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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


(Mark one)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-09992


KLA CORPORATION
(Exact name of registrant as specified in its charter)

Delaware

04-2564110

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

One Technology Drive,

Milpitas,

California

95035

(Address of principal executive offices)

(Zip Code)

(408) 875-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	KLAC	The Nasdaq Stock Market, LLC
		The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 26, 2026, there were 131,076,611 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

Table of Contents

INDEX


		Page Number

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of December 31, 2025 and June 30, 2025	3
	Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended December 31, 2025 and 2024	4
	Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended December 31, 2025 and 2024	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months and Six Months Ended December 31, 2025 and 2024	6
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2025 and 2024	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	52

SIGNATURES		53

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KLA CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands)	December 31, 2025		June 30, 2025
ASSETS
Current assets:
Cash and cash equivalents	$	2,452,124	$	2,078,908
Marketable securities	2,755,340		2,415,715
Accounts receivable, net	2,073,581		2,263,915
Inventories	3,282,605		3,212,149
Other current assets	700,155		728,102
Total current assets	11,263,805		10,698,789
Land, property and equipment, net	1,344,768		1,252,775
Goodwill, net	1,790,597		1,792,193
Deferred income taxes	1,144,113		1,105,770
Purchased intangible assets, net	348,018		444,785
Other non-current assets	828,927		773,614
Total assets	$	16,720,228	$	16,067,926
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	425,189	$	458,509
Deferred system revenue	858,088		816,834
Deferred service revenue	599,254		548,011

Other current liabilities	2,099,941		2,262,441
Total current liabilities	3,982,472		4,085,795
Long-term debt	5,886,128		5,884,257
Deferred tax liabilities	452,678		446,945
Deferred service revenue	270,549		348,844
Other non-current liabilities	662,670		609,632
Total liabilities	11,254,497		11,375,473
Commitments and contingencies (Notes 8, 13 and 14)
Stockholders’ equity:
Common stock and capital in excess of par value	2,604,177		2,511,922
Retained earnings	2,860,594		2,179,330
Accumulated other comprehensive income	960		1,201


Total stockholders’ equity	5,465,731		4,692,453
Total liabilities and stockholders’ equity	$	16,720,228	$	16,067,926

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

Table of Contents

KLA CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands, except per share amounts)	2025		2024		2025		2024
Revenues:
Product	$	2,511,093	$	2,409,462	$	4,976,099	$	4,606,851
Service	786,053		667,389		1,530,743		1,311,541
Total revenues	3,297,146		3,076,851		6,506,842		5,918,392
Costs and expenses:
Costs of revenues	1,271,210		1,221,461		2,514,280		2,368,892
Research and development	383,871		346,157		744,332		669,302
Selling, general and administrative	279,919		267,081		548,907		518,123
Impairment of goodwill and purchased intangible assets	—		239,100		—		239,100
Interest expense	69,668		74,981		140,743		157,152

Other expense (income), net	(37,825)		(44,458)		(81,199)		(85,393)
Income before income taxes	1,330,303		972,529		2,639,779		2,051,216
Provision for income taxes	184,621		148,002		373,057		280,838

Net income	$	1,145,682	$	824,527	$	2,266,722	$	1,770,378


Net income per share
Basic	$	8.73	$	6.18	$	17.24	$	13.24
Diluted	$	8.68	$	6.16	$	17.15	$	13.17
Weighted-average number of shares:
Basic	131,278		133,327		131,517		133,730
Diluted	132,009		133,926		132,205		134,415

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

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KLA CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands)	2025		2024		2025		2024
Net income	$	1,145,682	$	824,527	$	2,266,722	$	1,770,378
Other comprehensive income (loss):
Currency translation adjustments:
Cumulative currency translation adjustments	(697)		(15,281)		3,943		(5,024)
Income tax (provision) benefit	72		2,002		(644)		854
Net change related to currency translation adjustments	(625)		(13,279)		3,299		(4,170)
Cash flow hedges:
Net unrealized gains arising during the period	12,405		1,889		15,769		4,987
Reclassification adjustments for net gains included in net income	(12,168)		(2,260)		(24,380)		(5,768)
Income tax (provision) benefit	(150)		(1,118)		2,254		1,095
Net change related to cash flow hedges	87		(1,489)		(6,357)		314
Net change related to unrecognized gains and transition obligations in connection with defined benefit plans	132		807		278		575
Available-for-sale securities:
Net unrealized gains (losses) arising during the period	1,100		(8,816)		3,546		7,606
Reclassification adjustments for net gains included in net income	(215)		(1)		(312)		—
Income tax (provision) benefit	(190)		1,896		(695)		(1,636)
Net change related to available-for-sale securities	695		(6,921)		2,539		5,970
Other comprehensive income (loss)	289		(20,882)		(241)		2,689

Total comprehensive income	$	1,145,971	$	803,645	$	2,266,481	$	1,773,067

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

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KLA CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Stock and Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
(In thousands, except per share amounts)	Shares	Amount
Balances as of June 30, 2025	132,023	$	2,511,922	$	2,179,330	$	1,201	$	4,692,453
Net income	—	—		1,121,040		—		1,121,040

Other comprehensive loss	—	—		—		(530)		(530)
Net issuance under employee stock plans	116	(81,122)		—		—		(81,122)
Repurchase of common stock	(623)	(11,861)		(552,539)		—		(564,400)
Cash dividends ($1.90 per share) and dividend equivalents declared	—	—		(252,552)		—		(252,552)

Stock-based compensation expense	—	70,182		—		—		70,182


Balances as of September 30, 2025	131,516	2,489,121		2,495,279		671		4,985,071
Net income	—	—		1,145,682		—		1,145,682

Other comprehensive income	—	—		—		289		289
Net issuance under employee stock plans	87	49,826		—		—		49,826
Repurchase of common stock	(460)	(8,717)		(528,836)		—		(537,553)
Cash dividends ($1.90 per share) and dividend equivalents declared	—	—		(251,531)		—		(251,531)

Stock-based compensation expense	—	73,947		—		—		73,947
Balances as of December 31, 2025	131,143	$	2,604,177	$	2,860,594	$	960	$	5,465,731


	Common Stock and Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
(In thousands, except per share amounts)	Shares	Amount
Balances as of June 30, 2024	134,425	$	2,280,133	$	1,137,270	$	(49,075)	$	3,368,328
Net income	—	—		945,851		—		945,851

Other comprehensive income	—	—		—		23,571		23,571
Net issuance under employee stock plans	134	(72,245)		—		—		(72,245)
Repurchase of common stock	(740)	(12,536)		(558,400)		—		(570,936)
Cash dividends ($1.45 per share) and dividend equivalents declared	—	—		(196,555)		—		(196,555)
Stock-based compensation expense	—	61,700		—		—		61,700


Balances as of September 30, 2024	133,819	2,257,052		1,328,166		(25,504)		3,559,714
Net income	—	—		824,527		—		824,527

Other comprehensive loss	—	—		—		(20,882)		(20,882)
Net issuance under employee stock plans	104	43,931		—		—		43,931
Repurchase of common stock	(979)	(16,478)		(639,495)		—		(655,973)
Cash dividends ($1.70 per share) and dividend equivalents declared	—	—		(228,609)		—		(228,609)
Stock-based compensation expense	—	61,841		—		—		61,841
Balances as of December 31, 2024	132,944	$	2,346,346	$	1,284,589	$	(46,386)	$	3,584,549

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

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KLA CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended December 31,
(In thousands)	2025		2024
Cash flows from operating activities:
Net income	$	2,266,722	$	1,770,378
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of goodwill and purchased intangible assets	—		239,100
Depreciation and amortization	196,284		199,745

Unrealized foreign exchange loss and other	14,382		19,064


Stock-based compensation expense	144,129		123,541

Net gain on sale of assets	—		(161)
Deferred income taxes	(42,343)		(150,658)

Changes in assets and liabilities:
Accounts receivable	178,583		(486,264)
Inventories	(94,524)		5,632
Other assets	(14,346)		61,796
Accounts payable	(28,707)		54,617
Deferred system revenue	41,259		86,709
Deferred service revenue	(27,052)		58,790
Other liabilities	(105,189)		(137,536)
Net cash provided by operating activities	2,529,198		1,844,753
Cash flows from investing activities:
Proceeds from sale of assets	—		161



Capital expenditures	(201,470)		(152,716)
Proceeds from capital-related government assistance	16,782		—
Purchases of available-for-sale and equity securities	(1,811,484)		(1,326,968)
Proceeds from maturity and sale of available-for-sale securities	1,473,704		1,921,004
Purchases of trading securities	(180,808)		(34,857)
Proceeds from sale of trading securities	180,606		36,043

Net cash provided by (used in) investing activities	(522,670)		442,667
Cash flows from financing activities:

Payment of debt issuance costs	(1,602)		—

Repayment of debt	—		(750,000)
Common stock repurchases	(1,092,817)		(1,217,504)
Payment of dividends to stockholders	(503,662)		(424,855)

Issuance of common stock	55,542		47,538
Tax withholding payments related to vested and released restricted stock units	(86,839)		(75,854)



Net cash used in financing activities	(1,629,378)		(2,420,675)
Effect of exchange rate changes on cash and cash equivalents	(3,934)		(5,596)
Net increase (decrease) in cash and cash equivalents	373,216		(138,851)
Cash and cash equivalents at beginning of period	2,078,908		1,977,129
Cash and cash equivalents at end of period	$	2,452,124	$	1,838,278
Supplemental cash flow disclosures:
Income taxes paid, net	$	402,950	$	458,228
Interest paid, net of capitalized interest	$	139,194	$	156,185
Non-cash activities:



Dividends payable - financing activities	$	4,437	$	4,113
Unsettled common stock repurchase - financing activities	$	5,500	$	5,500

Accrued purchases of land, property and equipment - investing activities	$	26,040	$	11,354

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

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KLA CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

Basis of Presentation. For purposes of this report, “KLA,” “Company,” “we,” “our,” “us” or similar references mean KLA Corporation and its majority-owned subsidiaries unless the context requires otherwise. The Condensed Consolidated Financial Statements have been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

The unaudited interim Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for audited financial statements. The balance sheet as of June 30, 2025 was derived from the Company’s audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, but does not include all disclosures required by GAAP for audited financial statements. The unaudited interim Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair statement of the financial position, results of operations, comprehensive income, stockholders’ equity and cash flows for the periods indicated. These Condensed Consolidated Financial Statements and notes, however, should be read in conjunction with Item 8 “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

The Condensed Consolidated Financial Statements include the accounts of KLA and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

The results of operations for the three and six months ended December 31, 2025 are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year ending June 30, 2026.

Management Estimates. The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets and liabilities (and related disclosure of contingent assets and liabilities) at the dates of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Reclassifications. The Company has reclassified certain prior period balances to conform to the current year presentation. These reclassifications did not impact any prior amounts of reported total assets, total liabilities, stockholders’ equity, results of operations or cash flows.

Significant Accounting Policies. Except for the below change, there have been no changes to our significant accounting policies summarized in Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

Change in Annual Impairment Testing Date. During the second quarter of fiscal 2026, the Company changed the annual goodwill impairment testing date for all reporting units from February 28 to December 31 to better align with the timing of our budgeting and strategic planning process. We believe that the change in our annual impairment test date is preferable as it allows us to evaluate any potential impact strategic decisions may have on the recoverability of goodwill as those decisions are reached. This will also enable us to use the most current information available in the assessment process. The change in the annual impairment testing date did not delay, accelerate or avoid an impairment charge. For additional details, refer to Note 6 “Goodwill and Purchased Intangible Assets” to our Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements

Recently Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The new guidance requires enhanced disclosures about significant segment expenses. This standard update is effective for our annual reports beginning in the fiscal year ended June 30, 2025, and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2026. We adopted ASU 2023-07 starting with our annual report for the fiscal year ended June 30, 2025, for annual reporting and from July 1, 2025, for interim periods on a retrospective basis.

