KLA Corporation
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ITEM 1.BUSINESS
The Company
KLA Corporation and its majority-owned subsidiaries (“KLA” or the “Company” and also referred to as “we,” “our,” “us” or similar references) are suppliers of industry-leading equipment and services that enables innovation throughout the electronics industry. We provide advanced process control and process-enabling solutions for manufacturing wafers, reticles/masks, chemicals/materials, integrated circuits (“IC” or “chip”), packaged ICs and printed circuit boards (“PCB”), as well as comprehensive support and services across our installed base. Our suite of advanced products, coupled with our unique process control software and services, allow us to deliver the solutions our customers need to achieve their technology advancement and high-volume production goals by significantly improving yields, while simultaneously reducing waste, risks and costs. This improves our customers’ overall profitability and return on investment. Our services business, which accounted for approximately 22% of our revenue in fiscal 2025, increases the value of our contract offerings and promotes the extension of system lifetimes.
KLA was formed as KLA-Tencor Corporation in April 1997 through the merger of KLA Instruments Corporation and Tencor Instruments, two long-time leaders in the semiconductor capital equipment industry that began operations in 1975 and 1976, respectively. We are organized into three reportable segments: Semiconductor Process Control; Specialty Semiconductor Process; and PCB and Component Inspection.
Within the Semiconductor Process Control segment, our comprehensive portfolio of inspection, metrology and software products, as well as related services, help IC, wafer, reticle/mask and chemical/materials manufacturers achieve target yields throughout the entire fabrication process, from R&D to final volume production. These products and services are designed to provide comprehensive solutions to help customers accelerate development and production ramp cycles, achieve higher and more stable product yields and improve their overall profitability.
Within the Specialty Semiconductor Process segment, we develop and sell advanced vacuum deposition and etching process tools, which are used by a broad range of specialty semiconductor customers, including manufacturers of microelectromechanical systems (“MEMS”), radio frequency (“RF”) communication semiconductors, and power semiconductors for automotive and industrial applications.
Within the PCB and Component Inspection segment, we enable electronic device manufacturers to inspect, test and measure PCBs, IC substrates and packaged 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.
Additional information about KLA is available at www.kla.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available free of charge on our website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Information on our website is not part of this Annual Report on Form 10-K or our other filings with the SEC. Additionally, these filings may be obtained through the SEC’s website (www.sec.gov), which contains reports, proxy and information statements and other information regarding issuers that file electronically.
Investors and others should note that we may announce material financial information to investors using our investor relations website (ir.kla.com), which includes our SEC filings, press releases, public earnings calls and conference webcasts. The investor relations website is used to communicate with the public about us and our products, services and other matters.
Industry
Our core focus is enabling technological advances and improving manufacturing yields in the semiconductor industry. The semiconductor fabrication process begins with a bare silicon wafer - a round disk typically 200 millimeters or 300 millimeters in diameter, about as thick as a credit card and gray in color. The process of manufacturing wafers is highly sophisticated and involves the creation of large ingots of silicon by pulling them out of a vat of molten silicon. The ingots are then sliced into wafers. Prime silicon wafers are then polished to a mirror finish. Other, more specialized wafers, such as epitaxial silicon (“epi”), silicon on insulator (“SOI”), gallium nitride (“GaN”) and silicon carbide (“SiC”) are also used in the semiconductor industry.
The manufacturing cycle of an IC is grouped into three phases: design, fabrication and testing. IC design involves the architectural layout of the circuit, as well as design verification and reticle generation. The fabrication of a semiconductor chip (or “semiconductor”) is accomplished by depositing a series of film layers that act as conductors, semiconductors or insulators
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on bare wafers. The deposition of these film layers is interspersed with numerous other process steps that create circuit patterns, remove portions of the film layers, and perform other functions such as heat treatment, measurement and inspection. Most advanced chip designs require hundreds of individual steps, many performed multiple times. Most chips consist of two main structures: the lower structure, typically consisting of transistors or capacitors, which performs the “smart” functions; and the upper “interconnect” structure, typically consisting of circuitry, which connects the components in the lower structure. When the layers on the wafer have been fabricated, each chip on the wafer is tested for functionality. The wafer is then cut into individual chips, and the chips that pass functional testing are packaged. Final testing is performed on all packaged chips. Packaged chips are then mounted onto PCBs for connection to the rest of the electronic system.
