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

• Tariffs, retaliatory trade measures and other trade restrictions, as well as uncertainty regarding tariff authority, implementation and refund process;

• 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, or meeting stakeholder expectations;

• 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 reliance on critical information, including our enterprise resource planning system for daily operations;

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

• Climate change, natural disasters, public health crises, terrorism, acts of war and other catastrophic events 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 associated with our interest rate hedging activities;

• 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, including artificial intelligence (“AI”) related developments and changes in semiconductor manufacturing processes, customer investment patterns and end-market demand;

• 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 the development, adoption, governance and use of AI by us, our competitors and third parties;

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

• Our ability to compete in the industry;

• Availability and cost of components, materials or subassemblies used in the production of our products, including due to limited-source suppliers, the availability of rare earth elements or DRAM chip shortages;

• 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;

• Risks associated with our receipt of government funding;

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

• We are subject to risks related to receivables factoring, banking 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, along with related services, software

and other offerings, support R&D and manufacturing of integrated circuits (“ICs”), wafers and reticles. Our products, services and expertise enable our customers to measure, detect, analyze and resolve critical nanometer-scale product defects, helping them to address manufacturing challenges and achieve higher yields at lower cost.

We also offer advanced technology solutions across a range of adjacent markets, including printed circuit boards (“PCBs”), advanced packaging, specialty semiconductor (such as LEDs, power devices and compound semiconductors), data storage and general materials research. In addition, our services business has grown consistently year-over-year and accounted for approximately 20% of our total revenues in the first quarter of fiscal 2027. Our services revenue, which is generated largely from recurring “subscription-like” contracts, provides maintenance and other services to maximize uptime, productivity and tool life for our customers, supported in part by continued demand from 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 through 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.