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In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The new guidance removes all references to prescriptive and sequential software development stages or project stages throughout Subtopic 350-40. Therefore, an entity is required to start capitalizing software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed, and the software will be used to perform the function intended. The standard update is effective for our annual and interim reports beginning in the first quarter of our fiscal year ending June 30, 2028. Early adoption is permitted as of the beginning of an annual reporting period. We adopted ASU 2025-06 for our first quarter of the fiscal year ending June 30, 2026 using a prospective transition approach, and the effect was immaterial to our Consolidated Financial Statements.

Updates Not Yet Effective

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The new guidance requires enhanced disclosures about income tax expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2026. The amendments in this ASU will be applied on a prospective basis. Adoption of this new guidance will result in expanded disclosures in the Notes to the Consolidated Financial Statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The new guidance requires enhanced disclosures about certain expenses in the notes to the financial statements to provide enhanced transparency into the expense captions presented on the face of the income statement. In 2025, the FASB issued ASU 2025-01 which clarifies the effective date for entities that do not have an annual reporting period that ends on December 31st. The Company is required to adopt this standard for our annual reports beginning in the fiscal year ending June 30, 2028, and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2029. Early adoption is permitted. The amendments in this ASU should be applied either on a prospective or retrospective basis. We are currently evaluating the impact of this ASU on our disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets. The new guidance allows companies to apply a practical expedient when estimating credit losses on current accounts receivable and contract assets. The standard update is effective for our annual and interim reports beginning in the first quarter of our fiscal year ending June 30, 2027. Early adoption is permitted for periods in which financial statements have not yet been issued or made ready for issuance. The amendments in this ASU should be applied on a prospective basis. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The new guidance establishes the accounting for a government grant received by a business entity, including guidance for a grant related to an asset and a grant related to income. The new guidance also requires disclosures, including the nature of the government grant received, the accounting policies used to account for the grant, and significant terms and conditions of the grant unless legally prohibited from being disclosed. The standard update is effective for our annual and interim reports beginning in the fiscal year ending June 30, 2030. Early adoption is permitted in both interim and annual reporting periods in which the financial statements have not yet been issued or made available for issuance. If adopted in an interim reporting period, it must be adopted as of the beginning of the annual reporting period that includes that interim reporting period. The amendments in this ASU should be applied using a modified prospective, modified retrospective, or retrospective approach. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The new guidance clarifies interim disclosure requirements and the applicability of Topic 270. The standard update is effective for our annual and interim reports beginning in the fiscal year ending June 30, 2029. Early adoption is permitted. The amendments in this ASU can be applied either prospectively or retrospectively to any or all periods presented in the financial statements. We are currently evaluating the impact of this guidance on our interim reporting.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The new guidance adds clarification, corrects errors, or makes minor improvements. The standard update is effective for our annual and interim reports beginning in the fiscal year ending June 30, 2028. Early adoption is permitted. The amendments in this ASU can be applied either prospectively or retrospectively to the beginning of the earliest period presented in the financial statements. We are currently evaluating the impact of this guidance on our on our Consolidated Financial Statements.

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NOTE 2 – REVENUE

The following table represents the opening and closing balances of accounts receivable, net, contract assets and contract liabilities as of the indicated dates.


	As of		As of
(Dollar amounts in thousands)	December 31, 2025		June 30, 2025		$ Change		% Change
Accounts receivable, net	$	2,073,581	$	2,263,915	$	(190,334)	(8)	%
Contract assets	$	93,117	$	105,081	$	(11,964)	(11)	%
Contract liabilities	$	1,727,891	$	1,713,689	$	14,202	1	%

Our payment terms and conditions vary by contract type, although terms generally include a requirement of payment of 70% to 90% of total contract consideration within 30 to 60 days of shipment, with the remainder payable within 30 days of acceptance.

The change in contract assets during the six months ended December 31, 2025 was mainly due to $84.5 million of contract assets reclassified to accounts receivable, net, as our right to consideration for these contract assets became unconditional, partially offset by $72.7 million of revenue recognized for which the payment is subject to conditions other than passage of time. Contract assets are included in other current assets on our Condensed Consolidated Balance Sheets.

The change in contract liabilities during the six months ended December 31, 2025 was mainly due an increase in the value of products and services billed to customers for which control of the products and services has not transferred to the customers, largely offset by the recognition as revenue of $1.04 billion that was included in contract liabilities as of June 30, 2025. Contract liabilities are included in current liabilities and non-current liabilities, classified as deferred system revenue or deferred service revenue, on our Condensed Consolidated Balance Sheets.

The following table represents the transaction price for contracts that have not yet been recognized as revenue as of December 31, 2025, which equals our contract liabilities, and when the Company expects to recognize the amounts as revenue:


(Dollar amounts in thousands)	Less than 12 months		12 to 24 months		24 months or greater		Total
Contract liabilities	$	1,457,342	$	183,822	$	86,727	$1,727,891

NOTE 3 – FAIR VALUE MEASUREMENTS

Our financial assets and liabilities are measured and recorded at fair value, except for our debt and certain equity investments in privately held companies. Equity investments without a readily available fair value are accounted for using the measurement alternative. The measurement alternative is calculated as cost minus impairment, if any, plus or minus changes resulting from observable price changes. See Note 7 “Debt” to our Condensed Consolidated Financial Statements for disclosure of the fair value of our Senior Notes, as defined in that Note.

Our non-financial assets, such as goodwill, intangible assets, and land, property and equipment, are recorded at fair value only if an impairment is recognized in the current period. We assess for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. For goodwill, we assess for impairment annually.

Fair Value of Financial Instruments. We have evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The fair value of our cash equivalents, accounts receivable, accounts payable and other current assets and liabilities approximate their carrying amounts due to the relatively short maturity of these items.

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Fair Value Hierarchy. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:


Level 1						Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2						Valuations based on 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 data for substantially the full term of the assets or liabilities.

Level 3						Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The types of instruments valued based on quoted market prices in active markets include money market funds, certain U.S. Treasury securities, U.S. Government agency securities and equity securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.

The types of instruments valued based on other observable inputs include corporate debt securities, municipal securities and certain U.S. Treasury securities. The market inputs used to value these instruments generally consist of market yields, reported trades and broker/dealer quotes. Such instruments are generally classified within Level 2 of the fair value hierarchy.

The principal market in which we execute our foreign currency contracts is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants generally are large financial institutions. Our foreign currency contracts’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.

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Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis, as of the dates indicated below, were presented on our Condensed Consolidated Balance Sheets as follows:


			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs
As of December 31, 2025 (In thousands)	Total		(Level 1)		(Level 2)
Assets
Cash equivalents:
Corporate debt securities	$	11,517	$	—	$	11,517
Money market funds and other	2,029,446		2,029,446		—

U.S. Treasury securities	2,993		—		2,993




Marketable securities:
Corporate debt securities	1,123,698		—		1,123,698
Municipal securities	38,236		—		38,236

U.S. Government agency securities	114,233		114,233		—
U.S. Treasury securities	1,161,326		1,116,331		44,995

Equity securities	16,874		16,874		—

Total cash equivalents and marketable securities(1)	4,498,323		3,276,884		1,221,439
Other current assets:
Derivative assets	52,505		—		52,505
Other non-current assets:
Executive Deferred Savings Plan	369,933		278,880		91,053
Total financial assets(1)	$	4,920,761	$	3,555,764	$	1,364,997
Liabilities
Derivative liabilities	$	(8,219)	$	—	$	(8,219)




Total financial liabilities	$	(8,219)	$	—	$	(8,219)

________________

(1) Excludes cash of $307.3 million held in operating accounts and time deposits of $401.9 million (of which $100.9 million were cash equivalents) as of December 31, 2025.

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			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs
As of June 30, 2025 (In thousands)	Total		(Level 1)		(Level 2)
Assets
Cash equivalents:
Municipal securities	$	6,120	$	—	$	6,120
Corporate debt securities	1,498		—		1,498
Money market funds and other	1,531,022		1,531,022		—
U.S. Government agency securities	9,955		—		9,955
U.S. Treasury securities	9,981		—		9,981


Marketable securities:
Corporate debt securities	960,148		—		960,148
Municipal securities	51,453		—		51,453

U.S. Government agency securities	106,881		106,881		—
U.S. Treasury securities	877,578		802,682		74,896

Equity securities	23,962		23,962		—

Total cash equivalents and marketable securities(1)	3,578,598		2,464,547		1,114,051
Other current assets:
Derivative assets	59,503		—		59,503
Other non-current assets:
Executive Deferred Savings Plan	349,530		336,090		13,440
Total financial assets(1)	$	3,987,631	$	2,800,637	$	1,186,994
Liabilities
Derivative liabilities	$	(28,615)	$	—	$	(28,615)



Total financial liabilities	$	(28,615)	$	—	$	(28,615)

________________

(1) Excludes cash of $437.8 million held in operating accounts and time deposits of $478.2 million (of which $82.5 million were cash equivalents) as of June 30, 2025.

We did not have any financial assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of December 31, 2025 or June 30, 2025.

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NOTE 4 – FINANCIAL STATEMENT COMPONENTS

Condensed Consolidated Balance Sheets


	As of		As of
(In thousands)	December 31, 2025		June 30, 2025
Accounts receivable, net:
Accounts receivable, gross	$	2,107,540	$	2,297,930
Allowance for credit losses	(33,959)		(34,015)
	$	2,073,581	$	2,263,915
Inventories:
Customer service parts	$	625,503	$	600,769
Raw materials	1,568,734		1,491,786
Work-in-process	836,166		833,933
Finished goods	252,202		285,661
	$	3,282,605	$	3,212,149
Other current assets:
Deferred costs of revenues	$	230,611	$	223,829
Prepaid expenses	154,399		201,053
Contract assets	93,117		105,081
Prepaid income and other taxes	60,370		64,704
Other current assets	161,658		133,435
	$	700,155	$	728,102
Land, property and equipment, net:
Land	$	86,665	$	86,677
Buildings and leasehold improvements	1,221,595		1,132,176
Machinery and equipment	1,337,606		1,238,599
Office furniture and fixtures	77,227		73,993
Construction-in-process	210,611		207,807
	2,933,704		2,739,252
Less: accumulated depreciation	(1,588,936)		(1,486,477)
	$	1,344,768	$	1,252,775
Other non-current assets:
Executive Deferred Savings Plan(1)	$	369,933	$	349,530
Operating lease right of use assets	294,427		269,714
Other non-current assets	164,567		154,370
	$	828,927	$	773,614
Other current liabilities:
Compensation and benefits	$	550,870	$	418,515
Executive Deferred Savings Plan(1)	371,201		350,426
Customer deposits	363,121		636,369
Interest payable	110,058		110,056
Income taxes payable	159,410		167,262
Operating lease liabilities	50,987		45,192
Other liabilities and accrued expenses	494,294		534,621
	$	2,099,941	$	2,262,441
Other non-current liabilities:
Income taxes payable	$	252,145	$	221,808
Operating lease liabilities	172,363		158,833
Pension liabilities	48,767		51,750
Customer deposits	7,467		6,823
Other non-current liabilities	181,928		170,418
	$	662,670	$	609,632

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________________

(1)We have a non-qualified deferred compensation plan (known as the “Executive Deferred Savings Plan” or “EDSP”) under which certain employees and non-employee directors may defer a portion of their compensation. The expense associated with changes in the EDSP liability included in selling, general and administrative (“SG&A”) was $6.4 million and $3.3 million in the three months ended December 31, 2025 and 2024, respectively, and was $24.6 million and $21.3 million during the six months ended December 31, 2025 and 2024, respectively. The amount of net gains associated with changes in the EDSP assets included in SG&A expense was $6.2 million and $3.5 million in the three months ended December 31, 2025 and 2024, respectively, and was $24.4 million and $21.4 million during the six months ended December 31, 2025 and 2024, respectively. For additional details, refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

