Shareholder letter
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Letter to Shareholders Q4 Fiscal 2026 QUARTER ENDED JUNE 30, 2026 | REPORTED JULY 28, 2026
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 1 Dear KLA Shareholders, This letter details KLA’s results for the June 2026 quarter and outlook. Effective June 11, 2026, KLA completed a 10-for-1 stock split. All current and prior-period EPS and other per-share amounts in this letter have been adjusted to reflect the split. CEO Update - June 2026 Quarter Results KLA delivered another strong quarter, with revenue, profitability, and earnings per share all above the midpoint of guidance. Revenue reached a record $3.66 billion supported by accelerating investment tied to AI infrastructure, continued strength in leading-edge foundry/logic, and increasing process control intensity across memory and advanced packaging. These results underscore KLA’s market leadership and the growing strategic importance of process control as semiconductor innovation becomes more complex. The industry is in a period of accelerating investment driven by AI compute, a robust design environment, larger and more sophisticated device architectures, rising High-Bandwidth Memory (HBM) adoption, and increased advanced packaging requirements. Across these inflection points, customers are relying on KLA’s portfolio of systems, services, and expertise to accelerate yield learning, improve productivity, and scale new technologies into high-volume manufacturing. KLA remains uniquely positioned on the critical path of AI infrastructure expansion, where the increasing number and sophistication of leading-edge designs that are consuming a growing percentage of new wafer starts are driving greater demand for process control. The rapid expansion of the AI ecosystem requires more advanced logic and memory, new complex manufacturing and packaging flows, and additional KLA systems and services to ramp, yield, and sustain high-volume production. Since our March Investor Day, demand signals across AI infrastructure have strengthened materially, supported by accelerating hyperscale data center investment, rising AI compute requirements, and broader adoption of AI-enabled applications. Customer engagement remains robust, visibility continues to improve, and the wafer equipment market outlook continues to expand. We expect momentum across our business to accelerate through the second half of calendar 2026 and for significant growth to continue in calendar 2027. Importantly, AI-driven design activity and HBM adoption are only part of the process control story. Faster product cycles, higher-value wafers and masks, more rigorous device performance specifications, and growing design variability are also key catalysts benefiting KLA. In addition, the AI infrastructure buildout is increasing the importance of advanced packaging and its related process-control requirements. This is driving new high-growth opportunities where KLA’s market-leading process control portfolio for Advanced Packaging is well positioned. As we have discussed over the past several quarters, the advanced packaging roadmaps are moving towards more sophisticated wafer front-end processes demanding more front-end process control capabilities. With the most comprehensive process control product portfolio in the industry, KLA is well positioned to benefit from this trend. In fact, for calendar 2026, we now expect our Advanced Packaging process control systems revenue to grow to approximately $1.1billion, up more than 70% year-over-year, above our prior expectation of high 50% growth and almost two times faster than the advanced packaging market. Finally, high-performance compute packages and integration are also driving our Specialty Process, PCB, and Component Inspection businesses, augmenting the company’s growth momentum. KLA entered many of these markets in 2019 as part of the Orbotech acquisition. Our investment thesis for the transaction was centered around the rising value of the chip package and the ability for the KLA operating model to drive product strategy and business execution to take advantage of
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 2 this evolving trend. With these combined products expected to grow over 25% in calendar 2026, we are encouraged by our future opportunities in these markets. Rising system complexity, longer tool lifecycles, and increasing service intensity all enhance the strategic value of our service offerings. KLA Services delivered $820 million in revenue during the quarter, up 17% year-over-year, as customers rely on KLA to maximize tool performance, productivity, and availability across a growing installed base. This calendar year will be the 17th consecutive year of annual Services revenue growth. This recurring, subscription-like business strengthens our operating model, enhances free cash flow generation, and reinforces our long-term capital allocation strategy. June 2026 Quarter Financial Highlights KLA’s June quarter results reflect strong sequential and year-over-year growth and an industry-leading profitability profile. This reinforces our market leadership and consistent execution, which is made possible by the dedication of our customer-focused global teams. Revenue of $3.66 billion was above the midpoint of guidance of $3.575 billion and rose 7% sequentially and 15% year-over-year. Non-GAAP diluted EPS was $1.05, and GAAP diluted EPS was $1.04, each at the upper end of the respective guidance ranges. Non-GAAP gross margin was 62.4%. This was also at the upper end of our guidance range, driven by a more favorable services mix than modeled and manufacturing scale that served as positive offsets to the challenging memory pricing environment and tariff headwinds. Non-GAAP operating expenses were $682 million and included $399 million in R&D and $283 million in SG&A. Non-GAAP operating margin was 43.7%. Incremental operating margin in the quarter was 59%. Non-GAAP other income/expense, net, was $16 million in expense. The quarterly non-GAAP effective tax rate was 12.4% lower than the 14.5% guided planning rate due to various discrete items in the quarter as we true up actuals for the 2026 fiscal year.
