Summary of Key Points from the Semiconductor Industry Research Industry Overview - The research focuses on the global semiconductor industry, particularly the front-end Wafer Fab Equipment (WFE) and back-end advanced packaging supply chains, highlighting the challenges posed by globalization and geopolitics [2][6][32]. Core Companies Involved - Major players in the semiconductor industry include TSMC, UMC, Samsung Electronics, Intel, ASML, Applied Materials (AMAT), Lam Research, Tokyo Electron (TEL), KLA, ASE, Amkor, JCET, Disco, Besi, ASMPT, K&S, Semes, Hanmi, Hanwha, EVG, SUSS, Teradyne, SCREEN, Canon, Nikon, and Lasertec [19][49]. Key Trends and Insights 1. **Advanced Packaging Demand**: The demand for advanced packaging technologies such as 2.5D/3D packaging, Hybrid Bonding, and CoWoS is surging due to the rise of AI and high-performance computing (HPC) applications [2][8][10]. 2. **Moore's Law and Packaging**: As Moore's Law slows, advanced packaging has become the primary pathway for sustaining semiconductor performance gains, with technologies like CoWoS and SoIC leading the way [3][38][49]. 3. **Geopolitical Challenges**: Geopolitical pressures and government policies, such as the CHIPS Act, are reshaping the supply chain dynamics, pushing companies to diversify their manufacturing and service locations [7][44][60]. 4. **Localization Trends**: There is a significant trend towards localization in the semiconductor supply chain, with companies establishing production bases in North America, Europe, Japan, and Southeast Asia to mitigate risks [7][32][60]. 5. **Material Innovation**: The shift from equipment-centric to materials-centric innovation is becoming critical, with new materials like UV resins, advanced thermal interface materials, and low-Dk dielectrics emerging as strategic differentiators [15][47][49]. Market Dynamics - The WFE market is projected to grow from approximately USD 13.3 billion in 2024 to USD 16.5 billion by 2029, with a significant portion of revenue coming from equipment shipments [49][72]. - The back-end packaging market is also expanding, with the TCB equipment market estimated at around USD 936 million and HB equipment projected at USD 397 million by 2030 [53]. Challenges and Opportunities 1. **Cost and Pricing Pressures**: Equipment suppliers face challenges related to cost, pricing, and sustainability, which are becoming critical factors in maintaining competitiveness [8][29][49]. 2. **Technological Integration**: The ability to integrate differentiated materials and technologies will increasingly define competitiveness in the semiconductor industry [39][49]. 3. **Sustainability Goals**: Companies are embedding sustainability into their operational metrics, with ESG (Environmental, Social, and Governance) goals becoming essential for process efficiency and cost competitiveness [45][49][69]. Conclusion - The semiconductor industry is undergoing significant transformations driven by technological advancements, geopolitical factors, and evolving market demands. Companies that can effectively navigate these challenges while innovating in materials and processes are likely to secure a competitive edge in the future [49][72].