Accumulated Other Comprehensive Income (Loss)

The components of Accumulated Other Comprehensive Income (Loss) (“AOCI”) as of the dates indicated below were as follows:


(In thousands)	Currency Translation Adjustments		Unrealized Gains (Losses) on Available-for-Sale Securities		Unrealized Gains (Losses) on Derivatives		Unrealized Gains (Losses) on Defined Benefit Plans		Total
Balance as of December 31, 2025	$	(53,978)	$	8,331	$	58,441	$	(11,834)	$	960

Balance as of June 30, 2025	$	(57,277)	$	5,792	$	64,798	$	(12,112)	$	1,201

The effects on net income of amounts reclassified from AOCI to the Condensed Consolidated Statements of Operations for the indicated periods were as follows (in thousands; amounts in parentheses indicate debits or reductions to earnings):


AOCI Components		Three Months Ended				Six Months Ended
	Location in the Condensed Consolidated Statement of Operations	December 31,				December 31,
		2025		2024		2025		2024
Unrealized gains on cash flow hedges from foreign exchange and interest rate contracts	Revenues	$	2,193	$	1,011	$	2,403	$	3,546
	Costs of revenues and operating expenses	9,216		428		20,460		454
	Interest expense	759		821		1,517		1,768

	Net gains reclassified from AOCI	$	12,168	$	2,260	$	24,380	$	5,768
Unrealized gains on available-for-sale securities	Other expense (income), net	$	215	$	1	$	312	$	—

NOTE 5 – MARKETABLE SECURITIES

The amortized cost and fair value of our fixed income marketable securities as of the dates indicated below were as follows:


As of December 31, 2025 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	1,130,306	$	4,938	$	(29)	$	1,135,215
Money market funds and other	2,029,446		—		—		2,029,446
Municipal securities	38,094		142		—		38,236

U.S. Government agency securities	113,763		488		(18)		114,233
U.S. Treasury securities	1,159,229		5,109		(19)		1,164,319


Subtotal	4,470,838		10,677		(66)		4,481,449
Add: Time deposits(1)	401,850		—		—		401,850
Less: Cash equivalents	2,144,833		1		(1)		2,144,833
Marketable securities(2)	$	2,727,855	$	10,676	$	(65)	$	2,738,466

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As of June 30, 2025 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	957,256	$	4,456	$	(66)	$	961,646
Money market funds and other	1,531,022		—		—		1,531,022
Municipal securities	57,445		129		(1)		57,573

U.S. Government agency securities	116,436		458		(58)		116,836
U.S. Treasury securities	885,101		2,787		(329)		887,559


Subtotal	3,547,260		7,830		(454)		3,554,636
Add: Time deposits(1)	478,191		—		—		478,191
Less: Cash equivalents	1,641,074		1		(1)		1,641,074
Marketable securities(2)	$	2,384,377	$	7,829	$	(453)	$	2,391,753

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(1) Time deposits excluded from fair value measurements.

(2) Excludes equity marketable securities.

Our investment portfolio includes both corporate and government securities that have a maximum maturity of three years. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As yields increase, those securities with a lower yield-at-cost show a mark-to-market unrealized loss. Most of our unrealized losses are due to changes in market interest rates and bond yields. We believe that we have the ability to realize the full value of all these investments upon maturity. As of December 31, 2025, we had 43 investments in a gross unrealized loss position. The following table summarizes the fair value and gross unrealized losses of our investments that were in an unrealized loss position as of the dates indicated below.


As of December 31, 2025	Less than 12 Months				12 Months or Greater				Total
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate debt securities	$	66,944	$	(29)	$	—	$	—	$	66,944	$	(29)


U.S. Government agency securities	28,897		(18)		—		—		28,897		(18)
U.S. Treasury securities	20,992		(19)		2,468		—		23,460		(19)
Total	$	116,833	$	(66)	$	2,468	$	—	$	119,301	$	(66)


As of June 30, 2025	Less than 12 Months				12 Months or Greater				Total
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate debt securities	$	98,149	$	(63)	$	2,528	$	(3)	$	100,677	$	(66)
Municipal securities	5,774		(1)		—		—		5,774		(1)

U.S. Government agency securities	32,780		(58)		—		—		32,780		(58)
U.S. Treasury securities	238,627		(297)		20,330		(32)		258,957		(329)
Total	$	375,330	$	(419)	$	22,858	$	(35)	$	398,188	$	(454)

The contractual maturities of securities classified as available-for-sale, regardless of their classification on our Condensed Consolidated Balance Sheets, as of the date indicated below were as follows:


As of December 31, 2025 (In thousands)	Amortized Cost		Fair Value
Due within one year	$	1,192,512	$	1,194,912
Due after one year through three years	1,535,343		1,543,554
Total	$	2,727,855	$	2,738,466

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Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Realized gains and losses on available-for-sale securities for the three and six months ended December 31, 2025 and 2024 were immaterial.

The costs for our equity marketable securities were $22.9 million as of both December 31, 2025, and June 30, 2025. Unrealized gains and losses for our equity marketable securities for the three and six months ended December 31, 2025 and 2024 were immaterial.

NOTE 6 – GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in business combinations.

The following table presents changes in goodwill carrying value by reportable segment during the six months ended December 31, 2025:


(In thousands)	Semiconductor Process Control		Specialty Semiconductor Process		Printed Circuit Board (“PCB”) and Component Inspection		Total
Balances as of June 30, 2025	$	759,885	$	681,858	$	350,450	$	1,792,193





Foreign currency adjustments	82		(586)		(1,092)		(1,596)
Balances as of December 31, 2025	$	759,967	$	681,272	$	349,358	$	1,790,597

As of December 31, 2025, and June 30, 2025, goodwill is net of accumulated impairment losses of $277.6 million and $70.5 million in the Semiconductor Process Control and PCB and Component Inspection reportable segments, respectively.

Goodwill is not subject to amortization but is tested for impairment annually, as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In testing goodwill for impairment, we utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. When performing the qualitative assessment, we consider the following factors: stock price or market capitalization, changes in the industry and competitive environment, budget-to-actual revenue and profitability performance from the prior year and projected revenue and profitability trends for future years at our reporting units. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a quantitative assessment by comparing the carrying value to the fair value of the reporting units. If the fair value is determined to be less than the carrying value, the amount of impairment is computed as the excess of the carrying value over the estimated fair value, not to exceed the carrying value of goodwill. Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge.

During the second quarter of fiscal 2026, the Company changed the annual goodwill impairment testing date for all reporting units from February 28 to December 31 to better align with the timing of our budgeting and strategic planning process. We believe this change is preferable because it allows us to evaluate any potential impact strategic decisions may have on the recoverability of goodwill as those decisions are reached. This will also enable us to use the most current information available in the assessment process. The change in the measurement date did not delay, accelerate or avoid recognition of an impairment charge. Each quarter the Company evaluates impairment indicators to determine whether a triggering event has occurred which would warrant a quantitative assessment to determine whether there has been an impairment. We have applied this change on a prospective basis for the fiscal year ending June 30, 2026 since the impact is not material to our financial statements.

We performed the required annual goodwill impairment testing for all reportable segments as of December 31, 2025, and concluded that goodwill was not impaired. As a result of our qualitative assessment, we determined that it was not necessary to perform the quantitative assessment.

During the second quarter of fiscal 2025, in connection with our annual strategic planning process, we noted a continued deterioration of the long-term forecast for our PCB business, which is part of our PCB and Component Inspection reportable segment. In addition, in the second quarter of fiscal 2025, we completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. The downward revision of financial outlook for PCB and the reorganization of reporting units triggered goodwill impairment tests. As a result of our quantitative assessment before reorganization, we recorded a total goodwill impairment charge of $230.4 million in the former PCB reporting unit, which was part of the PCB and Component Inspection reportable

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segment, in the second quarter of fiscal 2025. No goodwill impairment was identified in the Specialty Semiconductor Process reportable segment. We assessed for impairment subsequent to the reorganization and noted no impairment. The goodwill balances of our new reporting units after reorganization were allocated on a relative fair value basis.

To determine the fair value of a reporting unit, we utilized income and market approaches and applied weighting of 75 percent and 25 percent, respectively. The income approach is estimated through discounted cash flow analysis. This valuation technique requires us to use significant estimates and assumptions, including long-term growth rates, discount rates and other inputs. The market approach estimates the fair value of the reporting unit by utilizing the market comparable method, which is based on revenue and earnings multiples from comparable companies. There can be no assurance that these estimates and assumptions will prove to be an accurate prediction of the future, and a downward revision of these estimates and/or assumptions would decrease the fair value of our reporting units, which could result in additional impairment charges in the future.

Purchased Intangible Assets

Changes in the gross carrying amount of intangible assets result from changes in foreign currency exchange rates and acquisitions. The components of purchased intangible assets as of the dates indicated below were as follows:


(In thousands)	As of December 31, 2025						As of June 30, 2025
Category	Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount		Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount
Existing technology	$	1,556,782	$	1,298,518	$	258,264	$	1,555,688	$	1,222,520	$	333,168
Customer relationships	358,499		301,549		56,950		359,555		285,274		74,281
Trade name / Trademark	119,416		118,019		1,397		119,409		113,210		6,199
Order backlog and other	91,352		84,992		6,360		89,309		84,419		4,890
Intangible assets subject to amortization	2,126,049		1,803,078		322,971		2,123,961		1,705,423		418,538
In-process research and development	44,874		19,827		25,047		46,074		19,827		26,247
Total	$	2,170,923	$	1,822,905	$	348,018	$	2,170,035	$	1,725,250	$	444,785

Purchased intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. Impairment indicators primarily include declines in our operating cash flows from the use of these assets. If impairment indicators are present, we are required to perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to these long-lived assets to their carrying value.

As of December 31, 2025, there were no impairment indicators for purchased intangible assets.

In connection with the evaluation of the goodwill impairment in the PCB and Component Inspection reportable segment during the second quarter of fiscal 2025, due to the continued deterioration of financial outlook for the businesses and internal reorganization both noted above, the Company assessed tangible and intangible assets for impairment prior to performing the goodwill impairment test. The Company first performed a recoverability test for each asset group identified in the PCB and Component Inspection reportable segment by comparing projected undiscounted cash flows from the use and eventual disposition of each asset group to its carrying value. This test indicated that the undiscounted cash flows were not sufficient to recover the carrying value of the asset groups. We then compared the carrying value of the individual long-lived assets within those asset groups against their fair value in order to measure the impairment loss. As a result of this assessment, we recorded a total purchased intangible asset impairment charge of $8.7 million. No impairment was identified for other long-lived assets in the second quarter of fiscal 2025.

Total impairment charges for goodwill and purchased intangible assets of $239.1 million were recognized as separate charges and included in income (loss) from operations in the three months ended December 31, 2024.

Amortization expense for purchased intangible assets was $49.3 million and $98.6 million for the three and six months ended December 31, 2025, respectively, and $58.9 million and $115.6 million for the three and six months ended December 31, 2024, respectively.

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Based on the purchased intangible assets gross carrying amount recorded as of December 31, 2025, the remaining estimated annual amortization expense is expected to be as follows:


Fiscal year ending June 30:	Amortization (In thousands)
2026 (remaining six months)	$	92,022
2027	129,064
2028	49,163
2029	35,606
2030	14,800
2031 and thereafter	2,316
Total	$	322,971

The expected amortization expense is an estimate. Actual amounts of amortization may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets and other events.

