Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION
Basis of Presentation. For purposes of this report, “KLA,” “Company,” “we,” “our,” “us” or similar references mean KLA Corporation and its majority-owned subsidiaries unless the context requires otherwise. The Condensed Consolidated Financial Statements have been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.
The unaudited interim Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for audited financial statements. The balance sheet as of June 30, 2025 was derived from the Company’s audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, but does not include all disclosures required by GAAP for audited financial statements. The unaudited interim Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair statement of the financial position, results of operations, comprehensive income, stockholders’ equity and cash flows for the periods indicated. These Condensed Consolidated Financial Statements and notes, however, should be read in conjunction with Item 8 “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
The Condensed Consolidated Financial Statements include the accounts of KLA and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
The results of operations for the three and nine months ended March 31, 2026 are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year ending June 30, 2026.
Management Estimates. The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets and liabilities (and related disclosure of contingent assets and liabilities) at the dates of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Reclassifications. The Company has reclassified certain prior period balances to conform to the current year presentation. These reclassifications did not impact any prior amounts of reported total assets, total liabilities, stockholders’ equity, results of operations or cash flows.
Significant Accounting Policies. Except for the below change, there have been no changes to our significant accounting policies summarized in Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
Change in Annual Impairment Testing Date. During the second quarter of fiscal 2026, the Company changed the annual goodwill impairment testing date for all reporting units from February 28 to December 31 to better align with the timing of our budgeting and strategic planning process. We believe that the change in our annual impairment test date is preferable as it allows us to evaluate any potential impact strategic decisions may have on the recoverability of goodwill as those decisions are reached. This will also enable us to use the most current information available in the assessment process. The change in the annual impairment testing date did not delay, accelerate or avoid an impairment charge.
Recent Accounting Pronouncements
Recently Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The new guidance requires enhanced disclosures about significant segment expenses. This standard update is effective for our annual reports beginning in the fiscal year ended June 30, 2025, and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2026. We adopted ASU 2023-07 starting with our annual report for the fiscal year ended June 30, 2025, for annual reporting and from July 1, 2025, for interim periods on a retrospective basis.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic
350-40): Targeted Improvements to the Accounting for Internal-Use Software. The new guidance removes all references to prescriptive and sequential software development stages or project stages throughout Subtopic 350-40. Therefore, an entity is required to start capitalizing software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed, and the software will be used to perform the function intended. The standard update is effective for our annual and interim reports beginning in the first quarter of our fiscal year ending June 30, 2028. Early adoption is permitted as of the beginning of an annual reporting period. We adopted ASU 2025-06 for our first quarter of the fiscal year ending June 30, 2026 using a prospective transition approach, and the effect was immaterial to our Consolidated Financial Statements.
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 ASU provides a practical expedient to measure credit losses on current accounts receivable and contract assets arising from transactions accounted for under ASC 606. This practical expedient allows companies to assume the current conditions as of the balance sheet date do not change for the remaining life of the current accounts receivable and current 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. The amendments in this ASU should be applied on a prospective basis and early adoption is permitted. We chose to early adopt ASU 2025-05 during the quarter ended March 31, 2026, and elected the practical expedient. Since we adopted it in an interim reporting period, we are required to apply the amendments as of the beginning of the annual reporting period containing this interim reporting period. The adoption did not have a material impact on our Consolidated Financial Statements or related disclosures.
Updates Not Yet Effective
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The new guidance requires enhanced disclosures about income tax expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2026. The amendments in this ASU will be applied on a prospective basis. Adoption of this new guidance will result in expanded disclosures in the Notes to the Consolidated Financial Statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The new guidance requires enhanced disclosures about certain expenses in the notes to the financial statements to provide enhanced transparency into the expense captions presented on the face of the income statement. In 2025, the FASB issued ASU 2025-01 which clarifies the effective date for entities that do not have an annual reporting period that ends on December 31st. The Company is required to adopt this standard 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. The amendments in this ASU should be applied either on a prospective or retrospective basis. We are currently evaluating the impact of this ASU on our disclosures.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The new guidance establishes the accounting for a government grant received by a business entity, including guidance for a grant related to an asset and a grant related to income. The new guidance also requires disclosures, including the nature of the government grant received, the accounting policies used to account for the grant, and significant terms and conditions of the grant unless legally prohibited from being disclosed. The standard update is effective for our annual and interim reports beginning in the fiscal year ending June 30, 2030. Early adoption is permitted in both interim and annual reporting periods in which the financial statements have not yet been issued or made available for issuance. If adopted in an interim reporting period, it must be adopted as of the beginning of the annual reporting period that includes that interim reporting period. The amendments in this ASU should be applied using a modified prospective, modified retrospective, or retrospective approach. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements.
NOTE 2 – REVENUE
The following table represents the opening and closing balances of accounts receivable, net, contract assets, long-term accounts receivable, net, and contract liabilities as of the indicated dates.
| | | | | | | | | | | | | | | | | | | | | | | |
| As of | | As of | | | | |
| (Dollar amounts in thousands) | March 31, 2026 | | June 30, 2025 | | $ Change | | % Change |
| Accounts receivable, net | $ | 2,304,454 | | | $ | 2,263,915 | | | $ | 40,539 | | | 2 | % |
| Contract assets | $ | 100,906 | | | $ | 105,081 | | | $ | (4,175) | | | (4) | % |
| Long-term accounts receivable, net | $ | 78,210 | | | $ | — | | | $ | 78,210 | | | 100 | % |
| Contract liabilities | $ | 1,448,905 | | | $ | 1,713,689 | | | $ | (264,784) | | | (15) | % |
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 nine months ended March 31, 2026 was mainly due to $91.1 million of contract assets reclassified to accounts receivable, net, as our right to consideration for these contract assets became unconditional, partially offset by $87.2 million of revenue recognized for which the payment is subject to conditions other than passage of time. Contract assets are included in other current assets on our Condensed Consolidated Balance Sheets.
The change in contract liabilities during the nine months ended March 31, 2026 was mainly due the recognition as revenue of $1.18 billion that was included in contract liabilities as of June 30, 2025, partially offset by an increase in 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 liabilities and non-current liabilities, classified as deferred system revenue or deferred service revenue, on our Condensed Consolidated Balance Sheets.
The following table represents the transaction price for contracts that have not yet been recognized as revenue as of March 31, 2026, which equals our contract liabilities, and when the Company expects to recognize the amounts as revenue:
| | | | | | | | | | | | | | | | | | | | | | | |
| (Dollar amounts in thousands) | Less than 12 months | | 12 to 24 months | | 24 months or greater | | Total |
| Contract liabilities | $ | 1,197,342 | | | $ | 170,588 | | | $ | 80,975 | | | $ | 1,448,905 | |
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 7 “Debt” to our Condensed Consolidated Financial Statements 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 recorded at fair value only if an impairment is recognized in the current period. We assess for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. For goodwill, we assess for impairment 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:
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| 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, sovereign 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.