Core Viewpoint - Review SEM devices are essential for defect analysis and process monitoring in semiconductor manufacturing, particularly as technology nodes shrink below 10nm, necessitating high-resolution imaging for accurate defect classification and analysis [2][5][19]. Industry Background and Development History - Review SEM is a critical tool in semiconductor manufacturing for defect analysis and process optimization, especially as optical defect detection devices face limitations in resolution [2]. - The evolution of Review SEM began in the early 1990s, transitioning from CD-SEM platforms to more automated systems capable of handling complex defect types as technology advanced [3][4]. - The demand for Review SEM surged with the introduction of more intricate multi-patterning structures in nodes below 90nm, leading to a systematic approach to defect analysis [3][5]. Technological Advancements - Key technological developments include low-voltage imaging to minimize sample damage, high-speed automated alignment, and AI-driven defect classification algorithms [6][7][9]. - Current mainstream devices achieve resolutions below 1nm and support low acceleration voltages (0.5–1.5kV), crucial for sensitive materials [7][20]. - Integration with inline process control systems is becoming a trend, allowing Review SEM to work in conjunction with other defect detection equipment [11][12]. Market Structure and Leading Manufacturers - The Review SEM market is highly concentrated, dominated by major players such as Applied Materials, Hitachi High-Technologies, and KLA, with Chinese manufacturers still in the early stages of development [13][28]. - The global market for Review SEM devices is projected to grow from $712 million in 2024 to $1.13 billion by 2031, with a CAGR of 7.06% from 2025 to 2031 [26]. Application Demand Trends - The expansion of wafer fabrication capacity, particularly in 12-inch logic factories and advanced packaging lines, is driving a rigid demand for Review SEM [14][15]. - The transition to EUV masks, which have low defect tolerance, is increasing the need for Review SEM as a standard detection tool [16][17]. - There is a rising demand for Review SEM in advanced packaging processes, indicating a new market expansion direction [18]. Future Development Trends - Review SEM is evolving from a passive inspection tool to an integrated, intelligent defect analysis platform, driven by the need for high precision in defect detection as technology nodes approach physical limits [19]. - The integration of AI for defect classification and image recognition is a key focus, with future developments expected to include unsupervised learning for unknown defect identification [21]. - Enhanced automation for defect positioning and real-time feedback mechanisms are essential for maintaining precision in defect analysis [22][23].

Core Insights - The profitability of top chip equipment manufacturers is diverging, with some losing momentum due to declining sales in China, while others are capitalizing on the demand for AI chips [2][5] - Among ten manufacturers from Japan, the US, and Europe, five reported a year-on-year decline in net profit or lower growth compared to the previous year [2] - The combined net profit of these manufacturers has remained robust, growing approximately 40% for the fifth consecutive quarter, reaching $9.4 billion [2] Group 1: Company Performance - Lam Research's net profit surged by 69%, driven by strong sales of deposition and etching equipment for high-bandwidth memory and advanced logic chips [2] - KLA's net profit increased by 44%, benefiting from growth in inspection and measurement equipment for advanced packaging [2] - ASML Holding, ASM International, and Advantest also reported higher profit growth compared to the same period in 2024 [2] Group 2: Challenges Faced - Tokyo Electron, Screen Holdings, and Teradyne experienced declines in net profit after significant growth of over 50% to 90% in the previous year [5] - A major factor for the decline is the slowdown in sales to China, with nine companies reporting a combined sales drop of 5% to $9.3 billion, accounting for 30% of total sales, down from approximately 40% at the end of 2023 [5] - Tokyo Electron's sales from China accounted for 39%, a decrease of 11 percentage points from the previous year, and growth in its Taiwan business could not compensate for this loss [5] Group 3: Market Outlook - Despite the challenges, five US and European companies expect sales growth in the upcoming quarter, with four Japanese companies also projected to achieve revenue growth [6] - The industry faces uncertainty as Washington considers imposing new semiconductor tariffs and restricting AI semiconductor exports [6] - The total market capitalization of the top ten semiconductor equipment manufacturers is approximately $910 billion, down about 20% from the latest peak in July 2024 [7]