NOTE 7 – DEBT

The following table summarizes our debt as of December 31, 2025 and June 30, 2025:


	As of December 31, 2025				As of June 30, 2025
	Amount (In thousands)		Effective Interest Rate		Amount (In thousands)		Effective Interest Rate
Fixed-rate 4.100% Senior Notes due on March 15, 2029	$	800,000	4.159	%	$	800,000	4.159	%
Fixed-rate 4.650% Senior Notes due on July 15, 2032	1,000,000		4.657	%	1,000,000		4.657	%
Fixed-rate 4.700% Senior Notes due on February 1, 2034	500,000		4.777	%	500,000		4.777	%
Fixed-rate 5.650% Senior Notes due on November 1, 2034	250,000		5.670	%	250,000		5.670	%
Fixed-rate 5.000% Senior Notes due on March 15, 2049	400,000		5.047	%	400,000		5.047	%
Fixed-rate 3.300% Senior Notes due on March 1, 2050	750,000		3.302	%	750,000		3.302	%
Fixed-rate 4.950% Senior Notes due on July 15, 2052	1,450,000		5.023	%	1,450,000		5.023	%
Fixed-rate 5.250% Senior Notes due on July 15, 2062	800,000		5.259	%	800,000		5.259	%


Total	5,950,000				5,950,000
Unamortized discount	(22,605)				(23,338)
Unamortized debt issuance costs	(41,267)				(42,405)
Total	$	5,886,128			$	5,884,257
Reported as:

Long-term debt	5,886,128				5,884,257
Total	$	5,886,128			$	5,884,257

Senior Notes and Debt Redemption

The original discounts on the senior, unsecured long-term notes listed in the table above (collectively, “Senior Notes”) are being amortized over the life of the debt. Interest is payable semi-annually as follows: on January 15 and July 15 of each year for the Senior Notes due July 15, 2032, 2052, and 2062; on February 1 and August 1 of each year for the Senior Notes due February 1, 2034; on March 1 and September 1 of each year for the Senior Notes due March 1, 2050; on March 15 and September 15 of each year for the Senior Notes due March 15, 2029, and 2049; and on May 1 and November 1 of each year for the Senior Notes due November 1, 2034. The Senior Notes rank senior in right of payment to all of KLA Corporation’s future subordinated indebtedness, equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness, are effectively subordinated in right of payment to all of our future secured indebtedness to the extent of the collateral securing such indebtedness and structurally subordinated in right of payment to all existing and future indebtedness

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and other liabilities of the Issuer’s subsidiaries. The relevant indentures for the Senior Notes (collectively, the “Indenture”) include covenants that limit our ability to grant liens on our facilities and enter into sale and leaseback transactions.

In certain circumstances involving a change of control followed by a downgrade of the rating of a series of Senior Notes by at least two of Moody’s Investors Service, S&P Global Ratings and Fitch Inc., unless we have exercised our rights to redeem the Senior Notes of such series, we will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s Senior Notes of that series pursuant to the offer described below (“Change of Control Offer”). In the Change of Control Offer, we will be required to offer payment in cash equal to 101% of the aggregate principal amount of Senior Notes repurchased plus accrued and unpaid interest, if any, on the Senior Notes repurchased, up to, but not including, the date of repurchase.

Based on the trading prices of the Senior Notes on the applicable dates, the fair value of the Senior Notes as of December 31, 2025 and June 30, 2025 was $5.55 billion and $5.54 billion, respectively. While the Senior Notes are recorded at cost, the fair value of the long-term debt was determined based on quoted prices in markets that are not active; accordingly, the long-term debt is categorized as Level 2 for purposes of the fair value measurement hierarchy.

As of December 31, 2025, we were in compliance with all of our covenants under the Indenture associated with the Senior Notes.

Revolving Credit Facility

On July 3, 2025, we entered into a revolving credit facility (“Revolving Credit Facility”) with a maturity date of July 3, 2030 that allows us to borrow up to $1.50 billion, pursuant to the terms set forth in the credit agreement (“Credit Agreement”). Subject to the terms of the Credit Agreement, the Revolving Credit Facility may be increased by an amount up to $500.0 million in the aggregate. As of December 31, 2025, we had no outstanding borrowings under the Revolving Credit Facility.

Under the Revolving Credit Facility, we may borrow, repay and reborrow funds until the maturity date, which may be extended following the exercise of no more than two one-year extension options with the consent of the lenders. We may prepay outstanding borrowings under the Revolving Credit Facility at any time without a prepayment penalty.

Borrowings under the Revolving Credit Facility can be made as Term Secured Overnight Financing Rate (“SOFR”) Loans or Alternate Base Rate (“ABR”) Loans, at the Company’s option. In the event that Term SOFR is unavailable, any Term SOFR elections will be converted to Daily Simple SOFR, as long as it is available. Each Term SOFR Loan will bear interest at a rate per annum equal to the applicable Adjusted Term SOFR rate, which is equal to the applicable Term SOFR rate plus a spread ranging from 62.5 bps to 100.0 bps, as determined by the Company’s credit ratings at the time. Each ABR Loan will bear interest at a rate per annum equal to the ABR, as determined by the Company’s credit ratings at the time. We are also obligated to pay an annual commitment fee on the daily undrawn balance of the Revolving Credit Facility, which ranges from 4.0 bps to 10.0 bps, subject to an adjustment in conjunction with changes to our credit rating. The applicable interest rates and commitment fees are also subject to adjustment based on the Company’s performance against certain environmental sustainability key performance indicators (“KPI”) related to greenhouse gas emissions and renewable electricity usage. Our performance against these KPIs in calendar year 2024 resulted in reductions to the fees associated with our Revolving Credit Facility. As of December 31, 2025, the applicable commitment fee on the daily undrawn balance of the Revolving Credit Facility was 5.5 bps.

Under the Revolving Credit Facility, the maximum net leverage ratio on a quarterly basis is 3.25 to 1.00, covering the trailing four consecutive fiscal quarters for each fiscal quarter, which may be increased to 3.75 to 1.00 for a period of time in connection with a material acquisition or a series of material acquisitions. As of December 31, 2025, our maximum allowed net leverage ratio was 3.25 to 1.00.

We were in compliance with all covenants under the Credit Agreement as of December 31, 2025.

NOTE 8 – LEASES

We have operating leases for facilities, vehicles and other equipment. Our facility leases are primarily used for administrative functions, research and development (“R&D”), manufacturing, and storage and distribution. Our finance leases are not significant.

Our existing leases do not contain significant restrictive provisions or residual value guarantees; however, certain leases contain provisions for the payment of maintenance, real estate taxes or insurance costs by us. Our leases have remaining lease terms ranging from less than one year to 27 years, including periods covered by options to extend the lease when it is reasonably certain that the option will be exercised.

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Lease expense was $14.3 million and $27.9 million for the three and six months ended December 31, 2025, respectively, and $11.9 million and $25.0 million for the three and six months ended December 31, 2024, respectively. Expenses related to short-term leases, which were not recorded on the Condensed Consolidated Balance Sheets, were not material for the three and six months ended December 31, 2025 and 2024. As of December 31, 2025 and June 30, 2025, the weighted-average remaining lease term was 5.8 and 6.2 years, respectively, and the weighted-average discount rate for operating leases was 3.83% and 4.06% as of December 31, 2025 and June 30, 2025, respectively.

Supplemental cash flow information related to leases was as follows:


	Six Months Ended December 31,
In thousands	2025		2024
Operating cash outflows from operating leases	$	27,322	$	21,258
Right of use assets obtained in exchange for new operating lease liabilities	$	40,673	$	22,051

Maturities of lease liabilities as of December 31, 2025 were as follows:


Fiscal Year Ending June 30:	(In thousands)
2026 (remaining six months)	$	30,311
2027	57,569
2028	38,354
2029	32,022
2030	29,555
2031 and thereafter	63,601
Total lease payments	251,412
Less imputed interest	(28,062)
Total	$	223,350

As of December 31, 2025, we did not have material leases that had not yet commenced.

NOTE 9 – EQUITY AND LONG-TERM INCENTIVE COMPENSATION PLANS

As of December 31, 2025, 9.3 million shares remained available for issuance under the KLA Corporation 2023 Incentive Award Plan (“2023 Plan”). In addition, we have an Employee Stock Purchase Plan (“ESPP”), which enables eligible employees to purchase our common stock. We also offer a cash-based long-term incentive program (“Cash LTI”) to eligible employees.

For details of the 2023 Plan, ESPP and Cash LTI plans, refer to Note 10 “Equity, Long-Term Incentive Compensation Plans and Non-Controlling Interest” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

Equity Incentive Plans - General Information

The following table summarizes the combined activity under our equity incentive plans:


(In thousands)			Available For Grant(1)
Balance as of June 30, 2025			9,574

Restricted stock units granted(2)			(311)
Restricted stock units granted adjustment(3)			53
Restricted stock units canceled			33

Balance as of December 31, 2025			9,349

__________________

(1)The number of restricted stock units (“RSU”) reflects the application of the award multiplier of 2.0x to calculate the impact of the award on the shares reserved under the 2023 Plan.

(2)Includes RSUs granted to senior management during the six months ended December 31, 2025 with performance-based vesting criteria (in addition to service-based vesting criteria for any of such RSUs that are deemed to have been earned) (“performance-based RSU”). This line item includes all such performance-based RSUs granted during the six months ended December 31, 2025 reported at the maximum possible number of shares that may ultimately be issuable if all

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applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied (0.1 million shares for the six months ended December 31, 2025 reflect the application of the multiplier described above).

(3)Represents the portion of RSUs granted with performance-based vesting criteria and reported at the actual number of shares issued upon achievement of the performance vesting criteria during the six months ended December 31, 2025.

The fair value of stock-based awards is measured at the grant date and is recognized as an expense over the employee’s requisite service period. The fair value for RSUs granted with “dividend equivalent” rights is determined using the closing price of our common stock on the grant date.

The following table shows stock-based compensation (“SBC”) expense for the indicated periods:


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands)	2025		2024		2025		2024
SBC expense by:
Costs of revenues	$	13,261	$	10,469	$	25,496	$	20,258
R&D	21,598		17,045		42,956		34,425
SG&A	39,088		34,327		75,677		68,858
Total SBC expense	$	73,947	$	61,841	$	144,129	$	123,541

SBC capitalized as inventory was $27.2 million and $26.3 million as of December 31, 2025 and June 30, 2025, respectively.

Restricted Stock Units

The following table shows the activity and weighted-average grant date fair values for RSUs during the six months ended December 31, 2025:


	Shares(1) (In thousands)	Weighted-Average Grant Date Fair Value
Outstanding RSUs as of June 30, 2025(2)	1,292	$	536.30
Granted(3)	156	$	919.13
Granted adjustments(4)	(27)	$	397.40


Vested and released	(224)	$	431.73

Forfeited	(16)	$	567.36
Outstanding RSUs as of December 31, 2025(2)	1,181	$	609.48

__________________

(1)Share numbers reflect actual shares subject to awarded RSUs.

(2)Includes performance-based RSUs.

(3)This line item includes performance-based RSUs granted during the six months ended December 31, 2025 reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied (0.1 million shares for the six months ended December 31, 2025, reflect the application of the multiplier described above).

(4)Represents the portion of RSUs granted with performance-based vesting criteria and reported at the actual number of shares issued upon achievement of the performance vesting criteria during the six months ended December 31, 2025.

The RSUs granted by us generally vest as follows, in each case subject to the recipient remaining employed by us as of the applicable vesting date: (i) with respect to awards with only service-based vesting criteria, over periods ranging from two to four years; and (ii) with respect to awards with both performance-based and service-based vesting criteria, over periods ranging from three to four years. The RSUs granted to the independent members of the Board of Directors vest annually.

As of December 31, 2025, the unrecognized SBC expense balance related to RSUs was $493.9 million, excluding the impact of estimated forfeitures, and will be recognized over an estimated weighted-average amortization period of 1.3 years. The intrinsic value of outstanding RSUs as of December 31, 2025 was $1.43 billion.

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NOTE 10 – STOCK REPURCHASE PROGRAM

Our Board of Directors has authorized a program that permits us to repurchase our common stock, including an increase in the authorized repurchase amount of $5.00 billion in the fourth quarter of fiscal 2025. The stock repurchase program has no expiration date and may be suspended at any time. The intent of the program is, in part, to mitigate the potential dilutive impact related to our equity incentive plans and shares issued in connection with our ESPP as well as to return excess cash to our stockholders. Any and all share repurchase transactions are subject to market conditions and applicable legal requirements.