Our business depends upon the capital expenditures of semiconductor, semiconductor-related and electronic device manufacturers. This is driven by the current and anticipated market demand for ICs, products utilizing ICs and other electronic components. We do not consider our business to be seasonal. Still, our business has historically been cyclical with respect to the capital equipment procurement practices of semiconductor, semiconductor-related and electronic device manufacturers, and it is impacted by the investment patterns of such manufacturers in different global markets. Downturns in the semiconductor or other industries in which we operate, slowdowns in the worldwide economy, customer consolidation as well as recent political and regulatory changes could have a material adverse effect on our future business and financial results.
Companies anticipating future market demands by developing and advancing new technologies and manufacturing processes are better positioned to lead in the semiconductor market. Accelerating the yield ramp and maximizing production yields of high-performance devices are critical goals of modern semiconductor and related electronics manufacturing. Ramping to high-volume production ahead of competitors can dramatically increase IC manufacturers’ revenue and profit for a given product. Leading semiconductor manufacturers invest in simultaneous production integration of multiple new process technologies, some requiring new substrate and film materials, new geometries, new transistor architectures, new power distribution schemes, advanced multi-patterning optical and extreme ultraviolet (“EUV”) lithography, and advanced packaging techniques. As design rules decrease, yields become more sensitive to the size and density of defects. Device performance characteristics (namely speed, capacity or power management) also become more sensitive to parameters such as linewidth and film thickness variation. New process materials require extensive characterization before they can be used in the manufacturing process. Moving several of these advanced technologies into production at once only adds to the risks that chipmakers face. The continuing evolution of semiconductors to smaller geometries and more complex multi-level circuitry has significantly increased the performance and cost requirements of the capital equipment used to manufacture these devices. Construction of an advanced IC fabrication facility today can cost well above $10 billion, substantially more than previous-generation facilities. In addition, chipmakers are demanding increased productivity and higher returns from their manufacturing equipment and are also seeking ways to extend the performance of their existing equipment.
The semiconductor capital equipment industry has been experiencing multiple growth drivers bolstered by demand for semiconductors from leading-edge foundry and logic manufacturers to support computational power and connectivity and continued investment by our customers in legacy nodes. Adoption of EUV in high volume manufacturing (“HVM”) for Logic and DRAM memory is driving new process control requirements and growth in key markets for KLA. Demand for advanced semiconductor technologies, particularly evident in the 2-nanometer node, which is seeing higher levels of investment and process control intensity, continues to drive investments in AI. Increasing complexity and value of semiconductor packages, particularly for AI and High-performance computing (“HPC”) applications, is also driving significant growth in the advanced packaging business. The digitization of all industries, including 5G markets and advances in healthcare and industrial applications, together with the increasing adoption of electric vehicles and intelligence in automobiles, are powering leading-edge design node technology investments and capacity expansions.
Regionalization of semiconductors has become a trend as access to semiconductors is viewed from the lens of national security. China remains as a major region for the manufacturing of legacy node logic and memory chips, adding to its role as the world’s largest consumer of ICs. The Chinese government initiatives around self-sustainability are propelling China to expand its domestic manufacturing capacity. Although China is currently seen as an important long-term growth region for the semiconductor capital equipment sector, Commerce has added certain China-based entities to the U.S. Entity List (a list of parties that are generally ineligible to receive U.S. regulated items without prior licensing from Commerce), restricting our ability to provide products and services to such entities without an export license. In addition, Commerce has imposed export licensing requirements on China-based customers that are military end users or engaged in military end uses. It also requires our customers to obtain an export license when they use certain semiconductor capital equipment based on U.S. technology to manufacture products connected to certain entities on the U.S. Entity List.
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Research and Development
The market for semiconductor and electronics industries is characterized by rapid technological development and product innovation. These technical innovations are inherently complex and require long development cycles and appropriate professional staffing. We make significant investments in product R&D for the timely development of new products and enhancements necessary to maintain our competitive position. Accordingly, we devote a significant portion of our human and financial resources to R&D programs and seek to maintain close relationships with customers to remain responsive to their needs.
Our key R&D activities during the fiscal year ended June 30, 2025 involved the development of process control and process-enabling solutions for front end semiconductors and advanced packaging. Our primary R&D centers are located in the U.S., United Kingdom (“U.K.”), India, China, Singapore and Israel. For information regarding our R&D expenses during the last three fiscal years, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
The strength of our competitive positions in many of our existing markets is primarily due to our leading technology, which is the result of our continuing significant investments in product R&D. Even during down cycles in the semiconductor industry, we have remained committed to significant engineering efforts toward both product improvement and new product development to enhance our competitive position.
