KLAC 10-K & 10-Q changes, risk factors and insider trading

Commercial,Macroeconomic, Operational,International FinancialTrade, Operational and Regulatory Risks

•Laws,Export controls, sanctions and other laws, rules, regulations or other orders that may limit our ability to sell our products or provide service on products previously soldservices to certain customerscustomers, particularly in China;

•IP disputes can be expensive and could result in an inability to use or sell our products in certain jurisdictions;

•We may be unable to attract, onboardretain and retainmotivate key personnel;

•Cybersecurity incidents could result in operational disruption and the loss of valuable information or assets or subject us to costly disruption, remediation, regulatory investigations, litigation and reputational damage;

•Natural disasters, suchclimate-related as earthquakes,events, public health crises, acts of terrorism or warwar, orand other catastrophic events, and the lack of insurance thereof, could significantly disrupt our operations, includingcustomer affectingoperations theor global supply chain,chains for lengthy periods of time;

•We are exposed to fluctuations in foreign currency exchange rates, interest rates andrates, the market values of our portfolio investments and the market price of our common stock;

•Economic, politicalgeopolitical or other conditions in the jurisdictions where we earn profits can impact the tax laws and taxes we pay in those jurisdictions, subsequently impacting our effective tax rate, cash flows and results of operations;

•Changes in accounting pronouncementsstandards andor lawspractices or taxation rules or practices could have unforeseen effects.

Industry and Technology Risks

•Prevailing local and global economic conditionsconditions, semiconductor industry cyclicality, customer capital spending patterns and AI-related investment trends may negatively affect thecustomer demand and purchasing decisions of our customers; and

•We are exposed to risks related to the development, adoption, governance and use of AI by usus, our competitors, customers, and ourother competitors.third parties.

•We may not be able to continue to compete withsuccessfully new products introduced by our competitorsworldwide;

•We may not have sufficient financial resources to repay our indebtedness when it becomes due, and our leveraged capital structure may divert resources from operationsoperations, investments, dividends, stock repurchases and other corporate uses;

•Our governmentGovernment funding formay R&Dbe isterminated, modified or subject to termination,audit, auditrepayment and any furtherobligations, penalties or other restrictions;

•We are subject to risks related to receivables factoringfactoring, banking arrangements, and compliance risk ofwith certain settlement agreements with the government; and

Commercial,Macroeconomic, Operational,International FinancialTrade, Operational and Regulatory Risks

In addition, a decline in the condition of the global financial markets could adversely impact the market values or liquidity of our investments. Our investment portfolio includes corporate and government securities, money market funds and other types of debt and equity investments. Although we believe our portfolio continues to be comprised of sound investments due to the quality and (where applicable) credit ratings of such investments, a decline in the capital and financial markets or rising interest rates would adversely impact the market value of our investments and their liquidity. If the market value of such investments were to decline, or if we were to have to sell some of our investments under illiquid market conditions, we may be required to recognize an impairment charge on such investments or a loss on such sales, either of which could have an adverse effect on our financial condition and operating results.

A majority of our annualtotal revenues are derived from outside the U.S., and we maintain significant operations outside the U.S. We are exposed to numerous risks as a result of the international nature of our business and operations. We expect these conditions to continue in the foreseeable future.

•Political instability, geopolitical tensions, natural disasters, legal or regulatory changes, acts of war such as the wars between Russia and Ukraine and the military conflicts in the Middle East and any further escalation thereof, or terrorism in regions where we, our customers or our suppliers have operations or where we or they do business;

•Slowing growth, increased unemploymentunemployment, and changes in fiscal and/or monetary policies in the countries where we operate;

Over the past several years, there have been a variety of rulesChina, and regulations issued by Commerce that have had an impact on our ability to sell certain products and provide certain services to certain customers in China. These rules and regulations may significantly harm our business, results of operations, financial condition and cash flows in future periods,flows, unless we are able to obtain required licenses.

We maintain significant operations outside the United States, and existing and evolving trade restrictions imposed by the U.S. and other governments could significantly disrupt our global operations. The U.S. government has tightened export controls for commodities, software, and technology (collectively, “items”) destined to China over the past several years. These controls have included, for example, restrictions on exporting certain items to military end users and for military end uses, the addition of numerous entities to the U.S. Entity List (a list of parties that are generally ineligible to receive U.S.-regulated items without prior licensing from Commerce), and the creation of new licensing requirements that apply to the export, re-export, and transfer of certain foreign-made items that are the direct product of U.S. originU.S.-origin technology or produced by a plant or major component of a plant that itself is the direct product of U.S. originU.S.-origin technology and whichthat are destined to Huawei or its affiliates and other specified companies on the U.S. Entity List, and other facilities in China where the production of advanced node ICICs occurs.

In October 2022, Commerce published the 2022 BIS RulesRules, (the “2022 BIS Rules”) thatwhich introduced restrictions related to semiconductor, semiconductor manufacturing, supercomputer,supercomputer and advanced computing items and end uses. These rules impose restrictions on our ability to sell, ship and support certain equipment and otherwise conduct business with certain counterparties, primarily including China-based companies involved in advanced semiconductor manufacturing. Further, the 2022 BIS Rules impose restrictions on the activities of U.S. persons with respect to certain items that are not subject to the Export Administration Regulations (“EAR”), which departs from Commerce’s typical practice of controlling items that are subject to the EAR,EAR and could further restrict our ability to conduct business in China. In October 2023, Commerce issued the 2023 BIS Rules (the “2023 BIS Rules”) designed to update export controls on advanced computing semiconductors and semiconductor manufacturing equipment, as well as items that support supercomputing applications and end-uses,end uses, to certain D1, D4 and/or D5 countries in Supplement No. 1 of Part 740 of the U.S. EAR, including China. The 2023 BIS Rules adjust the parameters included in the 2022 BIS Rules that determine whether an advanced computing chip is restricted and impose new measures to address risks of circumvention of the controls established by the 2022 BIS Rules.

In December 2024 and January 2025, Commerce again issued incremental 2024 BIS Rules and 2025 BIS Rules, adding even more companies to the U.S. Entity List and revising the definition of advanced DRAM, further restricting our ability to provide certain items and services to facilities in China producing advanced DRAM ICs. Commerce may continue to add China-based entities to the U.S. Entity List and impose other end use or end user export restrictions, which could disrupt or prevent our product shipment, and further disrupt our revenue recognition, business operations and our ability to support our customers in China.

These rules and regulations may significantly harm our business unless we are able to obtain required licenses. We will continue to apply for export licenses, when required, in an effort to avoid disruption to our and our customers’ operations, but there can be no assurance that export licenses applied for by either us or our customers, now or in the future, will be granted. To the extent Commerce does issue licenses to us or to our customers, such licenses may have a short duration or require us to satisfy various conditions. If pending and future export license applications are not granted, or additional restrictions are imposed, or if regulators adopt new interpretations of existing regulations, the potential impact on us could be material by disrupting our supply chain and product shipment, impairing our ability to complete product development in a timely manner, or our ability to support existing customers of covered products or supply customers of covered products outside the impacted regions, and requiring us to transition certain operations out of one or more of the identified countries. Failure to obtain export licenses havehas harmed and could continue to harm our backlog, requiring us to return substantial deposits received from customers in China for purchase orders, and/or further limiting our ability to meet our contractual obligations and sell our products or provide services to our customers in China. In addition, the U.S. export restrictions on semiconductors and semiconductor technology to China and Chinese customers may reduce the need for our products and make it easier for our China-based competitors to develop and sell their own products and take market share from us.