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 Condensed Consolidated Balance Sheets as follows:
| | | | | | | | | | | | | | | | | | | |
| | | Quoted Prices in Active Markets for Identical Assets | | Significant Other Observable Inputs | | |
| As of March 31, 2026 (In thousands) | Total | | (Level 1) | | (Level 2) | | |
| Assets | | | | | | | |
| Cash equivalents: | | | | | | | |
| Corporate debt securities | $ | 11,623 | | | $ | — | | | $ | 11,623 | | | |
| Money market funds and other | 1,401,575 | | | 1,401,575 | | | — | | | |
| | | | | | | |
| U.S. Treasury securities | 9,949 | | | — | | | 9,949 | | | |
| Sovereign securities | 5,045 | | | — | | | 5,045 | | | |
| Municipal securities | 4,282 | | | — | | | 4,282 | | | |
| | | | | | | |
| | | | | | | |
| Marketable securities: | | | | | | | |
| Corporate debt securities | 1,183,003 | | | — | | | 1,183,003 | | | |
| Municipal securities | 34,415 | | | — | | | 34,415 | | | |
| Sovereign securities | 46,917 | | | — | | | 46,917 | | | |
| U.S. Government agency securities | 98,950 | | | 98,950 | | | — | | | |
| U.S. Treasury securities | 1,389,222 | | | 1,286,435 | | | 102,787 | | | |
| | | | | | | |
| Equity securities | 42,799 | | | 42,799 | | | — | | | |
| | | | | | | |
Total cash equivalents and marketable securities(1) | 4,227,780 | | | 2,829,759 | | | 1,398,021 | | | |
| Other current assets: | | | | | | | |
| Derivative assets | 44,220 | | | — | | | 44,220 | | | |
| Other non-current assets: | | | | | | | |
| Executive Deferred Savings Plan | 371,868 | | | 356,883 | | | 14,985 | | | |
| Long-term accounts receivable, net | 78,210 | | | — | | | 78,210 | | | |
Total financial assets(1) | $ | 4,722,078 | | | $ | 3,186,642 | | | $ | 1,535,436 | | | |
| Liabilities | | | | | | | |
| Derivative liabilities | $ | (19,394) | | | $ | — | | | $ | (19,394) | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total financial liabilities | $ | (19,394) | | | $ | — | | | $ | (19,394) | | | |
________________
(1) Excludes cash of $292.0 million held in operating accounts and time deposits of $438.2 million (of which $62.6 million were cash equivalents) as of March 31, 2026.
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| | | Quoted Prices in Active Markets for Identical Assets | | Significant Other Observable Inputs | | |
| As of June 30, 2025 (In thousands) | Total | | (Level 1) | | (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: | | | | | | | |
| Executive Deferred Savings Plan | 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.
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 March 31, 2026 or June 30, 2025.
NOTE 4 – FINANCIAL STATEMENT COMPONENTS
Condensed Consolidated Balance Sheets
| | | | | | | | | | | |
| As of | | As of |
| (In thousands) | March 31, 2026 | | June 30, 2025 |
| Accounts receivable, net: | | | |
| Accounts receivable, gross | $ | 2,362,503 | | | $ | 2,297,930 | |
| Allowance for credit losses | (58,049) | | | (34,015) | |
| $ | 2,304,454 | | | $ | 2,263,915 | |
| Inventories: | | | |
| Customer service parts | $ | 602,543 | | | $ | 600,769 | |
| Raw materials | 1,648,430 | | | 1,491,786 | |
| Work-in-process | 929,604 | | | 833,933 | |
| Finished goods | 256,469 | | | 285,661 | |
| $ | 3,437,046 | | | $ | 3,212,149 | |
| Other current assets: | | | |
| Prepaid expenses | $ | 173,576 | | | $ | 201,053 | |
| Deferred costs of revenues | 172,014 | | | 223,829 | |
| Contract assets | 100,906 | | | 105,081 | |
| Prepaid income and other taxes | 63,958 | | | 64,704 | |
| Other current assets | 141,087 | | | 133,435 | |
| $ | 651,541 | | | $ | 728,102 | |
| Land, property and equipment, net: | | | |
| Land | $ | 86,654 | | | $ | 86,677 | |
| Buildings and leasehold improvements | 1,236,963 | | | 1,132,176 | |
| Machinery and equipment | 1,373,586 | | | 1,238,599 | |
| Office furniture and fixtures | 80,482 | | | 73,993 | |
| Construction-in-process | 220,756 | | | 207,807 | |
| 2,998,441 | | | 2,739,252 | |
| Less: accumulated depreciation | (1,634,657) | | | (1,486,477) | |
| $ | 1,363,784 | | | $ | 1,252,775 | |
| Other non-current assets: | | | |
Executive Deferred Savings Plan(1) | $ | 371,868 | | | $ | 349,530 | |
| Operating lease right of use assets | 332,287 | | | 269,714 | |
| Long-term accounts receivable, net | 78,210 | | | — | |
| Other non-current assets | 163,781 | | | 154,370 | |
| $ | 946,146 | | | $ | 773,614 | |
| Other current liabilities: | | | |
| Compensation and benefits | $ | 470,913 | | | $ | 418,515 | |
| Customer deposits | 411,202 | | | 636,369 | |
Executive Deferred Savings Plan(1) | 374,437 | | | 350,426 | |
| Income taxes payable | 117,231 | | | 167,262 | |
| Operating lease liabilities | 51,146 | | | 45,192 | |
| Interest payable | 48,253 | | | 110,056 | |
| Other liabilities and accrued expenses | 566,022 | | | 534,621 | |
| $ | 2,039,204 | | | $ | 2,262,441 | |
| Other non-current liabilities: | | | |
| Income taxes payable | $ | 254,498 | | | $ | 221,808 | |
| Operating lease liabilities | 207,151 | | | 158,833 | |
| Pension liabilities | 48,043 | | | 51,750 | |
| Customer deposits | 9,653 | | | 6,823 | |
| Other non-current liabilities | 189,312 | | | 170,418 | |
| $ | 708,657 | | | $ | 609,632 | |
________________
(1)We have a non-qualified deferred compensation plan (known as the “Executive Deferred Savings Plan” or “EDSP”) under which certain employees and non-employee directors may defer a portion of their compensation. The expense (benefit) associated with changes in the EDSP liability included in selling, general and administrative (“SG&A”) was $(8.8) million and $(7.9) million in the three months ended March 31, 2026 and 2025, respectively, and was $15.8 million and $13.4 million during the nine months ended March 31, 2026 and 2025, respectively. The amount of net gains (losses) associated with changes in the EDSP assets included in SG&A expense was $(9.0) million and $(9.1) million in the three months ended March 31, 2026 and 2025, respectively, and was $15.4 million and $12.3 million during the nine months ended March 31, 2026 and 2025, respectively. For additional details, refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated Other Comprehensive Income (Loss) (“AOCI”) as of the dates indicated below were as follows:
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| (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 March 31, 2026 | $ | (65,859) | | | $ | (848) | | | $ | 46,167 | | | $ | (11,440) | | | $ | (31,980) | |
| | | | | | | | | |
| Balance as of June 30, 2025 | $ | (57,277) | | | $ | 5,792 | | | $ | 64,798 | | | $ | (12,112) | | | $ | 1,201 | |
The effects on net income of amounts reclassified from AOCI to the Condensed Consolidated Statements of Operations for the indicated periods were as follows (in thousands; amounts in parentheses indicate debits or reductions to earnings):
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| AOCI Components | | | | Three Months Ended | | Nine Months Ended |
| Location in the Condensed Consolidated Statement of Operations | | March 31, | | March 31, |
| | 2026 | | 2025 | | 2026 | | 2025 |
| Unrealized gains (losses) on cash flow hedges from foreign exchange and interest rate contracts | | Revenues | | $ | 2,071 | | | $ | 2,680 | | | $ | 4,474 | | | $ | 6,226 | |
| | Costs of revenues and operating expenses | | 11,436 | | | (2,146) | | | 31,896 | | | (1,692) | |
| | Interest expense | | 758 | | | 758 | | | 2,275 | | | 2,526 | |
| | | | | | | | | | |
| | Net gains reclassified from AOCI | | $ | 14,265 | | | $ | 1,292 | | | $ | 38,645 | | | $ | 7,060 | |
| Unrealized gains on available-for-sale securities | | Other expense (income), net | | $ | 170 | | | $ | 9 | | | $ | 482 | | | $ | 9 | |
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:
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| As of March 31, 2026 (In thousands) | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Fair
Value |
| Corporate debt securities | $ | 1,194,203 | | | $ | 1,851 | | | $ | (1,428) | | | $ | 1,194,626 | |
| Money market funds and other | 1,401,575 | | | — | | | — | | | 1,401,575 | |
| Municipal securities | 38,648 | | | 54 | | | (5) | | | 38,697 | |
| Sovereign securities | 51,985 | | | — | | | (23) | | | 51,962 | |
| U.S. Government agency securities | 98,771 | | | 265 | | | (86) | | | 98,950 | |
| U.S. Treasury securities | 1,400,879 | | | 1,365 | | | (3,073) | | | 1,399,171 | |
| | | | | | | |
| | | | | | | |
| Subtotal | 4,186,061 | | | 3,535 | | | (4,615) | | | 4,184,981 | |
Add: Time deposits(1) | 438,179 | | | — | | | — | | | 438,179 | |
| Less: Cash equivalents | 1,495,035 | | | — | | | (4) | | | 1,495,031 | |
Marketable securities(2) | $ | 3,129,205 | | | $ | 3,535 | | | $ | (4,611) | | | $ | 3,128,129 | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
________________
(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 March 31, 2026, we had 448 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.