Under the authoritative guidance, share repurchases are recognized as a reduction to retained earnings to the extent available, with any excess recognized as a reduction of capital in excess of par value. In addition, the Inflation Reduction Act of 2022 introduced a 1% excise tax imposed on certain stock repurchases made after December 31, 2022 by publicly traded companies. The excise tax is recorded as part of the cost basis of treasury stock repurchased after December 31, 2022 and, as such, is included in stockholders’ equity.

As of December 31, 2025, an aggregate of $3.94 billion of authorization was available for repurchase under the stock repurchase program.

Share repurchases for the indicated periods (based on the trade date of the applicable repurchase) were as follows:


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands)	2025		2024		2025		2024
Number of shares of common stock repurchased	460		979		1,083		1,719
Total cost of repurchases	$	537,553	$	655,973	$	1,101,953	$	1,226,909

NOTE 11 – NET INCOME PER SHARE

Basic net income per share is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is calculated by using the weighted-average number of shares of common stock outstanding during the period, increased to include the number of additional shares of common stock that would have been outstanding if the shares of common stock underlying our outstanding dilutive RSUs had been issued. The dilutive effect of outstanding RSUs is reflected in diluted net income per share by application of the treasury stock method.

The following table sets forth the computation of basic and diluted net income per share:


(In thousands, except per share amounts)	Three Months Ended December 31,				Six Months Ended December 31,
	2025		2024		2025		2024
Numerator:
Net income	$	1,145,682	$	824,527	$	2,266,722	$	1,770,378
Denominator:
Weighted-average shares - basic, excluding unvested RSUs	131,278		133,327		131,517		133,730
Effect of dilutive RSUs and options	731		599		688		685
Weighted-average shares - diluted	132,009		133,926		132,205		134,415
Basic net income per share	$	8.73	$	6.18	$	17.24	$	13.24
Diluted net income per share	$	8.68	$	6.16	$	17.15	$	13.17
Anti-dilutive securities excluded from the computation of diluted net income per share	4		145		3		36

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NOTE 12 – INCOME TAXES

The following table provides details of income taxes:


	Three Months Ended December 31,						Six Months Ended December 31,
(Dollar amounts in thousands)	2025			2024			2025			2024
Income before income taxes	$	1,330,303		$	972,529		$	2,639,779		$	2,051,216
Provision for income taxes	$	184,621		$	148,002		$	373,057		$	280,838
Effective tax rate	13.9		%	15.2		%	14.1		%	13.7		%

Our effective tax rate was lower than the U.S. federal statutory rate during the three and six months ended December 31, 2025 primarily due to the proportion of earnings generated in jurisdictions with tax rates lower than the U.S. statutory rate and the proportion of U.S. earnings eligible for the Foreign Derived Intangible Income deduction.

In the normal course of business, we are subject to examination by tax authorities throughout the world. We are subject to U.S. federal income tax examinations for all years beginning from the fiscal year ended June 30, 2022 and are under U.S. federal income tax examination for the fiscal year ended June 30, 2018. We have completed the federal income tax examination for the fiscal years ended June 30, 2019 and June 30, 2020. We are subject to state income tax examinations for all years beginning from the fiscal year ended June 30, 2021. We are also subject to examinations in other major foreign jurisdictions, including Singapore and Israel, for all years beginning from the calendar year ended December 31, 2019. We are under audit in Israel for calendar year ended December 31, 2019 to the fiscal year ended June 30, 2022 and received a tax assessment from the Israel Tax Authority. The assessment will be appealed. We believe our current unrecognized tax benefits are sufficient. It is possible that certain examinations may be concluded in the next 12 months. The timing and resolution of income tax examinations are uncertain. Given the uncertainty around the timing of the resolution of these ongoing examinations, we are unable to estimate the full range of possible adjustments to our unrecognized tax benefits within the next 12 months.

Legislative Developments

In January 2026, the Organization for Economic Co-operation and Development’s (“OECD”) introduced two new Pillar Two safe harbors which are expected to be available for fiscal years beginning on or after January 1, 2026: (1) the Side-by-Side Safe Harbor (“SBSSH”) for multinational entities headquartered in the jurisdictions with both eligible domestic and worldwide tax systems, and (2) the Ultimate Parent Entity (“UPE”) Safe Harbor for multinational entities with a UPE located in a jurisdiction that has only an eligible domestic tax system. The U.S. is an eligible jurisdiction for the SBSSH. We are not expecting a material tax impact to our Condensed Consolidated Financial Statements when countries begin to enact legislation to adopt the SBSSH provisions.

In December 2025, Israel adopted the Pillar Two Global Anti-Base Erosion (“GLoBE”) rules under the Multinational Enterprise (“Minimum Tax”) Act, which includes a domestic minimum tax of 15% that will be effective for us beginning in the fiscal year ending June 30, 2027. The Pillar Two GloBE rules are deemed an alternative minimum tax so we did not recognize any deferred taxes for the estimated effects of the future minimum tax under current GAAP. We are not expecting a material tax impact to our Condensed Consolidated Financial Statements.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”), also known as the Tax Relief for American Families and Workers Act of 2025. The OBBBA provides for several permanent changes to the U.S. tax code among other items, including modifying the Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income rules from the Tax Cuts and Jobs Act; restoring full expensing for domestic research expenses; and reinstating 100% bonus depreciation provisions. ASC 740, Income Taxes, requires that the tax effects of changes in tax rates and laws be recognized in the period in which the legislation is enacted. The OBBBA provisions will result in an increase to our cash flows from operating activities and an increase to our effective tax rate in our fiscal year ending June 30, 2026. The effective tax rate changes have been reflected in the consolidated financial statements for the three and six months ended December 31, 2025, and did not have a material impact to our Condensed Consolidated Financial Statements.

In November 2024, Singapore adopted the Pillar Two GloBE rules under the Minimum Tax Act, which includes a domestic minimum tax of 15% that is effective for us in the current fiscal year. There was no material impact to our Condensed Consolidated Financial Statements during the three and six months ended December 31, 2025. The Pillar Two GloBE rules are deemed an alternative minimum tax so we did not recognize any deferred taxes for the estimated effects of the future minimum tax under current GAAP.

California Governor Newsom approved the 2024-25 California State Budget on June 27, 2024, which includes a provision to suspend the use of all net operating losses and limits the use of R&D tax credits to $5 million for tax years 2024

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through 2026. This provision is effective in our fiscal years ended June 30, 2025 through June 30, 2027. There was no material tax impact to our Condensed Consolidated Financial Statements during the three and six months ended December 31, 2025.

In December 2021, the OECD’s Inclusive Framework on Base Erosion and Profit Shifting released GloBE rules under Pillar Two. For the countries that have enacted legislation to adopt the Pillar Two GloBE rules, the provisions requiring a 15% minimum effective tax rate on income earned in the respective countries and a global 15% minimum effective top-up tax are effective for us beginning in our fiscal year ended June 30, 2025. There was no material tax impact to our Condensed Consolidated Financial Statements from these Pillar Two provisions during the three and six months ended December 31, 2025.

NOTE 13 – LITIGATION AND OTHER LEGAL MATTERS

We are named, from time to time, as a party to lawsuits and other types of legal proceedings and claims in the normal course of our business. Actions filed against us include commercial, intellectual property (“IP”), customer, and labor and employment related claims, including complaints of alleged wrongful termination and potential class action lawsuits regarding alleged violations of federal and state wage and hour and other laws. In general, legal proceedings and claims, regardless of their merit, and associated internal investigations (especially those relating to IP or confidential information disputes) are often expensive to prosecute, defend or conduct, and may divert management’s attention and other Company resources. Moreover, the results of legal proceedings are difficult to predict, and the costs incurred in litigation can be substantial, regardless of outcome. We believe the amounts provided in our Condensed Consolidated Financial Statements are adequate in light of the probable and estimated liabilities. However, because such matters are subject to many uncertainties and the ultimate outcomes are not predictable, there can be no assurances that the actual amounts required to satisfy alleged liabilities from the matters described above will not exceed the amounts reflected in our Condensed Consolidated Financial Statements or will not have a material adverse effect on our results of operations, financial condition or cash flows.

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Factoring. We have factoring agreements with financial institutions to sell certain of our trade receivables and promissory notes from customers without recourse. We do not believe we are at risk for any material losses as a result of these agreements. In addition, we periodically sell certain letters of credit (“LC”), without recourse, received from customers in payment for goods and services.

The following table shows total receivables sold under factoring agreements and proceeds from sales of LC for the indicated periods:


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands)	2025		2024		2025		2024
Receivables sold under factoring agreements	$	70,425	$	38,246	$	176,792	$	83,705
Proceeds from sales of LC	$	2,768	$	33,359	$	20,994	$	35,337

Factoring and LC fees for the sale of certain trade receivables were recorded in other expense (income), net and were not material for the periods presented. KLA may continue servicing the receivables that are sold.

Purchase Commitments. We maintain commitments to purchase inventory from our suppliers as well as goods, services and other assets in the ordinary course of business. Our liability under these purchase commitments is generally restricted to a forecasted time-horizon as mutually agreed between the parties. This forecasted time-horizon can vary among different suppliers. Our estimate of our significant purchase commitments primarily for material, services, supplies and asset purchases is approximately $2.75 billion as of December 31, 2025, a majority of which are due within the next 12 months. Actual expenditures will vary based upon the volume of the transactions and length of contractual service provided. In addition, the amounts paid under these arrangements may be less in the event that the arrangements are renegotiated or canceled. Certain agreements provide for potential cancellation penalties.

Cash LTI Plan. As of December 31, 2025, we have committed $116.0 million for future payment obligations under our Cash LTI Plan. Cash LTI awards issued to employees under the Cash LTI Plan vest in three or four equal installments, with one-third or one-fourth of the aggregate amount of the Cash LTI award vesting on each anniversary of the grant date over a three- or four-year period. In order to receive payments under a Cash LTI award, participants must remain employed by us as of the applicable award vesting date.

Guarantees, Contingencies and Other. We maintain guarantee arrangements available through various financial institutions for up to $164.7 million, of which $132.2 million had been issued as of December 31, 2025, primarily to fund

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guarantees to customs authorities for value-added tax and other operating requirements of our consolidated subsidiaries worldwide.

In January 2025, we entered into a long-term virtual power purchase agreement to purchase a portion of the output generated from a solar energy project for a fixed price. As part of this agreement, we will also receive renewable energy credits commensurate with the power we acquire. These credits can be applied against our greenhouse gas emissions, accelerating the progress towards our goals of 100% renewable electricity across our global operations by 2030, reduction of our Scope 1 and 2 emissions from our 2021 baseline by 50% by 2030 and achievement of net zero Scope 1 and Scope 2 emissions by 2050. This agreement had no material impact on our results of operations, financial condition or cash flows during the quarter ended December 31, 2025.

Indemnification Obligations. Subject to certain limitations, we are obligated to indemnify our current and former directors, officers and employees with respect to certain litigation matters and investigations that arise in connection with their service to us. These obligations arise under the terms of our certificate of incorporation, bylaws, applicable contracts, and Delaware and California law. The obligation to indemnify generally means that we are required to pay or reimburse the individuals’ reasonable legal expenses and possibly damages and other liabilities incurred by several of our current and former directors, officers and employees in connection with these matters. For example, we have paid or reimbursed legal expenses incurred in connection with the investigation of our historical stock option practices and the related litigation and government inquiries. Although the maximum potential amount of future payments we could be required to make under the indemnification obligations generally described in this paragraph is theoretically unlimited, we believe the fair value of this liability, to the extent estimable, is appropriately considered within the reserve we have established for currently pending legal proceedings.