Group 1: Tariff Expansion - The U.S. government has expanded the scope of tariffs on steel and aluminum imports, imposing a 50% tariff on hundreds of derivative products [1][2] - The expanded tariff list will officially take effect on August 18, 2024, and includes 407 product codes due to their steel and aluminum content [2] - The increase in tariffs is expected to raise prices on a wide range of goods, impacting U.S. businesses and consumers, and contributing to global economic uncertainty [2] Group 2: Semiconductor Tariffs - President Trump announced plans to impose tariffs on semiconductor imports, with rates potentially reaching up to 300% [3] - Initial lower rates are intended to encourage domestic manufacturing, but will increase significantly over time [3] - The impact on China's semiconductor exports to the U.S. is expected to be limited, as the exposure is only about 1% [3] Group 3: Inflation Concerns - Recent inflation indicators show a rise in consumer price expectations, with a one-year inflation forecast increasing from 4.5% to 4.9% [4] - The Producer Price Index (PPI) for July showed a significant increase of 0.9%, the largest rise since June 2022, raising concerns about the inflationary impact of tariffs [4][5] - Companies are beginning to pass on tariff costs to consumers, indicating that consumers may soon feel the effects of these tariffs directly [5] Group 4: Economic Outlook - The uncertainty surrounding tariffs and mixed inflation data has led to hesitance regarding interest rate cuts among Federal Reserve officials [6] - The overall economic environment remains volatile, with manufacturing output showing signs of weakness [5]

Core Viewpoint - Applied Materials issued an earnings warning that negatively impacted KLA stock, indicating potential challenges in the semiconductor industry [1][5]. Group 1: Earnings Performance - Applied Materials reported an 8% year-over-year sales growth for fiscal Q3, with profit margins and earnings per share also increasing by 8% [3]. - For Q4, Applied Materials expects earnings of $2.11 per share, reflecting a 15% sequential decline, contrary to Wall Street's expectations for an increase [4]. Group 2: Market Conditions - The decline in Q4 guidance from Applied Materials is attributed to a "dynamic macroeconomic and policy environment," leading to increased uncertainty and lower visibility [5]. - Sales weakness in China was specifically highlighted, with the country still "digesting" previously purchased semiconductor manufacturing equipment [5]. Group 3: Impact on KLA - KLA derives approximately 33% of its sales from China, similar to Applied Materials' 37%, suggesting that KLA will likely face similar challenges due to the negative news affecting Applied [6]. - KLA's stock is currently priced at 31 times earnings, indicating a significant potential decline in value in light of the adverse news [6].

Core Insights - KLA's international operations are crucial for assessing its financial resilience and growth prospects, especially in the context of a global economic landscape [1][2][3] International Revenue Performance - KLA's total revenue for the quarter was $3.17 billion, marking a year-over-year increase of 23.6% [4] - Revenue from Europe & Israel was $125.06 million, representing 3.9% of total revenue, which was a decrease of 9.67% from the expected $138.44 million [5] - Korea contributed $478.17 million, accounting for 15.1% of total revenue, exceeding expectations by 11.03% [6] - Taiwan's revenue was $873.72 million, making up 27.5% of total revenue, with a surprise increase of 3.28% compared to estimates [7] - Japan accounted for $377.17 million, or 11.9% of total revenue, surpassing expectations by 22.61% [8] - China generated $958.85 million, representing 30.2% of total revenue, with a surprise of 3.9% over analyst expectations [9] - The Rest of Asia contributed $80.58 million, or 2.5% of total revenue, which was a significant drop of 34.52% from the projected $123.05 million [10] Future Revenue Forecasts - Analysts anticipate KLA will report revenues of $3.16 billion for the current fiscal quarter, reflecting an 11.1% increase year-over-year [11] - Expected revenue contributions for the current quarter include 4.3% from Europe & Israel ($136.97 million), 14.5% from Korea ($456.24 million), 26% from Taiwan ($819.48 million), 9.6% from Japan ($303.39 million), 29.9% from China ($942.41 million), and 3.4% from Rest of Asia ($106.58 million) [12] - For the full year, total annual revenue is projected at $12.71 billion, an increase of 4.6% compared to last year, with specific contributions from various regions outlined [13] Key Takeaways - KLA's reliance on international markets presents both opportunities and challenges, making the tracking of international revenue trends essential for future projections [14] - The complexities of global interdependence and geopolitical factors are critical for analysts when adjusting earnings forecasts for companies with international operations [15]

Part I [Business](index=5&type=section&id=Item%201.%20Business) KLA is a leading supplier of process control equipment for the semiconductor industry, operating through three segments with significant international sales - KLA operates through three reportable segments: Semiconductor Process Control, Specialty Semiconductor Process, and PCB and Component Inspection[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - The services business accounted for approximately **22% of total revenue** in fiscal 2025, providing a recurring revenue stream[18](index=18&type=chunk) - International revenues accounted for approximately **89% of total revenues** in fiscal 2025, highlighting the company's global reach, particularly in Asia[39](index=39&type=chunk) - The company's order backlog decreased from **$9.83 billion** as of June 30, 2024, to **$7.86 billion** as of June 30, 2025, as supply chain constraints eased and lead times normalized[47](index=47&type=chunk) - As of June 30, 2025, KLA had approximately **15,000** regular full-time employees, with **49%** located in Asia, **32%** in the U.S., and **19%** in Europe and the Middle East[66](index=66&type=chunk) Major Customers (over 10% of total revenues) | Fiscal Year | Major Customers | | :--- | :--- | | **2025** | Taiwan Semiconductor Manufacturing Company Limited | | **2024** | Taiwan Semiconductor Manufacturing Company Limited | | **2023** | Taiwan Semiconductor Manufacturing Company Limited, Samsung Electronics Co., Ltd. | [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from macroeconomic conditions, international trade regulations targeting China, cybersecurity threats, and a concentrated customer base - A majority of annual revenues are derived from outside the U.S., exposing the company to risks from global trade issues, political instability, and foreign currency fluctuations[92](index=92&type=chunk)[93](index=93&type=chunk) - Evolving BIS rules from the U.S. Department of Commerce significantly restrict the company's ability to sell products and provide services to certain customers in China, which could harm business and cash flows[95](index=95&type=chunk)[96](index=96&type=chunk)[99](index=99&type=chunk) - Revenue from customers in China was **33% of total revenue** in fiscal 2025, a decrease from **43% in 2024**, reflecting the impact of trade restrictions and market normalization[100](index=100&type=chunk) - The company is exposed to cybersecurity threats affecting its own systems as well as those of its customers and suppliers, which could lead to operational disruptions and financial damages[122](index=122&type=chunk)[125](index=125&type=chunk) - The customer base is highly concentrated, with orders from a limited number of manufacturers accounting for a substantial portion of sales[156](index=156&type=chunk)[159](index=159&type=chunk) - As of June 30, 2025, the company had **$5.95 billion** in outstanding senior, unsecured long-term notes, creating a leveraged capital structure[177](index=177&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[201](index=201&type=chunk) [Cybersecurity](index=36&type=section&id=Item%201C.%20Cybersecurity) KLA maintains a cybersecurity risk management program based on the NIST Framework, with oversight from the Audit Committee and management led by the CISO - The company's cybersecurity risk management process is designed and assessed based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework[202](index=202&type=chunk) - The Board's Audit Committee has been delegated oversight of cybersecurity risks and receives quarterly reports from management[204](index=204&type=chunk)[206](index=206&type=chunk) - The management team responsible for cybersecurity includes the Chief Legal Officer and a CISO with over 20 years of experience in information technology[208](index=208&type=chunk) [Properties](index=37&type=section&id=Item%202.%20Properties) As of June 30, 2025, KLA owned or leased 7.1 million square feet of space globally, with its headquarters in Milpitas, California Owned and Leased Properties (as of June 30, 2025) | (Square Feet) | U.S. | Other Countries | Total | | :--- | :--- | :--- | :--- | | **Owned** | 1,134,127 | 3,147,113 | 4,281,240 | | **Leased** | 555,043 | 2,292,335 | 2,847,378 | | **Total** | 1,689,170 | 5,439,448 | 7,128,618 | [Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 15 in the Consolidated Financial Statements - Details on legal proceedings are incorporated by reference from Note 15 of the financial statements[212](index=212&type=chunk) [Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[213](index=213&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on NASDAQ, and capital is returned to shareholders via dividends and a stock repurchase program with $5.03 billion remaining - A quarterly cash dividend of **$1.90 per share** was declared on August 7, 2025[217](index=217&type=chunk) - As of June 30, 2025, **$5.03 billion** remained available for repurchases under the company's stock repurchase program, which was increased by **$5.00 billion** in Q4 fiscal 2025[221](index=221&type=chunk) Stock Repurchases (Q4 Fiscal 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 169,783 | $643.29 | | May 2025 | 272,564 | $732.50 | | June 2025 | 134,467 | $867.44 | | **Total** | **576,814** | | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2025 revenue grew 24% to $12.16 billion with improved margins, driven by strong AI-related demand, while the company maintained strong liquidity and shareholder returns [Executive Summary](index=40&type=section&id=EXECUTIVE%20SUMMARY) Fiscal 2025 saw strong revenue growth to $12.16 billion driven by advanced semiconductor demand, though the revenue share from China decreased due to export controls - The services business, largely from recurring contracts, accounted for approximately **22% of total revenues** in fiscal 2025[225](index=225&type=chunk) - Revenue from Chinese customers decreased to **33% of total revenue** in FY2025 from **43% in FY2024**, while revenue from Taiwan increased, driven by leading-edge demand[227](index=227&type=chunk)[260](index=260&type=chunk) Key Consolidated Financial Information (Fiscal Years 2023-2025) | (in thousands, except per share) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | **Total revenues** | $12,156,162 | $9,812,247 | $10,496,056 | | **Gross margin** | 60.9% | 60.0% | 59.8% | | **Net income attributable to KLA** | $4,061,643 | $2,761,896 | $3,387,277 | | **Diluted net income per share** | $30.37 | $20.28 | $24.15 | [Critical Accounting Estimates](index=41&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) Key accounting estimates involve revenue recognition, inventory, and income taxes, with a significant goodwill impairment charge of $239.1 million recorded in fiscal 2025 - A goodwill impairment charge of **$230.4 million** and a purchased intangible assets impairment charge of **$8.7 million** were recorded in the second quarter of fiscal 2025 for the PCB and Component Inspection segment[239](index=239&type=chunk)[244](index=244&type=chunk) - Inventory valuation requires significant judgment based on assumptions about future demand, market conditions, and technological changes[236](index=236&type=chunk) - The calculation of the effective tax rate involves complex judgments regarding tax laws, uncertain tax positions, and the realization of deferred tax assets[247](index=247&type=chunk)[249](index=249&type=chunk) [Results of Operations](index=44&type=section&id=RESULTS%20OF%20OPERATIONS) Fiscal 2025 revenues increased 24% to $12.16 billion, driven by strong product and service growth, with an expanded gross margin and a lower effective tax rate - R&D expenses increased by **6% to $1.36 billion** in FY2025, primarily due to higher employee-related expenses and project material costs[262](index=262&type=chunk)[263](index=263&type=chunk) - SG&A expenses increased by **6% to $1.03 billion** in FY2025, driven by higher facility, employee, depreciation, and promotional expenses[265](index=265&type=chunk) - The effective tax rate for fiscal 2025 was **12.5%**, down from **13.4%** in fiscal 2024, primarily due to the tax impact of non-deductible goodwill impairment charges in both years[276](index=276&type=chunk) Revenues and Gross Margin (FY25 vs. FY24) | (in thousands) | FY2025 | FY2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Product Revenue** | $9,472,854 | $7,482,679 | $1,990,175 | 27% | | **Service Revenue** | $2,683,308 | $2,329,568 | $353,740 | 15% | | **Total Revenues** | **$12,156,162** | **$9,812,247** | **$2,343,915** | **24%** | | **Gross Margin** | 60.9% | 60.0% | N/A | 0.9 ppt | Revenues by Segment (FY25 vs. FY24) | (in thousands) | FY2025 | FY2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Semiconductor Process Control** | $10,947,359 | $8,733,556 | $2,213,803 | 25% | | **Specialty Semiconductor Process** | $587,107 | $528,701 | $58,406 | 11% | | **PCB and Component Inspection** | $621,721 | $552,491 | $69,230 | 13% | [Liquidity and Capital Resources](index=48&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintained a strong liquidity position with $4.49 billion in cash, generated $4.08 billion in operating cash flow, and returned $3.05 billion to shareholders - In fiscal 2025, the company repurchased **$2.15 billion** of its common stock and paid **$904.6 million** in dividends[286](index=286&type=chunk)[287](index=287&type=chunk) - Total debt was **$5.95 billion** as of June 30, 2025, with maturities ranging from fiscal 2029 to 2063[289](index=289&type=chunk) - On July 3, 2025, the company replaced its revolving credit facility with a new one, maintaining borrowing capacity of **$1.50 billion** with a maturity of July 3, 2030[290](index=290&type=chunk) Key Liquidity and Cash Flow Data (Fiscal Year Ended June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | **Total cash, cash equivalents and marketable securities** | $4,494,623 | $4,503,995 | | **Net cash provided by operating activities** | $4,081,903 | $3,308,575 | | **Net cash used in investing activities** | ($202,481) | ($1,476,985) | | **Net cash used in financing activities** | ($3,785,687) | ($1,776,017) | [Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) KLA is exposed to interest rate, market price, and foreign currency risks, which it manages in part through derivative financial instruments - A hypothetical 100 basis point increase in market interest rates would cause the fair value of the company's **$2.05 billion** fixed income portfolio to decline by **$21.5 million**[302](index=302&type=chunk) - The company's investment in a publicly traded equity security, valued at **$24.0 million**, is subject to market price risk[305](index=305&type=chunk) - The company uses net forward and option contracts to hedge foreign currency exposures, with contracts to purchase **$50.9 million** in foreign currency as of June 30, 2025[307](index=307&type=chunk) [Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents KLA's audited consolidated financial statements and supplementary data for the fiscal years ended June 30, 2025, 2024, and 2023 [Consolidated Financial Statements](index=54&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements provide a comprehensive overview of KLA's financial health, showing total assets of $16.07 billion as of June 30, 2025 Consolidated Balance Sheet Summary (as of June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | **Total current assets** | $10,698,789 | $10,031,144 | | **Total assets** | $16,067,926 | $15,433,566 | | **Total current liabilities** | $4,085,795 | $4,660,774 | | **Total liabilities** | $11,375,473 | $12,065,238 | | **Total stockholders' equity** | $4,692,453 | $3,368,328 | Consolidated Statement of Operations Summary (Year Ended June 30) | (in thousands) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | **Total revenues** | $12,156,162 | $9,812,247 | $10,496,056 | | **Income before income taxes** | $4,644,448 | $3,190,032 | $3,789,190 | | **Net income attributable to KLA** | $4,061,643 | $2,761,896 | $3,387,277 | | **Diluted net income per share** | $30.37 | $20.28 | $24.15 | [Notes to Consolidated Financial Statements](index=60&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, revenue, debt, and taxes, including a $239.1 million goodwill impairment charge in FY2025 - As of June 30, 2025, the company had **$7.86 billion** of remaining performance obligations (RPO), representing future revenue from existing contracts[391](index=391&type=chunk) - In Q2 FY2025, the company recorded a goodwill impairment charge of **$230.4 million** in the PCB and Component Inspection segment[422](index=422&type=chunk) - Total debt as of June 30, 2025, was **$5.95 billion** in senior notes, with maturities ranging from 2029 to 2063[437](index=437&type=chunk)[438](index=438&type=chunk) - The effective income tax rate was **12.5%** in FY2025, compared to **13.4%** in FY2024 and **10.6%** in FY2023[492](index=492&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=102&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[562](index=562&type=chunk) [Controls and Procedures](index=102&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective as of June 30, 2025 - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[563](index=563&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2025[566](index=566&type=chunk) - No changes in internal control over financial reporting occurred during the fourth quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[569](index=569&type=chunk) [Other Information](index=103&type=section&id=Item%209B.%20Other%20Information) Three executive officers adopted or amended Rule 10b5-1 trading plans during the fourth quarter of fiscal 2025 Officer Rule 10b5-1 Trading Plans Adopted in Q4 FY2025 | Name of Officer | Title | Date of Adoption | Max Shares to be Sold | | :--- | :--- | :--- | :--- | | Bren Higgins | EVP and CFO | May 5, 2025 | 18,070 | | Ahmad Khan | President, Semiconductor Products | May 30, 2025 | 23,163 | | Brian Lorig | EVP, KLA Global Services | May 2, 2025 | 12,482 | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=104&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[574](index=574&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Other Matters](index=104&type=section&id=Items%2010-14) Information for Items 10 through 14 is incorporated by reference from the company's 2025 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's 2025 Proxy Statement[576](index=576&type=chunk)[577](index=577&type=chunk)[578](index=578&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=104&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K - This section contains a list of all financial statements, schedules, and exhibits filed with the Form 10-K[582](index=582&type=chunk) [Form 10-K Summary](index=107&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary under this item - None[587](index=587&type=chunk)

Summary of Key Points from the Conference Call Industry Overview: US Semiconductors and Semi Equipment Hyperscaler Capital Expenditure - Expected hyperscaler capex for C2025 is now projected at **$408 billion**, or **$435 billion** including key neoclouds, an increase from previous estimates of **$367 billion** and **$394 billion** [2][9] - Alphabet raised its C2025 capex guidance from **$75 billion** to **$85 billion**, indicating tightness in AI infrastructure supply-demand [2][9] - Meta's capex guidance remains at **$66-72 billion** for C2025, with a similar increase expected for 2026 [2][9] - Amazon reported **$16 billion** in Q2 AWS capex, down from **$20.4 billion** Q/Q, but increased its overall capex guidance by approximately **$10 billion** [2][9] - Microsoft spent **$24 billion** in the June quarter and guided for September above **$30 billion** [2][9] - Apple indicated "substantial growth" in capital investment driven by Private Cloud Compute expansion [2][9] - Overall, capex is expected to rise **70% Y/Y** with a record **45.5% capital intensity**, up nearly **15 points Y/Y** [2][9] MRVL Maia 300 Insights - MRVL is well-positioned with Microsoft, despite competition concerns [3] - The Maia 300 ramp is anticipated to be a C2027 event due to limitations in N2 foundry wafer capacity [3] KLAC Backlog and RPO - KLAC's RPO stands at approximately **$7.9 billion**, down **$1 billion** Q/Q, indicating shipments exceeded orders [4][6] - The book-to-bill ratio is around **0.6x**, marking the 10th of the last 11 quarters below **1x**, suggesting customers are drawing from backlog rather than placing new orders [4][6] Analog Sector Performance - Despite negative price action, early reporters in the analog sector have shown positive revisions in revenue and operating profit for C2025 and C2026 [7][25] - The overall sentiment in the analog sector has shifted from very negative to neutral, with expectations around automotive performance being worse than industrial [7][25] Applied Materials (AMAT) Preview - AMAT's FQ3:25 results are expected to be slightly ahead of guidance, driven by strong contributions from China and TSMC [8][41] - For FQ4:25, revenue guidance is expected to increase by **$175 million**, with systems revenue up **3% Q/Q** [8][41] - The price target for AMAT has been raised to **$185** from **$175** based on stronger contributions from China [8][43] Other Important Insights - KLAC has reached a point where systems backlog is nearly in the normal **7-9 months** range, indicating a need for new orders to grow revenue [6] - The analog sector's stock performance has been mixed, with some companies like NXP and STM showing slightly mixed guidance for CQ3 [7][25] - The overall market sentiment for semiconductor stocks has been volatile, with significant fluctuations in price returns observed [26][29] This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of the current state and expectations within the semiconductor industry.

