AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 18/10/2026
Moat63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Significant qualification and integration resources, supported by continuing installed-base service demand and adopted products, establish meaningful current switching friction and engineering capability. Comparative technology leadership is not quantified.
durability · 2/4 · Service growth across fiscal 2024–2026 supports persistence, but the extended-reliance statement is management's belief. Continued R&D and competition at new technology transitions make durability conditional.
customer dependency · 3/4 · Production-line integration and maintenance demand demonstrate substantial operational dependency. Service growth is indirect retention evidence; customer-level renewals and replacement frequency are absent.
erosion resilience · 2/4 · Fiscal 2026 growth and process-control results demonstrate resilience despite disruption. Actual export-related backlog harm, historical impairments and component shortages constrain the assessment; potential rival share gains are not treated as realized losses.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · Volume incentives are disclosed, but their actual effect on selling prices is not quantified. Revenue growth, product mix and input-cost changes cannot establish realized pricing outcomes in either direction.
retention · 3/4 · Qualification friction and three years of growing installed-base service revenue support strong continuing demand indirectly. No renewal rate or same-customer retention rate is inferred, and growth partly reflects additional installed tools.
margin resilience · 2/4 · March 2026 quarterly gross margin fell from 61.6% to 61.1%, while nine-month margin rose from 60.5% to 61.3%. The bridge identifies volume, mix and costs, and disclosed DRAM pressure limits resilience. These operating outcomes do not demonstrate price pass-through.
contractual freedom · 1/4 · Orders generally permit cancellation or delay with limited or no penalty, and larger-customer agreements can include future purchase credits. These disclosed terms provide weak revenue protection; unilateral repricing rights are not established.
Predictability89
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 10.97
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.64
Financial strength94
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 91.96
- netDebtEbitGrade
- 85.61
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 100.00
- Debt / FCF (x)
- 1.56
- Net debt / operating income (x)
- 0.72
- Current ratio (x)
- 2.88
Capital allocation97
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 56.20
- 3-year average dilution (%)
- -2.03
- 3-year average SBC / revenue (%)
- 2.21
- cashConversionGrade
- 90.48
Management69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Five years of positive cash generation and fiscal 2026 distributions of approximately $3.35 billion against approximately $3.77 billion of free cash flow support discipline. Historical impairments and write-offs, increased supply commitments and declining free cash flow margin provide counterweights. Buyback valuation effectiveness is unestablished.
incentive alignment · 3/4 · Actual PRSU terms link awards to three-year relative free cash flow margin and continued service; historical awards were earned and vested. Ownership guidelines and hedging restrictions support alignment. Bonus exclusions for acquisition, impairment and other charges weaken full economic accountability, and actual ownership compliance is unavailable.
execution · 3/4 · Reported product adoption, sustained service growth, expanding process-control revenue and higher fiscal 2026 revenue and net income demonstrate strong execution. This is assessed from operating outcomes, which also benefited from customer investment; specialty-process weakness and past impairments prevent an exceptional grade.
governance · 3/4 · Current independent director sessions, disclosed Audit Committee independence and related-party review procedures support strong governance safeguards. Shareholders lack written-consent and special-meeting rights. Nominee statistics do not establish completion of the forthcoming election, and policy existence does not prove exceptional oversight outcomes.
Evidence
•Semiconductor manufacturers generally must commit significant resources to qualify, install and integrate process control and yield management equipment into a semiconductor production line.
Risk factors / customer equipment qualification, installation and integration · Filed 06/08/2026
We believe that once a semiconductor manufacturer selects a particular supplier’s process control and yield management equipment, the manufacturer generally relies upon that equipment for that specific production line application for an extended period of time.
Risk factors / management belief concerning extended equipment reliance · Filed 06/08/2026
The amount of our service revenues is typically a function of the number of systems installed at our customers’ sites and the utilization of those systems, but it is also impacted by other factors, such as our rate of service contract renewals, the types of systems being serviced and fluctuations in foreign currency exchange rates.
MD&A / service revenue drivers and renewals · Filed 06/08/2026
Revenue growth also benefited from higher service revenues, which increased 16% due to growth in our installed base of tools.
