The company's revenue growth is primarily driven by increased investments from leading-edge foundries, particularly in the 2-nanometer node, AI infrastructure buildout, and advanced packaging for AI and HPC applications. This indicates a successful strategy of aligning with critical industry trends.

In March 2024, KLA made the strategic decision to exit its flat and flexible panel display manufacturing business, though it will continue to provide services to the installed base. This move, which resulted in goodwill impairment charges, allows the company to focus resources on its core semiconductor segments.

Research and development expenses increased by 6% to $1,360,334 thousand in fiscal 2025 from $1,278,981 thousand in fiscal 2024. This continued investment in R&D, focusing on process control and process-enabling solutions, is crucial for maintaining competitive advantage and developing new products.

The gross margin increased by 0.9 percentage points to 60.9% in fiscal 2025, primarily due to higher revenue volume and effective cost management. This indicates management's ability to leverage existing infrastructure and manage operational expenses efficiently.

Restructuring charges of $7.7 million in fiscal 2025 (down from $21.6 million in fiscal 2024) were primarily due to severance and related charges for the former PCB and Display operating segment. This reflects management's proactive steps to streamline operations following the decision to exit the Display business.

The overall employee voluntary turnover rate was under 3.8% in fiscal year 2025. This low turnover rate suggests effective human capital management and a stable workforce, which is critical for maintaining operational continuity and expertise in a complex industry.

Revenue from Chinese customers decreased to 33% of total revenues in fiscal 2025 from 43% in fiscal 2024, primarily due to more stringent U.S. export controls and regulations. The ongoing BIS Rules and potential further restrictions pose a significant risk to the company's ability to sell products and services in China.

The company recorded a $239.1 million goodwill impairment charge in the PCB and Component Inspection reportable segment in Q2 fiscal 2025, following a $192.6 million charge in Q2 fiscal 2024 related to PCB and Display. This indicates ongoing challenges and a downward revision of long-term forecasts for these businesses.

The company acknowledges increasing incorporation of AI capabilities into its products and operations, which introduces risks related to competitive success, legal liability from flawed algorithms, IP loss, and new regulatory frameworks. This highlights the evolving and complex nature of AI adoption.

KLA asserts its competitive strength is primarily due to its leading technology, which is a direct result of continuous significant investments in product R&D. This enables the company to offer industry-leading equipment and services for process control and yield management.

The company offers a comprehensive portfolio spanning Semiconductor Process Control (inspection, metrology, software), Specialty Semiconductor Process (vacuum deposition, etching), and PCB and Component Inspection. This diversified offering helps address a wide range of customer needs and market segments.

The semiconductor industry's concentrated customer base means a limited number of manufacturers account for a substantial portion of sales, increasing customer negotiating leverage. This could negatively impact pricing, order volumes, revenues, and gross margins.

Changes in gross margin from manufacturing labor, overhead, and efficiencies contributed positively by 0.4 percentage points in fiscal 2025. This indicates the company's ability to manage costs and drive productivity as it scales manufacturing activity to meet customer requirements.

KLA utilizes an outsourcing strategy for components and subassemblies while performing in-house assembly and testing. The company monitors supplier financial condition and maintains inventories to minimize production interruption risks, reflecting efforts to manage supply chain complexities.

Restructuring charges of $7.7 million in fiscal 2025 were primarily due to severance and related charges for the former PCB and Display operating segment. These actions are part of management's efforts to streamline operations and enhance efficiency by focusing on core business areas.

R&D expenses increased by 6% to $1,360,334 thousand in fiscal 2025, representing 11% of total revenues. This substantial investment is dedicated to developing new products and enhancements, particularly in process control and process-enabling solutions for advanced semiconductors and packaging.

The company's innovation strategy is driven by demand for advanced semiconductor technologies, including EUV in HVM for Logic and DRAM memory, 2-nanometer node, AI, and HPC applications. This ensures product relevance in the evolving semiconductor landscape.

As of June 30, 2025, KLA owned over 8,500 active patents globally and had over 3,500 U.S. and foreign patent applications pending. This extensive IP portfolio is critical for maintaining technology advantage and protecting proprietary rights in a highly competitive industry.

Total stock repurchases amounted to $2.15 billion in fiscal 2025, an increase from $1.74 billion in fiscal 2024, with $5.03 billion remaining available for repurchase. This program aims to mitigate dilution from equity incentive plans and return excess cash to stockholders, indicating management's confidence in future performance.

The company increased its quarterly cash dividend to $1.90 per share in Q4 fiscal 2025, marking the 16th consecutive annual dividend increase. Total dividends paid were $904.6 million in fiscal 2025, up from $773.0 million in fiscal 2024, demonstrating a commitment to shareholder returns.

KLA repaid $750.0 million of Senior Notes in November 2024 and replaced its Prior Revolving Credit Facility with a new $1.50 billion facility with a maturity of July 3, 2030. The company remains in compliance with all debt covenants, ensuring continued access to capital for strategic initiatives.

KLA has science-based targets validated by SBTi in 2024, committing to 100% renewable electricity by 2030 and a 50% reduction in Scope 1 & 2 emissions by 2030 (2021 baseline), aiming for net zero by 2050. A virtual power purchase agreement in January 2025 will accelerate Scope 2 GHG emission reductions.

Since 2023, KLA has directly engaged with key supply chain partners to reduce Scope 3 emissions and align on common sustainability goals. This proactive approach extends its ESG commitments beyond direct operations to its broader value chain.

The company achieved ISO 14001 and ISO 45001 certifications across its main production and R&D facilities in calendar year 2024 and consistently outperforms industry averages for injury rates. This demonstrates a strong commitment to employee well-being and environmental management.

The semiconductor capital equipment industry is experiencing multiple growth drivers, including demand from leading-edge foundry and logic manufacturers, adoption of EUV, and investments in 2-nanometer nodes for AI and HPC applications. This favorable market trend directly benefits KLA's core business.

Revenue from Chinese customers decreased to 33% of total revenues in fiscal 2025, down from 43% in fiscal 2024, primarily due to more stringent U.S. export controls and regulations. This highlights the material impact of geopolitical factors on key international markets.

The enactment of the OBBBA in July 2025 and Singapore's adoption of Pillar Two GloBE rules, effective in fiscal 2026, are expected to significantly impact the company's future effective tax rate and potentially neutralize existing tax incentives. This creates uncertainty regarding future financial performance.