10-K – 2025-08-08 – klac-20250630.htm

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) . The new guidance requires enhanced disclosures about certain costs and expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2028, and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2029. Early adoption is permitted either on a prospective or retrospective basis. We are currently evaluating the impact of this ASU on our disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets. The new guidance allows companies to apply a practical expedient when estimating credit losses on current accounts receivable and contract assets. The standard update is effective for our annual and interim reports beginning in the first quarter of our fiscal year ending June 30, 2027. Early adoption is permitted for periods in which financial statements have not yet been issued or made ready for issuance on a prospective basis. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements.

NOTE 2 — REVENUE
Contract Balances
The following table represents the opening and closing balances of accounts receivable, net, contract assets and contract liabilities as of the indicated dates.
As of As of As of
(In thousands, except for percentages) June 30, 2025 June 30, 2024 June 30, 2023 Change in Fiscal 2025 Change in Fiscal 2024
Accounts receivable, net $ 2,263,915   $ 1,833,041   $ 1,753,361   $ 430,874   24   % $ 79,680   5   %
Contract assets $ 105,081   $ 69,259   $ 117,137   $ 35,822   52   % $ ( 47,878 ) ( 41 ) %
Contract liabilities $ 1,713,689   $ 1,782,242   $ 1,245,007   $ ( 68,553 ) ( 4 ) % $ 537,235   43   %

Our payment terms and conditions vary by contract type, although terms generally include a requirement of payment of 70 % to 90 % of total contract consideration within 30 to 60 days of shipment, with the remainder payable within 30 days of acceptance.
The change in contract assets during the fiscal year ended June 30, 2025 was mainly due to $ 94.4 million of revenue recognized for which the payment is subject to conditions other than the passage of time, partially offset by $ 58.8 million of contract assets reclassified to net accounts receivable as our right to consideration for these contract assets became unconditional. Contract assets are included in other current assets on our Consolidated Balance Sheets.
The change in contract liabilities during the fiscal year ended June 30, 2025 was mainly due to the recognition in revenue of $ 1.39 billion that was included in contract liabilities as of June 30, 2024, partially offset by the value of products and services billed to customers for which control of the products and services has not transferred to the customers. Contract liabilities are included in current and non-current liabilities on our Consolidated Balance Sheet.
Remaining Performance Obligations
As of June 30, 2025, we had $ 7.86 billion of remaining performance obligations (“RPO”), which represents our obligation to deliver products and services, and primarily consists of sales orders where written customer requests have been received. This amount includes customer deposits of $ 643.2 million as disclosed in Note 4 “Financial Statement Components” and excludes contract liabilities of $ 1.71 billion as disclosed above. We expect to recognize approximately 71 % to 76 % of these performance obligations as revenue in the next 12 months, 20 % to 25 % in the subsequent 12 months and the remainder thereafter, but this estimate is subject to constant change.
The amount of our RPO and timing of revenue recognition of our RPO are evaluated quarterly and are largely driven by multiple variables, many of which are beyond our control, such as: changes in regulations, the readiness of customer fabs, end market needs for capacity, changes in the estimated versus actual start time of customers’ projects, timing of delivery and installation dates and supply chain constraints. As customers try to balance the evolution of their technological, production or market needs with the timing and content of orders placed with us, there is elevated risk of order modifications, pushouts or cancellations.
Practical expedients
We apply the following practical expedients in accordance with ASC 606, Revenue from Contracts with Customers :
• We account for shipping and handling costs as activities to fulfill the promise to transfer goods, instead of a promised service to our customer.
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• We have elected to not adjust the promised amount of consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will generally be one year or less.
• We have elected to expense costs to obtain a contract as incurred because the expected amortization period is one year or less.
Refer to Note 18 “Segment Reporting and Geographic Information” for information related to revenues by geographic region as well as significant product and service offerings.

NOTE 3 — FAIR VALUE MEASUREMENTS
Our financial assets and liabilities are measured and recorded at fair value, except for our debt and certain equity investments in privately held companies. Equity investments without a readily available fair value are accounted for using the measurement alternative. The measurement alternative is calculated as cost minus impairment, if any, plus or minus changes resulting from observable price changes. See Note 8 “Debt” for disclosure of the fair value of our Senior Notes, as defined in that Note.
Our non-financial assets, such as goodwill, intangible assets, and land, property and equipment, are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred and, for goodwill, also annually.
Fair Value of Financial Instruments. We have evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The fair value of our cash equivalents, accounts receivable, accounts payable and other current assets and liabilities approximate their carrying amounts due to the relatively short maturity of these items.
Fair Value Hierarchy. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

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

Level 2 Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

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

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The types of instruments valued based on quoted market prices in active markets include money market funds, certain U.S. Treasury securities, U.S. Government agency securities and equity securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.
The types of instruments valued based on other observable inputs include corporate debt securities, municipal securities and certain U.S. Treasury securities. The market inputs used to value these instruments generally consist of market yields, reported trades and broker/dealer quotes. Such instruments are generally classified within Level 2 of the fair value hierarchy.
The principal market in which we execute our foreign currency contracts is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants generally are large financial institutions. Our foreign currency contracts’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.
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Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis as of the dates indicated below were presented on our Consolidated Balance Sheets as follows:
As of June 30, 2025 (In thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2)
Assets
Cash equivalents:
Municipal securities $ 6,120   $ —   $ 6,120  
Corporate debt securities 1,498   —   1,498  
Money market funds and other 1,531,022   1,531,022   —  
U.S. Government agency securities 9,955   —   9,955  
U.S. Treasury securities 9,981   —   9,981  

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

U.S. Government agency securities 106,881   106,881   —  
U.S. Treasury securities 877,578   802,682   74,896  
Equity securities
23,962   23,962   —  

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

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

__________________ 
(1) Excludes cash of $ 437.8 million held in operating accounts and time deposits of $ 478.2 million (of which $ 82.5 million were cash equivalents) as of June 30, 2025.
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As of June 30, 2024 (In thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2)
Assets
Cash equivalents:

Corporate debt securities $ 2,312   $ —   $ 2,312  
Money market funds and other 1,585,832   1,585,832   —  

U.S. Treasury securities 35,158   —   35,158  

Marketable securities:
Corporate debt securities 771,920   —   771,920  
Municipal securities 41,159   —   41,159  

U.S. Government agency securities 105,874   105,874   —  
U.S. Treasury securities 716,148   476,230   239,918  

Equity securities
25,566   25,566   —  

Total cash equivalents and marketable securities (1)
3,283,969   2,193,502   1,090,467  
Other current assets:
Derivative assets 36,503   —   36,503  
Other non-current assets:
EDSP 303,365   272,816   30,549  
Total financial assets (1)
$ 3,623,837   $ 2,466,318   $ 1,157,519  
Liabilities
Derivative liabilities $ ( 15,683 ) $ —   $ ( 15,683 )

Total financial liabilities $ ( 15,683 ) $ —   $ ( 15,683 )

__________________ 
(1) Excludes cash of $ 287.6 million held in operating accounts and time deposits of $ 932.4 million (of which $ 66.2 million were cash equivalents) as of June 30, 2024.
We did not have any financial assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of June 30, 2025 or June 30, 2024.
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NOTE 4 — FINANCIAL STATEMENT COMPONENTS
Consolidated Balance Sheets

  As of June 30,
(In thousands) 2025 2024
Accounts receivable, net:
Accounts receivable, gross $ 2,297,930   $ 1,865,823  
Allowance for credit losses ( 34,015 ) ( 32,782 )
$ 2,263,915   $ 1,833,041  
Inventories:
Customer service parts $ 600,769   $ 589,751  
Raw materials 1,491,786   1,485,400  
Work-in-process 833,933   700,895  
Finished goods 285,661   258,735  
$ 3,212,149   $ 3,034,781  
Other current assets:
Deferred costs of revenues $ 223,829   $ 279,879  
Prepaid expenses 201,053   124,969  
Contract assets 105,081   69,259  

Prepaid income and other taxes 64,704   102,398  
Other current assets 133,435   82,822  
$ 728,102   $ 659,327  
Land, property and equipment, net:
Land $ 86,677   $ 78,260  
Buildings and leasehold improvements 1,132,176   919,919  
Machinery and equipment 1,238,599   1,116,793  
Office furniture and fixtures 73,993   64,480  
Construction-in-process 207,807   215,006  
2,739,252   2,394,458  
Less: accumulated depreciation ( 1,486,477 ) ( 1,284,490 )
$ 1,252,775   $ 1,109,968  
Other non-current assets:
EDSP $ 349,530   $ 303,365  
Operating lease ROU assets 269,714   231,812  
Other non-current assets 154,370   157,546  
$ 773,614   $ 692,723  
Other current liabilities:
Customer deposits $ 636,369   $ 645,893  
Compensation and benefits 418,515   371,713  
EDSP 350,426   303,088  
Income taxes payable 167,262   146,740  
Interest payable 110,056   128,727  
Operating lease liabilities 45,192   36,391  

Other liabilities and accrued expenses 534,621   431,017  
$ 2,262,441   $ 2,063,569  
Other non-current liabilities:
Income taxes payable $ 221,808   $ 291,106  
Operating lease liabilities 158,833   153,117  
Pension liabilities 51,750   51,778  
Customer deposits 6,823   99,794  
Other non-current liabilities 170,418   147,320  
$ 609,632   $ 743,115  

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

(In thousands) Currency Translation Adjustments Unrealized Gains (Losses) on Available-for-Sale Securities Unrealized Gains (Losses) on Derivatives Unrealized Gains (Losses) on Defined Benefit Plans Total
Balance as of June 30, 2025 $ ( 57,277 ) $ 5,792   $ 64,798   $ ( 12,112 ) $ 1,201  

Balance as of June 30, 2024 $ ( 75,846 ) $ ( 3,654 ) $ 46,243   $ ( 15,818 ) $ ( 49,075 )

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

Location in the Consolidated Statements of Operations Year Ended June 30,
AOCI Components 2025 2024 2023
Unrealized gains (losses) on cash flow hedges from foreign exchange and interest rate contracts Revenues $ 7,466   $ 18,374   $ 31,837  
Costs of revenues and operating expenses 4,678   3,766   ( 6,526 )
Interest expense 3,285   3,764   3,747  

Net gains reclassified from AOCI $ 15,429   $ 25,904   $ 29,058  

Unrealized gains (losses) on available-for-sale securities Other expense (income), net $ 59   $ ( 103 ) $ ( 986 )

Consolidated Statements of Operations
The following table shows Other expense (income), net for the indicated periods:
  Year Ended June 30,
(In thousands) 2025 2024 2023
Other expense (income), net:
Interest income $ ( 180,276 ) $ ( 160,688 ) $ ( 74,095 )
Foreign exchange (gains) losses, net 2,964   ( 7,268 ) 233  
Net realized (gains) losses on sale of investments ( 59 ) 103   986  
Other 5,884   12,778   ( 31,844 )
$ ( 171,487 ) $ ( 155,075 ) $ ( 104,720 )

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NOTE 5 — MARKETABLE SECURITIES
The amortized cost and fair value of our fixed income marketable securities as of the dates indicated below were as follows:

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

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

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

As of June 30, 2024 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Corporate debt securities $ 775,277   $ 973   $ ( 2,018 ) $ 774,232  
Money market funds and other 1,585,832   —  —  1,585,832  
Municipal securities 41,343   13   ( 197 ) 41,159  

U.S. Government agency securities 106,101   26   ( 253 ) 105,874  
U.S. Treasury securities 754,505   209   ( 3,408 ) 751,306  

Subtotal 3,263,058   1,221   ( 5,876 ) 3,258,403  
Add: Time deposits (1)
932,436   —  —  932,436  
Less: Cash equivalents 1,689,540   —   ( 1 ) 1,689,539  
Marketable securities (2)
$ 2,505,954   $ 1,221   $ ( 5,875 ) $ 2,501,300  

__________________ 
(1) Time deposits excluded from fair value measurements.
(2) Excludes equity marketable securities.
Our investment portfolio includes both corporate and government securities that have a maximum maturity of three years . The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As yields increase, those securities with a lower yield-at-cost show a mark-to-market unrealized loss. Most of our unrealized losses are due to changes in market interest rates, and bond yields. We believe that we have the ability to realize the full value of all these investments upon maturity. As of June 30, 2025, we had 104 investments in a gross unrealized loss position. The following table summarizes the fair value and gross unrealized losses of our investments that were in an unrealized loss position as of the dates indicated below:

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

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

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As of June 30, 2024 Less than 12 Months 12 Months or Greater Total
(In thousands) Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
Corporate debt securities $ 355,882   $ ( 942 ) $ 100,957   $ ( 1,076 ) $ 456,839   $ ( 2,018 )
Municipal securities 17,364   ( 81 ) 10,788   ( 116 ) 28,152   ( 197 )

U.S. Government agency securities 58,598   ( 137 ) 17,197   ( 116 ) 75,795   ( 253 )
U.S. Treasury securities 466,144   ( 1,040 ) 166,867   ( 2,368 ) 633,011   ( 3,408 )
Total $ 897,988   $ ( 2,200 ) $ 295,809   $ ( 3,676 ) $ 1,193,797   $ ( 5,876 )

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

As of June 30, 2025 (In thousands) Amortized Cost Fair Value
Due within one year $ 1,244,804   $ 1,246,095  
Due after one year through three years 1,139,573   1,145,658  
Total $ 2,384,377   $ 2,391,753  

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Realized gains and losses on available-for-sale securities were immaterial for the fiscal years ended June 30, 2025, 2024 and 2023.
The costs for our equity marketable securities were $ 22.9 million as of both June 30, 2025, and June 30, 2024. Unrealized gains (losses) for our equity marketable securities were $( 1.6 ) million, $( 12.3 ) million and $ 7.1 million during the fiscal years ended June 30, 2025, 2024 and 2023 respectively.

