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SUPPLEMENTAL BALANCE SHEET DETAILS | 9 Months Ended
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Sep. 28, 2025
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
SUPPLEMENTAL BALANCE SHEET DETAILS |
7. SUPPLEMENTAL BALANCE SHEET DETAILS
Accounts Receivable
In millions | September 28, 2025 |  | December 29, 2024
Trade accounts receivable, gross | $ | 738 |  |  | $ | 744 |
Allowance for credit losses | (9) |  |  | (9) |
Total accounts receivable, net | $ | 729 |  |  | $ | 735 |
Inventory
In millions | September 28, 2025 |  | December 29, 2024
Raw materials | $ | 251 |  |  | $ | 225 |
Work in process | 418 |  |  | 404 |
Finished goods | 50 |  |  | 31 |
Inventory, gross | 719 |  |  | 660 |
Inventory reserve | (129) |  |  | (113) |
Total inventory, net | $ | 590 |  |  | $ | 547 |
Accrued Liabilities
In millions | September 28, 2025 |  | December 29, 2024
Contract liabilities, current portion | $ | 234 |  |  | $ | 260 |
Accrued compensation expenses (1) | 232 |  |  | 252 |
Accrued taxes payable | 84 |  |  | 101 |
Operating lease liabilities, current portion | 78 |  |  | 79 |
Other, including warranties (2) | 118 |  |  | 135 |
Total accrued liabilities | $ | 746 |  |  | $ | 827 |
_____________ (1)Includes employee separation costs related to restructuring activities. (2)See table below for changes in the reserve for product warranties. Changes in the reserve for product warranties were as follows:
In millions | Q3 2025 |  | Q3 2024 |  | YTD 2025 |  | YTD 2024
Balance at beginning of period | $ | 16 |  |  | $ | 17 |  |  | $ | 18 |  |  | $ | 21 |
Additions charged to cost of product revenue | 3 |  |  | 8 |  |  | 17 |  |  | 30 |
Repairs and replacements | (5) |  |  | (9) |  |  | (21) |  |  | (35) |
Balance at end of period | $ | 14 |  |  | $ | 16 |  |  | $ | 14 |  |  | $ | 16 |
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. 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 | Q3 2025 |  | Q3 2024 |  | YTD 2025 |  | YTD 2024 |  | Cumulative charges recorded since inception
Employee separation costs | $ | 2 |  |  | $ | 6 |  |  | $ | 41 |  |  | $ | 13 |  |  | $ | 101 |
Asset impairment charges (1) | — |  |  | — |  |  | — |  |  | 32 |  |  | 146 |
Other costs | — |  |  | — |  |  | — |  |  | 1 |  |  | 8 |
Total restructuring charges (2) | $ | 2 |  |  | $ | 6 |  |  | $ | 41 |  |  | $ | 46 |  |  | $ | 255 |
_____________ (1)For YTD 2024, primarily relates to impairment of right-of-use assets and leasehold improvements for our Foster City campus. (2)For Q3 2025, $1 million was recorded in R&D expense and $1 million in SG&A expense. For YTD 2025, $23 million was recorded in SG&A expense, $15 million in R&D expense, with remainder in cost of revenue. For Q3 2024, $5 million was recorded in SG&A expense and $1 million in R&D expense. For YTD 2024, $43 million was recorded in SG&A expense, $2 million in R&D expense, with remainder in cost of revenue. Charges for YTD 2024 primarily related to Core Illumina segment. In Q1 2024, we recorded right-of-use asset impairments of $18 million related to our campus in Foster City, California and another property in San Diego, California. 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. We also recorded $14 million of leasehold improvement impairments, in Q1 2024, related to our Foster City campus. The impairments were recognized in selling, general and administrative expense. A summary of restructuring liability activity during YTD 2025 is as follows:
In millions | Employee Separation Costs (1) |  |  |  | Other Costs |  | Total
Amount recorded in accrued liabilities as of December 29, 2024 | $ | 2 |  |  |  |  | $ | 2 |  |  | $ | 4 |
Additional expense recorded | 41 |  |  |  |  | — |  |  | 41 |
Cash payments | (39) |  |  |  |  | (2) |  |  | (41) |
Adjustments to accrual | — |  |  |  |  | — |  |  | — |
Amount recorded in accrued liabilities as of September 28, 2025 | $ | 4 |  |  |  |  | $ | — |  |  | $ | 4 |
_____________ (1)It is expected that substantially all of the employee separation costs will be paid by the end of Q4 2025. Goodwill and Intangible Assets 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. We regularly perform reviews to determine if an event has occurred that may indicate identifiable intangible assets are potentially impaired. During Q2 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 Q2 2025 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. 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 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 income (expense), net, along with the re-measurement gain or loss on the foreign currency denominated assets or liabilities. As of September 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 September 28, 2025 and December 29, 2024, the total notional amounts of outstanding forward contracts in place for these foreign currency purchases were $508 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 to 24 months 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 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 income (expense), net. As of September 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 September 28, 2025 and December 29, 2024, the total notional amounts of outstanding cash flow hedge contracts in place for these foreign currency purchases were $670 million and $621 million, respectively. We recognized losses of $6 million and $1 million in revenue in Q3 2025 and YTD 2025, respectively. We recognized gains of $3 million and $10 million in revenue in Q3 2024 and YTD 2024, respectively. As of September 28, 2025, the fair value of foreign currency forward contracts recorded in total assets and total liabilities was $2 million and $20 million, respectively. As of December 29, 2024, the fair value of foreign currency forward contracts was $27 million, recorded in total assets. Estimated losses reported in accumulated other comprehensive (loss) income expected to be recognized into earnings in the next 12 months are $15 million as of September 28, 2025. 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 the Spin-Off. 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 the award. The indemnification is accounted for in accordance with ASC 460. As of both September 28, 2025 and December 29, 2024, we recognized a non-contingent liability of $1 million related to this indemnification.

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