency fluctuations. The fine accrued interest at a rate of 5.5 % per annum while it was outstanding. The guarantees we provided in October 2023 to satisfy the obligation in lieu of cash payment while we appealed the European Commission’s jurisdictional and fine decisions were no longer outstanding as of 2024.
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9. LEGAL PROCEEDINGS

We are involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters. In connection with these matters, we assess, on a regular basis, the probability and range of possible loss based on the developments in these matters. A liability is recorded in the consolidated financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review outstanding legal matters to determine the adequacy of the liabilities accrued and related disclosures in consideration of many factors, which include, but are not limited to, past history, scientific and other evidence, and the specifics and status of each matter. We may change our estimates if our assessment of the various factors changes and the amount of ultimate loss may differ from our estimates, resulting in a material effect on our business, financial condition, results of operations, and/or cash flows.

Shareholder Derivative Complaints
On October 17, 2023, a stockholder derivative and class action complaint captioned Icahn Partners LP, et al. v. deSouza, et al. , purportedly brought on behalf of Illumina and public holders of Illumina’s common stock, was filed in the Delaware Court of Chancery against certain current and former directors (including our former Chief Executive Officer). We are named as a nominal defendant in the complaint. The lawsuit alleges the named directors breached their fiduciary duties by knowingly causing Illumina to unlawfully close the GRAIL acquisition, concealing material facts related to the GRAIL acquisition and making inadequate disclosures. Before the filing of the complaint, the purported stockholders did not make a demand that our Board of Directors pursue the claims asserted therein. The complaint seeks damages, costs and expenses, including attorney fees, the certification and consolidation of a putative class, the issuance of amended disclosures, the removal of conflicted directors and declaratory and other equitable relief. On November 1, 2023, the defendants filed a motion to dismiss the complaint.
On February 26, 2024, a stockholder derivative complaint captioned City of Omaha Police and Firefighters Retirement System v. deSouza, et al. , purportedly brought on behalf of Illumina, was filed in the Delaware Court of Chancery against certain current and former directors. On April 16, 2024, a stockholder derivative complaint captioned City of Roseville General Employees Retirement System, et al. v. deSouza, et al. , purportedly brought on behalf of Illumina, was filed in the Delaware Court of Chancery against certain current and former directors and officers. On March 26, 2024, the defendants filed a motion to dismiss the complaint in the lawsuit filed by City of Omaha Police and Firefighters Retirement System. On May 16, 2024, the defendants filed a motion to dismiss the complaint in the lawsuit filed by City of Roseville General Employees Retirement System, et al.
On December 23, 2024, a stockholder derivative complaint captioned The Pavers and Road Builders Benefit Funds v. deSouza, et al. , purportedly brought on behalf of Illumina, was filed in the Delaware Court of Chancery against certain current and former directors and officers. Like the complaints described above, the lawsuits allege the named directors and officers breached their fiduciary duties by knowingly causing Illumina to unlawfully close the GRAIL acquisition. Before the filing of the complaint, the purported stockholder did not make a demand that our Board of Directors pursue the claim asserted therein. The complaint seeks damages against the individual defendants and other equitable relief. On January 21, 2025, the defendants filed a motion to dismiss the complaint in the lawsuit filed by The Pavers and Road Builders Benefit Funds.
On March 27, 2025, the parties in the Icahn Partners LP, et al. v. deSouza, et al. , City of Omaha Police and Firefighters Retirement System v. deSouza, et al. , City of Roseville General Employees Retirement System, et al. v. deSouza, et al. and The Pavers and Road Builders Benefit Funds v. deSouza, et al. Delaware shareholder derivative actions filed a stipulation to consolidate those actions. On April 11, 2025, the parties to the Icahn Partners LP, et al. v. deSouza, et al. action informed the court that they had agreed to a settlement in principle of that action involving a release of claims and no payment by any party. On April 17, 2025, the court held a teleconference on the consolidated action, during which it directed the parties to (i) refile the consolidation stipulation once the Icahn Partners LP, et al. v. deSouza, et al . settlement was finalized and (ii) proceed with the briefing on the motion to dismiss the operative complaint in the consolidated action, which is the complaint filed in The Pavers and Road Builders Benefit Funds v. deSouza, et al .
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On June 2, 2025, (i) Alex Aravanis filed his opening brief in support of his motion to dismiss, (ii) Francis deSouza, John W. Thompson, Frances Arnold, Caroline Dorsa, Robert Epstein, Scott Gottlieb, Gary Guthart, Philip Schiller and Susan Siegel (Director Defendants) filed their opening brief in support of their motion to dismiss and (iii) Illumina filed a joinder to the Director Defendants’ motion. On July 17, 2025, the court granted a stipulation filed by the parties giving plaintiffs until August 8, 2025, to file an amended complaint. On August 8, 2025, plaintiffs filed an amended complaint and a stipulation to dismiss without prejudice all claims against Alex Aravanis, and the court granted the stipulation the same day. In a settlement agreement dated August 21, 2025, the parties in Icahn Partners LP, et al. v. deSouza, et al. agreed that the matter would be dismissed with a full release of claims and no payment by any party. On September 19, 2025, the parties in Icahn Partners LP, et al. v. deSouza, et al. filed a stipulation and proposed order of dismissal in that case, which has not yet been granted. On November 3, 2025, the court held a teleconference with the parties in the Icahn Partners LP, et al. v. deSouza, et al. , City of Omaha Police and Firefighters Retirement System v. deSouza, et al. , City of Roseville General Employees Retirement System, et al. v. deSouza, et al. and The Pavers and Road Builders Benefit Funds v. deSouza, et al. actions and asked them to submit supplemental authority in support of dismissal of the Icahn Partners LP, et al. v. deSouza, et al. action. The parties filed a notice of supplemental authority in support of dismissal on December 2, 2025.