NOTE 6 - BUSINESS COMBINATIONS AND DISPOSITIONS
Fiscal 2023 Acquisitions
On August 9, 2022, we acquired a privately held company, primarily to secure the supply of materials for existing products, for aggregate purchase consideration of $ 32.7  million payable in cash. We allocated the purchase consideration as follows: $ 30.0 million to identifiable intangible assets, $ 2.3 million to net tangible assets, $ 6.5 million to deferred tax liabilities and $ 6.8 million to goodwill. The goodwill was assigned to the Semiconductor Process Control reportable segment. The purchase consideration included a $ 3.7  million holdback to satisfy general warranties and representations that was paid in full in February 2024.
Business Dispositions
As of June 30, 2022, we owned approximately 94 % of the outstanding equity interest in Orbograph Ltd. (“Orbograph”), a non-core business engaged in the development and marketing of character recognition solutions to banks, financial and other payment processing institutions and healthcare providers. On August 9, 2022, we acquired the non-controlling interest in Orbograph. On August 11, 2022, we sold our entire interest in Orbograph to a portfolio company of a private equity firm for total consideration of $ 110.0  million and net cash proceeds from the transaction of $ 75.4  million. We recognized a pre-tax gain from the sale of $ 29.7  million, which was recorded as part of Other expense (income), net. Included in the sale were $ 26.5  million in tangible assets, $ 30.5  million in liabilities and $ 61.2  million in goodwill and intangible assets.
Acquisition-Related Costs
Our acquisition and disposition related costs are primarily included within SG&A expenses in our Consolidated Statements of Operations. We incurred immaterial acquisition-related costs for fiscal 2023 acquisitions.

NOTE 7 — GOODWILL AND PURCHASED INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in business combinations. Goodwill is not subject to amortization but is tested for impairment annually during
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the third fiscal quarter, as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
The following table presents the carrying value of goodwill and the movements by reportable segment during the fiscal years ended June 30, 2025 and 2024:

(In thousands) Semiconductor Process Control Specialty Semiconductor Process PCB & Component Inspection Total
Balances as of June 30, 2023 $ 753,038   $ 681,858   $ 843,924   $ 2,278,820  

Goodwill impairment —   —   ( 263,074 ) ( 263,074 )
Foreign currency adjustment ( 20 ) —   —   ( 20 )
Balances as of June 30, 2024 753,018   681,858   580,850   2,015,726  

Goodwill impairment —   —   ( 230,400 ) ( 230,400 )

Foreign currency adjustments 6,867   —   —   6,867  
Balances as of June 30, 2025 $ 759,885   $ 681,858   $ 350,450   $ 1,792,193  

During the second quarter of fiscal 2025, in connection with our annual strategic planning process, we noted a continued deterioration of the long-term forecast for our PCB business, which is part of our PCB and Component Inspection reportable segment. In addition, in the second quarter of fiscal 2025, we completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. The downward revision of financial outlook for PCB and the reorganization of reporting units triggered goodwill impairment tests. As a result of our quantitative assessment before reorganization, we recorded a total goodwill impairment charge of $ 230.4 million in the former PCB reporting unit, which was part of the PCB and Component Inspection reportable segment, in the second quarter of fiscal 2025. No goodwill impairment was identified in the Specialty Semiconductor Process reportable segment. We assessed for impairment subsequent to the reorganization and noted no impairment. The goodwill balances of our new reporting units after reorganization were allocated on a relative fair value basis.
During the second quarter of fiscal 2024, we noted a significant deterioration of the long-term forecast for our PCB and flat and flexible panel displays (“Display”) businesses, which were part of our former PCB and Display operating segment, as the Company initiated its annual strategic planning process. The downward revision of financial outlook for the PCB and Display businesses triggered a goodwill impairment test. In addition, in the second quarter of fiscal 2024, we began to evaluate strategic options for our Display business. Effective from the second quarter of fiscal 2024, our PCB and Display operating segment was comprised of two reporting units, 1) PCB and 2) Display while, prior to the change, the PCB and Display operating segment represented a single reporting unit. As a result of our quantitative assessment, we recorded a total goodwill impairment charge of $ 192.6 million fo r the PCB and Display reporting unit in the second quarter of fiscal 2024. The goodwill balances of the new PCB and Display reporting units were determined based on their relative fair values. We assessed for impairment subsequent to the reporting unit change and noted no impairment.
To determine the fair value of the reporting units noted above, we utilized income and market approaches and applied a weighting of 75 percent and 25 percent , respectively. The income approach is estimated through discounted cash flow analysis. The estimated fair value of this reporting unit was computed by adding the present value of the estimated annual discounted cash flows over a discrete projection period to the residual value of the business at the end of the projection period. This valuation technique requires us to use significant estimates and assumptions, including long-term growth rates, discount rates and other inputs. The estimated growth rates for the projection period are based on our internal forecasts of anticipated future performance of the business. The residual value is estimated using a perpetual nominal growth rate, which is based on projected long-range inflation and long-term industry projections. The discount rates are calculated as the weighted average cost of capital of comparable peer companies, adjusted for company-specific risk. The market approach estimates the fair value of the reporting unit by utilizing the market comparable method, which uses revenue and earnings multiples from comparable companies.
We performed the required annual goodwill impairment test as of February 28, 2025 and concluded that goodwill was not impaired. As a result of our qualitative assessments, we determined that it was not necessary to perform a quantitative assessment at that time.
We performed the required annual goodwill impairment testing for all reporting units as of February 29, 2024, and concluded that goodwill was not impaired, except for the Display reporting unit. As a result of this qualitative assessment, we determined that it was not necessary to perform a quantitative assessment for the reporting units subject to testing other than Display. In March 2024, we made the decision to exit the Display business by announcing the end of manufacturing of most Display products, but we will continue to provide services to the installed base of Display products for existing customers. The
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exit of the business does not qualify as a discontinued operation under the relevant accounting guidance, but the decision triggered a quantitative impairment assessment for the Display reporting unit, which resulted in a total goodwill impairment charge of $ 70.5 million in the third quarter of fiscal 2024.
To determine the fair value of the Display reporting unit, we utilized an income approach estimated through a discounted cash flow analysis, by adding the present value of the estimated annual discounted cash flows over a discrete projection period. This valuation technique requires us to use significant estimates and assumptions, including discount rates and internal forecasts of the anticipated future performance of the business. The discount rates are calculated as the weighted average cost of capital of comparable peer companies, adjusted for company-specific risk. There can be no assurance that these estimates and assumptions will prove to be an accurate prediction of the future.
There have been no significant events or circumstances affecting the valuation of goodwill subsequent to the assessment performed in the third quarter of the fiscal year ended June 30, 2025. The next annual assessment of goodwill by reporting unit is scheduled to be performed in the third quarter of the fiscal year ending June 30, 2026.
As of June 30, 2025, following the internal reorganization noted above, goodwill is net of accumulated impairment losses of $ 277.6 million and $ 70.5 million in the Semiconductor Process Control and PCB and Component Inspection reportable segments, respectively. As of June 30, 2024, following the fiscal 2024 goodwill impairment and changes to the PCB and Display operating segment noted above, goodwill is net of accumulated impairment losses of $ 277.6 million, $ 144.2 million and $ 70.5 million in the Semiconductor Process Control, Specialty Semiconductor Process and PCB and Component Inspection reportable segments, respectively. As of June 30, 2023, goodwill is net of accumulated impairment losses of $ 277.6 million, $ 144.2 million and $ 112.5 million in the Semiconductor Process Control, Specialty Semiconductor Process and PCB and Component Inspection reportable segments, respectively.
Purchased Intangible Assets
Changes in the gross carrying amount of intangible assets result from changes in foreign currency exchange rates and acquisitions. The components of purchased intangible assets as of the dates indicated below were as follows:
(In thousands) As of June 30, 2025 As of June 30, 2024
Category Gross Carrying Amount Accumulated Amortization and Impairment Net Amount Gross Carrying Amount Accumulated Amortization and Impairment Net Amount
Existing technology $ 1,555,688   $ 1,222,520   $ 333,168   $ 1,552,074   $ 1,045,585   $ 506,489  
Customer relationships 359,555   285,274   74,281   358,567   248,106   110,461  
Trade name/trademark 119,409   113,210   6,199   119,083   97,106   21,977  
Order backlog and other 89,309   84,419   4,890   83,336   82,740   596  
Intangible assets subject to amortization
2,123,961   1,705,423   418,538   2,113,060   1,473,537   639,523  
IPR&D 46,074   19,827   26,247   46,074   16,833   29,241  
Total $ 2,170,035   $ 1,725,250   $ 444,785   $ 2,159,134   $ 1,490,370   $ 668,764  

Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” for our policy of testing purchased intangible assets for impairment.
In connection with the evaluation of the goodwill impairment in the PCB and Component Inspection reportable segment during the second quarter of fiscal 2025, due to the continued deterioration of financial outlook for the businesses and internal reorganization both noted above, the Company assessed tangible and intangible assets for impairment prior to performing the goodwill impairment test. The Company first performed a recoverability test for each asset group identified in the PCB and Component Inspection reportable segment by comparing projected undiscounted cash flows from the use and eventual disposition of each asset group to its carrying value. This test indicated that the undiscounted cash flows were not sufficient to recover the carrying value of the asset groups. We then compared the carrying value of the individual long-lived assets within those asset groups against their fair value in order to measure the impairment loss. As a result of this assessment, we recorded a total purchased intangible asset impairment charge of $ 8.7 million . No impairment was identified for other long-lived assets in the second quarter of fiscal 2025.
As part of the evaluation of goodwill impairment in the former PCB and Display operating segment in the second quarter of fiscal 2024 noted above, the Company assessed long-lived assets for impairment prior to performing the goodwill impairment test. As a result, we recorded a total purchased intangible asset impairment charge of $ 26.4 million in the second quarter of fiscal 2024.
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In the third quarter of fiscal 2024, in connection with the Company's decision to exit the Display business, as described above, an immaterial amount of purchased intangible assets were abandoned.
The total impairment charges for goodwill and purchased intangible assets of $ 239.1 million during the second quarter of fiscal 2025 and $ 219.0 million during the second quarter of fiscal 2024, as well as the goodwill impairment charge of $ 70.5 million in the third quarter of fiscal 2024, were recognized as separate charges and included in income (loss) from operations.
As of June 30, 2025 and 2024, there were no impairment indicators for purchased intangible assets.
Amortization expense for purchased intangible assets was $ 220.4 million, $ 239.3 million, and $ 260.6 million, for the fiscal years ended June 30, 2025, 2024 and 2023, respectively.
Based on the purchased intangible assets gross carrying amount recorded as of June 30, 2025, the remaining estimated annual amortization expense is expected to be as follows:
Fiscal Year Ending June 30: Amortization (In thousands)
2026 $ 195,869  
2027 123,357  
2028 48,123  
2029 35,237  
2030 14,349  
Thereafter 1,603  
Total $ 418,538  

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

NOTE 8 — DEBT
The following table summarizes our debt as of June 30, 2025 and June 30, 2024:

As of June 30, 2025 As of June 30, 2024
Amount
(In thousands) Effective Interest Rate Amount
(In thousands) Effective Interest Rate
Fixed-rate 4.650 % Senior Notes due on November 1, 2024
$ —   —   % $ 750,000   4.682   %
Fixed-rate 4.100 % Senior Notes due on March 15, 2029
800,000   4.159   % 800,000   4.159   %
Fixed-rate 4.650 % Senior Notes due on July 15, 2032
1,000,000   4.657   % 1,000,000   4.657   %
Fixed-rate 4.700 % Senior Notes due on February 1, 2034
500,000   4.777   % 500,000   4.777   %
Fixed-rate 5.650 % Senior Notes due on November 1, 2034
250,000   5.670   % 250,000   5.670   %
Fixed-rate 5.000 % Senior Notes due on March 15, 2049
400,000   5.047   % 400,000   5.047   %
Fixed-rate 3.300 % Senior Notes due on March 1, 2050
750,000   3.302   % 750,000   3.302   %