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 3 Non-GAAP net income was $1.39 billion, GAAP net income was $1.36 billion, cash flow from operations was $906 million, and free cash flow was $817 million. The company had 1.315 billion diluted weighted average shares outstanding for the quarter. Breakdown of Revenue by Reportable Segments and End Markets Revenue for the Semiconductor Process Control segment, including its associated Services business, was $3.26 billion, up 6% sequentially, and 13% on a year-over-year basis. The Semi Process Control systems-only mix for our Foundry/Logic and Memory semiconductor customers was approximately 79% for Foundry/Logic and 21% for Memory, with DRAM accounting for approximately 83% of Memory revenue, and NAND 17%. Revenue for the Specialty Semiconductor Process business, which includes its associated Services business, was $160 million, down 3% sequentially, but up 13% on a year-over-year basis. PCB and Component Inspection revenue, including its related Services business, was $241 million, up 44% sequentially and 56% year-over-year. Breakdown of Revenue by Major Products and Regions
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 4 Wafer Inspection systems increased 2% sequentially, and 1% year-over-year in the June quarter, totaling 49% of revenue. Patterning systems, which include multiple metrology products and reticle inspection, rose 18% sequentially and 61% year-over-year, accounting for 20% of quarterly revenue. Specialty Semiconductor Process systems revenue decreased 5% sequentially, but rose 11% year-over- year, representing 4% of revenue. PCB and Component Inspection systems revenue was up 76% sequentially and 96% year-over-year, ending at 4% of revenue. The primary driver of growth in this business remains the increasing value of more complex processing and more rigorous requirements for AI chip packages. Services revenue grew 6% sequentially and 17% year-over-year to $820 million in the quarter or 22% of revenue. Other, which is included in the Semiconductor Process Control segment, was 1% of revenue. In descending order, the quarterly regional revenue split was Taiwan at 31%, China at 26%, North America at 18%, Korea at 10%, Japan at 6%, Europe at 5%, and Rest of Asia at 4% of total revenue. Strong Investment Grade Balance Sheet KLA ended the quarter with $4.9 billion in total cash, cash equivalents, and marketable securities, and $5.9 billion of debt. The company maintains a flexible and attractive bond maturity profile, supported by investment-grade ratings from all three major rating agencies. KLA's strong balance sheet provides the financial flexibility to invest in both organic and inorganic growth opportunities, while continuing to return significant capital to shareholders through dividends and share repurchases.
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 5 FCF Generation Fuels Consistent Capital Return to Shareholders KLA generates consistent, strong free cash flow, driven by our high-performing operating model. Over the past five calendar years, free cash flow has grown at an approximate 20% CAGR, above the revenue CAGR of 15% over the same period. This growth, coupled with resilience across business cycles, enables a comprehensive capital return strategy featuring double-digit dividend growth and share repurchases to augment long-term shareholder value creation. Consistent Returns Across Both Share Repurchases and Dividends Free Cash Flow and Capital Return Highlights KLA's strong cash generation continues to support meaningful capital returns to shareholders. In the June quarter, free cash flow was $817 million. During the quarter, KLA returned $876 million to shareholders, including $571 million in share repurchases and $305 million in dividends. Over the past 12 months, total capital returns were $3.3 billion and free cash flow margin was 28%. KLA has made meaningful investments in our working capital and facilities to support the current growth environment. Given the expected aggregate investment in wafer equipment over the next several
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 6 years, our expectation is that these investments will continue to ensure that the company is positioned to take advantage of the strong market opportunity and deliver on our customer commitments. This consistent cash generation, combined with our disciplined approach to capital allocation, supports investment in future growth opportunities while delivering attractive returns to shareholders. Semiconductor Industry Demand Environment Semiconductors have become increasingly important to the global economy, and as end markets continue to expand, we see ongoing innovation in both semiconductor designs and manufacturing processes. Industry growth is increasingly being driven by investment in AI infrastructure, while semiconductor demand has broadened across a wider range of applications and end markets over the past ten years. Together, these trends are supporting stronger, more durable, and more diversified long-term industry growth. As AI systems become larger and more complex, process control is increasingly important throughout the semiconductor manufacturing flow. KLA's comprehensive portfolio is uniquely positioned to benefit from these trends. The expansion of AI data center investment and increasing adoption of advanced packaging architectures further reinforce the long-term growth opportunities for KLA. Calendar 2026 and 2027 Market Outlook The industry outlook continues to improve with extended visibility. Despite well-chronicled fab space limitations, we continue to see the market for wafer equipment strengthening as customers accelerate their delivery expectations across all segments. As a result, we are raising our expectation for the wafer equipment market, including advanced packaging, to approximately the low $150 billion range in calendar 2026, up from our prior expectation of $140 billion plus and mid 20 percent growth above the approximate $120 billion level in calendar 2025. Given the unprecedented visibility from customers, we continue to plan for significant growth in calendar 2027 as broad-based investment across leading-edge logic, foundry, DRAM, both conventional and HBM, NAND, and advanced packaging drives continued capacity expansion.