On October 3, 2025, the Director Defendants filed their opening brief in support of defendants’ motion to dismiss the amended complaint filed in the consolidated Pavers action. Illumina filed a joinder to the opening brief. Plaintiffs filed their answering brief on November 20, 2025, and the Director Defendants filed their reply brief on December 19, 2025. Illumina filed a joinder to the reply brief. Any hearing on the motion to dismiss will be held February 13, 2026.
In light of the fact that these lawsuits are in an early stage, we cannot predict the ultimate outcome of the suits. We deny the allegations in the complaints and intend to vigorously defend the litigations.
On May 1, 2024, stockholder Michael Warner sent a litigation demand to our Board of Directors requesting that a civil action for monetary damages be brought by the Board of Directors on behalf of Illumina against officers and directors involved with the GRAIL acquisition. On July 30, 2024, the Board unanimously determined that it was in the best interest of the Company and its shareholders to defer a final decision on the demand given, among other things, the pending stockholder lawsuits described herein and the similarity of issues raised in the demand and those lawsuits. By letter dated October 13, 2025, Mr. Warner requested that the Board reconsider his demand in light of developments in the various shareholder cases related to the acquisition of GRAIL. On February 4, 2026, the Board unanimously determined that it was in the best interest of the Company and its shareholders continuing to defer a final decision on the demand. Our Board will monitor the stockholder lawsuits and revisit the demand as warranted as the lawsuits progress.
On August 21, 2024, an additional stockholder, Jane Davidson, sent a litigation demand to our Board of Directors requesting that a civil action for breaches of fiduciary duty, indemnification, contribution and other appropriate claims be brought by the Board of Directors on behalf of Illumina against officers and directors involved with the GRAIL acquisition. On October 29, 2024, the Board unanimously determined that it was in the best interest of the Company and its shareholders to defer a final decision on the demand given, among other things, the pending stockholder lawsuits described herein and the similarity of issues raised in the demand and those lawsuits. Our Board will monitor the stockholder lawsuits and revisit the demand as warranted as the lawsuits progress.
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Securities Class Actions
Federal Securities Class Actions. On November 11, 2023, the first of three securities class action complaints was filed against Illumina and certain of its current and former executive officers in the United States District Court for the Southern District of California. The first-filed case is captioned Kangas v. Illumina, Inc. et al ., the second-filed case is captioned Roy v. Illumina, Inc. et al., and the third-filed case is captioned Louisiana Sheriffs’ Pension & Relief Fund v. Illumina, Inc. et al. (collectively, the Actions). The complaints generally allege, among other things, that defendants made materially false and misleading statements and omitted material facts relating to Illumina’s acquisition of GRAIL. The complaints seek unspecified damages, interest, fees, and costs. On January 9, 2024, four movants filed motions to consolidate the Actions and to appoint a lead plaintiff (Lead Plaintiff Motions). On April 11, 2024, the Court issued an order consolidating the Actions into a single action (captioned in re Illumina, Inc. Securities Litigation No. 23-cv-2082-LL-MMP), and appointed Universal-Investment-Gesellschaft mbH, UI BVK Kapitalverwaltungsgesellschaft mbH, and ACATIS Investment Kapitalverwaltungsgesellschaft mbH as lead plaintiffs (the Lead Plaintiffs). On June 21, 2024, the Lead Plaintiffs filed their consolidated amended complaint. The complaint alleges that Illumina and GRAIL and certain of their current and former directors and officers violated Sections 10(b) and 20(a) of the Securities Exchange Act and SEC Rule 10b-5 in connection with Illumina’s acquisition of GRAIL. On September 13, 2024, the Lead Plaintiffs filed a second amended consolidated complaint. On November 12, 2024, the Company and other defendants filed a motion to dismiss the second amended consolidated complaint. On December 20, 2024, the Lead Plaintiffs filed their opposition to the motion to dismiss. The defendants’ final reply brief was filed on February 3, 2025. On September 26, 2025, the Court granted the defendants’ motion to dismiss for failure to state a claim, but granted plaintiffs leave to file an amended complaint by October 27, 2025. On October 27, 2025, the Plaintiffs filed a Third Amended Complaint. On December 11, 2025, the Company filed a motion to dismiss the Third Amended Complaint. On February 4, 2026, the Plaintiffs filed their opposition to the motion to dismiss. The Company’s reply is due March 6, 2026. No hearing date has been set.
State Securities Class Actions . On February 2, 2024, the first of two additional securities class actions was filed against Illumina, certain of its officers and directors, and several other individuals and entities in the Superior Court of the State of California, County of San Mateo, captioned Loren Scott Mar v. Illumina, et al. and Scott Zerzanek v. Illumina, Inc. et al . Both complaints generally allege, among other things, that defendants made materially false and misleading statements and omitted material facts in the November 2020 and February 2021 registration statements and prospectus relating to Illumina’s acquisition of GRAIL. The complaints seek unspecified damages, interest, fees, and costs. On March 29, 2024, the parties to the actions filed a Joint Stipulation to Consolidate the actions and to appoint co-lead counsel for plaintiffs, which the Court granted on April 5, 2024. On August 12, 2024, the Plaintiffs filed their consolidated complaint. On February 28, 2025, the defendants filed demurrers seeking dismissal of the litigation. On April 30, 2025, Plaintiffs filed their oppositions to the demurrers, and defendants filed their reply briefs on May 30, 2025. On September 3, 2025, the Court overruled Illumina’s demurrer. On September 16, 2025, Illumina filed its answer to the consolidated complaint denying the allegations. On October 28, 2025, the Company filed a writ with the California Court of Appeals seeking interlocutory appellate review of the court’s order overruling Illumina’s demurrer. On October 31, 2025, the Court of Appeals denied the writ.
In light of the fact that the lawsuits are in an early stage, we cannot predict the ultimate outcome of the suits. We deny the allegations in the complaints and intend to vigorously defend the litigation.