Fixed-rate 4.950 % Senior Notes due on July 15, 2052
1,450,000   5.023   % 1,450,000   5.023   %
Fixed-rate 5.250 % Senior Notes due on July 15, 2062
800,000   5.259   % 800,000   5.259   %

Total 5,950,000   6,700,000  
Unamortized discount ( 23,338 ) ( 24,866 )
Unamortized debt issuance costs ( 42,405 ) ( 44,999 )
Total $ 5,884,257   $ 6,630,135  
Reported as:
Current portion of long-term debt $ —   $ 749,936  
Long-term debt 5,884,257   5,880,199  
Total $ 5,884,257   $ 6,630,135  

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Senior Notes and Debt Redemption:
In November 2024, we repaid $ 750.0 million of the Senior Notes that were due on November 1, 2024. In February 2024, KLA Corporation (the “Issuer”) issued $ 750.0  million aggregate principal amount of senior, unsecured notes as follows: $ 500.0 million of 4.700 % senior, unsecured notes (the “2024 Senior Notes”) due February 1, 2034; and an additional $ 250.0 million of 4.950 % senior, unsecured notes due July 15, 2052 which was originally issued in June 2022, resulting in an aggregate principal amount of $ 1.45 billion. The net proceeds were used for general corporate purposes, including repayment of outstanding indebtedness.
In June 2022, we issued $ 3.00  billion aggregate principal amount of senior, unsecured notes (the “2022 Senior Notes”) as follows: $ 1.00 billion of 4.650 % senior, unsecured notes due July 15, 2032; $ 1.20 billion of 4.950 % senior, unsecured notes due July 15, 2052; and $ 800.0 million of 5.250 % senior, unsecured notes due July 15, 2062. A portion of the net proceeds of the 2022 Senior Notes was used to complete a tender offer in July 2022 for $ 500.0  million of our 2014 Senior Notes due 2024 including associated redemption premiums, accrued interest and other fees and expenses. The redemption resulted in a pre-tax net loss on extinguishment of debt of $ 13.3  million for the fiscal year ended June 30, 2023. The remainder of the net proceeds was used for share repurchases and for general corporate purposes.
In February 2020, March 2019 and November 2014, we issued $ 750.0  million, $ 1.20  billion and $ 2.50  billion, respectively (the “2020 Senior Notes,” “2019 Senior Notes” and “2014 Senior Notes,” respectively, and, collectively with the 2024 and 2022 Senior Notes, the “Senior Notes”) aggregate principal amount of senior, unsecured notes. In July 2022, February 2020, October 2019 and November 2017, we repaid $ 500.0  million, $ 500.0  million, $ 250.0  million and $ 250.0  million of the Senior Notes, respectively.
The original discounts on the Senior Notes are being amortized over the life of the debt. Interest is payable as follows: semi-annually on February 1 and August 1 of each year for the 2024 Senior Notes; semi-annually on January 15 and July 15 of each year for the 2022 Senior Notes; semi-annually on March 1 and September 1 of each year for the 2020 Senior Notes; semi-annually on March 15 and September 15 of each year for the 2019 Senior Notes; and semi-annually on May 1 and November 1 of each year for the 2014 Senior Notes. The relevant indentures for the Senior Notes (collectively, the “Indenture”) include covenants that limit our ability to grant liens on our facilities and enter into sale and leaseback transactions.
The Senior Notes rank senior in right of payment to all of the Issuer's future subordinated indebtedness, equally in right of payment with all of the Issuer's existing and future unsecured and unsubordinated indebtedness, are effectively subordinated in right of payment to all of the Issuer's future secured indebtedness to the extent of the collateral securing such indebtedness and structurally subordinated in right of payment to all existing and future indebtedness and other liabilities of the Issuer's subsidiaries.
In certain circumstances involving a change of control followed by a downgrade of the rating of a series of Senior Notes by at least two of Moody’s Investors Service, S&P Global Ratings and Fitch Inc., unless we have exercised our rights to redeem the Senior Notes of such series, we will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s Senior Notes of that series pursuant to the offer described below (the “Change of Control Offer”). In the Change of Control Offer, we will be required to offer payment in cash equal to 101 % of the aggregate principal amount of Senior Notes repurchased plus accrued and unpaid interest, if any, on the Senior Notes repurchased, up to, but not including, the date of repurchase.
The fair value of the Senior Notes as of June 30, 2025 and 2024 was $ 5.54 billion and $ 6.26 billion, respectively. While the Senior Notes are recorded at cost, the fair value of the long-term debt was determined based on quoted prices in markets that are not active; accordingly, the long-term debt is categorized as Level 2 for purposes of the fair value measurement hierarchy.
As of June 30, 2025, we were in compliance with all of our covenants under the Indenture associated with the Senior Notes.
Revolving Credit Facility:
On July 3, 2025, we replaced our existing revolving credit facility (see Note 20 “Subsequent Events”). As of June 30, 2025, we had in place a Credit Agreement dated June 8, 2022 (“Prior Credit Agreement”) for an unsecured Revolving Credit Facility (“Prior Revolving Credit Facility”) having a maturity date of June 8, 2027 that allowed us to borrow up to $ 1.50  billion. Subject to the terms of the Prior Credit Agreement, the Prior Revolving Credit Facility could have been increased by an amount up to $ 250.0 million in the aggregate. As of June 30, 2025 and 2024, we had no outstanding borrowings under the Prior Revolving Credit Facility.
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We could borrow, repay and reborrow funds under the Prior Revolving Credit Facility until the maturity date, at which time we could exercise two one-year extension options with the consent of the lenders. We could prepay outstanding borrowings under the Prior Revolving Credit Facility at any time without a prepayment penalty.
Under the Prior Credit Agreement, borrowings could be made as Term Secured Overnight Financing Rate (“SOFR”) Loans or Alternate Base Rate (“ABR”) Loans, at the Company’s option. In the event that Term SOFR was unavailable, any Term SOFR elections would be converted to Daily Simple SOFR, if available. Each Term SOFR Loan would bear interest at a rate per annum equal to the applicable Adjusted Term SOFR rate, which is equal to the applicable Term SOFR rate plus 10 bps that shall not be less than zero, plus a spread ranging from 75 bps to 125 bps, as determined by the Company’s credit ratings at the time. Each ABR Loan would bear interest at a rate per annum equal to the ABR plus a spread ranging from 0 bps to 25 bps, as determined by the Company’s credit ratings at the time. We were also obligated to pay an annual commitment fee on the daily undrawn balance of the Prior Revolving Credit Facility, which ranges from 4.5 bps to 12.5 bps, subject to an adjustment in conjunction with changes to our credit rating. The applicable interest rates and commitment fees were also subject to adjustment based on the Company’s performance against certain environmental sustainability key performance indicators (“KPI”) related to greenhouse gas (“GHG”) emissions and renewable electricity usage. Our performance against these KPIs in calendar year 2024 resulted in reductions to the fees associated with our Prior Revolving Credit Facility. As of June 30, 2025, the applicable commitment fee on the daily undrawn balance of the Prior Revolving Credit Facility was 5.5 bps.
Under the Prior Credit Agreement, the maximum leverage ratio on a quarterly basis, was 3.50 to 1.00, covering the trailing four consecutive fiscal quarters for each fiscal quarter, which could have been increased to 4.00 to 1.00 for a period of time in connection with a material acquisition or a series of material acquisitions. As of June 30, 2025, our maximum allowed leverage ratio was  3.50  to 1.00.
We were in compliance with all covenants under the Prior Credit Agreement as of June 30, 2025.

NOTE 9 — LEASES
We have operating leases for facilities, vehicles and other equipment. Our facility leases are primarily used for administrative functions, R&D, manufacturing, and storage and distribution. Our finance leases are not significant.
Our existing leases do not contain significant restrictive provisions or residual value guarantees; however, certain leases contain provisions for the payment of maintenance, real estate taxes or insurance costs by us. Our leases have remaining lease terms ranging from less than one year to 27 years, including periods covered by options to extend the lease when it is reasonably certain that the option will be exercised.
Lease expense was $ 51.5 million, $ 54.6 million and $ 41.8 million for the fiscal years ended June 30, 2025, 2024 and 2023, respectively. Expense related to short-term leases, which are not recorded on the Consolidated Balance Sheets, was not material for the fiscal years ended June 30, 2025 and 2024. As of June 30, 2025 and 2024, the weighted-average remaining lease term was 6.2 years and 6.7 years, respectively, and the weighted-average discount rate for operating leases was 4.06 % and 4.30 %, as of June 30, 2025 and 2024, respectively.
Supplemental cash flow information related to leases was as follows:

Year Ended June 30,
(In thousands) 2025 2024
Operating cash outflows from operating leases $ 47,183   $ 41,405  
ROU assets obtained in exchange for new operating lease liabilities $ 46,018   $ 62,505  

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Maturities of lease liabilities as of June 30, 2025 were as follows:
Fiscal Year Ending June 30: Amount
(In thousands)
2026 $ 53,182  
2027 47,113  
2028 28,659  
2029 24,033  
2030 21,503  
2031 and thereafter 59,562  
Total lease payments 234,052  
Less imputed interest ( 30,027 )
Total $ 204,025  

As of June 30, 2025, we did not have any material leases that had not yet commenced.

NOTE 10 — EQUITY, LONG-TERM INCENTIVE COMPENSATION PLANS AND NON-CONTROLLING INTEREST
Equity Incentive Program
On August 3, 2023, our Board of Directors adopted the KLA Corporation 2023 Incentive Award Plan (the “2023 Plan”), which replaced our 2004 Equity Incentive Plan (the “2004 Plan”) for grants of equity awards occurring on or after November 1, 2023. The new plan was approved by our stockholders at the annual meeting of stockholders held on November 1, 2023. As of June 30, 2025, we were able to issue new equity incentive awards, such as RSUs and stock options, to our employees, consultants and members of our Board of Directors under our 2023 Plan, with 9.6  million shares available for issuance.
Any 2004 Plan and 2023 Plan awards of RSUs, performance shares, performance units or deferred stock units are counted against the total number of shares issuable under the 2023 Plan share reserve, or previously under the 2004 Plan reserve, as two shares for every one share subject thereto.
In addition, the plan administrator has the ability to grant “dividend equivalent” rights in connection with awards of RSUs, performance shares, performance units and deferred stock units before they are fully vested. The plan administrator, at its discretion, may grant a right to receive dividends on the aforementioned awards, which may be settled in cash or our stock subject to meeting the vesting requirement of the underlying awards. All grants during the fiscal years ended June 30, 2025, 2024 and 2023 included dividend equivalent rights.
Assumed Equity Plans
As of the Orbotech Ltd. (“Orbotech”) Acquisition on February 20, 2019 (“Acquisition Date”), we assumed outstanding equity incentive awards under Orbotech equity incentive plans (the “Assumed Equity Plans”). The awards under the Assumed Equity Plans, previously issued in the form of stock options and RSUs, were generally settled as follows:
a) Each award of Orbotech’s stock options and RSUs that was outstanding and vested immediately prior to the Acquisition Date (collectively, the “Vested Equity Awards”) was canceled and terminated and converted into the right to receive the purchase consideration in respect of such Vested Equity Awards as of the Acquisition Date and, in the case of stock options, less the exercise price.
b) Each award of Orbotech’s stock options and RSUs that was outstanding and unvested immediately prior to the Acquisition Date was assumed by us (each, an “Assumed Option” and “Assumed RSU,” and collectively the “Assumed Equity Awards”) and converted to stock options and RSUs exercisable for the number of shares of our common stock based on the exchange ratio defined in the acquisition agreement. The Assumed Equity Awards generally retain all of the rights, terms and conditions of the respective plans under which they were originally granted, including the same service-based vesting schedule, applicable thereto.
As of the Acquisition Date, the estimated fair value of the Assumed Equity Awards was $ 55.0 million, of which $ 13.3  million was recognized as goodwill and the balance of $ 41.7 million was recognized as stock-based compensation (“SBC”) expense over the remaining service period of the Assumed Equity Awards. The fair value of the Assumed Equity Awards for services rendered through the Acquisition Date was recognized as a component of the merger consideration, with the remaining fair value related to the post-combination services being recorded as SBC over the remaining vesting period. At the Acquisition Date, a total of 14,558 and 518,971 shares of our common stock underlay the Assumed Options and RSUs,
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respectively, and had an estimated weighted-average fair value of $ 53.3 and $ 104.5 per share, respectively. All Assumed Options were fully exercised as of June 30, 2020 and all Assumed RSUs were fully vested as of June 30, 2023.
Equity Incentive Plans - General Information
The following table summarizes the combined activity under our equity incentive plans:

(In thousands) Available
For Grant (1)(3)

Balances as of June 30, 2022 9,242  

RSUs granted (2)
( 1,601 )

RSUs canceled 120  

Balances as of June 30, 2023 7,761  

Plan shares increased 3,250  
RSUs granted (2)
( 849 )

RSUs canceled 78  
Balances as of June 30, 2024 10,240  

RSUs granted (2)
( 805 )
RSUs granted adjustment (4)
62  
RSUs canceled 77  
Balances as of June 30, 2025 9,574  

