KLA Corporation is a supplier of industry-leading equipment and services that enables innovation throughout the electronics industry, providing advanced process control and process-enabling solutions for manufacturing wafers, reticles, integrated circuits, packaged ICs, and printed circuit boards. The semiconductor fabrication process is highly sophisticated, involving the creation of large ingots of silicon sliced into wafers, and the manufacturing cycle of an IC is grouped into three phases: design, fabrication, and testing. The semiconductor capital equipment industry has been experiencing multiple growth drivers bolstered by demand for semiconductors from leading-edge foundry and logic manufacturers to support computational power and connectivity, with adoption of EUV in high volume manufacturing for Logic and DRAM memory driving new process control requirements. Demand for advanced semiconductor technologies, particularly evident in the 2-nanometer node, continues to drive investments in AI, and increasing complexity and value of semiconductor packages, particularly for AI and HPC applications, is driving significant growth in the advanced packaging business. The digitization of all industries, including 5G markets and advances in healthcare and industrial applications, together with the increasing adoption of electric vehicles and intelligence in automobiles, are powering leading-edge design node technology investments and capacity expansions. Regionalization of semiconductors has become a trend as access to semiconductors is viewed from the lens of national security, and China remains a major region for the manufacturing of legacy node logic and memory chips, with Chinese government initiatives around self-sustainability propelling China to expand its domestic manufacturing capacity.

In each of its product markets, KLA has many competitors, including companies such as Applied Materials, Inc., ASML Holding N.V., Hitachi High-Technologies Corporation, Onto Innovation, Inc. and Lasertec, Inc., some of which may have greater financial, research, engineering, manufacturing and marketing resources. The strength of KLA's competitive positions in many of its existing markets is primarily due to its leading technology, which is the result of continuing significant investments in product R&D. Management believes that KLA is well positioned in the market with its industry-leading portfolio of products and services. KLA's customers include the leading semiconductor, semiconductor-related and electronic device manufacturers in Asia, the U.S. and Europe, and for the fiscal years ended June 30, 2025, 2024 and 2023, Taiwan Semiconductor Manufacturing Company Limited accounted for more than 10% of total revenues in each year, and Samsung Electronics Co., Ltd. also accounted for more than 10% of total revenues in fiscal 2025.

KLA generates revenue primarily from product sales and related service contracts, mostly through its direct sales force. The services business accounted for approximately 22% of revenue in fiscal 2025, increasing the value of contract offerings and promoting the extension of system lifetimes. Revenues are derived primarily from product sales and related service contracts, and the company has direct sales forces in Asia, the U.S. and Europe. International revenues accounted for approximately 89% of total revenues in both fiscal years ended June 30, 2025 and 2024 and 88% of total revenues in the fiscal year ended June 30, 2023.

KLA is organized into three reportable segments: Semiconductor Process Control; Specialty Semiconductor Process; and PCB and Component Inspection. The Semiconductor Process Control segment offers a comprehensive portfolio of inspection, metrology, chemistry process control and software products and related services, supporting the semiconductor ecosystem from R&D to final volume production, and includes products such as the 39xx Series, 29xx Series, C30x Series, eSi50, Voyager Series, 8 Series, Puma Series, Micro-SR, CIRCL Series, Castor, Surfscan Series, eDR7380 Series, eDRX Series, Archer Series, ATL Series, Axion Series, SpectraShape Series, SpectraFilm Series, Aleris Series, PWG Series, Therma-Probe Series, OmniMap RS-xxx Series, MicroSense product family, CAPRES product family, QualiSurf Series, Quali-Line Quanta Series, Quali-Line Prima Series, QualiLab Elite Series, SensArray product family, Klarity product family, 5D Analyzer, OVALiS, aiSIGHT, Anchor product family, RDC, FabVision Series, ProDATA, PROLITH, I-PAT, SPOT, Surfscan Series, 2835, 2367 Pro, ASET-F5x Pro, Archer Series, HRP-260, Zeta Series, Tencor P Series, Nano Indenter G200X, Alpha-Step Series, Filmetrics F Series, Filmetrics R Series, iMicro, iNano, Filmetrics Profilm3D Series, and NanoFlip. The Specialty Semiconductor Process segment develops and sells advanced vacuum deposition and etching process tools used by a broad range of specialty semiconductor customers, including manufacturers of MEMS, RF communication chips and power semiconductors for automotive and industrial applications, and includes products such as the SPTS Omega Series, SPTS Sigma Series, SPTS Delta Series, SPTS Osprey Series, Primaxx Series, Xactix Series, SPTS Mosaic Series, and MVD Series. The PCB and Component Inspection segment enables electronic device manufacturers to inspect, test and measure PCBs, IC substrates and packaged ICs to verify their quality, pattern the desired electronic circuitry on the relevant substrate and perform three-dimensional shaping of metalized circuits on multiple surfaces, and includes products such as the Serena, Orbotech Corus Series, Orbotech Infinitum Series, Orbotech Nuvogo Fine/Nuvogo Series, Orbotech Diamond Series, Lumina, Orbotech Ultra Dimension Series, Orbotech Ultra Fusion/Fusion Series, Orbotech Discovery II Series, Orbotech Precise Series, Orbotech Ultra PerFix/PerFix Series, Orbotech Neos Series, Orbotech Sprint Series, Orbotech Magna Series, Frontline product family, ICOS F26x, ICOS Tx Series, and Zeta-5xx/6xx.