10. INCOME TAXES

Income (loss) before income taxes summarized by region was as follows:

In millions 2025 2024 2023
United States $ 331   $ ( 1,834 ) $ ( 1,735 )
Foreign 755   655   618  
Total income (loss) before income taxes
$ 1,086   $ ( 1,179 ) $ ( 1,117 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The provision for income taxes consisted of the following:

In millions 2025 2024 2023
Current:      
Federal $ —   $ 6   $ ( 5 )
State 13   18   6  
Foreign 104   137   77  
Total current provision 117   161   78  
Deferred:
Federal 106   ( 59 ) ( 13 )
State 19   ( 56 ) ( 26 )
Foreign ( 6 ) ( 2 ) 5  
Total deferred benefit 119   ( 117 ) ( 34 )
Total tax provision $ 236   $ 44   $ 44  

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During the year ended December 28, 2025, we adopted ASU 2023-09 to enhance the income tax disclosures regarding income taxes paid and the rate reconciliation disclosure. The provision for income taxes reconciles to the amount computed by applying the federal statutory rate to income (loss) before income taxes as follows:

2025 2024 2023
Dollars in millions $ % $ % $ %
US federal statutory tax rate $ 228   21.0   % $ ( 248 ) 21.0   % $ ( 235 ) 21.0   %
State and local income taxes, net of federal income tax effect (1)
22   2.0   % ( 36 ) 3.1   % ( 32 ) 2.9   %
Foreign tax effects
Singapore
Statutory rate difference between Singapore and US ( 54 ) ( 5.0 ) % ( 110 ) 9.3   % ( 103 ) 9.2   %
Change in valuation allowance ( 74 ) ( 6.8 ) % ( 3 ) 0.3   % 31   ( 2.8 ) %
Nondeductible R&D expense 2   0.2   % 15   ( 1.3 ) % 2   ( 0.2 ) %
Other 10   0.9   % 12   ( 1.0 ) % 3   ( 0.2 ) %
United Kingdom
Pillar 2 (Global Minimum Tax) top-up tax 10   0.9   % 54   ( 4.6 ) % —   —   %
Other 15   1.4   % 4   ( 0.3 ) % ( 2 ) 0.2   %
Other foreign jurisdictions 16   1.5   % 20   ( 1.7 ) % 8   ( 0.7 ) %
Effect of changes in tax laws or rates enacted in current period —   —   % —   —   % —   —   %
Effect of cross-border tax laws
Global intangible low-taxed income (GILTI) 12   1.1   % 121   ( 10.3 ) % 153   ( 13.7 ) %
Subpart F income ( 15 ) ( 1.4 ) % 23   ( 2.0 ) % 20   ( 1.8 ) %
Foreign-derived intangible income (FDII) ( 5 ) ( 0.5 ) % ( 4 ) 0.3   % 5   ( 0.4 ) %