We may lose revenue in future periods related to anticipated sales to customers in China unless we are able to replace their orders with other customer orders for which either an export license has been obtained or is not required. Our revenue from sales of products and provision of services to customers in China was 33%,30%, 43%33% and 27%43% for fiscal years 2025,2026, 20242025 and 2023, respectively, and future revenue from China as a percentage of our overall revenue may decline as a result of the current and future Commerce rules and regulations.

We have faced delays and could face additional delays or denials in the export of our tools by regulatory agencies for national security or other regulatory concerns in the countries in which we do business, which could negatively affect our results of operations and timing of revenue recognition. We have controls and procedures designed to maintain compliance with U.S. and other applicable export control laws and regulations; however, we cannot guarantee that such controls and procedures will be successful in preventing violations or allegations of violations,violations of increasingly complex and often conflicting regulations worldwide. Recently, some of our products destined for China have been held up by U.S. Customs and Border Protection due to questions about the nature of the customer or about the capabilities of our products. We cannot make any assurance that products that have been held up will be cleared for shipment in a timely manner or without a license. Shipment delays or cancellations could have an adverse effect on our financial condition and results of operations. The complexity and evolving nature of the rules and regulations, and the fact that Commerce or other relevant regulators might adopt interpretations of regulations that differ from those of the Company, increase our risk of non-compliance.

Recently announced and future U.S. tariffs or other restrictions placed on imports,tariffs, retaliatory trade measures taken byand other countriestrade restrictions, as well as uncertainty regarding tariff authority, implementation and resultingrefund trade warsprocesses, may have a material adverse impact on our results of operations.

In April 2025, Commerce announced the initiation of investigations into the effects on U.S. national security of imports of semiconductors under Section 232 of the Trade Expansion Act of 1962. The scope of the investigations includeincludes semiconductors, semiconductor manufacturing equipment and their derivative productsproducts, including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics and other components. While the results of the investigations are currently unknown, they may result in additional tariffs and trade restrictionsrestrictions, which may adversely impact our business.

The U.S. Tariffstariffs have increased our cost of revenues due to the increase in the cost of importing foreign sourced components to our U.S. facilities to build the products that we manufacture in the U.S. Tariffs imposed on U.S. goods by other countries may harm demand for our products from customers in those regions, or may cause our customers in those regions to push out or cancel previously placed purchase orders. In addition, we have had to return deposits given to us by our customers upon cancellation of their purchase orders. Moreover, tariffs can make it difficult for us and our customers and suppliers to make and execute business and capital equipment investment plans or increase supply chain complexity, which may have an impact on our ability to source the materials necessary to manufacture our products.

We are subject to various risks related to compliance with laws, rules and regulations enacted by legislative bodies and/or regulatory agencies in the countries in which we operate and with which we must comply, including environmental, safety, antitrust, anti-corruption/anti-bribery, unclaimed property, conflict minerals and other responsible sourcing practices, economic sanctions and export control regulations. We have policies and procedures designed to promote compliance with applicable laws, but there can be no assurance our policies and procedures will prove completely effective in ensuring compliance by all our personnel, business partners and representatives, for whose misconduct we may under some circumstances be legally responsible. Our failure or inability to comply with existing or future laws, rules or regulations in the countries in which we operate could result in government investigations and/or enforcement actions, which could result in significant financial cost (including investigation expenses, defense costs, assessments and criminal or civil penalties), reputational harm and other consequences that may adversely affect our operating results, financial condition and ability to conduct our business. For instance, in response to the war between Russia and Ukraine, the U.S., the European Union and other countries have imposed sanctions against Russia, Belarus and certain other regions, entities and individuals, and may impose additional sanctions, export controls or other measures. The imposition of sanctions, export controls and other measures could adversely impact our business including preventing us from performing existing contracts, recognizing revenue, pursuing new business opportunities or receiving payment for products already supplied or services already performed with customers.

Additionally, we are subject to various domestic and international environmental laws and regulations, including those that control and restrict the use, transportation, emission, discharge, storage, and disposal of certain chemicals, gases and other substances. Current and proposed restrictions on per- and polyfluoroalkyl substances (“PFAS”) may negatively impact our supply chain due to potentially decreased availability, or non-availability, of PFAS-containing products or commercially feasible alternatives. Any failure to comply with applicable environmental laws, regulations or requirements may subject us to a range of consequences, including fines, suspension of certain of our business activities, limitations on our ability to sell our products, obligations to remediate environmental contamination, and criminal and civil liabilities or other sanctions. Some of these laws impose strict liability for certain releases, which may require us to incur costs regardless of fault or the legality of actions at the time of release. In addition, changes in environmental laws and regulations (including any relating to climate change and GHG emissions) could require us, or others in our value chain, to install additional equipment, alter operations to

actions at the time of release. In addition, changes in environmental laws and regulations (including any relating to climate change and GHG emissions) could require us, or others in our value chain, to install additional equipment, alter operations to incorporate new technologies or processes, or revise process inputs, among other things, which may cause us to incur significant costs or otherwise adversely impact our business performance. Various agencies and governmental bodies have expressed particular interest in promulgating rules relating to climate change or other sustainability matters. For example, policymakers in the European Union, the State of California and elsewhere have adopted, or are considering adopting, various legal requirements on disclosures or other actions on certain climate or other sustainability matters. We also face increasing complexity in our manufacturing, product design and procurement operations as we adjust to new and prospective requirements relating to the composition of our products, including restrictions on lead and other substances and requirements to track the sources, production methods, or provenance of certain metals and other materials. The cost of complying, or failing to comply, with these and other regulatory requirements or contractual obligations could adversely affect our operating results, financial condition and ability to conduct our business.

Although we have engaged, and expect to continue to engage, in certain voluntary ESG initiatives,initiatives to improve the ESG profile of our operations and product offerings, we cannot guarantee that such efforts will have the intended results, including whether we are able to measure and disclose related data of sufficient quality or timeliness or in accordance with particular methodological practices. For example, we have adopted certain GHG emissions reduction targets for Scope 1, 2 and 3 emissions. Although several of these goals have been validated by SBTi, our estimates concerning the timing and cost of implementing our goals are subject to risks and uncertainties, some of which are outside of our control. In addition, standards for calculating and disclosing emissions and other sustainability metrics continue to evolve, which can result in inconsistencies or other changes to data over time, revisions to our strategies and targets, or our ability to achieve them, subjecting us to additional scrutiny. Standards for ESG metrics and reporting continue to evolve due to a variety of factors, and our disclosures are expected to evolve as well, whether in response to regulatory requirements or otherwise; however, we cannot guarantee that our approach will align with any particular methodology or stakeholder expectations. Any failure, or perceived failure, to disclose in keeping with best practices, regulations, or other stakeholder expectations or to successfully achieve our voluntary goals, or the manner in which we achieve some or any portion of our goals, could adversely impact our reputation or, to the extent related to our sustainability-linked capital sources, financial condition and results of operations.