In March 2024, KLA made the decision to exit its business of manufacturing flat and flexible panel displays by announcing the end of manufacturing of most Display products, but will continue to provide services to the installed base of Display products for existing customers. During the second quarter of fiscal 2025, KLA completed an internal reorganization affecting the composition of reporting units within its Specialty Semiconductor Process and PCB and Component Inspection reportable segments. In November 2024, KLA repaid $750.0 million ¹ of Senior Notes that were due on November 1, 2024. In February 2024, KLA issued $750.0 million ² aggregate principal amount of senior, unsecured notes, consisting of $500.0 million ³ of 4.700% senior, unsecured notes due February 1, 2034 and an additional $250.0 million ⁴ of 4.950% senior, unsecured notes due July 15, 2052. In the fiscal year ended June 30, 2025, KLA made $2.15 billion ⁵ in share repurchases and paid $904.6 million ⁶ in dividends, and increased the dividend in the fourth quarter of fiscal 2025 to $1.90 ⁷ per share per quarter, which was its 16th consecutive annual dividend increase. As of June 30, 2025, $5.03 billion ⁸ remained available for repurchases under the stock repurchase program, which reflects an increase in the authorized repurchase amount of $5.00 billion ⁹ in the fourth quarter of fiscal 2025. On July 3, 2025, KLA replaced its Prior Revolving Credit Facility with a new Credit Agreement and new Revolving Credit Facility with a maturity date of July 3, 2030, that allows borrowing up to $1.50 billion ¹⁰, subject to increase by up to $500.0 million ¹¹ in the aggregate.

Total revenues for the fiscal year ended June 30, 2025 were $12,156,162,000 ¹², compared to $9,812,247,000 ¹³ in fiscal 2024, an increase of 24% ¹⁴. Net income attributable to KLA was $4,061,643,000 ¹⁵ in fiscal 2025, compared to $2,761,896,000 ¹⁶ in fiscal 2024. Diluted net income per share attributable to KLA was $30.37 ¹⁷ in fiscal 2025, compared to $20.28 ¹⁸ in fiscal 2024. Gross margin was 60.9% ¹⁹ in fiscal 2025, compared to 60.0% ²⁰ in fiscal 2024. Net cash provided by operating activities was $4,081,903,000 ²¹ in fiscal 2025, compared to $3,308,575,000 ²² in fiscal 2024.

KLA's growth is driven by multiple factors including adoption of EUV in high volume manufacturing for Logic and DRAM memory, which drives new process control requirements and growth in key markets. Demand for advanced semiconductor technologies, particularly evident in the 2-nanometer node, which is seeing higher levels of investment and process control intensity, continues to drive investments in AI. Increasing complexity and value of semiconductor packages, particularly for AI and HPC applications, is also driving significant growth in the advanced packaging business. The digitization of all industries, including 5G markets and advances in healthcare and industrial applications, together with the increasing adoption of electric vehicles and intelligence in automobiles, are powering leading-edge design node technology investments and capacity expansions. China remains a major region for the manufacturing of legacy node logic and memory chips, and Chinese government initiatives around self-sustainability are propelling China to expand its domestic manufacturing capacity, although the U.S. government has tightened export controls for items destined to China over the past several years, restricting KLA's ability to provide products and services to certain entities without an export license.