Customers
We count among our largest customers the leading semiconductor, semiconductor-related and electronic device manufacturers in Asia, the U.S. and Europe. Our future performance will depend, in part, on our ability to continue to compete successfully in Asia, one of the largest markets for our equipment. Our business depends on capital expenditures from these manufacturers which, in turn, depend on many factors including general economic conditions, anticipated market demand, evolving government regulations and capacity constraints. Our ability to compete in this area depends upon the continuation of favorable trading relationships between countries in the region and the U.S., and our continuing ability to maintain satisfactory relationships with leading semiconductor companies in the region.
For the fiscal years ended June 30, 2025, 2024 and 2023, the following customers each accounted for more than 10% of total revenues, primarily in the Semiconductor Process Control segment:
| Fiscal Year Ended June 30, | ||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||
| Taiwan Semiconductor Manufacturing Company Limited | Taiwan Semiconductor Manufacturing Company Limited | Taiwan Semiconductor Manufacturing Company Limited | ||||||||||||
| Samsung Electronics Co., Ltd. | ||||||||||||||
Sales, Service and Marketing
Our sales, service and marketing efforts aim to build deep long-term relationships with our customers. We focus on providing comprehensive resources for the full breadth of process control, process-enabling and yield management solutions for manufacturing and testing wafers and reticles, a wide variety of ICs, PCBs, IC substrates and packaging as well as general materials research. Our revenues are derived primarily from product sales and related service contracts, mostly through our direct sales force.
We believe that the size and location of our field sales, service engineering, applications engineering, and marketing organizations represent a competitive advantage in our served markets. We have direct sales forces in Asia, the U.S. and Europe. We maintain an export compliance program designed to meet the requirements of Commerce and the U.S. Department of State and the trade regulations of the international jurisdictions in which we operate.
In addition to sales and service offices in the U.S., we conduct sales, marketing and services out of subsidiaries or branches in many regions; some of the largest include China, Germany, Israel, Japan, Korea, Singapore, Taiwan and the U.K. We believe sales outside the U.S. will continue to be a significant percentage of our total revenues. International revenues accounted for approximately 89% of our total revenues in both of the fiscal years ended June 30, 2025 and 2024 and 88% of our total revenues in the fiscal year ended June 30, 2023. Additional information regarding our revenues from foreign operations for our last three fiscal years can be found in Note 18 “Segment Reporting and Geographic Information” to our Consolidated Financial Statements.
International sales and operations may be adversely affected by the imposition of governmental controls, restrictions on
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export technology, political instability, trade restrictions, changes in tariffs and the difficulties associated with staffing and managing international operations. In addition, international sales may be adversely affected by the economic conditions in each country and by fluctuations in currency exchange rates. Such fluctuations may negatively impact our ability to compete on price with local providers or the value of revenues we generate from our international business. Although we attempt to manage some of the currency risk inherent in non-U.S. dollar product sales through hedging activities, there can be no assurance that such efforts will be adequate. These factors, as well as any of the other risk factors related to our international business and operations that are described in Item 1A “Risk Factors,” could have a material adverse effect on our future business and financial results.
Products and Services
KLA develops industry-leading process control and yield management solutions and services that enable innovation throughout the semiconductor and related electronics industries. We provide advanced process control and process-enabling solutions for manufacturing wafers, reticles, ICs, packaging, PCBs and IC substrates. In March 2024, we made the decision to exit our business of manufacturing flat and flexible panel displays (“Display”) 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.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”). All statements other than statements of historical fact may be forward-looking statements. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “could,” “would,” “should,” “expects,” “plans,” “anticipates,” “relies,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continues,” “thinks,” “seeks,” “commits”, or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Such forward-looking statements include those regarding, among others: the impact of tariffs on our business; forecasts of the future results of our operations, including profitability; orders for our products and capital equipment generally; sales of semiconductors; the investments by our customers in advanced technologies and new materials; growth of revenue in the semiconductor industry, the semiconductor capital equipment industry and our business; technological trends in the semiconductor industry; future developments or trends in the global capital and financial markets; our future product offerings and product features; the success and market acceptance of new products; timing of shipment of order backlog; our future product shipments and product and service revenues; our future gross margins; our future research and development (“R&D”) expenses and selling, general and administrative (“SG&A”) expenses; international sales and operations; our ability to maintain or improve our existing competitive position; success of our product offerings; creation and funding of programs for R&D; results of our investment in leading edge technologies; the effects of hedging transactions; the effect of the sale of trade receivables and promissory notes from customers; the effect of future compliance with laws and regulations; our future effective income tax rate; our recognition of tax benefits; the effects of any audits or litigation; future payments of dividends to our stockholders; the completion of any acquisitions of third parties, or the technology or assets thereof; benefits received from any acquisitions and development of acquired technologies; sufficiency of our existing cash balance, investments, cash generated from operations and the unfunded portion of our Revolving Credit Facility (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) to meet our operating and working capital requirements, including debt service and payment thereof; future dividends, and stock repurchases; our compliance with the financial covenants under the Credit Agreement (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) for our Revolving Credit Facility; the adoption of new accounting pronouncements; our repayment of our outstanding indebtedness; and our environmental, social and governance (“ESG”) related targets, goals and commitments.