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| As of March 31, 2026 | 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 | $ | 510,703 | | | $ | (1,428) | | | $ | — | | | $ | — | | | $ | 510,703 | | | $ | (1,428) | |
| Municipal securities | 10,794 | | | (5) | | | — | | | — | | | 10,794 | | | (5) | |
| Sovereign securities | 51,962 | | | (23) | | | — | | | — | | | 51,962 | | | (23) | |
| U.S. Government agency securities | 38,937 | | | (86) | | | — | | | — | | | 38,937 | | | (86) | |
| U.S. Treasury securities | 883,043 | | | (3,073) | | | — | | | — | | | 883,043 | | | (3,073) | |
| Total | $ | 1,495,439 | | | $ | (4,615) | | | $ | — | | | $ | — | | | $ | 1,495,439 | | | $ | (4,615) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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) | |
The contractual maturities of securities classified as available-for-sale, regardless of their classification on our Condensed Consolidated Balance Sheets, as of the date indicated below were as follows:
| | | | | | | | | | | |
| As of March 31, 2026 (In thousands) | Amortized Cost | | Fair Value |
| Due within one year | $ | 1,464,028 | | | $ | 1,465,331 | |
| Due after one year through three years | 1,665,177 | | | 1,662,798 | |
| Total | $ | 3,129,205 | | | $ | 3,128,129 | |
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 for the three and nine months ended March 31, 2026 and 2025 were immaterial.
The costs for our equity marketable securities were $22.9 million as of both March 31, 2026, and June 30, 2025. Unrealized gains and losses for our equity marketable securities for the three and nine months ended March 31, 2026 and 2025 were immaterial.
NOTE 6 – 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.
The following table presents changes in goodwill carrying value by reportable segment during the nine months ended March 31, 2026:
| | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Semiconductor Process Control | | Specialty Semiconductor Process | | Printed Circuit Board (“PCB”) and Component Inspection | | Total |
| Balances as of June 30, 2025 | $ | 759,885 | | | $ | 681,858 | | | $ | 350,450 | | | $ | 1,792,193 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Foreign currency adjustments | (1,452) | | | (816) | | | (1,442) | | | (3,710) | |
| Balances as of March 31, 2026 | $ | 758,433 | | | $ | 681,042 | | | $ | 349,008 | | | $ | 1,788,483 | |
As of March 31, 2026, and June 30, 2025, 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.
Goodwill is not subject to amortization but is tested for impairment annually, as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In testing goodwill for impairment, we utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. When performing the qualitative assessment, we consider the following factors: stock price or market capitalization, changes in the industry and competitive environment, budget-to-actual revenue and profitability performance from the prior year and projected revenue and profitability trends for future years at our reporting units. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a quantitative assessment by comparing the carrying value to the fair value of the reporting units. If the fair value is determined to be less than the carrying value, the amount of impairment is computed as the excess of the carrying value over the estimated fair value, not to exceed the carrying value of goodwill. Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge.
As of March 31, 2026, there have been no significant events or circumstances affecting the valuation of goodwill subsequent to the annual assessment performed in the second quarter of the fiscal year 2026.
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.
To determine the fair value of a reporting unit, we utilized income and market approaches and applied weighting of 75 percent and 25 percent, respectively. The income approach is estimated through discounted cash flow analysis. This valuation technique requires us to use significant estimates and assumptions, including long-term growth rates, discount rates and other inputs. The market approach estimates the fair value of the reporting unit by utilizing the market comparable method, which is based on revenue and earnings multiples from comparable companies. There can be no assurance that these estimates and assumptions will prove to be an accurate prediction of the future, and a downward revision of these estimates and/or assumptions would decrease the fair value of our reporting units, which could result in additional impairment charges in the future.
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 March 31, 2026 | | As of June 30, 2025 |
| Category | Gross
Carrying
Amount | | Accumulated
Amortization
and
Impairment | | Net
Amount | | Gross
Carrying
Amount | | Accumulated
Amortization
and
Impairment | | Net
Amount |
| Existing technology | $ | 1,555,974 | | | $ | 1,334,803 | | | $ | 221,171 | | | $ | 1,555,688 | | | $ | 1,222,520 | | | $ | 333,168 | |
| Customer relationships | 358,036 | | | 309,616 | | | 48,420 | | | 359,555 | | | 285,274 | | | 74,281 | |
| Trade name / Trademark | 119,346 | | | 119,346 | | | — | | | 119,409 | | | 113,210 | | | 6,199 | |
| Order backlog and other | 91,100 | | | 85,021 | | | 6,079 | | | 89,309 | | | 84,419 | | | 4,890 | |
Intangible assets subject to amortization | 2,124,456 | | | 1,848,786 | | | 275,670 | | | 2,123,961 | | | 1,705,423 | | | 418,538 | |
| In-process research and development | 44,874 | | | 19,827 | | | 25,047 | | | 46,074 | | | 19,827 | | | 26,247 | |
| Total | $ | 2,169,330 | | | $ | 1,868,613 | | | $ | 300,717 | | | $ | 2,170,035 | | | $ | 1,725,250 | | | $ | 444,785 | |
Purchased intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. Impairment indicators primarily include declines in our operating cash flows from the use of these assets. If impairment indicators are present, we are required to perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to these long-lived assets to their carrying value.
As of March 31, 2026, there were no impairment indicators for purchased intangible assets.
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.
Total impairment charges for goodwill and purchased intangible assets of $239.1 million were recognized as separate charges and included in income (loss) from operations in the nine months ended March 31, 2025.