We are a party to a variety of agreements pursuant to which we may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in connection with contracts and license agreements or the sale of assets, under which we customarily agree to hold the other party harmless against losses arising therefrom, or provide customers with other remedies to protect against bodily injury or damage to personal property caused by our products, non-compliance with our product performance specifications, infringement by our products of third-party IP rights and a breach of warranties, representations and covenants related to matters such as title to assets sold, validity of certain IP rights, non-infringement of third-party rights, and certain income tax-related matters. In each of these circumstances, payment by us is typically subject to the other party making a claim to and cooperating with us pursuant to the procedures specified in the particular contract. This usually allows us to challenge the other party’s claims or, in case of breach of IP representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, our obligations under these agreements may be limited in terms of amounts, activity (typically at our option to replace or correct the products or terminate the agreement with a refund to the other party), and duration. In some instances, we may have recourse against third parties and/or insurance covering certain payments made by us.

In addition, we may, in limited circumstances, enter into agreements that contain customer-specific commitments on pricing, tool reliability, spare parts stocking levels, response time and other commitments. Furthermore, we may give these customers limited audit or inspection rights to enable them to confirm that we are complying with these commitments. If a customer elects to exercise its audit or inspection rights, we may be required to expend significant resources to support the audit or inspection, as well as to defend or settle any dispute with a customer that could potentially arise out of such audit or inspection. To date, we have made no significant accruals in our Condensed Consolidated Financial Statements for this contingency. While we have not in the past incurred significant expenses for resolving disputes regarding these types of commitments, we cannot make any assurance that we will not incur any such liabilities in the future.

It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material effect on our business, financial condition, results of operations or cash flows.

NOTE 15 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The authoritative guidance requires companies to recognize all derivative instruments, including foreign exchange contracts and rate lock agreements (collectively, “derivatives”), as either assets or liabilities at fair value on the Condensed Consolidated Balance Sheets. In accordance with the accounting guidance, we designate foreign currency forward transactions and options contracts and interest rate forward transactions as cash flow hedges. In accordance with the accounting guidance, we also designate certain foreign currency exchange contracts as net investment hedge transactions intended to mitigate the variability of the value of certain investments in foreign subsidiaries.

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Our foreign subsidiaries operate and sell our products in various global markets. As a result, we are exposed to risks relating to changes in foreign currency exchange rates. We utilize foreign exchange contracts to hedge against future movements in foreign currency exchange rates that affect certain existing and forecasted foreign currency denominated sales and purchase transactions, such as the Japanese yen, the euro, the pound sterling and the new Israeli shekel.

We routinely hedge our exposures to certain foreign currencies with various financial institutions in an effort to minimize the impact of certain currency exchange rate fluctuations. These foreign exchange contracts, designated as cash flow hedges, generally have maturities of less than 12 months. Cash flow hedges are evaluated for effectiveness monthly, based on changes in total fair value of the derivatives. If a financial counterparty to any of our hedging arrangements experiences financial difficulties or is otherwise unable to honor the terms of the foreign currency hedge, we may experience material losses.

Since fiscal 2015, we have entered into five sets of forward contracts, generally to hedge the benchmark interest rate on portions of our Senior Notes prior to issuance (collectively, “Rate Lock Agreements”). Upon issuance of the associated debt, the Rate Lock Agreements were settled and their fair values were recorded within AOCI. The resulting gains and losses from these transactions are amortized to interest expense over the lives of the associated debt. As of December 31, 2025, the aggregate unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was a $42.9 million net gain.

For derivatives that are designated and qualify as cash flow hedges, the effective portion of the gains or losses is reported in AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative contracts executed after adopting the new accounting guidance in fiscal 2019, the election to include time value for the assessment of effectiveness is made on all forward contracts designated as cash flow hedges. The change in fair value of the derivative is recorded in AOCI until the hedged item is recognized in earnings. The assessment of effectiveness of options contracts designated as cash flow hedges exclude time value. The initial value of the component excluded from the assessment of effectiveness is recognized in earnings over the life of the derivative contract. Any differences between changes in the fair value of the excluded components and the amounts recognized in earnings are recorded in AOCI.

For derivatives that are designated and qualify as a net investment hedge in a foreign operation and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within AOCI. The remainder of the change in value of such instruments is recorded in earnings on a straight-line basis over the lives of the associated derivative contracts. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation or sale of the net investment in the hedged foreign operations.

For derivatives that are not designated as hedges, gains and losses are recognized in Other expense (income), net. We use foreign exchange contracts to hedge certain foreign currency denominated assets or liabilities. The gains and losses on these derivative instruments are largely offset by the changes in the fair value of the assets or liabilities being hedged.

Derivatives in Hedging Relationships: Foreign Exchange Contracts and Rate Lock Agreements

The gains (losses) on derivatives in cash flow and net investment hedging relationships recognized in other comprehensive income for the indicated periods were as follows:


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands)	2025		2024		2025		2024
Derivatives Designated as Cash Flow Hedging Instruments:


Foreign exchange contracts:
Amounts included in the assessment of effectiveness	$	12,394	$	1,703	$	15,694	$	5,147
Amounts excluded from the assessment of effectiveness	$	11	$	186	$	75	$	(160)
Derivatives Designated as Net Investment Hedging Instruments:
Foreign exchange contracts(1):	$	6,257	$	8,712	$	25,582	$	1,713

__________________

(1)No amounts were reclassified from AOCI into earnings related to the sale of a subsidiary, as there were no such sales during the periods presented.

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The locations and amounts of designated and non-designated derivatives’ gains and losses reported in the Condensed Consolidated Statements of Operations for the indicated periods were as follows:


	Three Months Ended December 31,								Three Months Ended December 31,
	2025								2024
(In thousands)	Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net		Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	3,297,146	$	1,935,000	$	69,668	$	(37,825)	$	3,076,851	$	2,073,799	$	74,981	$	(44,458)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings	$	—	$	—	$	759	$	—	$	—	$	—	$	821	$	—

Foreign exchange contracts:
Amount of gains reclassified from AOCI to earnings	$	2,438	$	9,216	$	—	$	—	$	1,325	$	428	$	—	$	—
Amount excluded from the assessment of effectiveness recognized in earnings	$	(245)	$	—	$	—	$	5,716	$	(314)	$	—	$	—	$	6,344

Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains recognized in earnings	$	—	$	—	$	—	$	12,837	$	—	$	—	$	—	$	3,317


	Six Months Ended December 31,								Six Months Ended December 31,
	2025								2024
(In thousands)	Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net		Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	6,506,842	$	3,807,519	$	140,743	$	(81,199)	$	5,918,392	$	3,795,417	$	157,152	$	(85,393)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings	$	—	$	—	$	1,517	$	—	$	—	$	—	$	1,768	$	—

Foreign exchange contracts:
Amount of gains reclassified from AOCI to earnings	$	2,819	$	20,460	$	—	$	—	$	4,429	$	454	$	—	$	—
Amount excluded from the assessment of effectiveness recognized in earnings	$	(416)	$	—	$	—	$	9,539	$	(883)	$	—	$	—	$	5,973

Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains recognized in earnings	$	—	$	—	$	—	$	13,098	$	—	$	—	$	—	$	3,400

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The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts and rate lock agreements, with maximum remaining maturities of approximately 12 months as of the dates indicated below, were as follows:


	As of		As of
(In thousands)	December 31, 2025		June 30, 2025
Cash flow hedge contracts - foreign currency
Purchase	$	466,783	$	405,349
Sell	$	111,752	$	159,475
Net investment hedge contracts - foreign currency

Sell	$	386,213	$	384,130
Other foreign currency hedge contracts
Purchase	$	623,473	$	618,844
Sell	$	429,916	$	429,643

The locations and fair value of our derivatives reported in our Condensed Consolidated Balance Sheets as of the dates indicated below were as follows:


	Asset Derivatives					Liability Derivatives
	Balance Sheet	As of		As of		Balance Sheet	As of		As of
	Location	December 31, 2025		June 30, 2025		Location	December 31, 2025		June 30, 2025
(In thousands)		Fair Value					Fair Value
Derivatives designated as hedging instruments

Foreign exchange contracts	Other current assets	$	34,810	$	29,492	Other current liabilities	$	(5,152)	$	(24,331)
Total derivatives designated as hedging instruments		34,810		29,492			(5,152)		(24,331)
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets	17,695		30,011		Other current liabilities	(3,067)		(4,284)
Total derivatives not designated as hedging instruments		17,695		30,011			(3,067)		(4,284)
Total derivatives		$	52,505	$	59,503		$	(8,219)	$	(28,615)

The changes in AOCI, before taxes, related to derivatives for the indicated periods were as follows:


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands)	2025		2024		2025		2024
Beginning AOCI	$	77,047	$	61,494	$	66,570	$	68,903
Amount reclassified to earnings as net gains	(12,168)		(2,260)		(24,380)		(5,768)
Net change in unrealized gains	18,662		10,601		41,351		6,700
Ending AOCI	$	83,541	$	69,835	$	83,541	$	69,835

As of December 31, 2025, the net gain reported in AOCI that is expected to be reclassified into earnings within the next 12 months is $32.5 million.

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Offsetting of Derivative Assets and Liabilities

We present derivatives at gross fair values in the Condensed Consolidated Balance Sheets. We have entered into arrangements with each of our counterparties, which reduce credit risk by permitting net settlement of transactions with the same counterparty under certain conditions. The information related to the offsetting arrangements for the periods indicated was as follows:


As of December 31, 2025							Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Derivatives		Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets		Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives - assets	$	52,505	$	—	$	52,505	$	(8,173)	$	—	$	44,332
Derivatives - liabilities	$	(8,219)	$	—	$	(8,219)	$	8,173	$	—	$	(46)


As of June 30, 2025							Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Derivatives		Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets		Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives - assets	$	59,503	$	—	$	59,503	$	(28,615)	$	—	$	30,888
Derivatives - liabilities	$	(28,615)	$	—	$	(28,615)	$	28,615	$	—	$	—

NOTE 16 – SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer.

Our operating segments are aggregated into reportable segments based on several factors including, but not limited to, customer base, homogeneity of products, technology, delivery channels and similar economic characteristics. We have three reportable segments: Semiconductor Process Control; Specialty Semiconductor Process; and PCB and Component Inspection.

Semiconductor Process Control

The Semiconductor Process Control segment offers a comprehensive portfolio of inspection, metrology and data analytics products, and related services, which helps integrated circuit (“IC”) manufacturers achieve target yield throughout the entire semiconductor fabrication process, from R&D to final volume production. Our differentiated products and services are designed to provide comprehensive solutions that help our customers accelerate development and production ramp cycles, achieve higher and more stable semiconductor die yields and improve their overall profitability.

Specialty Semiconductor Process

The Specialty Semiconductor Process segment develops and sells advanced vacuum deposition and etching process tools, which are used by a broad range of specialty semiconductor customers, including manufacturers of microelectromechanical systems (“MEMS”), radio frequency (“RF”) communication chips and power semiconductors for automotive and industrial applications.

PCB and Component Inspection

The PCB and Component Inspection segment enables electronic device manufacturers to inspect, test and measure PCBs, flat panel displays and 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. In March 2024, we made the decision to exit the Display business by announcing we would end manufacturing of most Display products but will continue to provide services to the installed base of Display products for existing customers.

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The CODM uses total segment revenues and segment profit (loss) to assess performance and allocate resources (including employees, financial or capital resources), primarily during the annual strategic long-term planning and budgeting process. The CODM considers changes in market conditions, technology constraints and the competitive environment when making decisions about allocating resources to segments. The CODM does not evaluate segments using discrete asset information because asset allocation is not managed at the segment level and assets are not tracked by segment in a way that it is meaningful for decision-making. Segment profit (loss) represents segment income (loss) before income taxes, and excludes interest expense, other expense (income), net, restructuring costs, effects of changes in foreign currency exchange rates, and other corporate expenses.