Our ESG efforts have included, and may in the future include further adoption, or expansion, of certain ESG practices or policies, which may require us to expend additional resources to implement or to forego certain business opportunities to the extent others in our value chain do not meet pertinent requirements of such policies. By contrast, any failure, or perceived failure, to conform to such policies could have an adverse impact on our reputation and business activities. Our performance may be subject to greater scrutiny as a result of our announcement of any goals or policies and the publication of our

failure, to conform to such policies could have an adverse impact on our reputation and business activities. Our performance may be subject to greater scrutiny as a result of our announcement of any goals or policies and the publication of our performance against the same. Stakeholders may have different, and at times conflicting, expectations. While some external sources may seek to pressure us to adopt additional or more aggressive ESG initiatives, there are simultaneous efforts by others to reduce companies'companies’ efforts on such matters. Such proponents and opponents of ESG matters are increasingly resorting to activism or litigation to advance their perspectives. In addition, as noted above, regulators, including the European Union and the State of California, have adopted, or are considering adopting, regulations regarding ESG matters, including, but not limited to, climate change-related matters. Such regulatory approaches are not uniform, which may increase the cost and complexity of compliance. Addressing stakeholder expectations, including regulations, entails costs and any failure to successfully navigate such expectations may result in reputational harm, loss of customers or contracts, potential regulatory or investor engagement, or other adverse impacts to our business. Such ESG matters also impact at least certain of our suppliers and customers, which may compound or cause new impacts on our business, financial condition or results of operations.

Our employees are vital to our success, and our key management, engineering and other employees are difficult to replace. We generally do not have employment contracts with our key employees. Further, we do not maintain key person life insurance for any of our employees. The expansion of high technology companies worldwide and the elevated demand for talent from the growth in the demand for semiconductors in recent years has increased demand and competition for qualified personnel. Competition for engineering and other technical personnel in many areas of the world in which we operate is especially intense due to the proliferation of technology companies worldwide. Our competitors have targeted individuals in our organization who have desired skills and experience. In addition, current or future immigration laws, policies or regulations may limit our ability to attract, hire and retain qualified personnel. If we are unable to attract, onboard and retain key personnel, or if we are not able to attract, assimilate, onboard and retain additional highly qualified employees to meet our current and future needs, our business and operations could be harmed.

We outsource a number of services, including our transportation, information systems management and logistics management of spare parts and certain accounting and procurement functions, among others, to domestic and overseas third-party service providers. While outsourcing arrangements may lower our cost of operations, they also reduce our direct control over the services rendered. It is uncertain what effect such diminished control will have on the quality or quantity of products delivered or services rendered, on our ability to quickly respond to changing market conditions, or on our ability to ensure compliance with all applicable domestic and foreign laws and regulations. In addition, many of these outsourced service providers, including certain hosted software applications that we use for confidential data storage, may employ cloud computing technology and other systems. These providers may beare susceptible to “cyber incidents,” such as software vulnerabilities, cyber-attacks aimed at theft of sensitive data, inadvertent cyber-security compromises, attacks aimed at operational disruption at the target or third-party service providers, all of which are outside of our control. If we do not effectively develop and manage our outsourcing strategies, if required export and other governmental approvals are not timely obtained, if our third-party service providers pass on the cost of inflation to us or do not perform as anticipated, or do not adequately maintain operational resilience or fail to protect our data from cyber-related security breaches, or if there are delays or difficulties in enhancing business processes, we may experience operational difficulties (such as limitations on our ability to ship products), increased costs, manufacturing or service interruptions or delays, loss of IP rights or other sensitive data, quality and compliance issues, and challenges in managing our product inventory or recording and reporting financial and management information, any of which could materially and adversely affect our business, financial condition and results of operations.

In the conduct of our business, we and certain of our third-party providers collect, use, transmit and store data on information systems and networks, including systems, software, hardware and networks owned and maintained by KLA and/or by third-party providers (collectively, “IT Systems”). This data includes confidential information, transactional information and IP belonging to us, our customers and our business partners, as well as personal information of individuals (collectively, “Confidential Information”). We also integrate and use certain third-party services and products, including software, in our IT Systems, and such third-party products, services and systems are beyond our control. We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information, including from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as diverse attack vectors, such as computer viruses, bugs, ransomware and other malware, technological errors and known and unknown vulnerabilities in our software and systems and those of third parties, cyber-related security breaches and similar disruptions from unauthorized intrusions, tampering, misuse or criminal acts made directly against our systems or networks, or

unknown vulnerabilities in our software and systems and those of third parties, cyber-related security breaches and similar disruptions from unauthorized intrusions, tampering, misuse or criminal acts made directly against our systems or networks, or through our third-party providers or the supply chain, including social engineering, phishing, or other events or developments that we may be unable to anticipate or fail to mitigate, including, but not limited to, financial fraud, including check fraud, vulnerabilities or misconfigurations in our IT Systems. In addition, insider actors, malicious or otherwise, could misappropriate our Confidential Information, compromise our IT Systems, tamper with our products or otherwise cause disruptions to our business operations. Cybersecurity threats also include attempts to infiltrate our products or services, including attacks targeting the security, confidentiality, integrity and/or availability of the hardware, software, and information stored in our products, including after those products have been sold by us and when they are incorporated into third-party facilities or infrastructure. Moreover, we have acquired and may continue to acquire companies with cybersecurity vulnerabilities and/or unsophisticated security measures, which may exposeexposes us to significant cybersecurity, operational and financial risks. Remote and hybrid working arrangements at our company (and at many third-party providers) also increase cybersecurity risks due to the challenges associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate and home networks.

We and our third-party providers regularly experience cyber-attacks and events and on occasion incidents involving unauthorized access to IT Systems and Confidential Information and, although no such attacks, events or incidents have materially impacted our operations or financial results to date, there can be no assurance that such attacks, events or incidents will not be material to KLA in the future. Because the techniques used to perpetrate cyberattacks and other security incidents change frequently and increasingly leverage technologies such as AI, cyber-attacks may not be recognized until launched against a target and are increasingly designed to circumvent controls, avoid detection and remove or obfuscate forensic artifacts. As such, we may be unable to anticipate these techniques, implement adequate preventative measures, or adequately identify, investigate and recover from cybersecurity incidents. There can also be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our IT Systems and Confidential Information. We strive to prioritize the remediation of identified security vulnerabilities based on known and anticipated risks, and we aim to patch vulnerabilities within reasonable timeframes. However, we are unable to comprehensively identify all vulnerabilities (particularly as related to third-party software and systems), apply patches or confirm that mitigating measures are in place, or ensure that any patches will be applied by us or our third parties before exploitation by a threat actor. If attackers are able to exploit vulnerabilities before patches are installed or mitigating measures are implemented, significant compromises could impact our IT Systems and Confidential Information. Moreover, AI may be used to generate cyberattacks as AI capabilities improve and are increasingly adopted. These attacks crafted with AI tools could directly attack our IT Systems or Confidential Information with greater speed and/or efficiency than a human threat actor or create more effective phishing emails.emails, polymorphic malware that adapts real-time to a victim environment during deployment, and automated vulnerability identification, among other things. In addition, the threat could be introduced from the result of us, our customers or business partners incorporating AI into our respective businesses, for example, introducing malicious code by incorporating AI generated source code.