Our actual results may differ significantly from those projected in the forward-looking statements in this report. Factors that might cause or contribute to such differences include, but are not limited to:
•Our vulnerability to a weakening in the condition of the financial markets and the global economy;
•Risks related to our international operations;
•Evolving Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce (“Commerce”) rules and regulations (the “BIS Rules”) and their impact on our ability to sell products to and provide services to certain customers in People’s Republic of China (“China”);
•Tariffs and other trade restrictions;
•Costly intellectual property (“IP”) disputes that could result in our inability to sell or use the challenged technology;
•Risks related to the legal, regulatory and tax environments in which we conduct our business;
•Differing stakeholder expectations, requirements and attention to ESG matters and the resulting costs, risks and impact on our business;
•Unexpected delays, difficulties and expenses in executing against our environmental, climate, or other ESG targets, goals and commitments;
•Our ability to attract, retain and motivate key personnel;
•Our vulnerability to disruptions and delays at our third-party service providers;
•Cybersecurity threats, cyber incidents affecting our and our business partners’ systems and networks;
•Our inability to access critical information in a timely manner due to system failures;
•Risks related to acquisitions, integrations, strategic alliances or collaborative arrangements;
•Climate change, earthquake, flood or other natural catastrophic events, public health crises or terrorism and the adverse impact on our business operations;
•The war between Ukraine and Russia, the armed conflict in Iran and elsewhere in the Middle East, and the significant military activity in those regions;
•Lack of insurance for losses and interruptions caused by terrorists and acts of war, and our self-insurance of certain risks including earthquake risk;
•Risks related to fluctuations in foreign currency exchange rates;
•Risks related to fluctuations in interest rates and the market values of our portfolio investments;
•Risks related to tax and regulatory compliance audits;
•Any change in taxation rules or practices and our effective tax rate;
•Compliance costs with federal securities laws, rules, regulations, NASDAQ requirements, and evolving accounting standards and practices;
•Ongoing changes in the technology industry, and the semiconductor industry in particular, including future growth rates, pricing trends in end-markets, or changes in customer capital spending patterns;
•Our vulnerability to a highly concentrated customer base;
•The cyclicality of the industries in which we operate;
•Our ability to timely develop new technologies and products that successfully address changes in the industry;
•Risks related to artificial intelligence (“AI”);
•Our ability to maintain our technology advantage and protect proprietary rights;
•Our ability to compete in the industry;
•Availability and cost of the materials and parts used in the production of our products;
•Our ability to operate our business in accordance with our business plan;
•Risks related to our debt and leveraged capital structure;
•We may not be able to declare cash dividends at all or in any particular amount;
•Liability to our customers under indemnification provisions if our products fail to operate properly or contain defects or our customers are sued by third parties due to our products;
•Our government funding for R&D is subject to audit, and potential termination or penalties;
•We may incur significant restructuring charges or other asset impairment charges or inventory write offs;
•We are subject to risks related to receivables factoring arrangements and compliance risk of certain settlement agreements with the government; and
•Risks related to the Court of Chancery of the State of Delaware being the sole and exclusive forum for certain actions and proceedings.
For a more detailed discussion of these and other risk factors that might cause or contribute to differences from the forward-looking statements in this report, see Part II, Item 1A “Risk Factors” in this report as well as Part I, Item 1 “Business”, Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended June 30, 2025. You should carefully review these risks and also review the risks described in documents we file from time to time with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, and we expressly assume no obligation and do not intend to update the forward-looking statements in this report after the date hereof.
EXECUTIVE SUMMARY
We are a leading supplier of process control and yield management solutions and services for the semiconductor and related electronics industries. Our broad portfolio of inspection and metrology products, and related service, software and other offerings, support R&D and manufacturing of integrated circuits (“IC”), wafers and reticles. Our products, services and expertise are used by our customers to measure, detect, analyze and resolve critical and nanometric level product defects, helping them to manage manufacturing process challenges and to obtain higher finished product yields at lower cost. We also offer advanced technology solutions to address various manufacturing needs of printed circuit boards (“PCB”), specialty semiconductor devices and other electronic components, including advanced packaging, light-emitting diode (“LED”), power devices, compound semiconductor, and data storage industries, as well as general materials research. In addition, our services business has grown consistently year-over-year and accounted for approximately 23% of our total revenues in the third quarter of fiscal 2026. Our services revenue, which is generated largely from recurring “subscription-like” contracts, increases the value of our contract offerings and extension of system lifetimes resulting from growth in legacy semiconductor markets.
We are organized into three reportable segments as follows:
•Semiconductor Process Control: a comprehensive portfolio of inspection, metrology and data analytics products as well as related service offerings that help IC manufacturers achieve target yields throughout the semiconductor fabrication process, from R&D to final volume production.
•Specialty Semiconductor Process: advanced vacuum deposition and etching process tools used by a broad range of specialty semiconductor customers.
•PCB and Component Inspection: a range of inspection, testing and measurement, and direct imaging for patterning products used by manufacturers of PCBs, advanced packaging, microelectromechanical systems (“MEMS”) and other electronic components.
The semiconductor industry continues to experience significant market expansion and diversification. High-performance computing and data centers, fueled by widespread adoption of AI, are driving industry growth. We expect this momentum to continue during calendar year 2026. AI is a technology inflection point driving innovation and demand at the leading edge, and we believe our portfolio of products is uniquely positioned to support leading-edge demand and the ongoing AI buildout. Our semiconductor customers generally operate in one or both of the major semiconductor device manufacturing markets: memory and foundry/logic. End-market demand drivers that are expected to continue to benefit KLA in the long term include adoption of extreme ultraviolet lithography (“EUV”) in high volume manufacturing for Logic and DRAM memory (including high-bandwidth memory), which drives new process control requirements and growth in key markets for KLA. Demand for advanced semiconductor technologies, particularly evident in the 2-nanometer node, which is seeing higher levels of investment and process control intensity, continues to drive investments in AI. Increasing complexity and value of semiconductor packages, particularly for AI and high-performance computing applications, is also driving significant growth in our advanced packaging business. The digitization of all industries, including 5G markets, advances in healthcare and industrial applications, together with the increasing adoption of electric vehicles and intelligence in automobiles, are powering leading-edge design node technology investments and capacity expansions.
While we continue to invest in technological innovation, factors such as delays from customers in adopting new chips and technology methods could impact process control capital intensity. Pushouts or cancellations of deliveries to our customers could cause earnings volatility, due to the timing of revenue recognition as well as increased risk of inventory-related charges. Geopolitical factors, such as government regulations and tariffs, have had an adverse impact on our results of operations. However, despite these headwinds, our total revenues and net income improved in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Looking ahead, while we expect continued revenue growth in calendar year 2026, escalating costs for DRAM chips used in the Company’s image computers will continue to negatively impact our gross margin, though we expect this impact to be transitory.
We are continuously assessing the aggregate potential impact of government regulations, tariffs and other geopolitical risks on our financial results and operations. See Part II, Item 1A “Risk Factors” below, and also Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended June 30, 2025 for more information regarding how such actions by the U.S. government or another country could significantly impact our ability to provide our products and services to existing and potential customers, especially in China, and adversely affect our business, financial condition and results of operations.
The following table sets forth some of our key quarterly unaudited financial information:
| (Dollar amounts in thousands, except net income per share) | Three Months Ended | ||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | September 30, 2025 | June 30, 2025 | March 31, 2025 | |||||||||||||||||||||||||
| Total revenues | $ | 3,415,078 | $ | 3,297,146 | $ | 3,209,696 | $ | 3,174,741 | $ | 3,063,029 | |||||||||||||||||||
| Costs of revenues | $ | 1,327,672 | $ | 1,271,210 | $ | 1,243,070 | $ | 1,207,286 | $ | 1,175,689 | |||||||||||||||||||
| Gross margin | 61.1% | 61.4% | 61.3% | 62.0% | 61.6% | ||||||||||||||||||||||||
Net income(1) | $ | 1,200,990 | $ | 1,145,682 | $ | 1,121,040 | $ | 1,202,849 | $ | 1,088,416 | |||||||||||||||||||
Diluted net income per share(2) | $ | 9.12 | $ | 8.68 | $ | 8.47 | $ | 9.06 | $ | 8.16 | |||||||||||||||||||
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(1)For the explanation why our net income increased to $1.20 billion in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, refer to the “Results of Operations” section below, as the change is a result of movements in various income statement line items.
(2)Diluted net income per share is computed independently for each of the quarters presented based on the weighted-average fully diluted shares outstanding for each quarter. Therefore, the sum of quarterly diluted net income per share information may not equal annual (or other multiple-quarter calculations of) diluted net income per share.
We continue to focus on returning cash to our investors, making $626.0 million in share repurchases and paying $248.8 million in dividends in the three months ended March 31, 2026. 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 $7.00 billion in the third quarter of fiscal 2026. As of March 31, 2026, we had $10.31 billion of repurchase authority remaining. In March 2026, we also announced an increase in the dividend level to $2.30 per share per quarter, which was our 17th consecutive annual dividend increase. Refer to the “Liquidity and Capital Resources” section below for more information on our strong cash flow generation and strategy of returning excess cash to our stockholders.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical experience and evaluate them on an ongoing basis to ensure that they remain reasonable under current conditions. Actual results could differ from those estimates.
There have been no material changes in our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 30, 2025 for a complete description of our critical accounting estimates.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, including those recently adopted and the expected dates of adoption as well as estimated effects, if any, on our Condensed Consolidated Financial Statements of those not yet adopted, see Note 1 “Basis of Presentation” to our Condensed Consolidated Financial Statements.
RESULTS OF OPERATIONS
Revenues and Gross Margin
Our business is affected by the concentration of our customer base and our customers’ capital equipment procurement schedules as a result of their investment plans. Our product revenues in any particular period are impacted by the amount of new orders we receive during that period and, depending upon the duration of manufacturing and installation cycles, in the preceding periods. Revenue is also impacted by average customer pricing, customer revenue deferrals associated with volume purchase agreements, the effect of fluctuations in foreign currency exchange rates, increased trade restrictions and the availability of government incentives for semiconductor capital investments. Service revenues are generated from product maintenance and support services, as well as billable time and material service calls made to our customers. The amount of our service revenues is typically a function of the number of systems installed at our customers’ sites and the utilization of those systems, but it is also impacted by other factors, such as our rate of service contract renewals, the types of systems being serviced and fluctuations in foreign currency exchange rates. A significant portion of our revenues continues to be generated in Asia, where a substantial portion of the world’s semiconductor manufacturing capacity is located, and we expect that trend to continue.
| Three Months Ended March 31, | Q3 FY26 vs. Q3 FY25 | |||||||||||||||||||||||||
| (Dollar amounts in thousands) | 2026 | 2025 | ||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Product | $ | 2,640,287 | $ | 2,393,821 | $ | 246,466 | 10 | % | ||||||||||||||||||
| Service | 774,791 | 669,208 | 105,583 | 16 | % | |||||||||||||||||||||
| Total revenues | $ | 3,415,078 | $ | 3,063,029 | $ | 352,049 | 11 | % | ||||||||||||||||||
| Costs of revenues | $ | 1,327,672 | $ | 1,175,689 | $ | 151,983 | 13 | % | ||||||||||||||||||
| Gross margin | 61.1% | 61.6% | ||||||||||||||||||||||||
| Nine Months Ended March 31, | Q3 FY26 YTD vs. Q3 FY25 YTD | |||||||||||||||||||||||
| (Dollar amounts in thousands) | 2026 | 2025 | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Product | $ | 7,616,386 | $ | 7,000,672 | $ | 615,714 | 9 | % | ||||||||||||||||
| Service | 2,305,534 | 1,980,749 | 324,785 | 16 | % | |||||||||||||||||||
| Total revenues | $ | 9,921,920 | $ | 8,981,421 | $ | 940,499 | 10 | % | ||||||||||||||||
| Costs of revenues | $ | 3,841,952 | $ | 3,544,581 | $ | 297,371 | 8 | % | ||||||||||||||||
| Gross margin | 61.3 | % | 60.5 | % | ||||||||||||||||||||
Total revenues increased 11% in the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to the increase in product revenues, and is attributable to higher investments from our memory customers, particularly in DRAM, led by high-bandwidth memory, and steady growth in foundry/logic. An increase in service revenues of 16%, due to continued growth in our installed base of tools, also contributed to higher total revenues compared to the same period in the prior year.
Total revenues increased 10% in the nine months ended March 31, 2026 compared to the nine months ended March 31, 2025, primarily due to the increase in our product revenues, and is attributable to higher investments by our memory customers, particularly in DRAM, led by high-bandwidth memory, strong customer adoption of our advanced packaging portfolio of products, and steady growth in foundry/logic. An increase in service revenues of 16%, as a result of continued growth of our installed base of tools, also contributed to higher total revenues compared to the same period in the prior year.
Revenues by segment(1)
| Three Months Ended March 31, | Q3 FY26 vs. Q3 FY25 | |||||||||||||||||||||||||
| (Dollar amounts in thousands) | 2026 | 2025 | ||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Semiconductor Process Control | $ | 3,083,912 | $ | 2,738,817 | $ | 345,095 | 13 | % | ||||||||||||||||||
| Specialty Semiconductor Process | 164,028 | 156,500 | 7,528 | 5 | % | |||||||||||||||||||||
| PCB and Component Inspection | 167,642 | 168,552 | (910) | (1) | % | |||||||||||||||||||||
| Total revenues for reportable segments | $ | 3,415,582 | $ | 3,063,869 | $ | 351,713 | 11 | % | ||||||||||||||||||
| Nine Months Ended March 31, | Q3 FY26 YTD vs. Q3 FY25 YTD | |||||||||||||||||||||||
| (Dollar amounts in thousands) | 2026 | 2025 | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Semiconductor Process Control | $ | 8,987,952 | $ | 8,069,711 | $ | 918,241 | 11 | % | ||||||||||||||||
| Specialty Semiconductor Process | 424,360 | 445,241 | (20,881) | (5) | % | |||||||||||||||||||
| PCB and Component Inspection | 509,305 | 467,615 | 41,690 | 9 | % | |||||||||||||||||||
| Total revenues for reportable segments | $ | 9,921,617 | $ | 8,982,567 | $ | 939,050 | 10 | % | ||||||||||||||||
(1)Segment revenues exclude corporate allocations and the effects of changes in foreign currency exchange rates. For additional details, refer to Note 16 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements.
Revenues from our Semiconductor Process Control segment for the three months ended March 31, 2026 increased by 13% compared to the same period in the prior year, primarily due to increased revenue from our memory customers, particularly related to DRAM, led by high-bandwidth memory, growth in foundry/logic, along with higher service revenues from an increasing number of tools in our installed base. Revenues in this segment increased by 11% for the nine months ended March 31, 2026 compared to the same period in the prior year, primarily due to increased revenue from our memory customers, particularly related to DRAM, led by high-bandwidth memory, higher revenue from advanced packaging, along with higher service revenues from an increasing number of tools in our installed base.
Revenues from our Specialty Semiconductor Process segment for the three months ended March 31, 2026 increased by 5% compared to the same period in the prior year, primarily due to timing of shipments and higher service revenues from an increasing number of tools in our installed base. Revenues in this segment decreased by 5% during the nine months ended March 31, 2026 compared to the same period in the prior year, attributable to lower volume of products sold, particularly in China, partially offset by higher service revenues from an increasing number of tools in our installed base.
Revenues from our PCB and Component Inspection segment decreased by 1% during the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to revenues from our Display business being included in the prior year results, a business which has since been exited. The decrease was mostly offset by increased revenues from PCB products, along with higher service revenues from growth in our installed base of tools. Revenues in this segment increased by 9% during the nine months ended March 31, 2026 compared to the same period in the prior year, due to increased revenue from advanced packaging and PCB and component inspection products, along with higher service revenues from growth in our installed base, partially offset by the exit of the Display business.
Below is supplementary revenue information by major product categories for the indicated periods:
| (Dollar amounts in thousands) | Three Months Ended March 31, | Q3 FY26 vs. Q3 FY25 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Wafer Inspection | $ | 1,739,671 | 51 | % | $ | 1,495,685 | 49 | % | $ | 243,986 | 16 | % | |||||||||||||||||||||||||||||||||||||||
| Patterning | 615,076 | 18 | % | 636,415 | 21 | % | (21,339) | (3) | % | ||||||||||||||||||||||||||||||||||||||||||
| Specialty Semiconductor Process | 144,199 | 4 | % | 138,376 | 4 | % | 5,823 | 4 | % | ||||||||||||||||||||||||||||||||||||||||||
| PCB and Component Inspection | 95,148 | 3 | % | 104,254 | 3 | % | (9,106) | (9) | % | ||||||||||||||||||||||||||||||||||||||||||
| Services | 774,791 | 23 | % | 669,208 | 22 | % | 105,583 | 16 | % | ||||||||||||||||||||||||||||||||||||||||||
| Other | 46,193 | 1 | % | 19,091 | 1 | % | 27,102 | 142 | % | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,415,078 | 100 | % | $ | 3,063,029 | 100 | % | $ | 352,049 | 11 | % | |||||||||||||||||||||||||||||||||||||||
| (Dollar amounts in thousands) | Nine Months Ended March 31, | Q3 FY26 YTD vs. Q3 FY25 YTD | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Wafer Inspection | $ | 4,849,697 | 49 | % | $ | 4,427,238 | 49 | % | $ | 422,459 | 10 | % | |||||||||||||||||||||||||||||||||||||||
| Patterning | 1,978,664 | 20 | % | 1,743,504 | 20 | % | 235,160 | 13 | % | ||||||||||||||||||||||||||||||||||||||||||
| Specialty Semiconductor Process | 366,006 | 4 | % | 394,165 | 4 | % | (28,159) | (7) | % | ||||||||||||||||||||||||||||||||||||||||||
| PCB and Component Inspection | 292,794 | 3 | % | 270,489 | 3 | % | 22,305 | 8 | % | ||||||||||||||||||||||||||||||||||||||||||
| Services | 2,305,534 | 23 | % | 1,980,749 | 22 | % | 324,785 | 16 | % | ||||||||||||||||||||||||||||||||||||||||||
| Other | 129,225 | 1 | % | 165,276 | 2 | % | (36,051) | (22) | % | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 9,921,920 | 100 | % | $ | 8,981,421 | 100 | % | $ | 940,499 | 10 | % | |||||||||||||||||||||||||||||||||||||||
Revenues by region
The following is a summary of revenues by geographic region, based on ship-to location, for the indicated periods:
| Three Months Ended March 31, | Q3 FY26 vs. Q3 FY25 | |||||||||||||||||||||||||||||||||
| (Dollar amounts in thousands) | 2026 | 2025 | ||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||
| Taiwan | $ | 869,110 | 25.5 | % | $ | 988,470 | 32.3 | % | $ | (119,360) | (12) | % | ||||||||||||||||||||||
| China | 829,583 | 24.3 | % | 792,884 | 25.9 | % | 36,699 | 5 | % | |||||||||||||||||||||||||
| Korea | 681,060 | 19.9 | % | 378,548 | 12.4 | % | 302,512 | 80 | % | |||||||||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-06-11 | WALLACE RICHARD P | President and CEO | Sell | -4,512 | $2,213.37 | -$9,986,725 |
| 2026-05-12 | WALLACE RICHARD P | President and CEO | Sell | -4,512 | $1,794.00 | -$8,094,528 |
| 2026-05-11 | Hanley Jeneanne Michelle | Director | Sell | -550 | $1,874.71 | -$1,031,088 |
| 2026-05-11 | Kirloskar Virendra A | SVP & Chief Accounting Officer | Sell | -297 | $1,879.02 | -$558,069 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-08-07 10-K expected by 2026-08-31 (in 53 days)
- ~2026-10-30 10-Q expected by 2026-11-10 (in 137 days)
- ~2027-01-29 10-Q expected by 2027-02-09 (in 228 days)
- ~2027-04-29 10-Q expected by 2027-05-10 (in 318 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-05-07 8-K Other Events; Financial Statements and Exhibits
- 2026-04-30 10-Q Quarterly Report
- 2026-04-29 8-K Earnings Release; Financial Statements and Exhibits
- 2026-03-12 8-K Regulation FD Disclosure; Other Events
- 2026-02-05 8-K Other Events; Financial Statements and Exhibits
- 2026-01-30 10-Q Quarterly Report
- 2026-01-29 8-K Earnings Release; Financial Statements and Exhibits
- 2025-11-07 8-K Bylaws/Articles Amended; Shareholder Vote Results; Other Events; Financial Statements and Exhibits
- 2025-10-31 10-Q Quarterly Report
- 2025-10-29 8-K Earnings Release; Financial Statements and Exhibits
- 2025-08-08 10-K Annual Report
- 2025-08-07 8-K Officer/Director Change; Other Events; Financial Statements and Exhibits
- 2025-07-31 8-K Earnings Release; Financial Statements and Exhibits
- 2025-07-08 8-K Material Agreement Entered; Material Agreement Terminated; Material Financial Obligation; Financial Statements and Exhibits
- 2025-05-08 8-K Officer/Director Change; Other Events; Financial Statements and Exhibits