KLA's services business has grown consistently each quarter on a year-over-year basis and accounted for approximately 22% ²³ of total revenues in fiscal 2025, due to increases in the installed base of KLA systems. The services revenue, which is generated largely from recurring subscription-like contracts, increases the value of contract offerings and extension of system lifetimes resulting from growth in legacy semiconductor markets.

Gross margin improved to 60.9% ²⁴ in fiscal 2025 from 60.0% ²⁵ in fiscal 2024, with the increase attributed to revenue volume of products and services contributing 1.8% ²⁶, partially offset by mix of products and services sold contributing negative 1.3% ²⁷, and manufacturing labor, overhead and efficiencies contributing 0.4% ²⁸. Other service and manufacturing costs included lower inventory obsolescence charges offset by higher tariff and freight expenses in fiscal year 2025 compared to fiscal year 2024.

KLA's backlog decreased from $9.83 billion ²⁹ as of June 30, 2024 to $7.86 billion ³⁰ as of June 30, 2025, as many capacity constrained suppliers made new investments to meet growing needs, enabling faster product delivery. Lead-time expectations, particularly from largest customers, reverted to historical levels from elevated lead times driven by post-pandemic supply chain disruptions. KLA expects to recognize approximately 71% to 76% ³¹ of this amount as revenue in the next 12 months, 20% to 25% ³² in the subsequent 12 months and the remainder thereafter. KLA's principal manufacturing activities occur in the U.S., Singapore, Israel, Germany, U.K., Italy and China.

KLA devotes a significant portion of its human and financial resources to R&D programs. R&D expenses were $1,360,334,000 ³³ in fiscal 2025, compared to $1,278,981,000 ³⁴ in fiscal 2024. Capital expenditures were $335,259,000 ³⁵ in fiscal 2025, compared to $277,384,000 ³⁶ in fiscal 2024. As of June 30, 2025, $5.03 billion ³⁷ remained available for repurchases under the stock repurchase program. KLA paid $904.6 million ³⁸ in dividends in fiscal 2025 and increased the dividend to $1.90 ³⁹ per share per quarter in the fourth quarter of fiscal 2025. On August 7, 2025, KLA announced that its Board of Directors had declared a quarterly cash dividend of $1.90 ⁴⁰ per share to be paid on September 3, 2025.

KLA faces headwinds from U.S. tariffs imposed on goods imported into the U.S., which have increased cost of revenues due to the increase in the cost of importing foreign sourced components to U.S. facilities. Tariffs imposed on U.S. goods by other countries may harm demand for products from customers in those regions. The U.S. government has tightened export controls for items destined to China over the past several years, and Commerce has added certain China-based entities to the U.S. Entity List, restricting KLA's ability to provide products and services to such entities without an export license. Revenue from sales of products and provision of services to customers in China was 33% ⁴¹, 43% ⁴² and 27% ⁴³ for fiscal years 2025, 2024 and 2023, respectively, and future revenue from China as a percentage of overall revenue may decline as a result of current and future Commerce rules and regulations. The percentage of overall revenue from Chinese customers decreased in fiscal year 2025 compared to fiscal year 2024, while increased investments in process control to meet leading-edge demand by customers in Taiwan contributed to the overall revenue increase in fiscal year 2025 compared to fiscal year 2024.