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 7 Customer engagement remains intense with numerous new fab projects and greenfield facilities actively underway. Against this backdrop, KLA's business momentum, and critical role in leading-edge process control position us to deliver accelerating growth in the second half of calendar 2026 and continued strong growth in 2027. High-performance computing (HPC), HBM, increasing EUV adoption in DRAM, and recently adopted advanced packaging technologies such as hybrid bonding are driving higher process control intensity across the semiconductor ecosystem. Our expectations of revenue growth acceleration in the second half of 2026 are materializing as more capacity comes online in our long-lead-time supply chain areas. We anticipate this resulting in second half of calendar 2026 growth for KLA over the first half to be approximately 20% and positioning the company for continued sequential growth into calendar 2027. Outlook for the September 2026 Quarter KLA’s September quarter guidance is for revenue of $4 billion, plus or minus $200 million. Foundry/Logic revenue from semiconductor customers is forecasted to increase to approximately 73%, and memory is expected to be approximately 27% of Semiconductor Process Control systems revenue to semiconductor customers. Within memory, DRAM is expected to account for approximately 90%, with NAND representing the remaining 10%. As a reminder, these business mix approximations pertain solely to our semiconductor customers and do not fully reflect our total Semiconductor Process Control systems revenue. Non-GAAP gross margin for the September quarter is forecasted to be 62.5%, plus or minus one percentage point. While guidance is roughly flat sequentially with results, it is up 75 basis points from gross margin guidance last quarter, benefiting from operating leverage on revenue growth. Non-GAAP operating expenses are forecasted to be approximately $690 million in the September quarter. We will continue to prioritize next-generation product development and company infrastructure investments to support expected revenue growth over the next several years, and we anticipate these expenses to grow by roughly $15 to $20 million sequentially over the next several
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 8 quarters. Our business model is designed to deliver 40% to 50% incremental non-GAAP operating margin leverage on revenue growth over the long run. Other model assumptions include: Non-GAAP other income and expense, net, of approximately $25 million expense for the September quarter, and we expect it to remain at approximately this quarterly level for the calendar year. The non-GAAP planning tax rate is 14.5%. Our tax rate will vary quarter-to- quarter due to discrete items. For the September quarter, non-GAAP diluted EPS is expected to be $1.16 plus or minus $0.10, and GAAP diluted EPS is expected to be $1.14 plus or minus $0.10. EPS guidance is based on a fully diluted share count of approximately 1.312 billion shares. Conclusion KLA enters the second half of calendar 2026 with strengthening momentum, expanding visibility, and a broader set of growth drivers across the semiconductor ecosystem. The acceleration of AI infrastructure investment, the rising complexity of leading-edge logic and memory devices, the rapid adoption of HBM, and the increasing importance of advanced packaging are all raising the strategic value of process control. These trends reinforce KLA’s critical role in helping customers accelerate yield learning, improve productivity, and ramp increasingly complex technologies into high-volume manufacturing. Our June quarter results demonstrate the strength of KLA’s market position, operating model execution, and drive continued confidence in our performance moving forward. Looking ahead, customer engagement and demand signals continue to strengthen and we are adding capacity to support expected demand. Growth is accelerating in the second half of calendar 2026 and we are well positioned to execute against the expected demand environment across all segments over the remainder of calendar 2026 and into calendar 2027. As AI-driven semiconductor complexity increases, KLA’s differentiated portfolio, compounding R&D investments, growing installed base, and disciplined execution position us to capture a larger market opportunity. As we progress toward our 2030 target model, adjusted to reflect our recent 10-for-1 stock split (see update below), we remain focused on supporting our customers, investing in innovation, scaling our global capabilities, and executing our proven capital allocation strategy. We believe KLA is well positioned to enable the next era of growth and to create durable shareholder value through customer collaboration, technology leadership, operational excellence, and consistent free cash flow generation.
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 9 Sincerely, Rick Wallace, CEO Bren Higgins, CFO
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 10 Appendix
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 11
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 12 About KLA Corporation KLA Corporation (KLA) is the world's leading supplier of process control and yield management solutions for the semiconductor and related microelectronics industries. The company's comprehensive portfolio of products, software, analysis, services, and expertise is designed to help Integrated Circuit (IC) manufacturers manage yield throughout the entire wafer fabrication process, from Research & Development to final yield analysis. KLA offers a broad spectrum of products and services used by every major semiconductor manufacturer worldwide. We provide advanced process control and process- enabling solutions for manufacturing wafers and reticles, integrated circuits, Packaging, and printed circuit boards. In close collaboration with leading customers across the globe, our expert teams of physicists, engineers, data scientists and problem-solvers design solutions that move the world forward. Additional information may be found at: www.kla.com. Investors and others should note that KLA announces material financial information on its investor relations website (ir.kla.com), including SEC filings, press releases, public earnings calls, and conference webcasts. These channels are used to communicate with the public about the company, products, services, and other matters.