The following is a summary of results for each of our three reportable segments for the indicated periods:


(In thousands)	Semiconductor Process Control		Specialty Semiconductor Process		PCB and Component Inspection		Total
For the three months ended December 31, 2025
Revenue	$	3,004,648	$	140,577	$	152,175	$	3,297,400
Less:
Cost of revenue	1,085,042		73,688		80,432
R&D	333,828		16,911		37,001
SG&A	237,621		11,951		25,266
Other segment items (1)	9,744		27,281		11,978
Segment profit (loss)	$	1,338,413	$	10,746	$	(2,502)	$	1,346,657
For the three months ended December 31, 2024
Revenue	$	2,755,743	$	160,407	$	161,080	$	3,077,230
Less:
Cost of revenue	992,666		79,285		105,554
R&D	299,315		11,018		35,319
SG&A	215,406		13,762		26,397
Other segment items (1)	10,546		27,283		259,929
Segment profit (loss)	$	1,237,810	$	29,059	$	(266,119)	$	1,000,750
For the six months ended December 31, 2025
Revenue	$	5,904,040	$	260,332	$	341,663	$	6,506,035
Less:
Cost of revenue	2,141,879		135,229		173,615
R&D	644,844		30,417		69,113
SG&A	452,664		23,388		50,969
Other segment items (1)	19,489		54,562		23,977
Segment profit	$	2,645,164	$	16,736	$	23,989	$	2,685,889
For the six months ended December 31, 2024
Revenue	$	5,330,894	$	288,741	$	299,063	$	5,918,698
Less:
Cost of revenue	1,951,035		143,125		186,000
R&D	573,770		21,318		71,336
SG&A	408,828		27,702		54,053
Other segment items (1)	22,123		54,564		277,764
Segment profit (loss)	$	2,375,138	$	42,032	$	(290,090)	$	2,127,080

__________________

(1)Other segment items for each reportable segment includes:

•Semiconductor Process Control — amortization of purchased intangible assets and acquisition related expenses.

•Specialty Semiconductor Process — amortization of purchased intangible assets.

•PCB and Component Inspection — amortization of purchased intangible assets for all periods presented and impairment of goodwill and purchased intangible assets for the three and six months ended December 31, 2024.

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The following table reconciles total reportable segment revenue to total revenue for the indicated periods:


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands)	2025		2024		2025		2024
Total revenues for reportable segments	$	3,297,400	$	3,077,230	$	6,506,035	$	5,918,698
Effects of changes in foreign currency exchange rates	(254)		(379)		807		(306)
Total revenues	$	3,297,146	$	3,076,851	$	6,506,842	$	5,918,392

The following table reconciles total segment profit to total income before income taxes for the indicated periods:


	Three Months Ended December 31,				Six Months Ended December 31,
(In thousands)	2025		2024		2025		2024
Total segment profit	$	1,346,657	$	1,000,750	$	2,685,889	$	2,127,080
Unallocated amounts (1)	(15,489)		(2,302)		(13,434)		4,105
Interest expense	69,668		74,981		140,743		157,152

Other expense (income), net	(37,825)		(44,458)		(81,199)		(85,393)
Income before income taxes	$	1,330,303	$	972,529	$	2,639,779	$	2,051,216

__________________

(1)Unallocated amounts include effects of changes in exchange rates, as well as restructuring costs and other corporate expenses.

Our significant operations outside the United States include manufacturing facilities in China, Germany, Israel and Singapore and sales, marketing and service offices in Japan, the rest of the Asia Pacific region and Europe. For geographical revenue reporting, revenues are attributed to the geographic location in which the customer is located. Long-lived assets consist of land, property and equipment, net, and are attributed to the geographic region in which they are located.

The following is a summary of revenues by geographic region, based on ship-to location, for the indicated periods:


(Dollar amounts in thousands)	Three Months Ended December 31,								Six Months Ended December 31,
	2025				2024				2025				2024
Revenues:
China	$	994,891	30.2	%	$	1,092,525	35.5	%	$	2,262,047	34.8	%	$	2,290,829	38.7	%
Taiwan	844,987		25.6	%	881,211		28.6	%	1,638,595		25.2	%	1,343,202		22.7	%
Korea	479,314		14.5	%	357,434		11.6	%	778,687		12.0	%	596,108		10.1	%
North America	394,231		12.0	%	286,191		9.3	%	692,138		10.6	%	787,134		13.3	%
Japan	229,050		6.9	%	228,614		7.5	%	524,259		8.1	%	417,183		7.0	%
Rest of Asia	193,503		5.9	%	96,610		3.1	%	298,970		4.5	%	204,850		3.5	%
Europe and Israel	161,170		4.9	%	134,266		4.4	%	312,146		4.8	%	279,086		4.7	%
Total	$	3,297,146	100.0	%	$	3,076,851	100.0	%	$	6,506,842	100.0	%	$	5,918,392	100.0	%

The following is a summary of revenues by major product categories for the indicated periods:


(Dollar amounts in thousands)	Three Months Ended December 31,								Six Months Ended December 31,
	2025				2024				2025				2024
Revenues:
Wafer Inspection	$	1,572,782	48	%	$	1,562,610	51	%	$	3,110,026	48	%	$	2,931,553	50	%
Patterning	696,161		21	%	530,680		17	%	1,363,588		21	%	1,107,089		19	%
Specialty Semiconductor Process	121,588		4	%	142,987		5	%	221,807		3	%	255,789		4	%
PCB and Component Inspection	80,348		2	%	93,327		3	%	197,646		3	%	166,235		3	%
Services	786,053		24	%	667,389		22	%	1,530,743		24	%	1,311,541		22	%
Other	40,214		1	%	79,858		2	%	83,032		1	%	146,185		2	%
Total	$	3,297,146	100	%	$	3,076,851	100	%	$	6,506,842	100	%	$	5,918,392	100	%

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Wafer Inspection and Patterning products are offered in the Semiconductor Process Control segment. Services are offered in multiple segments. Other includes primarily refurbished systems, remanufactured legacy systems, and enhancements and upgrades for previous-generation products that are part of the Semiconductor Process Control segment.

In the three months ended December 31, 2025, two customers accounted for approximately 17% and 11% of total revenues each. In the three months ended December 31, 2024, one customer accounted for approximately 23% of total revenues. In the six months ended December 31, 2025, two customers accounted for approximately 16% and 11% of total revenues each. In the six months ended December 31, 2024, one customer accounted for approximately 18% of total revenues. Two customers on an individual basis accounted for greater than 10% of accounts receivable, net, at both December 31, 2025 and June 30, 2025.

Land, property and equipment, net by geographic region as of the dates indicated below were as follows:


	As of		As of
(In thousands)	December 31, 2025		June 30, 2025
Land, property and equipment, net:
United States	$	764,869	$	728,162
Europe	280,639		253,848
Singapore	165,596		153,052
Rest of Asia	71,257		49,109
Israel	62,407		68,604
Total	$	1,344,768	$	1,252,775

NOTE 17 – RESTRUCTURING CHARGES

From time to time, management approves restructuring plans including workforce reductions in an effort to streamline operations.

Restructuring charges were $0.3 million and $2.1 million for the three months ended December 31, 2025 and 2024, respectively. Restructuring charges were $0.7 million and $5.0 million for the six months ended December 31, 2025 and 2024, respectively. The charges for fiscal year 2026 and 2025 include severance and related charges for the restructuring of the former PCB and Display operating segment, as a result of exiting the Display business. As of December 31, 2025 and June 30, 2025, the accrual for restructuring charges was $4.7 million and $5.9 million, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”). All statements other than statements of historical fact may be forward-looking statements. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “could,” “would,” “should,” “expects,” “plans,” “anticipates,” “relies,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continues,” “thinks,” “seeks,” “commits”, or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Such forward-looking statements include those regarding, among others: the impact of tariffs on our business; forecasts of the future results of our operations, including profitability; orders for our products and capital equipment generally; sales of semiconductors; the investments by our customers in advanced technologies and new materials; growth of revenue in the semiconductor industry, the semiconductor capital equipment industry and our business; technological trends in the semiconductor industry; future developments or trends in the global capital and financial markets; our future product offerings and product features; the success and market acceptance of new products; timing of shipment of order backlog; our future product shipments and product and service revenues; our future gross margins; our future research and development (“R&D”) expenses and selling, general and administrative (“SG&A”) expenses; international sales and operations; our ability to maintain or improve our existing competitive position; success of our product offerings; creation and funding of programs for R&D; results of our investment in leading edge technologies; the effects of hedging transactions; the effect of the sale of trade receivables and promissory notes from customers; the effect of future compliance with laws and regulations; our future effective income tax rate; our recognition of tax benefits; the effects of any audits or litigation; future payments of dividends to our stockholders; the completion of any acquisitions of third parties, or the technology or assets thereof; benefits received from any acquisitions and development of acquired technologies; sufficiency of our existing cash balance, investments, cash generated from operations and the unfunded portion of our Revolving Credit Facility (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) to meet our operating and working capital requirements, including debt service and payment thereof; future dividends, and stock repurchases; our compliance with the financial covenants under the Credit Agreement (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) for our Revolving Credit Facility; the adoption of new accounting pronouncements; our repayment of our outstanding indebtedness; and our environmental, social and governance (“ESG”) related targets, goals and commitments.

Our actual results may differ significantly from those projected in the forward-looking statements in this report. Factors that might cause or contribute to such differences include, but are not limited to:

•Our vulnerability to a weakening in the condition of the financial markets and the global economy;

•Risks related to our international operations;

•Evolving Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce (“Commerce”) rules and regulations (the “BIS Rules”) and their impact on our ability to sell products to and provide services to certain customers in People’s Republic of China (“China”);

•Tariffs and other trade restrictions;

•Costly intellectual property (“IP”) disputes that could result in our inability to sell or use the challenged technology;

•Risks related to the legal, regulatory and tax environments in which we conduct our business;

•Differing stakeholder expectations, requirements and attention to ESG matters and the resulting costs, risks and impact on our business;

•Unexpected delays, difficulties and expenses in executing against our environmental, climate, or other ESG targets, goals and commitments;

•Our ability to attract, retain and motivate key personnel;

•Our vulnerability to disruptions and delays at our third-party service providers;

•Cybersecurity threats, cyber incidents affecting our and our business partners’ systems and networks;

•Our inability to access critical information in a timely manner due to system failures;

•Risks related to acquisitions, integrations, strategic alliances or collaborative arrangements;

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•Climate change, earthquake, flood or other natural catastrophic events, public health crises or terrorism and the adverse impact on our business operations;

•The war between Ukraine and Russia, escalation of hostilities in the Middle East, and the significant military activity in those regions;

•Lack of insurance for losses and interruptions caused by terrorists and acts of war, and our self-insurance of certain risks including earthquake risk;

•Risks related to fluctuations in foreign currency exchange rates;

•Risks related to fluctuations in interest rates and the market values of our portfolio investments;

•Risks related to tax and regulatory compliance audits;

•Any change in taxation rules or practices and our effective tax rate;

•Compliance costs with federal securities laws, rules, regulations, NASDAQ requirements, and evolving accounting standards and practices;

•Ongoing changes in the technology industry, and the semiconductor industry in particular, including future growth rates, pricing trends in end-markets, or changes in customer capital spending patterns;

•Our vulnerability to a highly concentrated customer base;

•The cyclicality of the industries in which we operate;

•Our ability to timely develop new technologies and products that successfully address changes in the industry;

•Risks related to artificial intelligence (“AI”);

•Our ability to maintain our technology advantage and protect proprietary rights;

•Our ability to compete in the industry;

•Availability and cost of the materials and parts used in the production of our products;

•Our ability to operate our business in accordance with our business plan;

•Risks related to our debt and leveraged capital structure;

•We may not be able to declare cash dividends at all or in any particular amount;

•Liability to our customers under indemnification provisions if our products fail to operate properly or contain defects or our customers are sued by third parties due to our products;

•Our government funding for R&D is subject to audit, and potential termination or penalties;

•We may incur significant restructuring charges or other asset impairment charges or inventory write offs;

•We are subject to risks related to receivables factoring arrangements and compliance risk of certain settlement agreements with the government; and

•Risks related to the Court of Chancery of the State of Delaware being the sole and exclusive forum for certain actions and proceedings.

