ILLUMINA, INC.

Accounts Receivable

Inventory

Inventory with certain manufacturing processes that last more than one year is classified as long-term. As of September 27, 2026, long-term inventory primarily consists of work in process that was acquired from SomaLogic.

Accrued Liabilities

(1)See table below for changes in the reserve for product warranties.

Changes in the reserve for product warranties were as follows:

We generally provide aone-year warranty on instruments. Additionally, we provide a warranty on consumables through the expiration date, which generally ranges fromsix totwelve 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.

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 share-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.

No pre-tax restructuring charges were recognized in Q3 2026 or YTD 2026. In Q3 2025 and YTD 2025, total pre-tax restructuring charges were $2 million and $41 million, respectively, related to employee separation costs. In Q3 2025, $1 million was attributed to research and development and $1 million to selling, general and administrative expense. In YTD 2025, $23 million was allocated to selling, general and administrative expense and $15 million to research and development, with remainder recorded in cost of revenue.

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, research and development and workforce training activities. The incentives, which vary in size, have terms of up tofive 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.

We recognized benefits (reductions of expense) in our condensed consolidated statements of operations as follows:

As of September 27, 2026 and December 28, 2025, grant receivables totaled $56 million and $21 million, respectively, of which $15 million and $8 million, respectively, was included in prepaid expenses and other current assets, with the remaining balance included in other assets.

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 prepaid expenses and other current assets, other assets, accrued liabilities, or other long-term liabilities, as appropriate, on the condensed consolidated balance sheets. The cash flows associated with such foreign exchange contracts are classified as cash flows from operating activities in the condensed consolidated statements of cash flows, which is the same category as the hedged transaction.

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 are recognized in other (expense) income, net, along with the remeasurement gain or loss on the foreign currency denominated assets or liabilities. As of September 27, 2026, 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 September 27, 2026 and December 28, 2025, the total notional amounts of outstanding forward contracts in place for these foreign currency purchases were $424 million and $510 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 to 24 months and are designated as cash flow hedges. Changes in fair value are recognized as a component of accumulated other comprehensive income (loss) and are reclassified to revenue in the same period the underlying hedged transactions are recorded. We regularly review the effectiveness of our 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, if any, are recognized in other (expense) income, net. As of September 27, 2026, 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 September 27, 2026 and December 28, 2025, the total notional amounts of outstanding cash flow hedge contracts in place for these foreign currency purchases were $787 million and $707 million, respectively. We recognized losses of $1 million and $7 million in revenue in Q3 2026 and YTD 2026, respectively. We recognized losses of $6 million and $1 million in revenue in Q3 2025 and YTD 2025, respectively. As of September 27, 2026, the fair value of foreign currency forward contracts recognized in total assets and total liabilities was $13 million and $3 million, respectively. As of December 28, 2025, the fair value of foreign currency forward contracts recognized in total assets and total liabilities was $2 million and $17 million, respectively. As of September 27, 2026, a net gain of $7 million is expected to be reclassified from accumulated other comprehensive income (loss) in the next 12 months.

Indemnification Liability

In connection with the GRAIL acquisition, 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. This award was assumed by GRAIL in connection with our divestiture in 2024. For a period of 2.5 years following the divestiture (through December 2026), 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 September 27, 2026 and December 28, 2025, we recognized a non-contingent liability of $1 million related to this indemnification.