ILLUMINA INC

RESULTS OF OPERATIONS

To enhance comparability, the following table sets forth unaudited condensed consolidated statement of operations data for the specified reporting periods, stated as a percentage of total revenue.(1)

(1)Percentages may not recalculate due to rounding.

Revenue

The slight decrease in Core Illumina consumables revenue in Q1 2025 was primarily due to an increase in sequencing consumables revenue, driven primarily by an increase in NovaSeq X consumables, partially offset by decreases in consumables across our other high-throughput instruments, as customers continue to transition to NovaSeq X, and across our mid-throughput instruments. This increase was more than offset by a decrease in intercompany consumables revenue recognized in Q1 2024 prior to the Spin-Off of GRAIL in Q2 2024. The slight decrease in Core Illumina instruments revenue in Q1 2025 was primarily due to increases in MiSeq i100 Series shipments, which launched in Q4 2024, and NovaSeq X shipments, as customers continue to transition. This increase was more than offset by fewer shipments of our other high- and mid-throughput instruments, as capital and cash flow constraints continue to impact our customer’s purchasing behavior. Core Illumina service and other revenue decreased in Q1 2025 primarily due to decreased revenue from our strategic partnerships.

The decrease in GRAIL revenue in Q1 2025 was due to the Spin-Off in Q2 2024.

Gross Margin

*Not meaningful.

Core Illumina gross margin was relatively flat in Q1 2025 primarily due to a favorable impact from the execution of our operational excellence initiatives, that continue to deliver cost savings and improve productivity, and lower strategic partnership revenue, that is lower margin, offset by lower product margins, primarily due to reduced pricing, and an increase in field service costs.

The decrease in GRAIL gross loss in Q1 2025 was due to the Spin-Off in Q2 2024.

Operating Expense

Core Illumina R&D expense increased by $11 million, or 5%, in Q1 2025 primarily due to an increase in employee-separation related restructuring charges of $10 million, as we continue to focus on our cost reduction initiatives.

Core Illumina SG&A expense decreased by $69 million, or 21%, in Q1 2025 primarily due to a favorable impact from our contingent consideration liability related to the GRAIL CVRs of $27 million (recognized a gain of $11 million in Q1 2025 and a loss of $16 million in Q1 2024), a decrease in acquisition-related costs of $27 million, primarily for legal and transaction expenses due to the Spin-Off of GRAIL in Q2 2024, and a decrease in restructuring charges of $17 million, primarily due to the lease and other asset impairments recognized in Q1 2024 on two of our properties.

The decrease in GRAIL R&D and SG&A expense in Q1 2025 was due to the Spin-Off in Q2 2024.

Other Income (Expense)

(1)Total other income, net in Q1 2024 primarily relates to the Core Illumina segment.

Interest income in Q1 2025 was relatively flat and consisted primarily of interest on our money market funds. Interest expense consisted primarily of interest on our outstanding term debt and increased in Q1 2025 due to the issuance of our 2026 Term Notes in Q3 2024. Other income, net increased in Q1 2025 primarily due to an increase in net gains recognized on our strategic investments, primarily related to marketable equity securities, of $27 million.

Provision for Income Taxes

Our effective tax rate was 27.9% in Q1 2025 compared to (15.3)% in Q1 2024. The variance from the U.S. federal statutory tax rate of 21% for Q1 2025 was primarily because of the $10 million income tax expense impact of capitalizing research and development expenses for tax purposes. The income tax rate in Q1 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 in Singapore.

In Q1 2024, the variance from the U.S. federal statutory tax rate of 21% was primarily because of the $21 million income tax expense impact of capitalizing research and development expenses for tax purposes, and the $18 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. The income tax expense in Q1 2024 was also favorably impacted by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore. For Q1 2024, we determined the provision for income taxes utilizing the year-to-date effective tax rate method instead of the estimated annual effective tax rate method.

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” described in “Risk Factors” within the Business & Market Information section of our Annual Report on Form 10-K for the fiscal year ended December 29, 2024.