__________________
(1) The number of RSUs reflects the application of the award multiplier of 2.0 x as described above.
(2) Includes RSUs granted to senior management with performance-based vesting criteria (in addition to service-based vesting criteria for any of such RSUs that are deemed to have been earned) (“performance-based RSU”). As of June 30, 2025, it had not yet been determined the extent to which (if at all) the performance-based vesting criteria had been satisfied. Therefore, this line item includes all such performance-based RSUs granted during the fiscal year, reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied ( 0.2  million shares, 0.2  million shares and 0.6  million shares for the fiscal years ended June 30, 2025, 2024 and 2023, respectively, reflecting the application of the 2.0 x multiplier described above).
(3) No additional stock options, RSUs or other awards will be granted under the Assumed Equity Plans.
(4) Represents the portion of RSUs granted with performance-based vesting criteria and reported at the actual number of shares issued upon achievement of the performance vesting criteria during the fiscal year ended June 30, 2025.
The fair value of stock-based awards is measured at the grant date and is recognized as an expense over the employee’s requisite service period. The fair value for RSUs granted with “dividend equivalent” rights is determined using the closing price of our common stock on the grant date. The fair value for market-based RSUs is estimated on the grant date using a Monte Carlo simulation model with the following assumptions: expected volatilities ranging from 27.8 % to  28.1 %, based on a combination of implied volatility from traded options on our common stock and the historical volatility of our common stock; dividend yield ranging from 2.4 % to 2.5 %, based on our current expectations for our anticipated dividend policy; risk-free interest rate ranging from 2.3 % to  2.4 %, based on the implied yield available on U.S. Treasury zero-coupon issues with terms equal to the contractual terms of each tranche; and an expected term that takes into consideration the vesting term and the contractual term of the market-based award. The awards are amortized over service periods of  three ,  four , and  five years , which is the longer of the explicit service period or the period in which the market target is expected to be met. The fair value for purchase rights under our ESPP is determined using a Black-Scholes model.
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The following table shows SBC expense for the indicated periods:

Year Ended June 30,
(In thousands) 2025 2024 2023
SBC expense by:
Costs of revenues $ 46,502   $ 35,942   $ 29,101  
R&D 77,271   60,124   44,702  
SG&A 141,238   116,629   97,621  
Total SBC expense $ 265,011   $ 212,695   $ 171,424  

 SBC capitalized as inventory as of June 30, 2025 and 2024 was $ 26.3 million and $ 21.5 million, respectively.
Restricted Stock Units
The following table shows the activity and weighted-average grant date fair values for RSUs during the fiscal year ended June 30, 2025:

Shares
(In thousands)  (1)
Weighted-Average Grant Date Fair Value
Outstanding RSUs as of June 30, 2024 (2)
1,467   $ 424.66  
Granted (3)
402   $ 726.75  
Granted adjustments (4)
( 31 ) $ 397.40  
Vested and released ( 507 ) $ 377.12  

Forfeited ( 39 ) $ 482.79  
Outstanding RSUs as of June 30, 2025 (2)
1,292   $ 536.30  

 __________________ 
(1) Share numbers reflect actual shares subject to awarded RSUs.
(2) Includes performance-based RSUs.
(3) This line item includes all performance-based RSUs granted during the fiscal year ended June 30, 2025 reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied ( 0.1  million shares for the fiscal year ended June 30, 2025), reflect the application of the multiplier described above.
(4) Represents the portion of RSUs granted with performance-based vesting criteria and reported at the actual number of shares issued upon achievement of the performance vesting criteria during the fiscal year ended June 30, 2025.
The RSUs granted by us generally vest as follows, in each case subject to the recipient remaining employed by us as of the applicable vesting date: (a) with respect to awards with only service-based vesting criteria, over periods ranging from two to four years and (b) with respect to awards with both performance-based and service-based vesting criteria, over periods ranging from three to four years . The RSUs granted to the independent members of the Board of Directors vest annually.
The following table shows the weighted-average grant date fair value per unit for the RSUs granted, aggregate grant date fair value of RSUs vested, and tax benefits realized by us in connection with vested and released RSUs for the indicated periods:

(In thousands, except for weighted-average grant date fair value) Year Ended June 30,
2025 2024 2023
Weighted-average grant date fair value per unit $ 726.75   $ 584.49   $ 385.98  

Grant date fair value of vested RSUs $ 191,352   $ 144,888   $ 107,217  
Tax benefits realized by us in connection with vested and released RSUs $ 48,858   $ 47,315   $ 25,989  

As of June 30, 2025, the unrecognized SBC expense balance related to RSUs was $ 485.8 million, excluding the impact of estimated forfeitures, and will be recognized over an estimated weighted-average amortization period of 1.4 years. The intrinsic value of outstanding RSUs as of June 30, 2025 was $ 1.16 billion.
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Cash LTI Compensation
As part of our employee compensation program, we issue Cash LTI awards to many of our employees. Executives and non-employee members of the Board of Directors do not participate in the Cash LTI Plan. During the fiscal years ended June 30, 2025 and 2024, we approved Cash LTI awards of $ 41.7 million and $ 51.4 million, respectively. Cash LTI awards issued to employees under the Cash LTI Plan will vest in three or four equal installments, with one-third or one-fourth of the aggregate amount of the Cash LTI award vesting on each anniversary of the grant date over a three or four-year period. In order to receive payments under a Cash LTI award, participants must remain employed by us as of the applicable award vesting date. During the fiscal years ended June 30, 2025, 2024 and 2023, we recognized $ 56.8 million, $ 70.3 million and $ 76.4 million, respectively, in compensation expense under the Cash LTI Plan. As of June 30, 2025, the unrecognized compensation balance (excluding the impact of estimated forfeitures) related to the Cash LTI Plan was $ 108.8 million.
Employee Stock Purchase Plan
Our ESPP provides that eligible employees may contribute up to 15 % of their eligible earnings toward the semi-annual purchase of our common stock. The ESPP is qualified under Section 423 of the Internal Revenue Code. The employee’s purchase price is derived from a formula based on the closing price of the common stock on the first day of the offering period versus the closing price on the date of purchase (or, if not a trading day, on the immediately preceding trading day).
The offering period (or length of the look-back period) under the ESPP has a duration of six months , and the purchase price with respect to each offering period beginning on or after such date is, until otherwise amended, equal to 85 % of the lesser of (i) the fair market value of our common stock at the commencement of the applicable six-month offering period or (ii) the fair market value of our common stock on the purchase date. We estimate the fair value of purchase rights under the ESPP using a Black-Scholes model.
The fair value of each purchase right under the ESPP was estimated on the date of grant using the Black-Scholes model and the straight-line attribution approach with the following weighted-average assumptions:

  Year Ended June 30,
  2025 2024 2023
Stock purchase plan:
Expected stock price volatility 33.8   % 32.2   % 42.7   %
Risk-free interest rate 5.0   % 5.3   % 2.5   %
Dividend yield 0.9   % 1.1   % 1.6   %
Expected life (in years) 0.50 0.50 0.50

The following table shows total cash received from employees for the issuance of shares under the ESPP, the number of shares purchased by employees through the ESPP, the tax benefits realized by us in connection with the disqualifying dispositions of shares purchased under the ESPP and the weighted-average fair value per share for the indicated periods:

(In thousands, except for weighted-average fair value per share) Year Ended June 30,
2025 2024 2023
Total cash received from employees for the issuance of shares under the ESPP $ 151,514   $ 144,934   $ 124,731  
Number of shares purchased by employees through the ESPP 281   320   418  
Tax benefits realized by us in connection with the disqualifying dispositions of shares purchased under the ESPP $ 2,834   $ 2,623   $ 1,916  
Weighted-average fair value per share based on Black-Scholes model $ 164.88   $ 125.04   $ 89.52  

The ESPP shares are replenished annually on the first day of each fiscal year by virtue of an evergreen provision. The     provision allows for share replenishment equal to the lesser of 2.0 million shares or the number of shares that we estimate will be required to be issued under the ESPP during the forthcoming fiscal year. As of June 30, 2025, a total of 2.4 million shares were reserved and available for issuance under the ESPP.
Quarterly cash dividends
On June 3, 2025, we paid a quarterly cash dividend of $ 1.90 per share on the outstanding shares of our common stock to stockholders of record as of the close of business on May 19, 2025. The total amount of regular quarterly cash dividends and dividend equivalents paid during the fiscal years ended June 30, 2025 and 2024 was $ 904.6 million and $ 773.0 million,
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respectively. The amount of accrued dividend equivalents payable related to unvested RSUs with dividend equivalent rights was $ 13.3 million and $ 11.8 million as of June 30, 2025 and 2024, respectively. These amounts will be paid upon vesting of the underlying RSUs. Refer to Note 20 “Subsequent Events” to our Consolidated Financial Statements for additional information regarding the declaration of our quarterly cash dividend announced subsequent to June 30, 2025.
Non-controlling Interests
As of June 30, 2022, we owned approximately 94 % of the outstanding equity interest of Orbograph, which was a non-core business engaged in the development and marketing of character recognition solutions to banks, financial and other payment processing institutions and healthcare providers. On August 11, 2022, we sold our interest in Orbograph; for further details, refer to Note 6 “Business Combinations and Dispositions” to our Consolidated Financial Statements.

NOTE 11 — STOCK REPURCHASE PROGRAM
Our Board of Directors has authorized a program that permits us to repurchase our common stock, including an increase in the authorized repurchase amount of $ 5.00  billion in the fourth quarter of fiscal 2025. The stock repurchase program has no expiration date and may be suspended at any time. The intent of the program is, in part, to mitigate the potential dilutive impact related to our equity incentive plans and shares issued in connection with our ESPP as well as to return excess cash to our stockholders. Any and all share repurchase transactions are subject to market conditions and applicable legal requirements.
On June 23, 2022, the Company executed accelerated share repurchase agreements (“ASR Agreements”) with two financial institutions to repurchase shares of our common stock in exchange for an upfront payment of $ 3.00  billion. The Company received initial deliveries totaling 6.5  million shares of common stock in the fourth quarter of fiscal 2022, which represented 70 % of the prepayment amount at the then prevailing market price of the Company’s shares of common stock. The initial shares delivered were retired immediately upon settlement and treated as repurchases of the Company’s common stock for purposes of earnings per share calculations. The total number of shares received under the ASR Agreements was based on the volume-weighted average price of the Company’s common stock during the term of the ASR Agreements, less an agreed-upon discount. Final settlement of the ASR Agreements occurred during the second quarter of fiscal 2023, resulting in the delivery of 2.4  million additional shares, which yielded an average share price of $ 333.88 for the entire transaction.
Under the authoritative guidance, share repurchases are recognized as a reduction to retained earnings to the extent available, with any excess recognized as a reduction of capital in excess of par value. In addition, as explained further in Note 14 “Income Taxes,” the Inflation Reduction Act of 2022 (“IRA”) introduced a 1% excise tax imposed on certain stock repurchases made after December 31, 2022 by publicly traded companies. The excise tax is recorded as part of the cost basis of treasury stock repurchased after December 31, 2022 and, as such, is included in stockholders’ equity.
As of June 30, 2025, an aggregate of $ 5.03 billion of authorization was available for repurchase under the stock repurchase program.
Share repurchases for the indicated periods (based on the trade date of the applicable repurchase) were as follows:

(In thousands) Year Ended June 30,
2025 2024 2023
Number of shares of common stock repurchased 3,007   3,032   5,844  
Total cost of repurchases $ 2,165,635   $ 1,742,501   $ 1,329,714  

NOTE 12 — NET INCOME PER SHARE
Basic net income per share is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is calculated by using the weighted-average number of shares of common stock outstanding during the period, increased to include the number of additional shares of common stock that would have been outstanding if the shares of common stock underlying our outstanding dilutive RSUs had been issued. The dilutive effect of outstanding RSUs is reflected in diluted net income per share by application of the treasury stock method. In addition, the shares delivered under the ASR Agreements discussed in Note 11 “Stock Repurchase Program” in the fourth quarter of fiscal 2022 and second quarter of fiscal 2023 resulted in a reduction of outstanding shares used to determine our weighted-average common shares outstanding for purposes of calculating basic and diluted earnings per share for those respective fiscal years.
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The following table sets forth the computation of basic and diluted net income per share attributable to KLA:

(In thousands, except per share amounts) Year Ended June 30,
2025 2024 2023
Numerator:
Net income attributable to KLA $ 4,061,643   $ 2,761,896   $ 3,387,277  
Denominator:
Weighted-average shares - basic, excluding unvested RSUs 133,030   135,345   139,483  
Effect of dilutive RSUs and options 720   842   752  
Weighted-average shares - diluted 133,750   136,187   140,235  
Basic net income per share attributable to KLA $ 30.53   $ 20.41   $ 24.28  
Diluted net income per share attributable to KLA $ 30.37   $ 20.28   $ 24.15  
Anti-dilutive securities excluded from the computation of diluted net income per share —   35 8