Amortization expense for purchased intangible assets was $47.3 million and $145.8 million for the three and nine months ended March 31, 2026, respectively, and $53.9 million and $169.5 million for the three and nine months ended March 31, 2025, respectively.
Based on the purchased intangible assets gross carrying amount recorded as of March 31, 2026, the remaining estimated annual amortization expense is expected to be as follows:
| | | | | |
| Fiscal year ending June 30: | Amortization (In thousands) |
| 2026 (remaining three months) | $ | 44,846 | |
| 2027 | 129,024 | |
| 2028 | 49,123 | |
| 2029 | 35,566 | |
| 2030 | 14,760 | |
| 2031 and thereafter | 2,351 | |
| Total | $ | 275,670 | |
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 7 – DEBT
The following table summarizes our debt as of March 31, 2026 and June 30, 2025:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2026 | | As of June 30, 2025 |
| Amount
(In thousands) | | Effective
Interest Rate | | Amount
(In thousands) | | Effective
Interest Rate |
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 | | | | | 5,950,000 | | | |
| Unamortized discount | (22,239) | | | | | (23,338) | | | |
| Unamortized debt issuance costs | (40,698) | | | | | (42,405) | | | |
| Total | $ | 5,887,063 | | | | | $ | 5,884,257 | | | |
| Reported as: | | | | | | | |
| | | | | | | |
| Long-term debt | 5,887,063 | | | | | 5,884,257 | | | |
| Total | $ | 5,887,063 | | | | | $ | 5,884,257 | | | |
Senior Notes and Debt Redemption
The original discounts on the senior, unsecured long-term notes listed in the table above (collectively, “Senior Notes”) are being amortized over the life of the debt. Interest is payable semi-annually as follows: on January 15 and July 15 of each year for the Senior Notes due July 15, 2032, 2052, and 2062; on February 1 and August 1 of each year for the Senior Notes due February 1, 2034; on March 1 and September 1 of each year for the Senior Notes due March 1, 2050; on March 15 and September 15 of each year for the Senior Notes due March 15, 2029, and 2049; and on May 1 and November 1 of each year for the Senior Notes due November 1, 2034. The Senior Notes rank senior in right of payment to all of KLA Corporation’s future
subordinated indebtedness, equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness, are effectively subordinated in right of payment to all of our 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. 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.
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 (“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.
Based on the trading prices of the Senior Notes on the applicable dates, the fair value of the Senior Notes as of March 31, 2026 and June 30, 2025 was $5.46 billion and $5.54 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 March 31, 2026, 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 entered into a revolving credit facility (“Revolving Credit Facility”) with a maturity date of July 3, 2030 that allows us to borrow up to $1.50 billion, pursuant to the terms set forth in the credit agreement (“Credit Agreement”). Subject to the terms of the Credit Agreement, the Revolving Credit Facility may be increased by an amount up to $500.0 million in the aggregate. As of March 31, 2026, we had no outstanding borrowings under the Revolving Credit Facility.
Under the Revolving Credit Facility, we may borrow, repay and reborrow funds until the maturity date, which may be extended following the exercise of no more than two one-year extension options with the consent of the lenders. We may prepay outstanding borrowings under the Revolving Credit Facility at any time without a prepayment penalty.
Borrowings under the Revolving Credit Facility can 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 is unavailable, any Term SOFR elections will be converted to Daily Simple SOFR, as long as it is available. Each Term SOFR Loan will 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 a spread ranging from 62.5 bps to 100.0 bps, as determined by the Company’s credit ratings at the time. Each ABR Loan will bear interest at a rate per annum equal to the ABR, as determined by the Company’s credit ratings at the time. We are also obligated to pay an annual commitment fee on the daily undrawn balance of the Revolving Credit Facility, which ranges from 4.0 bps to 10.0 bps, subject to an adjustment in conjunction with changes to our credit rating. The applicable interest rates and commitment fees are also subject to adjustment based on the Company’s performance against certain environmental sustainability key performance indicators (“KPI”) related to greenhouse gas emissions and renewable electricity usage. Our performance against these KPIs in calendar year 2024 resulted in reductions to the fees associated with our Revolving Credit Facility. As of March 31, 2026, the applicable commitment fee on the daily undrawn balance of the Revolving Credit Facility was 5.5 bps.
Under the Revolving Credit Facility, the maximum net leverage ratio on a quarterly basis is 3.25 to 1.00, covering the trailing four consecutive fiscal quarters for each fiscal quarter, which may be increased to 3.75 to 1.00 for a period of time in connection with a material acquisition or a series of material acquisitions. As of March 31, 2026, our maximum allowed net leverage ratio was 3.25 to 1.00.
We were in compliance with all covenants under the Credit Agreement as of March 31, 2026.
NOTE 8 – LEASES
We have operating leases for facilities, vehicles and other equipment. Our facility leases are primarily used for administrative functions, research and development (“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 $16.6 million and $44.5 million for the three and nine months ended March 31, 2026, respectively, and $13.1 million and $38.0 million for the three and nine months ended March 31, 2025, respectively. Expenses related to short-term leases, which were not recorded on the Condensed Consolidated Balance Sheets, were not material for the three and nine months ended March 31, 2026 and 2025. As of March 31, 2026 and June 30, 2025, the weighted-average remaining lease term was 6.7 and 6.2 years, respectively, and the weighted-average discount rate for operating leases was 3.77% and 4.06% as of March 31, 2026 and June 30, 2025, respectively.
Supplemental cash flow information related to leases was as follows:
| | | | | | | | | | | |
| Nine Months Ended March 31, |
| In thousands | 2026 | | 2025 |
| Operating cash outflows from operating leases | $ | 41,264 | | | $ | 33,759 | |
| Right of use assets obtained in exchange for new operating lease liabilities | $ | 87,116 | | | $ | 43,369 | |
Maturities of lease liabilities as of March 31, 2026 were as follows:
| | | | | |
| Fiscal Year Ending June 30: | (In thousands) |
| 2026 (remaining three months) | $ | 15,015 | |
| 2027 | 59,001 | |
| 2028 | 49,330 | |
| 2029 | 38,905 | |
| 2030 | 35,153 | |
| 2031 and thereafter | 98,962 | |
| Total lease payments | 296,366 | |
| Less imputed interest | (38,069) | |
| Total | $ | 258,297 | |
As of March 31, 2026, we did not have material leases that had not yet commenced.
NOTE 9 – EQUITY AND LONG-TERM INCENTIVE COMPENSATION PLANS
As of March 31, 2026, 9.3 million shares remained available for issuance under the KLA Corporation 2023 Incentive Award Plan (“2023 Plan”). In addition, we have an Employee Stock Purchase Plan (“ESPP”), which enables eligible employees to purchase our common stock. We also offer a cash-based long-term incentive program (“Cash LTI”) to eligible employees.
For details of the 2023 Plan, ESPP and Cash LTI plans, refer to Note 10 “Equity, Long-Term Incentive Compensation Plans and Non-Controlling Interest” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
Equity Incentive Plans - General Information
The following table summarizes the combined activity under our equity incentive plans:
| | | | | |
| (In thousands) | Available For Grant(1) |
| Balance as of June 30, 2025 | 9,574 | |
| |
Restricted stock units granted(2) | (324) | |
Restricted stock units granted adjustment(3) | 53 | |
| Restricted stock units canceled | 41 | |
| |
| Balance as of March 31, 2026 | 9,344 | |
__________________
(1)The number of restricted stock units (“RSU”) reflects the application of the award multiplier of 2.0x to calculate the impact of the award on the shares reserved under the 2023 Plan.