Management's message emphasizes that KLA is a leading supplier of process control and yield management solutions and services for the semiconductor and related electronics industries, with a broad portfolio of inspection and metrology products and related service, software and other offerings. Management highlights that the services business has grown consistently each quarter on a year-over-year basis and accounted for approximately 22% ⁴⁷ of total revenues in fiscal 2025, due to increases in the installed base of KLA systems. Management notes that despite headwinds from tariffs, gross margin and overall financial performance improved in fiscal year 2025 compared to fiscal year 2024 due to higher revenue volume on products and services sold and cost management. Management states that KLA continues to focus on returning cash to investors, making $2.15 billion ⁴⁸ in share repurchases and paying $904.6 million ⁴⁹ in dividends in the year ended June 30, 2025, and increased the dividend in the fourth quarter of fiscal 2025 to $1.90 ⁵⁰ per share per quarter, which was the 16th consecutive annual dividend increase. Management's strategic priorities include investing in technological innovation, with key R&D activities during the fiscal year ended June 30, 2025 involving the development of process control and process-enabling solutions for front end semiconductors and advanced packaging, and maintaining a commitment to product development in new and emerging technologies.

Total revenues for fiscal 2025 were $12,156,162,000 ⁵¹ compared to $9,812,247,000 ⁵² in fiscal 2024. Net income attributable to KLA was $4,061,643,000 ⁵³ in fiscal 2025 compared to $2,761,896,000 ⁵⁴ in fiscal 2024. Diluted net income per share attributable to KLA was $30.37 ⁵⁵ in fiscal 2025 compared to $20.28 ⁵⁶ in fiscal 2024. Gross margin was 60.9% ⁵⁷ in fiscal 2025 compared to 60.0% ⁵⁸ in fiscal 2024. Operating income, calculated as income before income taxes of $4,644,448,000 ⁵⁹ plus interest expense of $302,166,000 ⁶⁰ and loss on extinguishment of debt of $0 ⁶¹, less other expense (income), net of negative $171,487,000 ⁶², was $4,775,127,000 ⁶³ in fiscal 2025 compared to $3,346,009,000 ⁶⁴ in fiscal 2024. Net cash provided by operating activities was $4,081,903,000 ⁶⁵ in fiscal 2025 compared to $3,308,575,000 ⁶⁶ in fiscal 2024. As of June 30, 2025, cash and cash equivalents were $2,078,908,000 ⁶⁷ and marketable securities were $2,415,715,000 ⁶⁸, totaling $4,494,623,000 ⁶⁹ compared to $4,503,995,000 ⁷⁰ as of June 30, 2024. Total debt, including current portion, was $5,884,257,000 ⁷¹ as of June 30, 2025 compared to $6,630,135,000 ⁷² as of June 30, 2024. The Semiconductor Process Control segment generated revenues of $10,947,359,000 ⁷³ in fiscal 2025, an increase of 25% ⁷⁴ compared to fiscal 2024. The Specialty Semiconductor Process segment generated revenues of $587,107,000 ⁷⁵ in fiscal 2025, an increase of 11% ⁷⁶ compared to fiscal 2024. The PCB and Component Inspection segment generated revenues of $621,721,000 ⁷⁷ in fiscal 2025, an increase of 13% ⁷⁸ compared to fiscal 2024. Impairment of goodwill and purchased intangible assets was $239,100,000 ⁷⁹ in fiscal 2025 compared to $289,474,000 ⁸⁰ in fiscal 2024, which reduced reported net income.

KLA's business is significantly exposed to evolving U.S. export controls and regulations, particularly those imposed by the Bureau of Industry and Security, which restrict the ability to sell products and provide services to certain customers in China. Revenue from China was 33% ⁴⁴ of total revenues in fiscal 2025, down from 43% ⁴⁵ in fiscal 2024, and future revenue from China may decline further as a result of these rules. The recent imposition of U.S. tariffs has increased cost of revenues due to higher costs of importing foreign sourced components, and retaliatory tariffs by other countries may harm demand for KLA's products. KLA has a highly concentrated customer base, with Taiwan Semiconductor Manufacturing Company Limited and Samsung Electronics Co., Ltd. each accounting for more than 10% of total revenues in fiscal 2025, and orders from a relatively limited number of manufacturers account for a substantial portion of sales. The semiconductor industry is historically cyclical, and downturns could materially affect KLA's business. KLA has a leveraged capital structure with $5.95 billion ⁴⁶ aggregate principal amount of outstanding indebtedness as of June 30, 2025, and its ability to service this debt depends on managing business operations, credit ratings, and interest rate environments.