Tax Credits
Research tax credits ( 16 ) ( 1.5 ) % ( 21 ) 1.8   % ( 27 ) 2.4   %
Change in valuation allowances 44   4.1   % 14   ( 1.2 ) % ( 2 ) 0.2   %
Nontaxable or nondeductible items
Stock compensation 17   1.6   % 16   ( 1.4 ) % 31   ( 2.8 ) %
Goodwill impairment —   —   % 308   ( 26.1 ) % 149   ( 13.3 ) %
Accrual of European Commission fine —   —   % ( 99 ) 8.4   % 3   ( 0.3 ) %
Impact of acquisition related items ( 3 ) ( 0.3 ) % ( 46 ) 3.9   % 8   ( 0.7 ) %
Other 6   0.6   % 4   ( 0.3 ) % —   —   %
Changes in unrecognized tax benefits 22   2.0   % 19   ( 1.6 ) % 32   ( 2.9 ) %
Other adjustments ( 1 ) ( 0.1 ) % 1   ( 0.1 ) % —   —   %
Total tax provision, effective tax rate $ 236   21.7   % $ 44   ( 3.8 ) % $ 44   ( 3.9 ) %

_____________
(1) State taxes in California, Massachusetts, Illinois and Maryland made up the majority (greater than 50%) of the tax effect in this category for 2025. California and Massachusetts made up the majority (greater than 50%) of the tax effect in this category for 2024 and 2023.

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We have elected to account for the global intangible low-taxed income (GILTI) as a period cost in our consolidated financial statements.

The impact of acquisition related items includes the income tax expense impact of transaction costs, acquisition related compensation, and changes to the contingent value rights associated with the GRAIL acquisition.

Significant components of deferred tax assets and liabilities were as follows:

In millions December 28,
2025 December 29,
2024
Deferred tax assets:    
Net operating losses $ 125   $ 189  
Tax credits 290   252  
Other accruals and reserves 32   40  
Stock compensation 31   34  
Capitalized U.S. R&D expenses 134   181  
Other amortization 36   42  
Operating lease liabilities 97   112  
Property and equipment 22   17  
Investments —   23  
Other 68   63  
Total gross deferred tax assets 835   953  
Valuation allowance on deferred tax assets ( 250 ) ( 278 )
Total deferred tax assets
585   675  
Deferred tax liabilities:    
Purchased intangible amortization ( 23 ) ( 35 )
Operating lease right-of-use assets ( 50 ) ( 57 )
Investments ( 39 ) —  
Other ( 23 ) ( 25 )
Total deferred tax liabilities ( 135 ) ( 117 )
Deferred tax assets, net $ 450   $ 558  

A valuation allowance is established when it is more likely than not the future realization of all or some of the deferred tax assets will not be achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis and includes a review of all available positive and negative evidence, including operating results and forecasted ranges of future taxable income. Based on the available evidence as of December 28, 2025, we were not able to conclude it is more likely than not certain deferred tax assets will be realized. Therefore, a valuation allowance of $ 250 million was recorded against certain U.S. and foreign deferred tax assets.     

As of December 28, 2025, we had net operating loss carryforwards for federal and state tax purposes of $ 59  million and $ 1,829 million, respectively, which will begin to expire in 2036 and 2026, respectively, unless utilized prior. We also had federal and state tax credit carryforwards of $ 173 million and $ 250 million, which will begin to expire in 2031 and 2027, respectively, unless utilized prior.

Pursuant to Section 382 and 383 of the Internal Revenue Code, utilization of net operating losses and credits may be subject to annual limitations in the event of any significant future changes in its ownership structure. These annual limitations may result in the expiration of net operating losses and credits prior to utilization. The deferred tax assets as of December 28, 2025 are net of any previous limitations due to Section 382 and 383.

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ILLUMINA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our manufacturing operations in Singapore operate under various tax holidays and incentives, which will begin to expire in 2035. These tax holidays and incentives resulted in a $ 37 million, $ 33 million, and $ 75 million decrease to the provision for income taxes in 2025, 2024, and 2023, respectively. These tax holidays and incentives resulted in an increase in diluted earnings per share of $ 0.24 in 2025, and a decrease in diluted loss per share of $ 0.20 and $ 0.47 in 2024 and 2023, respectively.

As of December 28, 2025, we asserted that $ 1,729 million of foreign earnings would not be indefinitely reinvested, and accordingly, recorded a deferred tax liability of $ 23 million.

The following table summarizes the gross amount of our uncertain tax positions: