KLA CORP files 10-Q: quarterly report (10-Q)

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

• Risks related to our international operations;

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

• Tariffs and other trade restrictions;

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

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

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

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

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

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

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

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

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

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

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

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

• Risks related to fluctuations in foreign currency exchange rates;

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

• Risks related to tax and regulatory compliance audits;

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

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

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

• Our vulnerability to a highly concentrated customer base;

• The cyclicality of the industries in which we operate;

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

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

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

• Our ability to compete in the industry;

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

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

• Risks related to our debt and leveraged capital structure;

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

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

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

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

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

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

EXECUTIVE SUMMARY

We are a leading supplier of process control and yield management solutions and services for the semiconductor and related electronics industries. Our broad portfolio of inspection and metrology products, and related service, software and other offerings, support R&D and manufacturing of integrated circuits (“IC”), wafers and reticles. Our products, services and expertise are used by our customers to measure, detect, analyze and resolve critical and nanometric level product defects, helping them to manage manufacturing process challenges and to obtain higher finished 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 23% of our total revenues in the third 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.

We are organized into three reportable segments as follows:

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

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

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

The semiconductor industry continues to experience significant market expansion and diversification. High-performance computing and data centers, fueled by widespread adoption of AI, are driving industry growth. We expect this momentum to continue during 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.