NOTE 13 — EMPLOYEE BENEFIT PLANS
Profit-sharing program and U.S. 401(k)
We have a profit-sharing program for eligible employees, which distributes a percentage of our pre-tax profits on a quarterly basis. In addition, we have an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Since January 1, 2019, the employer match is the greater of 50 % of the first $ 8,000 of an eligible employee’s contributions or 50 % of the first 5 % of eligible compensation contributed plus 25 % of the next 5 % of compensation contributed. The total expenses under the profit-sharing and 401(k) programs amounted to $ 43.2 million, $ 39.4 million, and $ 37.3 million in the fiscal years ended June 30, 2025, 2024 and 2023, respectively.
Employee benefit plans
In addition to the profit-sharing plan and the U.S. 401(k), several of our foreign subsidiaries have retirement plans for their full-time employees, many of which are defined benefit plans. The assumptions used in calculating the obligations for the foreign plans depend on the local economic environment. Discount rates for the plans are derived by reference to appropriate benchmark yields on high-quality corporate bonds, allowing for the approximate duration of both plan obligations and the relevant benchmark index. Asset return assumptions are developed by considering the historical returns and expectations of future returns relevant to the country in which each plan is in effect and the investments applicable to the corresponding plan.
The foreign plans’ investments are measured at fair value on a recurring basis. They are managed by third-party trustees consistent with the regulations or market practice of the country where the assets are invested. We are not actively involved in the investment strategy, nor do we have control over the target allocation of these investments. We manage a variety of risks, including market, credit and liquidity risks, across our plan assets through our investment managers. We define a concentration of risk as an undiversified exposure to one of the above-mentioned risks that increases the exposure of the loss of plan assets unnecessarily. We monitor exposure to such risks in the foreign plans by monitoring the magnitude of the risk in each plan and diversifying our exposure to such risks across a variety of instruments, markets and counterparties. As of June 30, 2025, we did not have concentrations of plan asset investment risk in any single entity, manager, counterparty, sector, industry or country.
We apply authoritative guidance that requires an employer to recognize the funded status of each of our defined benefit pension and post-retirement benefit plans as a net asset or liability on its balance sheets. Additionally, the authoritative guidance requires an employer to measure the funded status of each of its plans as of the date of its year-end statement of financial position. The benefit obligations and related assets under our plans have been measured as of June 30, 2025 and 2024 and were immaterial. The net funded status of these plans is recognized as a liability and included in other current or non-current liabilities in the Consolidated Balance Sheets in the years presented. The net periodic benefit costs were immaterial for the fiscal years ended June 30, 2025, 2024 and 2023.
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NOTE 14 — INCOME TAXES
The components of income before income taxes were as follows:

  Year Ended June 30,
(In thousands) 2025 2024 2023
Domestic income before income taxes $ 3,070,097   $ 1,997,090   $ 2,017,338  
Foreign income before income taxes 1,574,351   1,192,942   1,771,852  
Total income before income taxes $ 4,644,448   $ 3,190,032   $ 3,789,190  

The provision for income taxes was comprised of the following:
(In thousands) Year Ended June 30,
2025 2024 2023
Current:
Federal $ 624,002   $ 395,876   $ 553,197  
State 21,161   10,737   14,804  
Foreign 182,448   160,401   188,991  
827,611   567,014   756,992  
Deferred:
Federal ( 222,907 ) ( 110,686 ) ( 228,414 )
State ( 5,433 ) ( 2,770 ) ( 4,295 )
Foreign ( 16,466 ) ( 25,422 ) ( 122,444 )
( 244,806 ) ( 138,878 ) ( 355,153 )
Provision for income taxes $ 582,805   $ 428,136   $ 401,839  

The significant components of deferred income tax assets and liabilities were as follows:

(In thousands) As of June 30,
2025 2024
Deferred tax assets:
Capitalized R&D expenses $ 447,043   $ 328,061  
Tax credits and net operating losses 327,618   311,026  
Depreciation and amortization 190,256   151,371  
Inventory reserves 135,121   121,238  
Employee benefits accrual 106,746   95,461  
Non-deductible reserves 69,790   53,668  

Unearned revenue 48,372   25,532  
SBC 18,835   15,375  

Other 43,843   12,785  
Gross deferred tax assets 1,387,624   1,114,517  
Valuation allowance ( 310,599 ) ( 289,534 )
Net deferred tax assets $ 1,077,025   $ 824,983  
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries not indefinitely reinvested $ ( 360,544 ) $ ( 315,231 )
Deferred profit ( 41,378 ) ( 70,204 )
Unrealized gain on investments ( 16,278 ) ( 10,949 )

Total deferred tax liabilities ( 418,200 ) ( 396,384 )
Total net deferred tax assets $ 658,825   $ 428,599  

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Our deferred tax assets for the years ended June 30, 2025 and 2024 reflect the impact of the mandatory capitalization of research and experimental expenditures as required by the 2017 Tax Cuts and Jobs Act. This provision was first effective for us in the year ending June 30, 2023.
As of June 30, 2025, we had U.S. federal, state and foreign net operating loss (“NOL”) carry-forwards of $ 3.7 million, $ 10.0 million and $ 174.5 million, respectively. We also had foreign capital loss carry-forwards of $ 1.3  million as of June 30, 2025. The U.S. federal NOL carry-forwards will expire at various dates beginning in 2026 through 2036. The utilization of NOLs created by acquired companies is subject to annual limitations under Section 382 of the Internal Revenue Code. However, it is not expected that such annual limitation will significantly impair the realization of these NOLs. The state NOLs will expire at various dates beginning in 2028 through 2036. Foreign NOLs and capital loss carry-forwards will be carried forward indefinitely. State credits of $ 395.2 million will also be carried forward indefinitely.
The net deferred tax asset valuation allowance was $ 310.6 million and $ 289.5 million as of June 30, 2025 and 2024, respectively. The change was primarily due to an increase in the valuation allowance related to state credit carry-forwards generated in the fiscal year ended June 30, 2025. The valuation allowance is based on our assessment that it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future. Of the valuation allowance as of June 30, 2025, $ 308.5 million was related to federal and state credit carry-forwards. The remainder of the valuation allowance was related to state and foreign NOL carry-forwards.
 As of June 30, 2025, we intend to indefinitely reinvest $ 185.9 million of cumulative undistributed earnings held by certain non-U.S. subsidiaries. If these undistributed earnings were repatriated to the U.S., the potential deferred tax liability associated with the undistributed earnings would be approximately $ 39 million.
We benefit from tax holidays in Singapore where we manufacture certain of our products. These tax holidays are on approved investments. The tax holidays in Singapore are scheduled to expire in four to seven years . We were in compliance with all the terms and conditions of the tax holidays as of June 30, 2025. The net impact of these tax holidays was to decrease our tax expense by $ 198.6 million, $ 159.4 million and $ 161.5 million in the fiscal years ended June 30, 2025, 2024 and 2023, respectively. The benefits of the tax holidays on diluted net income per share were $ 1.49 , $ 1.19 and $ 1.18 for the fiscal years ended June 30, 2025, 2024 and 2023, respectively.
The reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate was as follows:
  Year Ended June 30,
  2025 2024 2023
Federal statutory rate 21.0   % 21.0   % 21.0   %
GILTI 2.9   % 3.7   % 3.4   %
Goodwill impairment 1.1   % 1.7   % —   %
Net change in tax reserves 0.3   % 1.1   % —   %
State income taxes, net of federal benefit 0.3   % 0.3   % 0.2   %

Effect of SBC —   % —   % 0.1   %

Foreign derived intangible income ( 6.6 ) % ( 5.9 ) % ( 5.7 ) %
Effect of foreign operations taxed at various rates ( 5.1 ) % ( 6.6 ) % ( 7.1 ) %
R&D tax credit ( 1.1 ) % ( 1.6 ) % ( 1.5 ) %
Other ( 0.3 ) % ( 0.3 ) % 0.2   %
Effective income tax rate 12.5   % 13.4   % 10.6   %

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A reconciliation of gross unrecognized tax benefits was as follows:

  Year Ended June 30,
(In thousands) 2025 2024 2023
Unrecognized tax benefits at the beginning of the year $ 245,707   $ 213,092   $ 217,927  

Increases for tax positions taken in current year 35,429   40,209   44,590  
Increases for tax positions taken in prior years 10,862   23,291   434  
Decreases for lapsing of statutes of limitations ( 17,100 ) ( 4,119 ) ( 888 )

Decreases for tax positions taken in prior years ( 11,607 ) ( 26,766 ) ( 3,929 )
Decreases for settlements with taxing authorities ( 4,687 ) —   ( 45,042 )
Unrecognized tax benefits at the end of the year $ 258,604   $ 245,707   $ 213,092  

The amounts of unrecognized tax benefits that would impact the effective tax rate were $ 244.9 million, $ 244.6 million and $ 199.0 million as of June 30, 2025, 2024 and 2023, respectively. The amounts of interest and penalties recognized during the years ended June 30, 2025, 2024 and 2023 were expenses (benefits) of $ 9.0 million, $ 8.3 million and $( 20.2 ) million, respectively. Our policy is to include interest and penalties related to unrecognized tax benefits within Other expense (income), net. The amounts of interest and penalties accrued as of June 30, 2025 and 2024 were $ 50.1 million and $ 41.1 million, respectively.
In the normal course of business, we are subject to examination by tax authorities throughout the world. We are subject to U.S. federal income tax examinations for all years beginning from the fiscal year ended June 30, 2022 and are under U.S. federal income tax examination for the fiscal year ended June 30, 2018. We have completed the federal income tax examination for the fiscal years ended June 30, 2019 and June 30, 2020. We are subject to state income tax examinations for all years beginning from the fiscal year ended June 30, 2021. We are also subject to examinations in other major foreign jurisdictions, including Singapore and Israel, for all years beginning from the calendar year ended December 31, 2019. We are under audit in Israel for calendar year 2019 to the fiscal year ended June 30, 2022, and received a tax assessment from the Israel Tax Authority. The assessment will be appealed. We believe our current unrecognized tax benefits are sufficient.
We believe that we may recognize up to $ 22.7 million of our existing unrecognized tax benefits within the next 12 months as a result of the lapse of statutes of limitations. It is possible that certain income tax examinations may be concluded in the next 12 months. The timing and resolution of income tax examinations are uncertain. Given the uncertainty around the timing of the resolution of these ongoing examinations, we are unable to estimate the full range of possible adjustments to our unrecognized tax benefits within the next 12 months.
Legislative Developments
President Biden signed into law the CHIPS and Science Act of 2022 (“CHIPS Act,” where “CHIPS” stands for Creating Helpful Incentives to Produce Semiconductors) on August 9, 2022. The CHIPS Act provides for various incentives and tax credits among other items, including the Advanced Manufacturing Investment Credit (“AMIC”), which equals 25% of qualified investments in an advanced manufacturing facility that is placed in service after December 31, 2022. There was no material tax impact to our Consolidated Financial Statements from the AMIC provision.
President Biden also signed into law the IRA on August 16, 2022. The IRA has several provisions including a 15% corporate alternative minimum tax (“CAMT”) for certain large corporations that have at least an average of $1.0 billion of adjusted financial statement income over a consecutive three-tax-year period. There was no material tax impact to our Consolidated Financial Statements in our fiscal year ended June 30, 2025 from the CAMT provision.
California Governor Newsom approved the 2024-25 California State Budget on June 27, 2024, which includes a provision to suspend the use of all NOLs and limits the use of R&D tax credits to $5 million for tax years 2024 through 2026. This provision will be effective in our fiscal years ended June 30, 2025 through June 30, 2027. There was no material tax impact to our Consolidated Financial Statements in our fiscal year ended June 30, 2025.
In December 2021, the Organization for Economic Co-operation and Development’s Inclusive Framework on Base Erosion and Profit Shifting released Global Anti-Base Erosion (“GloBE”) rules under Pillar Two. For the countries that have enacted legislation to adopt the Pillar Two GloBE rules, the provision requiring a 15% minimum effective tax rate on income earned in the respective countries was effective for us beginning in our fiscal year ended June 30, 2025, and there was no material tax impact to our Consolidated Financial Statements from this Pillar Two provision.
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In November 2024, Singapore adopted the Pillar Two GloBE rules under the Multinational Enterprise (“Minimum Tax”) Act (“MMT Act”), which includes a domestic minimum tax of 15% for financial years beginning on or after January 1, 2025. We earn significant profits and currently benefit from tax incentives in Singapore, so it is likely the MMT Act will neutralize our current tax incentives when it is effective for us beginning in our fiscal year ending June 30, 2026. We will continue to evaluate the impact of the MMT Act to our future financial statements. The Pillar Two GloBE rules are deemed an alternative minimum tax so we will not recognize any deferred taxes for the estimated effects of the future minimum tax under current U.S. GAAP.
On July 4, 2025, President Trump signed into law the OBBBA, also known as the Tax Relief for American Families and Workers Act of 2025. The OBBBA provides for several permanent changes to the United States tax code including, among other items, modifying the GILTI and Foreign-Derived Intangible Income rules from the Tax Cuts and Jobs Act, restoring full expensing for domestic research expenses and reinstating 100% bonus depreciation provisions. ASC 740, Income Taxes , requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, we are evaluating the impact of the OBBBA on our future Consolidated Financial Statements including our cash flows. We may be subject to the CAMT of 15% in future periods as a result of the OBBBA provisions.

NOTE 15 — LITIGATION AND OTHER LEGAL MATTERS
We are named, from time to time, as a party to lawsuits and other types of legal proceedings and claims in the normal course of our business. Actions filed against us include commercial, intellectual property (“IP”), customer, and labor and employment related claims, including complaints of alleged wrongful termination and potential class action lawsuits regarding alleged violations of federal and state wage and hour and other laws. In general, legal proceedings and claims, regardless of their merit, and associated internal investigations (especially those relating to IP or confidential information disputes) are often expensive to prosecute, defend or conduct and may divert management’s attention and other Company resources. Moreover, the results of legal proceedings are difficult to predict, and the costs incurred in litigation can be substantial, regardless of outcome. We believe the amounts provided in our Consolidated Financial Statements are adequate in light of the probable and estimated liabilities. However, because such matters are subject to many uncertainties and the ultimate outcomes are not predictable, there can be no assurances that the actual amounts required to satisfy alleged liabilities from the matters described above will not exceed the amounts reflected in our Consolidated Financial Statements or will not have a material adverse effect on our results of operations, financial condition or cash flows.

NOTE 16 — COMMITMENTS AND CONTINGENCIES
Factoring. We have factoring agreements with financial institutions to sell certain of our trade receivables and promissory notes from customers without recourse. We do not believe we are at risk for any material losses as a result of these agreements. In addition, we periodically sell certain LC, without recourse, received from customers in payment for goods and services.
The following table shows total receivables sold under factoring agreements and proceeds from sales of LC for the indicated periods:

Year Ended June 30,
(In thousands) 2025 2024 2023
Receivables sold under factoring agreements $ 230,552   $ 254,889   $ 328,933  
Proceeds from sales of LC $ 55,525   $ 22,242   $ 69,247  

Factoring and LC fees for the sale of certain trade receivables were recorded in Other expense (income), net and were not material for the periods presented. KLA may continue servicing the receivables that are sold.
Purchase Commitments. We maintain commitments to purchase inventory from our suppliers as well as goods, services, and other assets in the ordinary course of business. Our estimate of our significant purchase commitments primarily for material, services, supplies and asset purchases is $ 2.42 billion as of June 30, 2025, a majority of which are due within the next 12  months. Actual expenditures will vary based upon the volume of the transactions and length of contractual service provided. In addition, the amounts paid under these arrangements may be less in the event that the arrangements are renegotiated or canceled. Certain agreements provide for potential cancellation penalties.
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Cash LTI Plan. As of June 30, 2025, we have committed $ 119.6 million for future payment obligations under our Cash LTI Plan. Cash LTI awards issued to employees under the Cash LTI Plan vest in three or four equal installments, with one-third or one-fourth of the aggregate amount of the Cash LTI award vesting on each anniversary of the grant date over a three or four-year period. In order to receive payments under a Cash LTI award, participants must remain employed by us as of the applicable award vesting date.
Guarantees and Contingencies. We maintain guarantee arrangements available through various financial institutions for up to $ 126.8 million, of which $ 92.7 million had been issued as of June 30, 2025, primarily to fund guarantees to customs authorities for value-added tax and other operating requirements of our consolidated subsidiaries worldwide.
In January 2025, we entered into a long-term virtual power purchase agreement to purchase a portion of the output generated from a solar energy project for a fixed price. As part of this agreement, we will also receive renewable energy credits commensurate with the power we acquire. These credits can be applied against our GHG emissions, accelerating the progress towards our goals of 100 % renewable electricity across our global operations by 2030, reduction of our Scope 1 and 2 emissions from our 2021 baseline by 50 % by 2030 and achievement of net zero Scope 1 and Scope 2 emissions by 2050. This agreement had no material impact on our results of operations, financial condition or cash flows during the fiscal year ended June 30, 2025.
Indemnification Obligations.  Subject to certain limitations, we are obligated to indemnify our current and former directors, officers and employees with respect to certain litigation matters and investigations that arise in connection with their service to us. These obligations arise under the terms of our certificate of incorporation, bylaws, applicable contracts, and Delaware and California law. The obligation to indemnify generally means that we are required to pay or reimburse the individuals’ reasonable legal expenses and possibly damages and other liabilities incurred by several of our current and former directors, officers and employees in connection with these matters. For example, we have paid or reimbursed legal expenses incurred in connection with the investigation of our historical stock option practices and the related litigation and government inquiries. Although the maximum potential amount of future payments we could be required to make under the indemnification obligations generally described in this paragraph is theoretically unlimited, we believe the fair value of this liability, to the extent estimable, is appropriately considered within the reserve we have established for currently pending legal proceedings.
We are a party to a variety of agreements pursuant to which we may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in connection with contracts and license agreements or the sale of assets, under which we customarily agree to hold the other party harmless against losses arising therefrom, or provide customers with other remedies to protect against, bodily injury or damage to personal property caused by our products, non-compliance with our product performance specifications, infringement by our products of third-party IP rights and a breach of warranties, representations and covenants related to matters such as title to assets sold, validity of certain IP rights, non-infringement of third-party rights, and certain income tax-related matters. In each of these circumstances, payment by us is typically subject to the other party making a claim to and cooperating with us pursuant to the procedures specified in the particular contract. This usually allows us to challenge the other party’s claims or, in case of breach of IP representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, our obligations under these agreements may be limited in terms of amounts, activity (typically at our option to replace or correct the products or terminate the agreement with a refund to the other party), and duration. In some instances, we may have recourse against third parties and/or insurance covering certain payments made by us.
In addition, we may, in limited circumstances, enter into agreements that contain customer-specific commitments on pricing, tool reliability, spare parts stocking levels, response time and other commitments. Furthermore, we may give these customers limited audit or inspection rights to enable them to confirm that we are complying with these commitments. If a customer elects to exercise its audit or inspection rights, we may be required to expend significant resources to support the audit or inspection, as well as to defend or settle any dispute with a customer that could potentially arise out of such audit or inspection. To date, we have made no significant accruals in our Consolidated Financial Statements for this contingency. While we have not in the past incurred significant expenses for resolving disputes regarding these types of commitments, we cannot make any assurance that we will not incur any such liabilities in the future.
It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material effect on our business, financial condition, results of operations or cash flows.
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NOTE 17 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The authoritative guidance requires companies to recognize all derivative instruments, including foreign exchange contracts and rate lock agreements (collectively “derivatives”) as either assets or liabilities at fair value on the Consolidated Balance Sheets. In accordance with the accounting guidance, we designate foreign currency forward transactions and options contracts and interest rate forward transactions as cash flow hedges. In accordance with the accounting guidance, we also designate certain foreign currency exchange contracts as net investment hedge transactions intended to mitigate the variability of the value of certain investments in foreign subsidiaries.
Our foreign subsidiaries operate and sell our products in various global markets. As a result, we are exposed to risks relating to changes in foreign currency exchange rates. We utilize foreign exchange contracts to hedge against future movements in foreign currency exchange rates that affect certain existing and forecasted foreign currency denominated sales and purchase transactions, such as the Japanese yen, the euro, the pound sterling and the new Israeli shekel.
We routinely hedge our exposures to certain foreign currencies with various financial institutions in an effort to minimize the impact of certain currency exchange rate fluctuations. These foreign exchange contracts, designated as cash flow hedges, generally have maturities of less than 18 months. Cash flow hedges are evaluated for effectiveness monthly, based on changes in total fair value of the derivatives. If a financial counterparty to any of our hedging arrangements experiences financial difficulties or is otherwise unable to honor the terms of the foreign currency hedge, we may experience material losses.
Since fiscal 2015, we have entered into five sets of Rate Lock Agreements to hedge the benchmark interest rate on portions of our Senior Notes prior to issuance. Upon issuance of the associated debt, the Rate Lock Agreements were settled and their fair values were recorded within AOCI. The resulting gains and losses from these transactions are amortized to interest expense over the lives of the associated debt. As of June 30, 2025, the aggregate unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was a $ 44.4 million net gain.
For derivatives that are designated and qualify as cash flow hedges, the effective portion of the gains or losses is reported in AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative contracts executed after adopting the new accounting guidance in fiscal 2019, the election to include time value for the assessment of effectiveness is made on all forward contracts designated as cash flow hedges. The change in fair value of the derivative is recorded in AOCI until the hedged item is recognized in earnings. The assessment of effectiveness of options contracts designated as cash flow hedges exclude time value. The initial value of the component excluded from the assessment of effectiveness is recognized in earnings over the life of the derivative contract. Any differences between changes in the fair value of the excluded components and the amounts recognized in earnings are recorded in AOCI.
For derivatives that are designated and qualify as a net investment hedge in a foreign operation and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within AOCI. The remainder of the change in value of such instruments is recorded in earnings using the mark-to-market approach. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation or sale of the net investment in the hedged foreign operations.
For derivatives that are not designated as hedges, gains and losses are recognized in Other expense (income), net. We use foreign exchange contracts to hedge certain foreign currency denominated assets or liabilities. The gains and losses on these derivative instruments are largely offset by the changes in the fair value of the assets or liabilities being hedged.
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Derivatives in Hedging Relationships: Foreign Exchange Contracts and Rate Lock Agreements
The gains (losses) on derivatives in cash flow and net investment hedging relationships recognized in OCI for the indicated periods were as follows:
Year Ended June 30,
(In thousands) 2025 2024 2023
Derivatives Designated as Cash Flow Hedging Instruments:
Rate lock agreements:
Amounts included in the assessment of effectiveness $ —   $ 415   $ —  
Foreign exchange contracts:
Amounts included in the assessment of effectiveness $ 36,747   $ 9,176   $ 30,153  
Amounts excluded from the assessment of effectiveness $ ( 21 ) $ 146   $ ( 128 )
Derivatives Designated as Net Investment Hedging Instruments:
Foreign exchange contracts (1)
$ ( 23,630 ) $ 3,459   $ 3,626  
________________
(1) No amounts were reclassified from AOCI into earnings related to the sale of a subsidiary.
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The locations and amounts of designated and non-designated derivatives’ gains and losses reported in the Consolidated Statements of Operations for the indicated periods were as follows:

(In thousands) Revenues Costs of Revenues and Operating Expense Interest Expense Other Expense (Income), Net
For the year ended June 30, 2023

Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 10,496,056   $ 6,501,360   $ 296,940   $ ( 104,720 )
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings $ —   $ —   $ 3,747   $ —  

Foreign exchange contracts:
Amount of gains (losses) reclassified from AOCI to earnings $ 33,243   $ ( 6,526 ) $ —   $ —  
Amount excluded from the assessment of effectiveness recognized in earnings $ ( 1,406 ) $ —   $ —   $ 2,598  

Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of losses recognized in earnings $ —   $ —   $ —   $ ( 2,062 )
For the year ended June 30, 2024

Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 9,812,247   $ 6,466,037   $ 311,253   $ ( 155,075 )
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings $ —   $ —   $ 3,764   $ —  

Foreign exchange contracts:
Amount of gains reclassified from AOCI to earnings $ 19,246   $ 3,766   $ —   $ —  
Amount excluded from the assessment of effectiveness recognized in earnings $ ( 872 ) $ —   $ —   $ 2,328  

Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains recognized in earnings $ —   $ —   $ —   $ 10,597  
For the year ended June 30, 2025

Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 12,156,162   $ 7,381,035   $ 302,166   $ ( 171,487 )
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains reclassified from AOCI to earnings $ —   $ —   $ 3,285   $ —  

Foreign exchange contracts:
Amount of gains reclassified from AOCI to earnings $ 8,950   $ 4,678   $ —   $ —  
Amount excluded from the assessment of effectiveness recognized in earnings $ ( 1,484 ) $ —   $ —   $ 2,984  
Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains recognized in earnings $ —   $ —   $ —   $ 37,588  

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The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts, with maximum remaining maturities of approximately 14 months as of June 30, 2025 and 12 months as of June 30, 2024, were as follows:
(In thousands) As of June 30, 2025 As of June 30, 2024
Cash flow hedge contracts - foreign currency
Purchase $ 405,349   $ 426,839  
Sell $ 159,475   $ 76,342  
Net Investment hedge contracts - foreign currency

Sell $ 384,130   $ 273,952  
Other foreign currency hedge contracts
Purchase $ 618,844   $ 589,171  
Sell $ 429,643   $ 411,635  

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

  Asset Derivatives Liability Derivatives
  Balance Sheet 
Location As of June 30, 2025 As of June 30, 2024 Balance Sheet 
Location As of June 30, 2025 As of June 30, 2024

(In thousands) Fair Value Fair Value
Derivatives designated as hedging instruments