Any impact to the availability, integrity or confidentiality of our IT Systems ofor Confidential Information can materially adversely impact our business, operations and financial condition directly, or indirectly by impacting third parties in the supply chain, including direct or sub-tier suppliers, in many potential ways: disruptions to operations; misappropriation, corruption or theft of Confidential Information; misappropriation of funds and Company assets; reduced value of our investments in research, development and engineering; litigation (including class action lawsuits) with, or payment of damages to, third parties; reputational damage; costs to comply with regulatory inquiries or actions; data privacy issues; costs to rebuild our IT Systems or restore our Confidential Information; and increased cybersecurity protection and remediation costs. Additionally, cybersecurity and data security and protection laws and regulations are evolving and present increasing compliance challenges, which may increase our costs, affect our competitiveness, cause reputational harm and expose us to substantial fines or other penalties. Cybersecurity incidents affecting our customers could result in substantial delays in our ability to ship to those customers or install our products, which could result in delays in revenue recognition or the cancellation of orders, and cybersecurity incidents affecting our suppliers could result in substantial delays in our ability to obtain necessary components for our products from those suppliers, which could hamper our ability to ship our products to our customers and service them, harming our results of operations. For example, in February 2023, one of our suppliers experienced a ransomware event that caused delays in its manufacturing operations, resulting in its shipment delays to us for components we ordered, whichwhich, in turnturn, caused delays in some of our outbound shipments during the quarter. Similar events could cause disruptions in the future.

We rely upon certaincritical information systems, including our ERP system, for daily business operations and financial reporting, and system failures, implementation issues, or limited access to critical information systems for our daily business operations. Our inability to use or access our information systems at critical points in time could unfavorablyadversely impactaffect our business operations.

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, andalong with related service,services, software and other offerings, supportsupports R&D and manufacturing of ICs, wafers and reticles. Our products, services and expertise are used byenable our customers to measure, detect, analyze and resolve critical and nanometric levelnanometer-scale product defects, helping them to manageaddress manufacturing process challenges and to obtainachieve higher finish product yields at lower cost. We also offer advanced technology solutions to address various manufacturing needs of PCBs, 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 each quarter on a year-over-year basis and accounted for approximately 22% of our total revenues in fiscal 2025, due to increases in the installed base of KLA systems. 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.

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

We are continuously assessing the aggregate potential impact of government regulationsregulations, tariffs and tariffsother geopolitical risks on our financial results and operations. See Part I Item 1A “Risk Factors” in this report 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.

We continue to focus on returning cash to our investors, making $2.15$2.29 billion in share repurchases and paying $904.6$1.06 millionbillion in dividends in the year ended June 30, 2025.2026. WeOur increasedBoard theof dividendDirectors has authorized a program that permits us to repurchase our common stock, including an increase in the fourthauthorized repurchase amount of $7.00 billion in the third quarter of fiscal 20252026. As of June 30, 2026, we had $9.74 billion of repurchase authority remaining. We also announced an increase in the dividend level in the third quarter of fiscal 2026 to $1.90$0.230 per share per quarter, which was our 16th17th 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.

Management uses judgment in identifying performance obligations, determining the stand-alone selling price (“SSP”) for each distinct performance obligation and allocating consideration from an arrangement to the individual performance obligations based on the SSP. We estimate the SSP of products and services based on observable transactions when the products and services are sold on a stand-alone basis and those prices fall within a reasonable range. We typically have established SSP ranges for individual products and services due to the stratification of these products by customers and circumstances. In instances where the SSP is not directly observable, we determine the SSP using information that includes market conditions, entity-specific factors including discounting strategies, information about the customer or class of customer that is reasonably available and other observable inputs. While changes in the allocation of SSP between performance obligations will not affect the amount of total revenue recognized for a particular contract, any material changes could impact the timing of revenue recognition, which could have a material effect on our financial position and results of operations. Additionally, management also uses judgments to evaluate whether or not the customer has obtained control of the product and considers several indicators in evaluating whether or not control has transferred to the customer, which could also impact the timing of revenue recognition, and could have a material effect on our financial position and results of operations. Although our products are generally not sold with a right of return, we may provide other credits or sales incentives, which are accounted for either as variable consideration or a material right, depending on the specific terms and conditions of the arrangement. These credits and incentives are estimated at contract inception and updated at the end of each reporting period if and when additional information becomes available.

Inventory Valuation. Inventories are stated at the lower of cost or net realizable value using standard costs that approximate actual costs on a first-in, first-out basis. The carrying value of inventory is reduced for estimated obsolescence equal to the difference between its cost and the estimated net realizable value based on assumptions about future demand for meeting our product manufacturing plans and our customers’ support requirements. The estimate of net realizable value of inventory is impacted by assumptions regarding general semiconductor market conditions, manufacturing schedules, technology changes, new product introductions and possible alternative uses, and requires us to use significant judgment that may include uncertain elements. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. If in any period we anticipate an adverse change in assumptions such as future demand or market conditions to be less favorable than our previous estimates, additional inventory write-downs may be required and would be reflected in cost of revenues, resulting in a negative impact to our gross margin in that period. The potential negative impact based on future demand is not practically quantifiable. On the other hand, if in any period we are able to sell inventories that had been written down in a previous period to a level below the ultimate realized selling price, related revenue would be recorded with a lower or no offsetting charge to cost of revenues resulting in a net benefit to our gross margin in that period. A decrease in the future average selling prices would not have a material impact on the estimated net realizable value of finished goods and work in process inventories.

We determine the fair value of purchased intangible assets using the income approach, primarily by applying the relief-from-royalty or multi-period excess-earnings methods. In connection with the downwardcontinued revisiondeterioration of financialthe outlooklong-term forecast for our PCB and Display businesses noted above, we recorded impairment losses related to purchased intangible assets of $8.7 million during the second quarter of fiscal 2025 and $26.4 million during the second quarter of fiscal 2024. As a result of the Company's decision to exit the Display business, also described above, an immaterial purchased intangible asset impairment charge was recorded in the third quarter of fiscal 2024.2025.

There can be no assurance that the estimates and assumptions used in our fair value calculations will prove to be an accurate prediction of the future. If our assumptions are not realized, or if there are future changes in any of the assumptions due to a change in economic conditions or otherwise, it is possible that a further impairment charge may need to be recorded in the future.

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 as discussed in the “Executive Summary” section above 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.

The 12% increase in total revenues by 24% in the fiscal year ended June 30, 20252026 compared to the prior fiscal year iswas primarily attributabledriven by higher product revenues resulting from increased leading-edge customer investments in foundry/logic, memory and advanced packaging technologies, supported by strong demand associated with AI and HPC applications. Revenue growth also benefited from higher service revenues, which increased 16% due to the increasegrowth in our productinstalled revenues and is due to increased investments by leading edge foundries driven by the AI infrastructure buildout, strong customer adoptionbase of our advanced packaging portfolio of products and strong demand for many of our products, especially those in our inspection portfolio, partially offset by a decrease of 4% in revenues from our customers in China.tools.

•Revenue from our Semiconductor Process Control segment increased 12% in fiscal 20252026 compared to fiscal 20242025, primarily due to aincreased resumptionrevenue from foundry/logic and memory customers, driven by continued leading-edge investment supporting AI and HPC applications. Revenue growth also benefited from strong customer adoption of our advanced packaging products and higher service revenue attributable to growth in the industry,installed demonstrated by strong demand for manybase of our products, especially those in our inspection portfolio, as well as higher service revenue from an increase in our installed base.tools.