MD&A / fiscal 2026 service growth · Filed 06/08/2026
The increase in service revenues by 15% in the fiscal year ended June 30, 2025 compared to the prior fiscal year is primarily attributable to the growth of our installed base.
MD&A / fiscal 2025 service growth · Filed 08/08/2025
The increase in service revenues by 10% in the fiscal year ended June 30, 2024 compared to the prior fiscal year is primarily attributable to an increase in our installed base.
MD&A / fiscal 2024 service growth · Filed 05/08/2024
Semiconductor Process Control The Semiconductor Process Control segment offers a comprehensive portfolio of inspection, metrology and data analytics products, and related services, which helps IC manufacturers achieve target yield throughout the entire semiconductor fabrication process, from R&D to final volume production.
Segment reporting / process-control portfolio · Filed 06/08/2026
The increase in total revenues by 24% in the fiscal year ended June 30, 2025 compared to the prior fiscal year is primarily attributable to the increase in our product revenues and is due to increased investments by leading edge foundries driven by the AI infrastructure buildout, strong customer adoption of our advanced packaging portfolio of products and strong demand for many of our products, especially those in our inspection portfolio, partially offset by a decrease of 4% in revenues from our customers in China.
MD&A / product adoption and fiscal 2025 demand drivers · Filed 08/08/2025
(In thousands) Semiconductor Process Control Specialty Semiconductor Process PCB and Component Inspection Total For the year ended June 30, 2024 Revenues $ 8,733,556 $ 528,701 $ 552,491 $ 9,814,748 Less: Costs of revenues 3,104,254 245,791 393,531 R&D 1,077,366 40,043 147,867 SG&A 728,349 43,959 116,074 Other segment items (1) 56,014 108,069 365,292 Segment profit (loss) $ 3,767,573 $ 90,839 $ (470,273) $ 3,388,139 For the year ended June 30, 2025 Revenues $ 10,947,359 $ 587,107 $ 621,721 $ 12,156,187 Less: Costs of revenues 3,922,735 283,160 358,847 R&D 1,165,858 47,054 133,487 SG&A 814,074 48,980 102,662 Other segment items (1) 41,946 108,961 307,882 Segment profit (loss) $ 5,002,746 $ 98,952 $ (281,157) $ 4,820,541 For the year ended June 30, 2026 Revenues $ 12,244,733 $ 584,064 $ 750,415 $ 13,579,212 Less: Costs of revenues 4,453,558 305,303 365,120 R&D 1,341,321 59,418 130,166 SG&A 930,850 47,423 100,930 Other segment items (1) 36,174 107,347 46,155 Segment profit $ 5,482,830 $ 64,573 $ 108,044 $ 5,655,447 __________________ (1)Other segment items for each reportable segment includes: •Semiconductor Process Control — amortization of purchased intangible assets and acquisition related expenses.
Segment reporting / fiscal 2024–2026 revenue, R&D and profit · Filed 06/08/2026
Competition The worldwide market for technologically advanced process control, process-enabling and yield management solutions used by semiconductor and electronics manufacturers is highly competitive, with important competitive factors including system performance, ease of use, reliability, technical service and support, and overall cost of ownership.
Business / competition factors · Filed 06/08/2026
In each of our product markets, we have many competitors, including companies such as Applied Materials, Inc., ASML Holding N.V., Hitachi High-Tech Corporation, Lasertec, Inc.
Business / named competitors · Filed 06/08/2026
and Onto Innovation, Inc., some of which may have greater financial, research, engineering, manufacturing and marketing resources than we have.
Business / named competitor and comparative resource risk · Filed 06/08/2026
We expect our competitors to continue to improve the design and performance of their current products and to introduce new products with improved pricing and performance characteristics.
Business / expected competitor product improvements · Filed 06/08/2026
During down cycles in our industry, the financial results of our customers may be negatively impacted, which could result not only in a decrease in, or cancellation or delay of, orders (which are generally subject to cancellation or delay by the customer with limited or no penalty) but also a weakening of their financial condition that could impair their ability to pay for our products or our ability to recognize revenue from certain customers.
Risk factors / customer cancellation and delay rights · Filed 06/08/2026
Furthermore, we occasionally enter into volume purchase agreements with our larger customers, and these agreements may provide for certain volume purchase incentives, such as credits toward future purchases.
Risk factors / volume purchase agreements and incentives · Filed 06/08/2026
However, these arrangements could require us to recognize a reduced level of revenue for the products that are initially purchased, to account for the potential future credits or other volume purchase incentives.
Risk factors / potential revenue reductions from purchase incentives · Filed 06/08/2026
Failure to obtain export licenses has harmed and could continue to harm our backlog, requiring us to return substantial deposits received from customers in China for purchase orders, and/or further limiting our ability to meet our contractual obligations and sell our products or provide services to our customers in China.
Risk factors / realized export-license harm to backlog · Filed 30/04/2026
In addition, the U.S. export restrictions on semiconductors and semiconductor technology to China and Chinese customers may reduce the need for our products and make it easier for our China-based competitors to develop and sell their own products and take market share from us.
Risk factors / potential competitive effects of China export restrictions · Filed 30/04/2026
Recently, a few large suppliers have discontinued manufacturing certain DRAM chips that are incorporated in a number of our products, and the resulting shortage has caused a dramatic increase in the prices to acquire these chips.
Risk factors / realized DRAM component shortages and acquisition-cost increases · Filed 30/04/2026
Looking ahead, while we expect continued revenue growth in calendar year 2026, escalating costs for DRAM chips used in the Company’s image computers will continue to negatively impact our gross margin, though we expect this impact to be transitory.
MD&A / component-cost gross-margin pressure and management outlook · Filed 30/04/2026
The following table summarizes the major factors that contributed to the changes in gross margin: Gross Margin Three Months Ended Nine Months Ended March 31, 2025 61.6% 60.5% Revenue volume of products and services 0.5% 0.4% Mix of products and services sold (0.5)% 0.5% Manufacturing labor, overhead and efficiencies (0.1)% 0.1% Other service and manufacturing costs (0.4)% (0.2)% March 31, 2026 61.1% 61.3% Changes in gross margin from revenue volume of products and services reflect our ability to leverage existing infrastructure to generate higher revenues.
MD&A / quarterly and nine-month gross-margin bridges · Filed 30/04/2026
Free Cash Flow Measures (Dollars in millions) For the twelve months ended June 30, 2022 June 30, 2023 June 30, 2024 June 30, 2025 June 30, 2026 Net cash provided by operating activities $3,312.7 $3,669.8 $3,308.6 $4,081.9 $4,143.1 Less Capital expenditures $ (307.3) $ (341.6) $ (277.4) $ (335.3) $ (375.9) Free cash flow $3,005.4 $3,328.2 $3,031.2 $3,746.6 $3,767.1 Total revenues $9,211.9 $10,496.1 $9,812.2 $12,156.2 $13,579.5 Free cash flow margin 32.6% 31.7% 30.9% 30.8% 27.7% | 2026 Proxy Statement Table of Contents 72 | Executive Compensation Tables Narrative Disclosure to Pay Versus Performance Table Relationship Between Compensation Actually Paid and Total Shareholder Return, Net Income and Free Cash Flow Margin The following charts graphically depict the relationship between compensation actually paid to our PEO and the average of the compensation actually paid to our non-PEO NEOs and each of our cumulative total shareholder return, Peer Index total shareholder return , our net income and free cash flow margin.
Pay versus performance / fiscal 2022–2026 operating cash flow, capital expenditure and free cash flow · Filed 22/09/2026
Fiscal Year 2026 Performance Highlights (Dollars in thousands) Total revenues $13,579,476 11.7% from FY25 Net income $4,830,771 18.9% from FY25 Dividends and stock repurchases $3,347,601 9.6% from FY25 | 2026 Proxy Statement Table of Contents 4| Proposal One: Election of Directors Proposal One: Election of Directors NOMINEES Nine incumbent directors are nominated for election at the Annual Meeting.
Proxy summary / fiscal 2026 operating results and shareholder distributions · Filed 22/09/2026
Historically, we have recorded restructuring charges related to our prior global workforce reductions, large excess inventory write-offs, and material impairment charges related to our goodwill and purchased intangible assets, such as the goodwill and purchased intangible asset impairment charges recorded in the second quarter of fiscal 2025.