Core Insights - KLA Corporation reported strong fourth-quarter fiscal 2025 results with non-GAAP earnings of $9.38 per share, exceeding estimates by 10% and showing a year-over-year increase of 42.1% [1][8] - Revenues for the quarter reached $3.17 billion, a 23.6% increase year over year, surpassing the consensus estimate by 3.21% [1][8] Segment Performance - Semiconductor Process Control revenues, which represent 90.6% of total revenues, increased by 24.7% year over year to $2.88 billion, with Foundry & Logic accounting for approximately 69% and Memory for 31% of this segment [2] - Specialty Semiconductor Process revenues were $142 million, up 17% year over year but down 9% sequentially [3] - PCB and Component Inspection revenues increased by 10.1% year over year to $154.1 million, but also saw a 9% decline sequentially [3] Revenue Breakdown - Product revenues, making up 78% of total revenues, surged 26.5% year over year to $2.47 billion, while service revenues increased by 14.4% year over year to $702.6 million [4] - Wafer Inspection revenues rose 52% year over year to $1.77 billion, while Patterning revenues decreased by 16% year over year to $453 million [5] Geographic Revenue Distribution - Taiwan and China were the largest contributors to revenue, accounting for 27% and 30% respectively, followed by Korea at 15%, Japan at 12%, North America at 9%, Europe at 4%, and the rest of Asia at 3% [5] Operating Metrics - The non-GAAP gross margin for the fourth quarter was 63.2%, slightly above the guidance midpoint [6] - R&D expenses increased by 8.4% year over year to $353 million, while SG&A expenses rose by 3% to $262.7 million [6][7] - The non-GAAP operating margin was reported at 44.2% for the quarter [9] Cash Flow and Balance Sheet - As of June 30, 2025, cash, cash equivalents, and marketable securities totaled $4.49 billion, an increase from $4.03 billion at the end of the previous quarter [10] - Operating cash flow for the quarter was $1.16 billion, with free cash flow at $1.06 billion [10] - The company repurchased $426 million worth of shares during the quarter [11] Future Guidance - For the first quarter of fiscal 2026, KLA expects revenues of approximately $3.15 billion, indicating a year-over-year growth of 7.2% [12] - Non-GAAP earnings are projected at $8.53 per share, suggesting an 11.2% year-over-year growth [12] - The company anticipates advanced packaging-related revenues to exceed $925 million in 2025, up from a previous estimate of $850 million [13]

Core Insights - KLA reported $3.17 billion in revenue for the quarter ended June 2025, a year-over-year increase of 23.6% and an EPS of $9.38 compared to $6.60 a year ago, exceeding Zacks Consensus Estimates [1] - The revenue surpassed the Zacks Consensus Estimate of $3.08 billion by 3.21%, and the EPS exceeded the consensus estimate of $8.53 by 9.96% [1] Revenue Breakdown - Semiconductor Process Control revenues were $2.88 billion, exceeding the average estimate of $2.77 billion, with a year-over-year change of 24.7% [4] - Specialty Semiconductor Process revenues were $141.87 million, slightly below the estimated $150.12 million, representing a year-over-year increase of 17% [4] - Service revenues reached $702.56 million, surpassing the estimate of $694.66 million, with a year-over-year change of 14.4% [4] - Product revenues totaled $2.47 billion, exceeding the average estimate of $2.38 billion, reflecting a year-over-year increase of 26.5% [4] - PCB and Component Inspection revenues were $154.11 million, below the estimated $161.18 million, with a year-over-year change of 10.1% [4] Stock Performance - KLA shares returned +0.4% over the past month, compared to the Zacks S&P 500 composite's +2.7% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential outperformance against the broader market in the near term [3]