•Revenue from our Specialty Semiconductor Process segment,segment whichdecreased comprisesslightly etchingby and deposition solutions for advanced packaging and specialty semiconductor markets, increased1% in fiscal 20252026 compared to fiscal 20242025, primarily due to increasedlower revenuecustomer investments and reduced product sales in China, mostly offset by higher service revenues resulting from ourgrowth advancedin packagingthe business.installed base of tools.

The followingBelow is asupplementary summaryrevenue of revenuesinformation by major product categories for the indicated periods:

The following customers eachcustomer accounted for more than 10% of our total revenues, primarily in our Semiconductor Process Control segment, for the indicated periods:

Changes in gross margin from revenue volume of products and services reflect our ability to leverage existing infrastructure to generate higher revenues. Changes in gross margin from the mix of products and services sold reflect the impact of changes within the composition of product and service offerings. Changes in gross margin from manufacturing labor, overhead and efficiencies reflect our ability to manage costs and drive productivity as we scale our manufacturing activity to respond to customer requirements and amortization of intangible assets. Changes in gross margin from other service and manufacturing costs include the impact of customer support costs, including the efficiencies with which we deliver services to our customers, and the effectiveness with which we manage our production plans and inventory risk. Other service and manufacturing costs included lower inventory obsolescence charges offset by higher tariff and freight expenses in fiscal year 2025 compared to fiscal year 2024.

R&D expenses during the fiscal year ended June 30, 20252026 increased compared to the fiscal year ended June 30, 20242025, primarily due to an increaseincreases in employee-related expenses of $70.1$124.8 million,million anas increasea in depreciation expenseresult of $5.9increased millionheadcount and anhigher increasecompensation inand benefits costs, and engineering project material costs of $4.9$36.0 million.

SG&A expenses during the fiscal year ended June 30, 20252026 increased compared to the fiscal year ended June 30, 20242025, primarily due to increases in the following areas: employee-related expenses of $35.9 million as a result of increased headcount and higher compensation and benefits costs, facility-related expenses of $15.9$23.9 million, employee-relatedand expensesprovision for credit losses of $12.9 million, depreciation expense of $12.0 million, promotional expenses of $8.3 million, travel expenses of $6.8 million and engineering project material costs of $6.1$22.7 million.

During the second quarter of fiscal 2025, 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. We also completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. These two events triggered goodwill and purchased intangible assets impairment tests, which resulted in a $239.1 million goodwill and purchased intangible assets impairment charge in the PCB and Component Inspection reportable segment. See Note 6 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements for further details.

The change in Other expense (income), net during the fiscal year ended June 30, 20252026 compared to the fiscal year ended June 30, 20242025 was primarily attributabledue to highera net fair value gain of $28.0 million from an equity security, favorable foreign exchange fluctuation of $19.2 million, and release of a tax reserve of $11.6 million compared to the prior fiscal year, partially offset by lower interest income of $17.1$3.8 million due to higher interest earning balances and amillion.

Tax expense was lowerhigher as a percentage of income before taxes during the fiscal year ended June 30, 20252026 compared to the fiscal year ended June 30, 20242025 primarily due to goodwilla impairmentdecrease charges,in whichthe areproportion non-deductibleof earnings generated in jurisdictions with tax rates lower than the U.S. statutory rates and a decrease in the proportion of U.S. earnings eligible for incomethe tax.FDDEI Therededuction, waspartially offset by a decrease in our NCTI during the fiscal year ended June 30, 2026 and a $230.4 million goodwill impairment charge during the fiscal year ended June 30, 2025 comparedwhich tois anon-deductible $263.1for millionincome goodwill impairment charge during the fiscal year ended June 30, 2024.tax.

Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with acquisitions, R&D credits as a percentage of aggregate pre-tax income, non-taxable or non-deductible increases or decreases in the assets held within our Executive Deferred Savings Plan, the tax effects of employee stock activity and the effectiveness of our tax planning strategies. We also continue to monitor the adoption of Pillar Two relating to the global minimum tax in each of our tax jurisdictions to evaluate its impact on our effective income tax rate. For some of the jurisdictions that have adopted Pillar Two in their tax legislation, it was effective for us beginning in our fiscal year ended June 30, 2025, and there was no material impact to our effective tax rate.2025.

As of June 30, 2025,2026, our cash, cash equivalents and marketable securities totaled $4.49$4.90 billion, compared to the $4.50$4.49 billion balance as of June 30, 2024.2025. Refer to below discussions of sources and uses of cash during the fiscal year. As of June 30, 2026, $735.1 million of our $4.90 billion cash, cash equivalents, and marketable securities were held by our foreign subsidiaries and branch offices. We have recorded appropriate provisions for income or withholding taxes that may result from future repatriations of this balance.

We typically finance our liquidity requirements through cash generated from our operations. Net cash provided by operating activities during the fiscal year ended June 30, 20252026 was $4.08$4.14 billion compared to $3.31$4.08 billion during the fiscal year ended June 30, 2024.2025. The increase in cash provided was primarily due to an increase in customer and other collections of approximately $1.4$1.2 billion, mainly driven by higher shipmentsshipments, plus a decrease of income tax and other tax payments of approximately $136 million; partially offset by increases in accounts payable payments of approximately $480$1.1 millionbillion and employee-related payments of approximately $130$213 million.

Net cash used in investing activities during the fiscal year ended June 30, 20252026 was $202.5$1.19 millionbillion compared to $1.48$202.5 billionmillion during the fiscal year ended June 30, 2024.2025. The decreaseincrease in cash used was mainlyprimarily due to an increaseincreases in net proceedspurchases fromof available-for-sale securities of $1.33$959.9 billion,million, primarilyand duecapital to the saleexpenditures of investments$40.7 tomillion, supportpartially theoffset $750.0by a $10.5 million debt principal payment in November 2024, and $6.3 millionincrease in proceeds from capital-related government assistance, partially offset by increases in capital expenditures of $57.9 million and IP acquisitions of $5.0 million.assistance.

Net cash used in financing activities during the fiscal year ended June 30, 20252026 was $3.79$3.39 billion compared to $1.78$3.79 billion during the fiscal year ended June 30, 2024.2025. The increasedecrease in cash used was mainlyprimarily due to a debt repayment of $750.0 million contrasting with debt-related proceeds of $735.0 million in the prior year, and increasesan inincrease of cash usedprovided forby issuance of common stock repurchases of $414.2$17.1 million; andpartially offset by increases in cash paid for dividends and dividend equivalents of $131.6$153.2 million, cash used for common stock repurchases of $139.8 million and tax withholding payments related to vested and released RSUs of $72.3 million.