For a more detailed discussion of these and other risk factors that might cause or contribute to differences from the forward-looking statements in this report, see Part II, Item 1A “Risk Factors” in this report as well as Part I, Item 1 “Business”, Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended June 30, 2025. You should carefully review these risks and also review the risks described in documents we file from time to time with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, and we expressly assume no obligation and do not intend to update the forward-looking statements in this report after the date hereof.

EXECUTIVE SUMMARY

We are a leading supplier of process control and yield management solutions and services for the semiconductor and related electronics industries. Our broad portfolio of inspection and metrology products, and related service, software and other offerings, support R&D and manufacturing of integrated circuits (“IC”), wafers and reticles. Our products, services and expertise are used by our customers to measure, detect, analyze and resolve critical and nanometric level product defects, helping them to manage manufacturing process challenges and to obtain higher finish product yields at lower cost. We also offer advanced technology solutions to address various manufacturing needs of printed circuit boards (“PCB”), specialty semiconductor devices and other electronic components, including advanced packaging, light-emitting diode (“LED”), power devices, compound semiconductor, and data storage industries, as well as general materials research. In addition, our services business has grown consistently year-over-year and accounted for approximately 24% of our total revenues in the second quarter of fiscal 2026. Our services revenue, which is generated largely from recurring “subscription-like” contracts, increases the value of our contract offerings and extension of system lifetimes resulting from growth in legacy semiconductor markets.

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We are organized into three reportable segments as follows:

•Semiconductor Process Control: a comprehensive portfolio of inspection, metrology and data analytics products as well as related service offerings that help IC manufacturers achieve target yields throughout the semiconductor fabrication process, from R&D to final volume production.

•Specialty Semiconductor Process: advanced vacuum deposition and etching process tools used by a broad range of specialty semiconductor customers.

•PCB and Component Inspection: a range of inspection, testing and measurement, and direct imaging for patterning products used by manufacturers of PCBs, advanced packaging, microelectromechanical systems (“MEMS”) and other electronic components.

As we close calendar year 2025, the semiconductor industry continues to experience significant market expansion and diversification. High-performance computing and data centers, fueled by widespread adoption of AI, are driving industry growth. We expect this momentum to continue into calendar year 2026. AI is a technology inflection point driving innovation and demand at the leading edge, and we believe our portfolio of products is uniquely positioned to support leading-edge demand and the ongoing AI buildout. Our semiconductor customers generally operate in one or both of the major semiconductor device manufacturing markets: memory and foundry/logic. End-market demand drivers that are expected to continue to benefit KLA in the long term include adoption of extreme ultraviolet lithography (“EUV”) in high volume manufacturing for Logic and DRAM memory (including high-bandwidth memory), which drives new process control requirements and growth in key markets for KLA. 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 high-performance computing applications, is also driving significant growth in our advanced packaging business. The digitization of all industries, including 5G markets, 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.

While we continue to invest in technological innovation, factors such as delays from customers in adopting new chips and technology methods could impact process control capital intensity. Pushouts or cancellations of deliveries to our customers could cause earnings volatility, due to the timing of revenue recognition as well as increased risk of inventory-related charges. Geopolitical factors, such as government regulations and tariffs, have had an adverse impact on our results of operations. However, despite these headwinds, our gross margin and overall financial performance improved in the three months ended December 31, 2025 compared to the three months ended December 31, 2024. Looking ahead to calendar year 2026, while we expect continued revenue growth, escalating costs for DRAM chips used in the Company’s image computers is likely to negatively impact our gross margin.

We are continuously assessing the aggregate potential impact of government regulations and tariffs on our financial results and operations. See Part II, Item 1A “Risk Factors” below, and also Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended June 30, 2025 for more information regarding how such actions by the U.S. government or another country could significantly impact our ability to provide our products and services to existing and potential customers, especially in China, and adversely affect our business, financial condition and results of operations.

The following table sets forth some of our key quarterly unaudited financial information:


(Dollar amounts in thousands, except net income per share)	Three Months Ended
	December 31, 2025		September 30, 2025		June 30, 2025		March 31, 2025		December 31, 2024
Total revenues	$	3,297,146	$	3,209,696	$	3,174,741	$	3,063,029	$	3,076,851
Costs of revenues	$	1,271,210	$	1,243,070	$	1,207,286	$	1,175,689	$	1,221,461
Gross margin	61.4%		61.3%		62.0%		61.6%		60.3%
Net income(1)(2)	$	1,145,682	$	1,121,040	$	1,202,849	$	1,088,416	$	824,527
Diluted net income per share(3)	$	8.68	$	8.47	$	9.06	$	8.16	$	6.16

__________________

(1)For the explanation why our net income increased to $1.15 billion in the three months ended December 31, 2025 compared to the three months ended December 31, 2024, refer to the “Results of Operations” section below, as the change is a result of movements in various income statement line items.

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(2)Our net income for the three months ended December 31, 2024 included pre-tax goodwill and purchased intangible assets impairment charges of $239.1 million. For additional details, refer to Note 6 “Goodwill and Purchased Intangible Assets” in the Notes to the Consolidated Financial Statements and Note 7 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

(3)Diluted net income per share is computed independently for each of the quarters presented based on the weighted-average fully diluted shares outstanding for each quarter. Therefore, the sum of quarterly diluted net income per share information may not equal annual (or other multiple-quarter calculations of) diluted net income per share.

We continue to focus on returning cash to our investors, making $547.8 million in share repurchases and paying $249.7 million in dividends in the three months ended December 31, 2025. We increased the dividend in the fourth quarter of fiscal 2025 to $1.90 per share per quarter, which was our 16th consecutive annual dividend increase. Refer to the “Liquidity and Capital Resources” section below for more information on our strong cash flow generation and strategy of returning excess cash to our stockholders.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical experience and evaluate them on an ongoing basis to ensure that they remain reasonable under current conditions. Actual results could differ from those estimates.

There have been no material changes in our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 30, 2025 for a complete description of our critical accounting estimates.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, including those recently adopted and the expected dates of adoption as well as estimated effects, if any, on our Condensed Consolidated Financial Statements of those not yet adopted, see Note 1 “Basis of Presentation” to our Condensed Consolidated Financial Statements.

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RESULTS OF OPERATIONS

Revenues and Gross Margin

Our business is affected by the concentration of our customer base and our customers’ capital equipment procurement schedules as a result of their investment plans. Our product revenues in any particular period are impacted by the amount of new orders we receive during that period and, depending upon the duration of manufacturing and installation cycles, in the preceding periods. Revenue is also impacted by average customer pricing, customer revenue deferrals associated with volume purchase agreements, the effect of fluctuations in foreign currency exchange rates, increased trade restrictions and the availability of government incentives for semiconductor capital investments. Service revenues are generated from product maintenance and support services, as well as billable time and material service calls made to our customers. The amount of our service revenues is typically a function of the number of systems installed at our customers’ sites and the utilization of those systems, but it is also impacted by other factors, such as our rate of service contract renewals, the types of systems being serviced and fluctuations in foreign currency exchange rates. A significant portion of our revenues continues to be generated in Asia, where a substantial portion of the world’s semiconductor manufacturing capacity is located, and we expect that trend to continue.


	Three Months Ended December 31,				Q2 FY26 vs. Q2 FY25
(Dollar amounts in thousands)	2025		2024
Revenues:
Product	$	2,511,093	$	2,409,462	$	101,631	4	%
Service	786,053		667,389		118,664		18	%
Total revenues	$	3,297,146	$	3,076,851	$	220,295	7	%
Costs of revenues	$	1,271,210	$	1,221,461	$	49,749	4	%
Gross margin	61.4%		60.3%


	Six Months Ended December 31,						Q2 FY26 YTD vs. Q2 FY25 YTD
(Dollar amounts in thousands)	2025			2024
Revenues:
Product	$	4,976,099		$	4,606,851		$	369,248	8	%
Service	1,530,743			1,311,541			219,202		17	%
Total revenues	$	6,506,842		$	5,918,392		$	588,450	10	%
Costs of revenues	$	2,514,280		$	2,368,892		$	145,388	6	%
Gross margin	61.4		%	60.0		%

Total revenues increased 7% in the three months ended December 31, 2025 compared to the three months ended December 31, 2024, primarily due to an 18% increase in service revenues attributable to growth in our installed base of tools, and a 4% increase in product revenues from higher investments from our memory customers, particularly in DRAM led by high-bandwidth memory, and strong customer adoption of our advanced packaging portfolio of products. The increase in revenues was partially offset by lower shipments to foundry/logic customers driven by the timing of fab readiness.

Total revenues increased by 10% in the six months ended December 31, 2025 compared to the six months ended December 31, 2024, primarily due to the increase in our product revenues, and is attributable to higher investments by our memory customers and strong customer adoption of our advanced packaging portfolio of products. An increase in service revenues of 17%, as a result of continued growth of our installed base of tools, also contributed to higher total revenues compared to the same period in the prior year.

Revenues by segment(1)


	Three Months Ended December 31,				Q2 FY26 vs. Q2 FY25
(Dollar amounts in thousands)	2025		2024
Revenues:
Semiconductor Process Control	$	3,004,648	$	2,755,743	$	248,905	9	%
Specialty Semiconductor Process	140,577		160,407		(19,830)		(12)	%
PCB and Component Inspection	152,175		161,080		(8,905)		(6)	%
Total revenues for reportable segments	$	3,297,400	$	3,077,230	$	220,170	7	%

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	Six Months Ended December 31,				Q2 FY26 YTD vs. Q2 FY25 YTD
(Dollar amounts in thousands)	2025		2024
Revenues:
Semiconductor Process Control	$	5,904,040	$	5,330,894	$	573,146	11	%
Specialty Semiconductor Process	260,332		288,741		(28,409)		(10)	%
PCB and Component Inspection	341,663		299,063		42,600		14	%
Total revenues for reportable segments	$	6,506,035	$	5,918,698	$	587,337	10	%

_______________

(1)Segment revenues exclude corporate allocations and the effects of changes in foreign currency exchange rates. For additional details, refer to Note 16 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements.

Revenues from our Semiconductor Process Control segment for the three and six months ended December 31, 2025 increased by 9% and 11%, respectively, compared to the same period in the prior year, primarily due to increased revenue from our memory customers, particularly related to DRAM, higher revenue from advanced packaging, along with higher service revenues from an increasing number of tools in our installed base.

Revenues from our Specialty Semiconductor Process segment for the three and six months ended December 31, 2025 decreased by 12% and 10%, respectively, compared to the same period in the prior year, primarily due to lower volume of products sold, particularly to customers in China, partially offset by higher service revenues from an increasing number of tools in our installed base.

Revenues from our PCB and Component Inspection segment decreased by 6% during the three months ended December 31, 2025 compared to the same period in the prior year, primarily due to revenues from our Display business being included in the prior year results, a business which has since been exited. The decrease was partially offset by increased revenues from advanced packaging and higher service revenues from growth in our installed base of tools. Revenues in this segment increased by 14% during the six months ended December 31, 2025 compared to the same period in the prior year, due to increased revenue from advanced packaging and higher service revenues from growth in our installed base, partially offset by the exit of the Display business as noted previously.

Below is supplementary revenue information by major product categories for the indicated periods:


(Dollar amounts in thousands)	Three Months Ended December 31,								Q2 FY26 vs. Q2 FY25
	2025				2024
Revenues:
Wafer Inspection	$	1,572,782	48	%	$	1,562,610	51	%		$	10,172	1	%
Patterning	696,161		21	%	530,680		17	%		165,481		31	%
Specialty Semiconductor Process	121,588		4

KLA CORP 10-Q