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 13 KLA’s Broad Portfolio Addresses Entire Semiconductor Ecosystem Semiconductor Manufacturing Related Electronics Industries • IC Manufacturing • Compound Semiconductor • Wafer Manufacturing • Power Device • Reticle Manufacturing • LED • IC Packaging • MEMS • Printed Circuit Board • Data Storage/Media Head • General Purpose/Labs Investor Contact: Media Contact: Kevin Kessel, CFA Mike Dulin VP, Investor Relations & Market Analytics Corporate Communications ir@kla.com media@kla.com Reticle Manufacturing Wafer Manufacturing IC Manufacturing Materials OEMs Wafer-Level Packaging Packaging Printed Circuit Board
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KLA Earnings | Letter to Shareholders | June 2026 Quarter – Reported July 28, 2026 Page 14 Note on Forward-Looking Statements Statements in this letter other than historical facts, such as statements pertaining to: (i) future industry demand for semiconductors, Wafer Equipment, and advanced packaging; (ii) our market position for the future and future growth in demand for our products; (iii) our forecast of financial measures for the September quarter, calendar 2026, calendar 2027 and our 2030 Target Model; (iv) our future revenues by customer segment for our Semi Process Control systems; (v) our long-term financial targets and underlying assumptions; (vi) our future investment plan on R&D, technology, manufacturing capacity and infrastructure; and (vii) future shareholder returns, are forward-looking statements and subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including, but not limited to: our vulnerability to a weakening in the condition of the financial markets and the global economy; risks related to our international operations; evolving Bureau of Industry and Security of the U.S. Department of Commerce rules and regulations and their impact on our ability to sell products to and provide services to certain customers in China; tariffs and other trade restrictions; costly intellectual property disputes that could result in our inability to sell or use the challenged technology; ris ks related to the legal, regulatory and tax environments in which we conduct our business; differing stakeholder expectations, requirements and attention to environment, social and governance (“ESG”) matters and the resulting costs, risks and impact on our business; unexpected delays, difficulties and expenses in executing against our environmental, climate, or other ESG targets, goals and commitments; our ability to attract, retain and motivate key personnel; our vulnerability to disruptions and delays at our third -party service providers; cybersecurity threats, cyber incidents affecting our and our business partners' systems and networks; our inability to access critical information in a timely manner due to system failures; risks related to acquisitions, integrations, strategic alliances or collaborative arrangements; climate change, earthquake, flood or other natural catastrophic events, public health crises or terrorism and the adverse impact on our business operations; the war between Ukraine and Russia, escalation of hostilities in Iran and the Middle East, and the significant military activity in those regions; lack of insurance for losses and interruptions caused by terrorists and acts of war, and our self - insurance of certain risks including earthquake risk; risks related to fluctuations in foreign currency exchange rates; risks related to fluctuations in interest rates and the market values of our portfolio investments; risks related to tax and regulatory compliance audits; any change in taxation rul es or practices and our effective tax rate; compliance costs with federal securities laws, rules, regulations, NASDAQ requirements, and evolving accounting standards and practices; ongoing changes in the technology industry, and the semiconductor industry in particular, including future growth rates, pricing trends in end-markets, or changes in customer capital spending patterns; our vulnerability to a highly concentrated customer base; the cyclicality of the industries in which we operate; our ability to timely develop new technologies and products that successfully address changes in the industry; risks related to artificial intelligence; our ability to maintain our technology advantage and protect proprietary rights; our ability to compete in the industry; availability and cost of the materials and parts used in the production of our products; our ability to operate our business in accordance with our business plan; risks related to our debt and leveraged capital structure; we may not be able to declare ca sh dividends at all or in any particular amount; liability to our customers under indemnification provisions if our products fail to operate properly or contain defects or our customers are sued by third parties due to our products; our government funding for research and development is subject to audit, and potential termination or penalties; we may incur significant restructuring charges or other asset impairment charges or inventory write offs; we are subject to risks related to receivables factoring arrangements and compliance risk of certain settlement agreements with the government; and risks related to the Court of Chancery of the State of Delaware being the sole and exclusive forum for certain actions and proceedings. For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this press release, please refer to KLA's Annual Report on Form 10-K for the year ended June 30, 2025, and other subsequent filings with the Securiti es and Exchange Commission (including, but not limited to, the risk factors described therein). KLA assumes no obligation to, and does not currently intend to, update these forward -looking statements.