The shares of common stock repurchased under our stock repurchase program have reduced our basic and diluted weighted-average shares outstanding for the fiscal years ended June 30, 2025,2026, 20242025 and 2023.2024. The total amount of stock repurchases during the fiscal years ended June 30, 2025,2026, 2025 and 2024 andwas 2023 were $2.15$2.29 billion, $1.74$2.15 billion and $1.31$1.74 billion, respectively. The stock repurchase program is intended, 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. As of June 30, 2025,2026, an aggregate of $5.03$9.74 billion was available for repurchase under our stock repurchase program, which reflects an increase in the authorized repurchase amount of $5.00$7.00 billion in the fourththird quarter of fiscal 2025.2026, which is in addition to the

The total amounts of regular quarterly cash dividends and dividend equivalents paid during the fiscal years ended June 30, 2025,2026, 2025 and 2024 and 2023 were $1.06 billion, $904.6 million, $773.0 million and $732.6$773.0 million, respectively. The increase in the amount of regular quarterly cash dividends and dividendsdividend equivalents paid during the fiscal year ended June 30, 20252026 as compared to the fiscal year ended June 30, 20242025 reflected the cumulative effect of two increases in the level of our regular quarterly cash dividend from $1.45$0.170 to $1.70$0.190 per share and from $1.70 to $1.90 per share that were announced during the first and fourth quarters, respectivelyquarter of fiscal 2025.2025, and from $0.190 to $0.230 per share announced during the third quarter of fiscal 2026. The amounts of accrued dividend equivalents payable for regular quarterly cash dividends on unvested RSUs with dividend equivalent rights were $13.3 million and $11.8 million as of both June 30, 20252026 and 2024, respectively.2025. These amounts will be paid upon vesting of the underlying unvested RSUs as described in Note 109 “Equity,Equity and Long-term Incentive Compensation Plans and Non-Controlling Interest” to our Consolidated Financial Statements.

We have faced delays and could face additional delays or denials in the export of our tools by regulatory agencies for national security or other regulatory concerns in the countries in which we do business, which could negatively affect our results of operations and timing of revenue recognition. We have controls and procedures designed to maintain compliance with U.S. and other applicable export control laws and regulations; however, we cannot guarantee that such controls and procedures will be successful in preventing violations or allegations of violations, of increasingly complex and often conflicting regulations worldwide. Recently, some of our products destined for China have been held up by U.S. Customs and Border Protection due to questions about the nature of the customer or about the capabilities of our products. We cannot make any assurance that products that have been held up will be cleared for shipment in a timely manner or without a license. Shipment delays or cancellations could have an adverse effect on our financial condition and results of operations. The complexity and evolving nature of the rules and regulations, and the fact that Commerce or other relevant regulators might adopt interpretations of regulations that differ from those of the Company, increase our risk of non-compliance.

We use a wide range of materials in the production of our products, including custom electronic and mechanical components, and we use numerous suppliers to supply these materials. Generally, we do not have guaranteed supply arrangements with our suppliers. Because of the variability and uniqueness of customers’ orders, we do not maintain an extensive inventory of materials for manufacturing. Through our business interruption planning, we seek to minimize the risk of production and service interruptions and/or shortages of key parts by, among other things, monitoring the financial stability of key suppliers, identifying (but not necessarily qualifying) possible alternative suppliers and maintaining appropriate inventories of key parts. Although we make reasonable efforts to ensure that parts are available from multiple suppliers, certain key parts are available only from a single supplier or a limited group of suppliers. Also, key parts we obtain from some of our suppliers incorporate the suppliers’ proprietary IP; in those cases, we are increasingly reliant on third parties for high-performance, high-technology components, which reduces the amount of control we have over the availability and protection of the technology and IP that is used in our products. In addition, if certain of our key suppliers experience liquidity issues and are forced to discontinue operations, which is a heightened risk, especially during economic downturns, it could affect their ability to deliver parts and could result in delays for our products. Similarly, especially with respect to suppliers of high-technology components, our suppliers themselves have increasingly complex supply chains, and delays or disruptions at any stage of their supply chains may prevent us from obtaining parts in a timely manner and result in delays for our products, or our suppliers might pass on the cost of inflation to us while we are unable to adjust pricing with our own customers.

A supplier may discontinue production of a particular part for any number of reasons, including the supplier’s financial condition or business operational decisions, which would require us to purchase, in a single transaction, a large number of such discontinued parts in order to ensure that a continuous supply of such parts remains available to our customers. Such “end-of-life” parts purchases could result in significant expenditures by us in a particular period, and, ultimately, any unused parts may result in a significant inventory write-off, either of which could have an adverse impact on our financial condition and results of operations for the applicable periods. Recently, a few large suppliers have discontinued manufacturing certain DRAM chips that are incorporated in a number of our products, and the resulting shortage has caused a dramatic increase in the prices to acquire these chips. Our efforts to procure these chips have contributed to an increase in purchase commitments in fiscal 2026. We estimate that the additional costs to procure these DRAM chips will continue to have an adverse impact on our gross margin in calendar 2026. If we are unable to acquire adequate supply of such chips or acquire them in a timely or cost-controlled manner, our results of operations could be harmed.

•The war between Ukraine and Russia, escalationthe ofarmed hostilitiesconflict in Iran and elsewhere in the Middle East, and the significant military activity in those regions;

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 finishfinished 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%23% of our total revenues in the secondthird 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.

As we close calendar year 2025, theThe 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 intoduring 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 grosstotal marginrevenues and overallnet financial performanceincome improved in the three months ended DecemberMarch 31, 20252026 compared to the three months ended DecemberMarch 31, 2024.2025. Looking ahead to calendar year 2026,ahead, while we expect continued revenue growth,growth in calendar year 2026, escalating costs for DRAM chips used in the Company’s image computers iswill likelycontinue to negatively impact our gross margin.margin, though we expect this impact to be transitory.

We are continuously assessing the aggregate potential impact of government regulationsregulations, tariffs and tariffsother geopolitical risks 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.

(1)For the explanation why our net income increased to $1.15$1.20 billion in the three months ended DecemberMarch 31, 20252026 compared to the three months ended DecemberMarch 31, 2024,2025, refer to the “Results of Operations” section below, as the change is a result of movements in various income statement line items.

We continue to focus on returning cash to our investors, making $547.8$626.0 million in share repurchases and paying $249.7$248.8 million in dividends in the three months ended DecemberMarch 31, 2025.2026. WeOur increasedBoard theof dividendDirectors has authorized a program that permits us to repurchase our common stock, including an increase in the fourthauthorized repurchase amount of $7.00 billion in the third quarter of fiscal 20252026. As of March 31, 2026, we had $10.31 billion of repurchase authority remaining. In March 2026, we also announced an increase in the dividend level to $1.90$2.30 per share per quarter, which was our 16th17th 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.

Total revenues increased by 10%11% in the sixthree months ended DecemberMarch 31, 20252026 compared to the sixthree months ended DecemberMarch 31, 2024,2025, primarily due to the increase in our product revenues, and is attributable to higher investments byfrom our memory customerscustomers, particularly in DRAM, led by high-bandwidth memory, and strongsteady customergrowth adoptionin of our advanced packaging portfolio of products.foundry/logic. An increase in service revenues of 17%,16%, asdue a result ofto continued growth ofin our installed base of tools, also contributed to higher total revenues compared to the same period in the prior year.

Revenues from our Semiconductor Process Control segment for the three and six months ended DecemberMarch 31, 20252026 increased by 9% and 11%, respectively,13% compared to the same period in the prior year, primarily due to increased revenue from our memory customers, particularly related to DRAM, led by high-bandwidth memory, growth in foundry/logic, along with higher service revenues from an increasing number of tools in our installed base. Revenues in this segment increased by 11% for the nine months ended March 31, 2026 compared to the same period in the prior year, primarily due to increased revenue from our memory customers, particularly related to DRAM, led by high-bandwidth memory, 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 DecemberMarch 31, 20252026 decreasedincreased by 12% and 10%, respectively,5% compared to the same period in the prior year, primarily due to timing of shipments and higher service revenues from an increasing number of tools in our installed base. Revenues in this segment decreased by 5% during the nine months ended March 31, 2026 compared to the same period in the prior year, attributable 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%1% during the three months ended DecemberMarch 31, 20252026 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 partiallymostly offset by increased revenues from advancedPCB packagingproducts, andalong with higher service revenues from growth in our installed base of tools. Revenues in this segment increased by 14%9% during the sixnine months ended DecemberMarch 31, 20252026 compared to the same period in the prior year, due to increased revenue from advanced packaging and PCB and component inspection products, along with higher service revenues from growth in our installed base, partially offset by the exit of the Display business as noted previously.business.