Foreign exchange contracts Other current assets $ 29,492   $ 13,783   Other current liabilities $ ( 24,331 ) $ ( 8,066 )
Total derivatives designated as hedging instruments 29,492   13,783   ( 24,331 ) ( 8,066 )
Derivatives not designated as hedging instruments

Foreign exchange contracts Other current assets 30,011   22,720   Other current liabilities ( 4,284 ) ( 7,617 )
Total derivatives not designated as hedging instruments 30,011   22,720   ( 4,284 ) ( 7,617 )
Total derivatives $ 59,503   $ 36,503   $ ( 28,615 ) $ ( 15,683 )

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

Year Ended June 30,
(In thousands) 2025 2024 2023
Beginning balance $ 68,903   $ 81,611   $ 77,018  
Amount reclassified to earnings as net gains ( 15,429 ) ( 25,904 ) ( 29,058 )
Net change in unrealized gains 13,096   13,196   33,651  
Ending balance $ 66,570   $ 68,903   $ 81,611  

As of June 30, 2025, the net gain reported in AOCI that is expected to be reclassified into earnings within the next 12 months is $ 29.4 million.
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Offsetting of Derivative Assets and Liabilities
We present derivatives at gross fair values in the Consolidated Balance Sheets . We have entered into arrangements with each of our counterparties, which reduce credit risk by permitting net settlement of transactions with the same counterparty under certain conditions. The information related to the offsetting arrangements for the periods indicated was as follows:
As of June 30, 2025 Gross Amounts of Derivatives Not Offset in the Consolidated Balance Sheets
(In thousands) Gross Amounts of Derivatives
Gross Amounts of Derivatives Offset in the Consolidated Balance Sheets
Net Amount of Derivatives Presented in the Consolidated Balance Sheets
Financial Instruments Cash Collateral Received Net Amount
Derivatives - assets $ 59,503   $ —   $ 59,503   $ ( 28,615 ) $ —   $ 30,888  
Derivatives - liabilities $ ( 28,615 ) $ —   $ ( 28,615 ) $ 28,615   $ —   $ —  

As of June 30, 2024 Gross Amounts of Derivatives Not Offset in the Consolidated Balance Sheets
(In thousands) Gross Amounts of Derivatives
Gross Amounts of Derivatives Offset in the Consolidated Balance Sheets
Net Amount of Derivatives Presented in the Consolidated Balance Sheets
Financial Instruments Cash Collateral Received Net Amount
Derivatives - assets $ 36,503   $ —   $ 36,503   $ ( 15,173 ) $ —   $ 21,330  
Derivatives - liabilities $ ( 15,683 ) $ —   $ ( 15,683 ) $ 15,173   $ —   $ ( 510 )

NOTE 18 — SEGMENT REPORTING AND GEOGRAPHIC INFORMATION
ASC 280, Segment Reporting , establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer.
Our operating segments are aggregated into reportable segments based on several factors including, but not limited to, customer base, homogeneity of products, technology, delivery channels and similar economic characteristics. We have three reportable segments: Semiconductor Process Control; Specialty Semiconductor Process; and PCB and Component Inspection.
Semiconductor Process Control
The Semiconductor Process Control segment offers a comprehensive portfolio of inspection, metrology and data analytics products, and related services, which helps IC manufacturers achieve target yield throughout the entire semiconductor fabrication process, from R&D to final volume production. Our differentiated products and services are designed to provide comprehensive solutions that help our customers accelerate development and production ramp cycles, achieve higher and more stable semiconductor die yields and improve their overall profitability.
Specialty Semiconductor Process
The Specialty Semiconductor Process segment develops and sells advanced vacuum deposition and etching process tools, which are used by a broad range of specialty semiconductor customers, including manufacturers of MEMS, radio frequency communication chips, and power semiconductors for automotive and industrial applications.
PCB and Component Inspection
The PCB and Component Inspection segment enables electronic device manufacturers to inspect, test and measure PCBs, flat panel displays and ICs to verify their quality, pattern the desired electronic circuitry on the relevant substrate and perform three-dimensional shaping of metalized circuits on multiple surfaces. In March 2024, we made the decision to exit the Display business by announcing we would end manufacturing of most Display products, but will continue to provide services to the installed base of Display products for existing customers.
The CODM uses total segment revenues and segment profit (loss) to assess performance and allocate resources (including employees, financial or capital resources), primarily during the annual strategic long-term planning and budgeting process. The CODM considers changes in market conditions, technology constraints and the competitive environment when making decisions about allocating resources to segments. The CODM does not evaluate segments using discrete asset
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information. Segment profit (loss) represents segment income (loss) before income taxes, and excludes interest expense, other expense (income), net, restructuring costs, effects of changes in foreign currency exchange rates, and other corporate expenses.
The following is a summary of results for each of our three reportable segments for the indicated periods.

(In thousands)
Semiconductor Process Control Specialty Semiconductor Process PCB and Component Inspection Total
For the year ended June 30, 2023
Revenue $ 9,324,190   $ 543,398   $ 631,604   $ 10,499,192  
Less:
Cost of revenue 3,366,617   261,456   410,353  
R&D 1,064,752   40,436   168,283  
SG&A 713,924   45,982   116,613  
Other segment items (1)
78,747   114,049   78,768  
Segment profit (loss) $ 4,100,150   $ 81,475   $ ( 142,413 ) $ 4,039,212  
For the year ended June 30, 2024
Revenue $ 8,733,556   $ 528,701   $ 552,491   $ 9,814,748  
Less:
Cost of revenue 3,104,254   245,791   393,531  
R&D 1,077,366   40,043   147,867  
SG&A 728,349   43,959   116,074  
Other segment items (1)
56,014   108,069   365,292  
Segment profit (loss) $ 3,767,573   $ 90,839   $ ( 470,273 ) $ 3,388,139  
For the year ended June 30, 2025
Revenue $ 10,947,359   $ 587,107   $ 621,721   $ 12,156,187  
Less:
Cost of revenue 3,922,735   283,160   358,847  
R&D 1,165,858   47,054   133,487  
SG&A 814,074   48,980   102,662  
Other segment items (1)
41,946   108,961   307,882  
Segment profit (loss) $ 5,002,746   $ 98,952   $ ( 281,157 ) $ 4,820,541  
__________________
(1) Other segment items for each reportable segment includes:
• Semiconductor Process Control — amortization of purchased intangible assets and acquisition related expenses.
• Specialty Semiconductor Process — amortization of purchased intangible assets.
• PCB and Component Inspection — amortization of purchased intangible assets and impairment of goodwill and purchased intangible assets for the years ended June 30, 2024 and 2025.
The following table reconciles total reportable segment revenue to total revenue for the indicated periods:

  Year Ended June 30,
(In thousands) 2025 2024 2023
Total revenues for reportable segments $ 12,156,187   $ 9,814,748   $ 10,499,192  
Corporate allocations and effects of changes in foreign currency exchange rates ( 25 ) ( 2,501 ) ( 3,136 )
Total revenues $ 12,156,162   $ 9,812,247   $ 10,496,056  

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

  Year Ended June 30,
(In thousands) 2025 2024 2023
Total segment profit $ 4,820,541   $ 3,388,139   $ 4,039,212  
Unallocated expenses (1)
45,414   41,929   44,516  
Interest expense 302,166   311,253   296,940  
Loss on extinguishment of debt —   —   13,286  
Other expense (income), net ( 171,487 ) ( 155,075 ) ( 104,720 )
Income before income taxes $ 4,644,448   $ 3,190,032   $ 3,789,190  

__________________
(1) Unallocated expenses include restructuring costs, effects of changes in exchange rates and other corporate expenses.
Our significant operations outside the U.S. include manufacturing facilities in China, Germany, Israel and Singapore and sales, marketing and service offices in Japan, the rest of the Asia Pacific region and Europe. For geographical revenue reporting, revenues are attributed to the geographic location in which the customer is located. Long-lived assets consist of land, property and equipment, net, and are attributed to the geographic region in which they are located.
The following is a summary of revenues by geographic region, based on ship-to location, for the indicated periods:

(Dollar amounts in thousands) Year Ended June 30,
2025 2024 2023
Revenues:
China $ 4,042,567   33   % $ 4,196,727   43   % $ 2,867,443   27   %
Taiwan 3,205,392   27   % 1,738,065   18   % 2,493,379   24   %
Korea 1,452,826   12   % 906,924   9   % 1,895,710   18   %
North America 1,362,311   11   % 1,070,791   11   % 1,254,956   12   %
Japan 1,133,002   9   % 963,203   10   % 888,016   9   %
Europe and Israel 574,197   5   % 540,263   6   % 682,103   6   %
Rest of Asia 385,867   3   % 396,274   3   % 414,449   4   %
Total $ 12,156,162   100   % $ 9,812,247   100   % $ 10,496,056   100   %

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

(Dollar amounts in thousands) Year Ended June 30,
2025 2024 2023
Revenues:
Wafer Inspection $ 6,198,815   51   % $ 4,333,296   44   % $ 4,336,663   41   %
Patterning 2,196,347   18   % 2,054,442   21   % 2,791,130   26   %
Specialty Semiconductor Process 517,201   4   % 470,565   5   % 492,109   5   %
PCB and Component Inspection 355,891   3   % 291,161   3   % 378,030   4   %
Services 2,683,308   22   % 2,329,568   24   % 2,117,031   20   %
Other 204,600   2   % 333,215   3   % 381,093   4   %
Total $ 12,156,162   100   % $ 9,812,247   100   % $ 10,496,056   100   %

Wafer Inspection and Patterning products are offered in the Semiconductor Process Control segment. Services are offered in multiple segments. Other includes primarily refurbished systems, remanufactured legacy systems, and enhancements and upgrades for previous-generation products that are part of the Semiconductor Process Control segment.
In the fiscal year ended June 30, 2025, one customer accounted for approximately 19 % of total revenues. In the fiscal year ended June 30, 2024, one customer accounted for approximately 13 % of total revenues. In the fiscal year ended June 30, 2023, two customers accounted for approximately 18 % and 15 % of total revenues.
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Land, property and equipment, net by geographic region as of the dates indicated below were as follows:

  As of June 30,
(In thousands) 2025 2024
Land, property and equipment, net:
U.S. $ 728,162   $ 689,937  
Europe 253,848   155,812  
Singapore 153,052   148,557  
Israel 68,604   84,279  

Rest of Asia 49,109   31,383  
Total $ 1,252,775   $ 1,109,968  

NOTE 19 — RESTRUCTURING CHARGES
From time to time, management approves restructuring plans including workforce reductions in an effort to streamline operations.
Restructuring charges were $ 7.7  million and $ 21.6  million for fiscal years ended June 30, 2025 and June 30, 2024, respectively, primarily due to severance and related charges for the restructuring of the former PCB and Display operating segment, as described further in Note 7 “Goodwill and Purchased Intangible Assets,” as well as write-downs of certain ROU assets and fixed assets that were abandoned. Restructuring charges were $ 44.0  million for the year ended June 30, 2023, primarily due to workforce reductions announced and substantially completed in the third and fourth fiscal quarters. The amounts of restructuring charges accrued were $ 5.9  million and $ 6.5  million as of June 30, 2025 and 2024, respectively.