Risk factors / historical restructuring, inventory write-offs and fiscal 2025 impairments · Filed 06/08/2026
Our fiscal year 2026 annual PRSUs are tied to three-year Relative Free Cash Flow Margin (as defined below).
Executive compensation / fiscal 2026 PRSU performance metric · Filed 22/09/2026
Earned PRSUs vest 100% at three years from date of grant, subject to continued service through the vesting date.
Executive compensation / earned PRSU service-vesting requirement · Filed 22/09/2026
The terms of the fiscal year 2023 annual PRSUs, including the target performance and payout level, actual results and vesting schedule, are summarized in the following table: Terms of Fiscal Year 2023 Annual PRSUs Threshold Target Level Maximum Level Actual Results Relative Free Cash Flow Margin performance 30 th percentile 55 th percentile 75 th percentile 75 th percentile Payout level as a percentage of target shares Vesting schedule With respect to the earned fiscal year 2023 annual PRSUs, 50% vested in August 2025 and the remaining 50% vested in August 2026 | 2026 Proxy Statement Table of Contents 52| Executive Compensation and Other Matters The following table sets forth the threshold, target and maximum shares achievable by the NEOs, as well as the actual number of shares earned by them, with respect to the fiscal year 2023 PRSUs (rounded down to the nearest whole share).
Executive compensation / fiscal 2023 PRSU actual results and completed vesting schedule · Filed 22/09/2026
No hedging and pledging: We prohibit officers, directors and employees from hedging against our stock or pledging our stock.
Executive compensation practices / hedging and pledging prohibition · Filed 22/09/2026
CONDUCTING FORMAL INDEPENDENT DIRECTOR SESSIONS At the conclusion of each regularly scheduled Board meeting, the independent directors meet in an executive session without KLA management or any non-independent directors.
Corporate governance / independent director executive sessions · Filed 22/09/2026
Independence: The Board has determined that each of the members of the Audit Committee meets the independence requirements (including the heightened requirements for Audit Committee members) of NASDAQ and under the rules and regulations of the SEC, and has no material relationship with KLA (including any relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment as a director) outside of their service on the Board and its committees.
Board committees / current Audit Committee independence determination · Filed 22/09/2026
Under this policy, the Audit Committee reviews transactions, arrangements or relationships in which the Company (including any of its subsidiaries) is a participant, the amount involved exceeds $100,000 in any fiscal year, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members) has a direct or indirect material interest (other than solely as a result of being a director or beneficial owner of less than a specified percentage of shares of the other entity (5% for publicly traded entities and 10% for other entities)).
Related-party transactions / Audit Committee review policy · Filed 22/09/2026
AC = Audit Committee CTC = Compensation and Talent Committee NGC = Nominating and Governance Committee | 2026 Proxy Statement Table of Contents 3 GOVERNANCE HIGHLIGHTS Board and Governance Information* Size of the Board 9 Independent Chair Yes Number of Independent Directors 8 Proxy Access Yes Average Age of Directors 61.3 Stockholder Action by Written Consent No Average Tenure of Directors 8.7 years Stockholder Ability to Call Special Meeting No Annual Election of Directors Yes Poison Pill No Women/Men 33% / 67% Stock Ownership Guidelines for Directors and Executive Officers Yes Ethnic/Racial Diversity 22% Anti-Hedging and Pledging Policies Yes Majority Voting in Director Elections Yes Clawback Policy Yes * The information in this table reflects only the directors nominated.
Governance highlights / shareholder rights and nominee-based board statistics · Filed 22/09/2026
For our calendar year 2025 Bonus Plan, “Operating Margin Dollar” represents our total revenues less total costs of revenues, research and development expenses and selling, general and administrative expenses, other than expenses related to acquisitions, goodwill impairment, severance and merger-related items.
Executive compensation / bonus metric exclusions · Filed 22/09/2026
Stock ownership guidelines: We impose stock ownership guidelines on all executive officers and Outside Directors.
Executive compensation practices / stock ownership guidelines · Filed 22/09/2026
We have also increased our purchase commitments, in part to secure the supply of key components, which may affect the timing and magnitude of our costs and working capital requirements.
MD&A / increased purchase commitments to secure components · Filed 06/08/2026