Revenues from our customers in China decreasedincreased 9%5% and by less than 1% in the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively, compared to the same periodperiods in the prior year, primarily due to continued legacy node demand, partially offset by the effects of U.S. export controls and regulations, partially offset by continued legacy node demand.regulations.

Revenues from our customers in Taiwan decreased 4%12% in the three months ended DecemberMarch 31, 20252026 compared to the same period in the prior year, primarily due to the timing of shipments. Overall revenuesRevenues from customers in Taiwan increased by 22%8% in the sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in the prior year, primarily due to increased investments in process control to meet leading-edge demand driven by innovation and growth of AI.

Revenues from our customers in Korea increased 34%80% and 31%50% in the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively, compared to the same periodperiods in the prior year, primarily due to increased investments from our memory customers. Revenues from our customers in North America increased 38%40% in the three months ended DecemberMarch 31, 20252026 compared to the same period in the prior year, due to increased investments from both memory and foundry/logic customers. Revenues from customers in North America increased 2% in the nine months ended March 31, 2026, compared to the same period in the prior year, primarily due to increased investments from memory customers and continued legacy node demand, partially offset by lower shipments to foundry/logic customers. Overall revenuesRevenues from our customers in North AmericaJapan decreased 12%47% in the sixthree months ended DecemberMarch 31, 2025,2026 compared to the same period in the prior year, primarily due to lower shipments to foundry/logic customers partially offset by increaseddecreased investments from memorycustomers customers.in the semiconductor process control segment. The remaining regions accounted for less than 10% of total revenues individually in the periods presented.

Changes in gross margin from revenue volume of products and services reflect our ability to leverage existing infrastructure to generate higher revenues. Changes in gross margin from the mix of products and services sold reflect the impact of changes within the composition of product and service offerings. Changes in gross margin from manufacturing labor, overhead and efficiencies reflect our ability to manage costs and drive productivity as we scale our manufacturing activity to respond to customer requirements and amortization of intangible assets. In both the three and nine months ended March 31, 2026, manufacturing labor, overhead and efficiencies included increased employee-related costs due to increases in headcount offset by absorption benefits from better build plans, compared to the same periods in the prior year. Changes in gross margin from other service and manufacturing costs include the impact of tariffs, customer support costs, including the efficiencies with which we deliver services to our customers, and the effectiveness with which we manage our production plans and inventory risk. OtherIn both the three and nine months ended March 31, 2026, other service and manufacturing costs included lowerhigher inventory-relatedinstallation chargesand partiallywarranty offsetcosts byand theincreased impactcosts of tariffs during the three months ended December 31, 2025, compareddue to the same period in the prior year. Other service and manufacturing costs reflect the impact of tariffs which wastariffs, partially offset by lower inventory-related charges during the six months ended December 31, 2025,charges, compared to the same periodperiods in the prior year.

R&D expenses during the three months ended DecemberMarch 31, 20252026 increased compared to the three months ended DecemberMarch 31, 20242025 primarily due to increases in employee-related expenses of $26.3$35.7 million as a result of additional headcount and higher employee compensation and benefit costscosts, and engineering project material costs of $12.9$7.3 million.

R&D expenses during the sixnine months ended DecemberMarch 31, 20252026 increased compared to the sixnine months ended DecemberMarch 31, 20242025 primarily due to increases in employee-related expenses of $51.9$87.6 million as a result of additional headcount and higher employee compensation and benefit costscosts, and engineering project material costs of $24.6$31.9 million.

SG&A expenses during the sixthree months ended DecemberMarch 31, 20252026 increased compared to the sixthree months ended DecemberMarch 31, 20242025 primarily due to increases in suppliesprovision for credit losses of $23.1 million, employee-related expenses of $14.9 million as a result of additional headcount and materialshigher expenseemployee ofcompensation $14.3and millionbenefit costs, and facilities-related expense of $13.6$6.6 million.

Restructuring charges were $0.3$0.2 million and $2.1$0.6 million for the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. Restructuring charges were $0.7$0.9 million and $5.0$5.6 million for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. For additional information, refer to Note 17 “Restructuring Charges” to our Condensed Consolidated Financial Statements.

Other expense (income), net is comprised primarily of fair value adjustments and realized gains or losses on sales of marketable and non-marketable securities, gains or losses from revaluations of certain foreign currency denominated assets and liabilities as well as foreign currency contracts, interest-related accruals (such as interest and penalty accruals related to our tax obligations) and interest income earned on our invested cash, cash equivalents and marketable securities.

Interest expense during the three months ended DecemberMarch 31, 20252026 decreasedwas comparedcomparable to the three months ended DecemberMarch 31, 20242025, primarilyas dueaverage to reduced interest expense following our $750.0 millionoutstanding debt repaymentwas inessentially the second quarter of fiscal 2025.unchanged.

The change in other expense (income), net during the three months ended DecemberMarch 31, 20252026 compared to the three months ended DecemberMarch 31, 20242025 was primarily due to a net fair value lossgain of $5.6$31.9 million from an equity securitysecurity, and unfavorablefavorable foreign exchange fluctuations of $5.3$12.4 million, partially offset byand higher interest income of $1.9$4.1 million.

Interest expense during the sixnine months ended DecemberMarch 31, 20252026 decreased compared to the sixnine months ended DecemberMarch 31, 20242025 primarily due to reduced interest expense following our $750.0 million debt repayment in the second quarter of fiscal 2025.

The change in other expense (income), net during the sixnine months ended DecemberMarch 31, 20252026 compared to the sixnine months ended DecemberMarch 31, 20242025 was primarily due to lower interest income of $8.4 million, partially offset by a net fair value gain of $3.2$35.1 million from an equity security andsecurity, favorable foreign exchange fluctuations of $1.0$13.4 million, partially offset by lower interest income of $4.3 million.

Excluding the goodwill impairment charge during the six months ended December 31, 2024, theThe effective tax rate during the sixthree months ended DecemberMarch 31, 20252026 was higher compared to the sixthree months ended DecemberMarch 31, 20242025, primarily due to a decrease in the proportion of earnings generated in jurisdictions with tax rates lower than the U.S. statutory rates and a decrease in the proportion of U.S. earnings eligible for the Foreign Derived Intangible Income deduction, partially offset by a decrease in our Global Intangible Low-Taxed Income.

Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with acquisitions, R&D credits as a percentage of aggregate pre-tax income, non-taxable or non-deductible increases or decreases in the assets held within our Executive Deferred Savings Plan, the tax effects of employee stock activity and the effectiveness of our tax planning strategies. We also continue to monitor the adoption of Pillar Two relating to the global minimum tax in each of our tax jurisdictions to evaluate its impact on our effective income tax rate. For some of the jurisdictions that have adopted Pillar Two in their tax legislation, it was effective for us beginning in our fiscal year ended June 30, 2025.