NOTE 20 — SUBSEQUENT EVENTS
On August 7, 2025, we announced that our Board of Directors had declared a quarterly cash dividend of $ 1.90 per share to be paid on September 3, 2025 to stockholders of record as of the close of business on August 18, 2025.
On July 3, 2025, we replaced our Prior Revolving Credit Facility. The new Credit Agreement maturity date is July 3, 2030, and allows us the ability to request an increase in the Revolving Credit Facility by $ 500.0  million in aggregate.
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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of KLA Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of KLA Corporation and its subsidiaries (the “Company”) as of June 30, 2025 and 2024, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2025, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
As described in Note 1 to the consolidated financial statements, the Company’s arrangements with its customers include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The transaction consideration, including any sales incentives, is allocated between separate performance obligations of an arrangement based on the stand-alone selling price for each distinct product or service. Revenues are measured based on consideration stipulated in the arrangement with each customer. Revenue is recognized from product sales at a point in time when the performance obligation has been satisfied by transferring control of the product to the customer. Services revenue is recognized ratably over the period the customer simultaneously receives and consumes the benefits of the services provided or when the related service is performed. The Company’s total revenues were $12,156.2 million for the year ended June 30, 2025.
The principal consideration for our determination that performing procedures relating to revenue recognition is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the recording of product and services revenue at the transaction consideration once control passes to the customer. These procedures also included, among others (i) testing the completeness, accuracy, and occurrence of revenue recognized for a sample of product revenue transactions by obtaining and inspecting source documents, such as purchase orders, sales orders, and proof of shipment; (ii) testing the completeness, accuracy, and occurrence of a sample of service revenue transactions by obtaining and inspecting source documents, such as purchase orders, sales orders, and other evidence supporting the service period; and (iii) for a sample of outstanding customer invoice balances as of June 30, 2025, obtaining and inspecting source documents, such as invoices, proof of shipment, and subsequent cash receipts.
/s/ PricewaterhouseCoopers LLP
San Jose, California
August 8, 2025
We have served as the Company’s auditor since 1977.
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SCHEDULE II
Valuation and Qualifying Accounts
 
(In thousands) Balance at Beginning of Period Charged to Expense Deductions/Adjustments Balance at End of Period
Fiscal Year Ended June 30, 2023:
Allowance for Credit Losses $ 20,631   $ 19,894   $ ( 6,893 ) $ 33,632  
Allowance for Deferred Tax Assets $ 244,429   $ —   $ 14,743   $ 259,172  
Fiscal Year Ended June 30, 2024:
Allowance for Credit Losses $ 33,632   $ 5,912   $ ( 6,762 ) $ 32,782  
Allowance for Deferred Tax Assets $ 259,172   $ —   $ 30,362   $ 289,534  
Fiscal Year Ended June 30, 2025:
Allowance for Credit Losses $ 32,782   $ 11,494   $ ( 10,261 ) $ 34,015  
Allowance for Deferred Tax Assets $ 289,534   $ ( 1,315 ) $ 22,380   $ 310,599  

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act (“Disclosure Controls”) as of the end of the period covered by this Annual Report on Form 10-K (this “Report”) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b). The evaluation of our disclosure controls and procedures was conducted under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based on this evaluation, the CEO and CFO have concluded that as of June 30, 2025, the end of the period covered by this Report, our Disclosure Controls were effective at a reasonable assurance level.
Attached as exhibits to this Report are certifications of the CEO and CFO, which are required in accordance with Rule 13a-14 of the Securities Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Definition of Disclosure Controls
Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our Disclosure Controls include components of our internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States. To the extent that components of our internal control over financial reporting are included within our Disclosure Controls, they are included in the scope of our annual controls evaluation.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of June 30, 2025.
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The effectiveness of our internal control over financial reporting as of June 30, 2025 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls or internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Securities Exchange Act that occurred during the fourth quarter of the fiscal year ended June 30, 2025 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION
Rule 10b5-1 Trading Plans Adopted by Officers and Directors During the Fourth Quarter
In the fourth quarter of fiscal 2025, the following officers adopted trading plans, or amendments to existing trading plans, to sell and/or gift shares of our common stock that have been or will be issued upon the vesting of RSUs, or purchased in our ESPP, that are intended to satisfy the affirmative defense conditions set forth in Rule 10b5-1(c) under the Securities Exchange Act. The material terms of the trading plans other than pricing conditions are set forth in the table below:

Name of Officer
Title of Officer
Date of Adoption
Duration
Maximum Number of Shares to be Sold (1) (2)

Bren Higgins Executive Vice President and Chief Financial Officer May 5, 2025 432 days (3)
18,070
Ahmad Khan President, Semiconductor Products and Customers May 30, 2025 211 days (4)
23,163
Brian Lorig Executive Vice President, KLA Global Services May 2, 2025 299 days (5)
12,482

(1) Due to pricing conditions in the trading plans, the number of shares actually sold under the trading plans may be less than the maximum number of shares that can be sold. Shares sold under plans upon the vesting of performance-based RSUs where the performance conditions have not been met at the time of plan adoption are calculated at the maximum number of shares that may be issued, with fractional shares disregarded. Shares sold in the future that are issuable under our ESPP, where the number of shares to be purchased have not been determined, are calculated based on a 15% discount to the price at the opening of the purchase period.
(2) For RSUs that have not vested, the maximum number of shares to be sold does not take into account shares withheld for taxes.
(3) Mr. Higgins’ trading plan terminates when the last trade is placed under the plan. The last scheduled trade is on July 2, 2026; provided that if any scheduled trades are not placed because of trading conditions set forth in the plan, the trading plan will terminate on July 10, 2026 .
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(4) Mr. Khan’s trading plan terminates when the last trade is placed under the plan. The last scheduled trade is on November 10, 2025; provided that if any scheduled trades are not placed because of trading conditions set forth in the plan, the trading plan will terminate on December 26, 2025 .
(5) Mr. Lorig’s trading plan was amended on May 2, 2025, and it terminates when the last trade is placed under the plan. The last scheduled trade is on August 12, 2025; provided that if any scheduled trades are not placed because of trading conditions set forth in the plan, the trading plan will terminate on February 24, 2026 .

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
For the information required by this Item, see “Information About the Board of Directors and its Committees,” “Information About Executive Officers,” “Our Corporate Governance Practices - Standards of Business Conduct; Whistleblower Hotline and Website,” “Our Corporate Governance Practices - Insider Trading Policy ,” “Report of the Audit Committee,” and, if applicable, “Security Ownership of Certain Beneficial Owners and Management - Delinquent Section 16(a) Reports,” in the Proxy Statement, which is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION
For the information required by this Item, see “Executive Compensation and Other Matters,” “Information About the Board of Directors and Its Committees - Director Compensation,” “Our Corporate Governance Practices - Compensation and Talent Committee Interlocks and Insider Participation,” “Compensation and Talent Committee Report,” and “Information About the Board of Directors and Its Committees - Compensation and Talent Committee - Risk Considerations in Our Compensation Programs” in the Proxy Statement, which is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
For the information required by this Item, see “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement, which is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
For the information required by this Item, see “Certain Relationships and Related Transactions” and “Information About the Board of Directors and Its Committees - The Board of Directors” in the Proxy Statement, which is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
For the information required by this Item, see “Proposal Two: Ratification of Appointment of PricewaterhouseCoopers LLP as Our Independent Registered Public Accounting Firm for the Fiscal Year Ending June 30, 2026” in the Proxy Statement, which is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1. Financial Statements:
The following financial statements and schedules of the Registrant are contained in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K:
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Consolidated Balance Sheets as of June 30, 2025 and 2024
50

Consolidated Statements of Operations for each of the three years in the period ended June 30, 2025
51

Consolidated Statements of Comprehensive Income for each of the three years in the period ended June 30, 2025
52

Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended June 30, 2025
53

Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 2025
54

Notes to Consolidated Financial Statements
55

Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
95

2. Financial Statement Schedule:
The following financial statement schedule of the Registrant is filed as part of this Annual Report on Form 10-K and should be read in conjunction with the financial statements:

Schedule II—Valuation and Qualifying Accounts for the three years in the period ended June 30, 2025
97

All other schedules are omitted because they are either not applicable or the required information is shown in the Consolidated Financial Statements or notes thereto.
3. Exhibits
The information required by this item is set forth below.

Exhibit
Number Exhibit Description Incorporated by Reference
Form File No. Exhibit Number Filing Date
3.1
Restated Certificate of Incorporation
10-K No. 000-09992 3.1 August 16, 2019
3.2
Amended and Restated Bylaws
8-K No. 000-09992 3.1 November 4, 2022
4.1
Indenture dated November 6, 2014 between KLA-Tencor Corporation and Wells Fargo Bank, National Association, as trustee
8-K No. 000-09992 4.1 November 7, 2014
4.2
Form of Officer’s Certificate setting forth the terms of the Notes (with form of Notes attached)
8-K No. 000-09992 4.2 November 7, 2014
4.3
Indenture, dated as of June 23, 2022 between KLA Corporation and U.S. Bank Trust Company, National Association, as trustee
8-K No. 000-09992 4.1 June 24, 2022
4.4
Form of Officer’s Certificate setting forth the terms of the 4.650% Senior Notes due 2032, 4.950% Senior Notes due 2052, and 5.250% Senior Notes due 2062 (with form of Notes attached)
8-K No. 000-09992 4.2 June 24, 2022
4.5
Form of Officer’s Certificate setting forth the terms of the 4.100% Senior Notes due 2029 and 5.000% Senior Notes due 2049 (with form of Notes attached)
8-K No. 000-09992 4.2 March 20, 2019
4.6
Form of Officer’s Certificate setting forth the terms of the 3.300% Senior Notes due 2050 (with form of Notes attached)
8-K No. 000-09992 4.2 March 3, 2020
4.7
Officer’s Certificate, dated February 1, 2024, including the form of the Company’s 4.700% Senior Notes due 2034
8-K No. 000-09992 4.2 February 1, 2024
4.8
Description of the Registrant’s securities registered under Section 12 of the Securities Act of 1934
10-Q No. 000-09992 4.1 October 30, 2020
10.1
2004 Equity Incentive Plan (as amended and restated (as of November 7, 2018))*
S-8 No. 228283 10.1 November 8, 2018
10.2
Form of Restricted Stock Unit Award Notification (Performance-Vesting)*
10-K No. 000-09992 10.2 August 6, 2021

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Exhibit
Number Exhibit Description Incorporated by Reference
Form File No. Exhibit Number Filing Date
10.3
Form of Restricted Stock Unit Award Notification (Service-Vesting)*
10-K No. 000-09992 10.3 August 6, 2021
10.4
Form of Accelerated Stock Repurchases Agreement
8-K No. 000-09992 10.1 June 24, 2022
10.5
Executive Deferred Savings Plan (as amended and restated effective July 31, 2019)*
10-K No. 000-09992 10.9 August 16, 2019
10.6
Credit Agreement, dated as of June 8, 2022, by and among KLA Corporation, the several banks and other financial institutions party thereto as lenders, and JPMorgan Chase Bank, N.A., as administrative agent
8-K No. 000-09992 10.1 June 8, 2022
10.7
Amended and Restated Executive Severance Plan*
8-K No. 000-09992 10.1 October 20, 2016
10.8
Amended and Restated 2010 Executive Severance Plan*
10-Q No. 000-09992 10.45 October 22, 2015
10.9
Calendar Year 202 5 Executive Incentive Plan*+
10-Q No. 000-09992 10.1 May 1, 2025
10.10
Amendment No. 1 dated as of July 25, 2022, by and among the registrant, the subsidiary guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent ^
10-K No. 000-09992 10.10 August 5, 2022
10.11
Form of Restricted Stock Unit Award Notification and Agreement (Special Awards)*+
10-Q No. 000-09992 10.1 October 28, 2022
10.12
KLA Corporation 2023 Incentive Award Plan *
8-K No. 000-09992 10.1 November 3, 2023
10.13
KLA Corporation 2023 Incentive Award Plan Global Restricted Stock Unit Agreement *
10-Q No. 000-09992 10.2 January 26, 2024
10.14
Senior Advisor Agreement, dated November 15, 2024, by and between KLA Corporation and Oreste Donzella *
10-Q No. 000-09992 10.1 January 31, 2025
10.15
Credit Agreement, dated as of July 3, 2025, among KLA Corporation, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent
8-K No. 000-09992 10.1 July 8, 2025
19.1
Policy on Insider Trading and Unauthorized Disclosures

21.1
List of Subsidiaries

23.1
Consent of Independent Registered Public Accounting Firm

31.1
Certification of Chief Executive Officer under Rule 13a-14(a)/15d - 14(a) of the Securities Exchange Act of 1934

31.2
Certification of Chief Financial Officer under Rule 13a-14(a)/15d - 14(a) of the Securities Exchange Act of 1934

32
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350^

97.1
Policy for Recovery of Erroneously Awarded Compensation
10-K No. 000-09992 97.1 August 5, 2024

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Exhibit
Number Exhibit Description Incorporated by Reference
Form File No. Exhibit Number Filing Date
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).

__________________

* Denotes a management contract, plan or arrangement.
+ Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K, Item 601(b)(10).
^ Furnished herewith

ITEM 16.     FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  KLA Corporation

August 6, 2025 By:   / S /    R ICHARD P. W ALLACE

Date   Richard P. Wallace
  President and Chief Executive Officer

Each person whose signature appears below constitutes and appoints Richard P. Wallace and Bren D. Higgins, and each or any of them, his or her true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments or supplements (including post-effective amendments) to this Report, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title   Date

/s/    RICHARD P. WALLACE President, Chief Executive Officer and Director (principal executive officer)   August 6, 2025
Richard P. Wallace

/s/     BREN D. HIGGINS Executive Vice President and Chief Financial Officer (principal financial officer)   August 6, 2025
Bren D. Higgins

/s/    VIRENDRA A. KIRLOSKAR Senior Vice President and Chief Accounting Officer (principal accounting officer)   August 6, 2025
Virendra A. Kirloskar

/s/    ROBERT M. CALDERONI Chairman of the Board and Director   August 7, 2025
Robert M. Calderoni

/s/    JENEANNE HANLEY Director August 7, 2025
Jeneanne Hanley

/s/    EMIKO HIGASHI Director August 6, 2025
Emiko Higashi

/s/    KEVIN J. KENNEDY Director   August 6, 2025
Kevin J. Kennedy

/s/    MICHAEL R. MCMULLEN Director August 7, 2025
Michael R. McMullen

/s/ GARY B. MOORE Director August 6, 2025
Gary B. Moore

/s/ VICTOR PENG Director August 6, 2025
Victor Peng

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/s/ JAMIE E. SAMATH Director August 6, 2025
Jamie E. Samath

/s/ SUSAN J.S. TAYLOR Director August 7, 2025
Susan J.S. Taylor

104