(2)Includes RSUs granted to senior management during the nine months ended March 31, 2026 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”). This line item includes all such performance-based RSUs granted during the nine months ended March 31, 2026 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 nine months ended March 31, 2026 reflect the application of the multiplier described above).
(3)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 nine months ended March 31, 2026.
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 following table shows stock-based compensation (“SBC”) expense for the indicated periods:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Nine Months Ended March 31, |
| (In thousands) | 2026 | | 2025 | | 2026 | | 2025 |
| SBC expense by: | | | | | | | |
| Costs of revenues | $ | 16,832 | | | $ | 12,875 | | | $ | 42,328 | | | $ | 33,133 | |
| R&D | 26,370 | | | 20,726 | | | 69,326 | | | 55,151 | |
| SG&A | 40,736 | | | 36,600 | | | 116,413 | | | 105,458 | |
| Total SBC expense | $ | 83,938 | | | $ | 70,201 | | | $ | 228,067 | | | $ | 193,742 | |
SBC capitalized as inventory was $32.5 million and $26.3 million as of March 31, 2026 and June 30, 2025, respectively.
Restricted Stock Units
The following table shows the activity and weighted-average grant date fair values for RSUs during the nine months ended March 31, 2026:
| | | | | | | | | | | |
| Shares(1) (In thousands) | | Weighted-Average
Grant Date
Fair Value |
Outstanding RSUs as of June 30, 2025(2) | 1,292 | | | $ | 536.30 | |
Granted(3) | 162 | | | $ | 933.85 | |
Granted adjustments(4) | (27) | | | $ | 397.40 | |
| | | |
| | | |
| Vested and released | (234) | | | $ | 436.47 | |
| | | |
| Forfeited | (19) | | | $ | 574.36 | |
Outstanding RSUs as of March 31, 2026(2) | 1,174 | | | $ | 613.65 | |
__________________
(1)Share numbers reflect actual shares subject to awarded RSUs.
(2)Includes performance-based RSUs.
(3)This line item includes performance-based RSUs granted during the nine months ended March 31, 2026 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 nine months ended March 31, 2026, 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 nine months ended March 31, 2026.
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: (i) with respect to awards with only service-based vesting criteria, over periods ranging from two to four years; and (ii) 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.
As of March 31, 2026, the unrecognized SBC expense balance related to RSUs was $436.1 million, excluding the impact of estimated forfeitures, and will be recognized over an estimated weighted-average amortization period of 1.1 years. The intrinsic value of outstanding RSUs as of March 31, 2026 was $1.73 billion.
NOTE 10 – 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 $7.00 billion in the third quarter of fiscal 2026. 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.
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, the Inflation Reduction Act of 2022 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 March 31, 2026, an aggregate of $10.31 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:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Nine Months Ended March 31, |
| (In thousands) | 2026 | | 2025 | | 2026 | | 2025 |
| Number of shares of common stock repurchased | 440 | | | 711 | | | 1,523 | | | 2,430 | |
| Total cost of repurchases | $ | 631,913 | | | $ | 511,703 | | | $ | 1,733,866 | | | $ | 1,738,612 | |
NOTE 11 – 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.
The following table sets forth the computation of basic and diluted net income per share:
| | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands, except per share amounts) | Three Months Ended March 31, | | Nine Months Ended March 31, |
| 2026 | | 2025 | | 2026 | | 2025 |
| Numerator: | | | | | | | |
| Net income | $ | 1,200,990 | | | $ | 1,088,416 | | | $ | 3,467,712 | | | $ | 2,858,794 | |
| Denominator: | | | | | | | |
| Weighted-average shares - basic, excluding unvested RSUs | 130,909 | | | 132,607 | | | 131,318 | | | 133,361 | |
| Effect of dilutive RSUs and options | 841 | | | 696 | | | 755 | | | 705 | |
| Weighted-average shares - diluted | 131,750 | | | 133,303 | | | 132,073 | | | 134,066 | |
| Basic net income per share | $ | 9.17 | | | $ | 8.21 | | | $ | 26.41 | | | $ | 21.44 | |
| Diluted net income per share | $ | 9.12 | | | $ | 8.16 | | | $ | 26.26 | | | $ | 21.32 | |
| Anti-dilutive securities excluded from the computation of diluted net income per share | — | | | 5 | | | 1 | | | 39 | |
NOTE 12 – INCOME TAXES
The following table provides details of income taxes:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Nine Months Ended March 31, |
| (Dollar amounts in thousands) | 2026 | | 2025 | | 2026 | | 2025 |
| Income before income taxes | $ | 1,416,761 | | $ | 1,264,433 | | $ | 4,056,540 | | $ | 3,315,649 |
| Provision for income taxes | $ | 215,771 | | $ | 176,017 | | $ | 588,828 | | $ | 456,855 |
| Effective tax rate | 15.2 | % | | 13.9 | % | | 14.5 | % | | 13.8 | % |
Our effective tax rate was lower than the U.S. federal statutory rate during the three and nine months ended March 31, 2026, primarily due to the proportion of earnings generated in jurisdictions with tax rates lower than the U.S. statutory rate and the proportion of U.S. earnings eligible for the Foreign Derived Intangible Income deduction.
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 have completed the audit in Israel for calendar year ended December 31, 2019 to the fiscal year ended June 30, 2022. We believe our current unrecognized tax benefits are sufficient. It is possible that certain 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
In January 2026, the Organization for Economic Co-operation and Development’s (“OECD”) introduced two new Pillar Two safe harbors which are expected to be available for fiscal years beginning on or after January 1, 2026: (1) the Side-by-Side Safe Harbor (“SBSSH”) for multinational entities headquartered in the jurisdictions with both eligible domestic and worldwide tax systems, and (2) the Ultimate Parent Entity (“UPE”) Safe Harbor for multinational entities with a UPE located in a jurisdiction that has only an eligible domestic tax system. The U.S. is an eligible jurisdiction for the SBSSH. We are not expecting a material tax impact to our Condensed Consolidated Financial Statements when countries begin to enact legislation to adopt the SBSSH provisions.
In December 2025, Israel adopted the Pillar Two Global Anti-Base Erosion (“GLoBE”) rules under the Multinational Enterprise (“Minimum Tax”) Act, which includes a domestic minimum tax of 15% that will be effective for us beginning in the fiscal year ending June 30, 2027. The Pillar Two GLoBE rules are deemed an alternative minimum tax so we did not recognize any deferred taxes for the estimated effects of the future minimum tax under current GAAP. We are not expecting a material tax impact to our Condensed Consolidated Financial Statements.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The OBBBA provides for several permanent changes to the U.S. tax code among other items, including modifying the Global Intangible Low-Taxed Income 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 that the tax effects of changes in tax rates and laws be recognized in the period in which the legislation is enacted. The OBBBA provisions will result in an increase to our cash flows from operating activities and an increase to our effective tax rate in our fiscal year ending June 30, 2026. The effective tax rate changes have been reflected in the consolidated financial statements for the three and nine months ended March 31, 2026, and did not have a material impact to our Condensed Consolidated Financial Statements.
In November 2024, Singapore adopted the Pillar Two GLoBE rules under the Minimum Tax Act, which includes a domestic minimum tax of 15% that is effective for us in the current fiscal year. There was no material impact to our Condensed Consolidated Financial Statements during the three and nine months ended March 31, 2026. The Pillar Two GLoBE rules are deemed an alternative minimum tax so we did not recognize any deferred taxes for the estimated effects of the future minimum tax under current GAAP.
California Governor Newsom approved the 2024-25 California State Budget on June 27, 2024, which includes a provision to suspend the use of all net operating losses and limits the use of R&D tax credits to $5 million for tax years 2024 through 2026. This provision is effective in our fiscal years ended June 30, 2025 through September 30, 2027. There was no
material tax impact to our Condensed Consolidated Financial Statements during the three and nine months ended March 31, 2026.
In December 2021, the OECD’s Inclusive Framework on Base Erosion and Profit Shifting released GLoBE rules under Pillar Two. For the countries that have enacted legislation to adopt the Pillar Two GLoBE rules, the provisions requiring a 15% minimum effective tax rate on income earned in the respective countries and a global 15% minimum effective top-up tax are effective for us beginning in our fiscal year ended June 30, 2025. There was no material tax impact to our Condensed Consolidated Financial Statements from these Pillar Two provisions during the three and nine months ended March 31, 2026.
NOTE 13 – 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 Condensed 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 Condensed Consolidated Financial Statements or will not have a material adverse effect on our results of operations, financial condition or cash flows.
NOTE 14 – 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 letters of credit (“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:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | Nine Months Ended March 31, |
| (In thousands) | 2026 | | 2025 | | 2026 | | 2025 |
| Receivables sold under factoring agreements | $ | 109,405 | | | $ | 59,734 | | | $ | 286,197 | | | $ | 143,439 | |
| Proceeds from sales of LC | $ | 22,128 | | | $ | 20,188 | | | $ | 43,122 | | | $ | 55,525 | |
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 liability under these purchase commitments is generally restricted to a forecasted time-horizon as mutually agreed between the parties. This forecasted time-horizon can vary among different suppliers. Our estimate of our significant purchase commitments primarily for material, services, supplies and asset purchases is approximately $4.83 billion as of March 31, 2026, 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.
Cash LTI Plan. As of March 31, 2026, we have committed $114.6 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, Contingencies and Other. We maintain guarantee arrangements available through various financial institutions for up to $156.5 million, of which $124.6 million had been issued as of March 31, 2026, primarily to fund
guarantees to customs authorities for value-added tax and other operating requirements of our consolidated subsidiaries worldwide.
We have a duty drawback program that allows for the recovery of certain import duties upon the export of qualifying goods. Our accounting policy is to recognize a receivable for duty drawback upon submission of a qualifying claim to U.S. Customs and Border Protection when recovery is considered probable and estimable.
In February 2026, the U.S. Supreme Court held that certain tariffs imposed under the International Emergency Economic Powers Act were not authorized. As a result, we are evaluating the appropriate method and timing of potential recovery of duties previously paid. While the administrative process for obtaining refunds under this ruling has been outlined, the timing and the potential for legal challenges remains uncertain. Any changes in the administrative process or regulations arising from legal challenges could impact our results of operations and cash flows, though the effect is not expected to be material.
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 greenhouse gas 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 three and nine months ended March 31, 2026 or during the three months ended March 31, 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 Condensed 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.
NOTE 15 – 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 Condensed 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 12 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 forward contracts, generally to hedge the benchmark interest rate on portions of our Senior Notes prior to issuance (collectively, “Rate Lock Agreements”). 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 March 31, 2026, the aggregate unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was a $42.2 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 on a straight-line basis over the lives of the associated derivative contracts. 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.
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 other comprehensive income for the indicated periods were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Nine Months Ended March 31, |
| (In thousands) | 2026 | | 2025 | | 2026 | | 2025 |
| Derivatives Designated as Cash Flow Hedging Instruments: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Foreign exchange contracts: | | | | | | | |
| Amounts included in the assessment of effectiveness | $ | (288) | | | $ | (1,893) | | | $ | 15,406 | | | $ | 3,254 | |
| Amounts excluded from the assessment of effectiveness | $ | 18 | | | $ | 42 | | | $ | 93 | | | $ | (118) | |
| Derivatives Designated as Net Investment Hedging Instruments: |
Foreign exchange contracts(1): | $ | 193 | | | $ | 1,730 | | | $ | 25,775 | | | $ | 3,443 | |
__________________(1)No amounts were reclassified from AOCI into earnings related to the sale of a subsidiary, as there were no such sales during the periods presented.
The locations and amounts of designated and non-designated derivatives’ gains and losses reported in the Condensed Consolidated Statements of Operations for the indicated periods were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Three Months Ended March 31, |
| 2026 | | 2025 |
| (In thousands) | Revenues | | Costs of Revenues and Operating Expenses | | Interest Expense | | Other Expense (Income), Net | | Revenues | | Costs of Revenues and Operating Expenses | | Interest Expense | | Other Expense (Income), Net |
| Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded | $ | 3,415,078 | | | $ | 2,007,569 | | | $ | 70,423 | | | $ | (79,675) | | | $ | 3,063,029 | | | $ | 1,762,637 | | | $ | 71,889 | | | $ | (35,930) | |
| Gains (Losses) on Derivatives Designated as Hedging Instruments: |
| Rate lock agreements: | | | | | | | | | | | | | | | |
| Amount of gains reclassified from AOCI to earnings | $ | — | | | $ | — | | | $ | 758 | | | $ | — | | | $ | — | | | $ | — | | | $ | 758 | | | $ | — | |
| | | | | | | | | | | | | | | |
| Foreign exchange contracts: | | | | | | | | | | | | | | | |
| Amount of gains (losses) reclassified from AOCI to earnings | $ | 2,293 | | | $ | 11,436 | | | $ | — | | | $ | — | | | $ | 3,006 | | | $ | (2,146) | | | $ | — | | | $ | — | |
| Amount excluded from the assessment of effectiveness recognized in earnings | $ | (222) | | | $ | — | | | $ | — | | | $ | 6,806 | | | $ | (326) | | | $ | — | | | $ | — | | | $ | 363 | |
| | | | | | | | | | | | | | | |
| Gains (Losses) on Derivatives Not Designated as Hedging Instruments: |
| Amount of gains (losses) recognized in earnings | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | (7,790) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended March 31, | | Nine Months Ended March 31, |
| 2026 | | 2025 |
| (In thousands) | Revenues | | Costs of Revenues and Operating Expenses | | Interest Expense | | Other Expense (Income), Net | | Revenues | | Costs of Revenues and Operating Expenses | | Interest Expense | | Other Expense (Income), Net |
| Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded | $ | 9,921,920 | | | $ | 5,815,088 | | | $ | 211,166 | | | $ | (160,874) | | | $ | 8,981,421 | | | $ | 5,558,054 | | | $ | 229,041 | | | $ | (121,323) | |
| Gains (Losses) on Derivatives Designated as Hedging Instruments: |
| Rate lock agreements: | | | | | | | | | | | | | | | |
| Amount of gains reclassified from AOCI to earnings | $ | — | | | $ | — | | | $ | 2,275 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,526 | | | $ | — | |
| | | | | | | | | | | | | | | |
| Foreign exchange contracts: | | | | | | | | | | | | | | | |
| Amount of gains (losses) reclassified from AOCI to earnings | $ | 5,112 | | | $ | 31,896 | | | $ | — | | | $ | — | | | $ | 7,435 | | | $ | (1,692) | | | $ | — | | | $ | — | |
| Amount excluded from the assessment of effectiveness recognized in earnings | $ | (638) | | | $ | — | | | $ | — | | | $ | 16,345 | | | $ | (1,209) | | | $ | — | | | $ | — | | | $ | 6,336 | |
| | | | | | | | | | | | | | | |
| Gains (Losses) on Derivatives Not Designated as Hedging Instruments: |
| Amount of gains (losses) recognized in earnings | $ | — | | | $ | — | | | $ | — | | | $ | 13,099 | | | $ | — | | | $ | — | | | $ | — | | | $ | (4,390) | |
The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts and rate lock agreements, with maximum remaining maturities of approximately 12 months as of the dates indicated below, were as follows:
| | | | | | | | | | | |
| As of | | As of |
| (In thousands) | March 31, 2026 | | June 30, 2025 |
| Cash flow hedge contracts - foreign currency | | | |
| Purchase | $ | 505,004 | | | $ | 405,349 | |
| Sell | $ | 88,114 | | | $ | 159,475 | |
| Net investment hedge contracts - foreign currency | | | |
| | | |
| Sell | $ | 390,677 | | | $ | 384,130 | |
| Other foreign currency hedge contracts | | | |
| Purchase | $ | 647,088 | | | $ | 618,844 | |
| Sell | $ | 572,240 | | | $ | 429,643 | |
| | | |
The locations and fair value of our derivatives reported in our Condensed Consolidated Balance Sheets as of the dates indicated below were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Asset Derivatives | | Liability Derivatives |
| Balance Sheet | | As of | | As of | | Balance Sheet | | As of | | As of |
| | Location | | March 31, 2026 | | June 30, 2025 | | Location | | March 31, 2026 | | June 30, 2025 |
| (In thousands) | | Fair Value | | | Fair Value |
| Derivatives designated as hedging instruments | | | | | | | | | | | |
| | | | | | | | | | | |
| Foreign exchange contracts | Other current assets | | $ | 33,949 | | | $ | 29,492 | | | Other current liabilities | | $ | (8,831) | | | $ | (24,331) | |
| Total derivatives designated as hedging instruments | | | 33,949 | | | 29,492 | | | | | (8,831) | | | (24,331) | |
| Derivatives not designated as hedging instruments | | | | | | | | | | | |
| Foreign exchange contracts | Other current assets | | 10,271 | | | 30,011 | | | Other current liabilities | | (10,563) | | | (4,284) | |
| Total derivatives not designated as hedging instruments | | | 10,271 | | | 30,011 | | | | | (10,563) | | | (4,284) | |
| Total derivatives | | | $ | 44,220 | | | $ | 59,503 | | | | | $ | (19,394) | | | $ | (28,615) | |
The changes in AOCI, before taxes, related to derivatives for the indicated periods were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Nine Months Ended March 31, |
| (In thousands) | 2026 | | 2025 | | 2026 | | 2025 |
| Beginning AOCI | $ | 83,541 | | | $ | 69,835 | | | $ | 66,570 | | | $ | 68,903 | |
| Amount reclassified to earnings as net gains | (14,265) | | | (1,292) | | | (38,645) | | | (7,060) | |
| Net change in unrealized gains (losses) | (77) | | | (121) | | | 41,274 | | | 6,579 | |
| Ending AOCI | $ | 69,199 | | | $ | 68,422 | | | $ | 69,199 | | | $ | 68,422 | |
As of March 31, 2026, the net gain reported in AOCI that is expected to be reclassified into earnings within the next 12 months is $14.3 million.
Offsetting of Derivative Assets and Liabilities
We present derivatives at gross fair values in the Condensed 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 March 31, 2026 | | | | | | Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets | | |
| (In thousands) | | Gross Amounts of Derivatives | | Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets | | Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets | | Financial Instruments | | Cash Collateral Received | | Net Amount |
| Derivatives - assets | | $ | 44,220 | | | $ | — | | | $ | 44,220 | | | $ | (17,298) | | | $ | — | | | $ | 26,922 | |
| Derivatives - liabilities | | $ | (19,394) | | | $ | — | | | $ | (19,394) | | | $ | 17,298 | | | $ | — | | | $ | (2,096) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2025 | | | | | | Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets | | |
| (In thousands) | | Gross Amounts of Derivatives | | Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets | | Net Amount of Derivatives Presented in the Condensed 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 | | | $ | — | | | $ | — | |
NOTE 16 – 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 integrated circuit (“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 microelectromechanical systems (“MEMS”), radio frequency (“RF”) 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 information because asset allocation is not managed at the segment level and assets are not tracked by segment in a way that it is meaningful for decision-making. 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 three months ended March 31, 2026 | | | | | | | | | | | |
| Revenue | $ | 3,083,912 | | | $ | 164,028 | | | $ | 167,642 | | | $ | 3,415,582 | | | | | |
| Less: | | | | | | | | | | | |
| Cost of revenue | 1,127,180 | | | 88,505 | | | 80,956 | | | | | | | |
| R&D | 344,303 | | | 13,806 | | | 29,905 | | | | | | | |
| SG&A | 240,772 | | | 11,524 | | | 24,033 | | | | | | | |
Other segment items (1) | 8,805 | | | 26,754 | | | 11,420 | | | | | | | |
| Segment profit | $ | 1,362,852 | | | $ | 23,439 | | | $ | 21,328 | | | $ | 1,407,619 | | | | | |
| For the three months ended March 31, 2025 | | | | | | | | | | | |
| Revenue | $ | 2,738,817 | | | $ | 156,500 | | | $ | 168,552 | | | $ | 3,063,869 | | | | | |
| Less: | | | | | | | | | | | |
| Cost of revenue | 973,623 | | | 72,673 | | | 87,453 | | | | | | | |
| R&D | 289,222 | | | 12,827 | | | 30,414 | | | | | | | |
| SG&A | 198,305 | | | 10,415 | | | 23,909 | | | | | | | |
Other segment items (1) | 10,062 | | | 27,199 | | | 16,402 | | | | | | | |
| Segment profit | $ | 1,267,605 | | | $ | 33,386 | | | $ | 10,374 | | | $ | 1,311,365 | | | | | |
| For the nine months ended March 31, 2026 | | | | | | | | | | | |
| Revenue | $ | 8,987,952 | | | $ | 424,360 | | | $ | 509,305 | | | $ | 9,921,617 | | | | | |
| Less: | | | | | | | | | | | |
| Cost of revenue | 3,269,059 | | | 223,734 | | | 254,571 | | | | | | | |
| R&D | 989,147 | | | 44,223 | | | 99,018 | | | | | | | |
| SG&A | 693,436 | | | 34,912 | | | 75,002 | | | | | | | |
Other segment items (1) | 28,294 | | | 81,316 | | | 35,397 | | | | | | | |
| Segment profit | $ | 4,008,016 | | | $ | 40,175 | | | $ | 45,317 | | | $ | 4,093,508 | | | | | |
| For the nine months ended March 31, 2025 | | | | | | | | | | | |
| Revenue | $ | 8,069,711 | | | $ | 445,241 | | | $ | 467,615 | | | $ | 8,982,567 | | | | | |
| Less: | | | | | | | | | | | |
| Cost of revenue | 2,924,658 | | | 215,798 | | | 273,453 | | | | | | | |
| R&D | 862,992 | | | 34,145 | | | 101,750 | | | | | | | |
| SG&A | 607,133 | | | 38,117 | | | 77,962 | | | | | | | |
Other segment items (1) | 32,185 | | | 81,763 | | | 294,166 | | | | | | | |
| Segment profit (loss) | $ | 3,642,743 | | | $ | 75,418 | | | $ | (279,716) | | | $ | 3,438,445 | | | | | |
__________________(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 for all periods presented and impairment of goodwill and purchased intangible assets for the nine months ended March 31, 2025.
The following table reconciles total reportable segment revenue to total revenue for the indicated periods:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | Nine Months Ended March 31, |
| (In thousands) | 2026 | | 2025 | | 2026 | | 2025 |
| Total revenues for reportable segments | $ | 3,415,582 | | | $ | 3,063,869 | | | $ | 9,921,617 | | | $ | 8,982,567 | |
| Effects of changes in foreign currency exchange rates | (504) | | | (840) | | | 303 | | | (1,146) | |
| Total revenues | $ | 3,415,078 | | | $ | 3,063,029 | | | $ | 9,921,920 | | | $ | 8,981,421 | |
The following table reconciles total segment profit to total income before income taxes for the indicated periods:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | Nine Months Ended March 31, |
| (In thousands) | 2026 | | 2025 | | 2026 | | 2025 |
| Total segment profit | $ | 1,407,619 | | | $ | 1,311,365 | | | $ | 4,093,508 | | | $ | 3,438,445 | |
Unallocated amounts (1) | 110 | | | 10,973 | | | (13,324) | | | 15,078 | |
| Interest expense | 70,423 | | | 71,889 | | | 211,166 | | | 229,041 | |
| | | | | | | |
| Other expense (income), net | (79,675) | | | (35,930) | | | (160,874) | | | (121,323) | |
| Income before income taxes | $ | 1,416,761 | | | $ | 1,264,433 | | | $ | 4,056,540 | | | $ | 3,315,649 | |
__________________
(1)Unallocated amounts include effects of changes in exchange rates, restructuring costs and other corporate expenses.
Our significant operations outside the United States 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) | Three Months Ended March 31, | | Nine Months Ended March 31, |
| 2026 | | 2025 | | 2026 | | 2025 |
| Revenues: | | | | | | | | | | | | | | | |
| Taiwan | $ | 869,110 | | | 25.5 | % | | $ | 988,470 | | | 32.3 | % | | $ | 2,507,705 | | | 25.3 | % | | $ | 2,331,672 | | | 26.0 | % |
| China | 829,583 | | | 24.3 | % | | 792,884 | | | 25.9 | % | | 3,091,630 | | | 31.2 | % | | 3,083,713 | | | 34.3 | % |
| Korea | 681,060 | | | 19.9 | % | | 378,548 | | | 12.4 | % | | 1,459,747 | | | 14.7 | % | | 974,656 | | | 10.9 | % |
| North America | 410,241 | | | 12.0 | % | | 293,980 | | | 9.6 | % | | 1,102,379 | | | 11.1 | % | | 1,081,114 | | | 12.0 | % |
| Europe and Israel | 247,323 | | | 7.2 | % | | 170,056 | | | 5.5 | % | | 559,469 | | | 5.6 | % | | 449,142 | | | 5.0 | % |
| Rest of Asia | 197,387 | | | 5.8 | % | | 100,440 | | | 3.3 | % | | 496,357 | | | 5.0 | % | | 305,290 | | | 3.4 | % |
| Japan | 180,374 | | | 5.3 | % | | 338,651 | | | 11.0 | % | | 704,633 | | | 7.1 | % | | 755,834 | | | 8.4 | % |
| Total | $ | 3,415,078 | | | 100.0 | % | | $ | 3,063,029 | | | 100.0 | % | | $ | 9,921,920 | | | 100.0 | % | | $ | 8,981,421 | | | 100.0 | % |
The following is a summary of revenues by major product categories for the indicated periods:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollar amounts in thousands) | Three Months Ended March 31, | | Nine Months Ended March 31, |
| 2026 | | 2025 | | 2026 | | 2025 |
| Revenues: | | | | | | | | | | | | | | | |
| Wafer Inspection | $ | 1,739,671 | | | 51 | % | | $ | 1,495,685 | | | 49 | % | | $ | 4,849,697 | | | 49 | % | | $ | 4,427,238 | | | 49 | % |
| Patterning | 615,076 | | | 18 | % | | 636,415 | | | 21 | % | | 1,978,664 | | | 20 | % | | 1,743,504 | | | 20 | % |
| Specialty Semiconductor Process | 144,199 | | | 4 | % | | 138,376 | | | 4 | % | | 366,006 | | | 4 | % | | 394,165 | | | 4 | % |
| PCB and Component Inspection | 95,148 | | | 3 | % | | 104,254 | | | 3 | % | | 292,794 | | | 3 | % | | 270,489 | | | 3 | % |
| Services | 774,791 | | | 23 | % | | 669,208 | | | 22 | % | | 2,305,534 | | | 23 | % | | 1,980,749 | | | 22 | % |
| Other | 46,193 | | | 1 | % | | 19,091 | | | 1 | % | | 129,225 | | | 1 | % | | 165,276 | | | 2 | % |
| Total | $ | 3,415,078 | | | 100 | % | | $ | 3,063,029 | | | 100 | % | | $ | 9,921,920 | | | 100 | % | | $ | 8,981,421 | | | 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 three months ended March 31, 2026, two customers accounted for approximately 19% and 11% of total revenues each. In the three months ended March 31, 2025, one customer accounted for approximately 23% of total revenues. In the nine months ended March 31, 2026, one customer accounted for approximately 17% of total revenues. In the nine months ended March 31, 2025, one customer accounted for approximately 20% of total revenues. Three customers and two customers on an individual basis accounted for greater than 10% of accounts receivable, net, at March 31, 2026 and June 30, 2025, respectively.
Land, property and equipment, net by geographic region as of the dates indicated below were as follows:
| | | | | | | | | | | |
| As of | | As of |
| (In thousands) | March 31, 2026 | | June 30, 2025 |
| Land, property and equipment, net: | | | |
| United States | $ | 768,968 | | | $ | 728,162 | |
| Europe | 285,242 | | | 253,848 | |
| Singapore | 178,574 | | | 153,052 | |
| Rest of Asia | 71,784 | | | 49,109 | |
| Israel | 59,216 | | | 68,604 | |
| Total | $ | 1,363,784 | | | $ | 1,252,775 | |
NOTE 17 – RESTRUCTURING CHARGES
From time to time, management approves restructuring plans including workforce reductions in an effort to streamline operations.
Restructuring charges were $0.2 million and $0.6 million for the three months ended March 31, 2026 and 2025, respectively. Restructuring charges were $0.9 million and $5.6 million for the nine months ended March 31, 2026 and 2025, respectively. The charges for fiscal years 2026 and 2025 include severance and related charges for the restructuring of the former PCB and Display operating segment, as a result of exiting the Display business. As of March 31, 2026 and June 30, 2025, the accrual for restructuring charges was $4.9 million and $5.9 million, respectively.