As of DecemberMarch 31, 2025,2026, our cash, cash equivalents and marketable securities totaled $5.21$4.96 billion, compared to the $4.49 billion balance as of June 30, 2025. Refer to below discussions of sources and uses of cash during the sixnine months ended DecemberMarch 31, 2025.2026. As of DecemberMarch 31, 2025,2026, $1.25$1.09 billion of our $5.21$4.96 billion of cash, cash equivalents and marketable securities were held by our foreign subsidiaries and branch offices. We have recorded appropriate provisions for income or withholding taxes that may result from future repatriations of this balance.

We typically finance our liquidity requirements through cash generated from our operations. Net cash provided by operating activities during the sixnine months ended DecemberMarch 31, 20252026 was $2.53$3.24 billion compared to $1.84$2.92 billion during the sixnine months ended DecemberMarch 31, 2024.2025. This increase was primarily due to an increase in customer and other collections of approximately $1.2$960 billionmillion primarily driven by higher shipments andshipments, a decrease in income tax payments of $55approximately $73 million and a decrease in other tax payments of approximately $30 million; partially offset by increases in accounts payable payments of approximately $460$580 million and employee-related payments of approximately $100$165 million.

Net cash used in investing activities during the sixnine months ended DecemberMarch 31, 20252026 was $522.7$1.02 millionbillion compared to $442.7$122.9 million of net cash provided during the sixnine months ended DecemberMarch 31, 2024.2025. This increase in cash used was primarily due to increases in net purchases of available-for-sale securities of $931.8$1.11 million,billion, and capital expenditures of $48.7$51.8 million, partially offset by a $16.8$16.5 million increase in proceeds from capital-related government assistance.

Net cash used in financing activities during the sixnine months ended DecemberMarch 31, 20252026 was $1.63$2.51 billion compared to $2.42$3.16 billion during the sixnine months ended DecemberMarch 31, 2024.2025. This decrease in cash used was primarily due to a $750.0 million debt repayment during the sixnine months ended DecemberMarch 31, 20242025 and a decrease in common stock repurchases of $124.7$5.5 million, partially offset by increases in payment of dividends and dividend equivalents of $78.8$101.9 million and tax withholding payments related to vested and released restricted stock units (“RSU”) of $11.0$12.7 million.

The shares of common stock repurchased under our stock repurchase program have reduced our basic and diluted weighted-average shares outstanding for the sixnine months ended DecemberMarch 31, 20252026 and 2024.2025. The total amount of stock repurchases during the sixnine months ended DecemberMarch 31, 20252026 and 20242025 were $1.09$1.72 billion andfor $1.22both billion, respectively.periods. The stock repurchase program is intended, in part, to mitigate the potential dilutive impact related to our equity incentive plans and shares issued in connection with our Employee Stock Purchase Program as well as to return excess cash to our stockholders. As of DecemberMarch 31, 2025,2026, an aggregate of $3.94$10.31 billion was available for repurchase under our stock repurchase program, which reflects an increase in the authorized repurchase amount of $5.00$7.00 billion in the fourththird quarter of fiscal 2025.2026.

During the three months ended DecemberMarch 31, 2025,2026, our Board of Directors declared a regular quarterly cash dividend of $1.90 per share on our outstanding common stock, which was paid on DecemberMarch 2,3, 20252026 to our stockholders of record as of the close of business on NovemberFebruary 17, 2025.2026. During the same period in fiscal year ended June 30, 2025, our Board of Directors declared and paid a regular quarterly cash dividend of $1.70 per share on our outstanding common stock. The total amount of regular quarterly cash dividends and dividend equivalents paid during the three months ended DecemberMarch 31, 20252026 and 20242025 was $249.7$248.8 million and $226.8$225.8 million, respectively. The total amount of regular quarterly cash dividends and dividend equivalents paid during the sixnine months ended DecemberMarch 31, 20252026 and 20242025 was $503.7$752.5 million and $424.9$650.6 million, respectively. The amount of accrued dividend equivalents payable for regular quarterly cash dividends on unvested RSUs with dividend equivalent rights as of DecemberMarch 31, 20252026 and June 30, 2025 was $13.7$15.8 million and $13.3 million, respectively. These amounts will be paid upon vesting of the underlying unvested RSUs as described in Note 9 “Equity and Long-term Incentive Compensation Plans” to our Condensed Consolidated Financial Statements.

As of DecemberMarch 31, 2025,2026, we had an aggregate principal amount of senior, unsecured notes totaling $5.95 billion (collectively, “Senior Notes”) with due dates ranging from fiscal 2029 through fiscal 2063. For additional information on these Senior Notes, see Note 7 “Debt” to our Condensed Consolidated Financial Statements. As of DecemberMarch 31, 2025,2026, we were in compliance with all of our covenants under the Indenture associated with the Senior Notes.

We have in place a Credit Agreement (“Credit Agreement”) for an unsecured Revolving Credit Facility (“Revolving Credit Facility”) with a maturity date of July 3, 2030 that allows us to borrow up to $1.50 billion. 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 DecemberMarch 31, 2025,2026, we had no outstanding borrowings under the Revolving Credit Facility. We were in compliance with all covenants under the Credit Agreement as of DecemberMarch 31, 20252026 (the net leverage ratio was 0.560.54 to 1.00, compared to a maximum net leverage ratio of 3.25 to 1.00 on a quarterly basis covering the trailing four consecutive fiscal quarters for each fiscal quarter). Considering our current liquidity position, short-term financial forecasts and ability to prepay the Revolving Credit Facility, if necessary, we expect to continue to be in compliance with our financial covenants at the end of our fiscal year ending June 30, 2026.

For details regarding our debt and other material cash commitments, refer to Note 7 “Debt” and Note 14 “Commitments and Contingencies,” respectively, to our Condensed Consolidated Financial Statements. For additional details regarding our material cash requirements, refer to “Material Cash Requirements” in the “Liquidity and Capital Resources” section of Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form on 10-K for the fiscal year ended June 30, 2025.

As of DecemberMarch 31, 2025,2026, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial position, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Refer to Note 14 “Commitments and Contingencies” to our Condensed Consolidated Financial Statements for information related to indemnification obligations.

Working capital was $7.28$7.60 billion as of DecemberMarch 31, 2025,2026, which represents an increase of $668.3$986.4 million compared to our working capital of $6.61 billion as of June 30, 2025. As of DecemberMarch 31, 2025,2026, our principal sources of liquidity consisted of $5.21$4.96 billion of cash, cash equivalents and marketable securities, as well as $1.50 billion availability under our Revolving Credit Facility. Our liquidity may be affected by many factors, some of which are based on the normal ongoing operations of the business, spending for business acquisitions, and other factors such as uncertainty in the global and regional economies and the semiconductor, semiconductor-related and electronic device industries. Although cash requirements will fluctuate based on the timing and extent of these factors, we believe that cash generated from operations, together with the liquidity provided by existing cash and cash equivalents balances, marketable securities and our Revolving Credit Facility, will be sufficient to satisfy our liquidity requirements associated with working capital needs, capital expenditures, cash dividends, stock repurchases and other contractual obligations for at least the next 12 months.

Our credit ratings as of DecemberMarch 31, 20252026 are summarized below: