KLA Corporation

“End-market demand drivers expected to benefit KLA over the long term include adoption of EUV in high-volume manufacturing (“HVM”) for logic and DRAM memory, including high-bandwidth memory, which drives new process control requirements and growth in key markets for KLA.”

Annual report 2026A · The company itself

“Demand for advanced semiconductor technologies, particularly at the 2-nanometer node, where investment levels and process control intensity are increasing, continues to support AI-related investments.”

Annual report 2026A · The company itself

“Our business depends upon the capital expenditures of semiconductor, semiconductor-related and electronic device manufacturers, which are driven by current and anticipated market demand for ICs and the products that use them.”

Annual report 2026A · The company itself

“In April 2025, Commerce announced the initiation of investigations into the effects on U.S. national security of imports of semiconductors under Section 232 of the Trade Expansion Act of 1962. The scope of the investigations includes semiconductors, semiconductor manufacturing equipment and their derivative products, including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics and other components.”

Annual report 2026A · The company itself

“Industry and Technology Risks Ongoing changes in the technology industry, including AI-related developments and changes in semiconductor manufacturing processes, customer investment patterns and end-market demand, could expose our business to significant risks.”

Annual report 2026A · The company itself

“This increasing concentration exposes our business, financial condition and operating results to a number of risks, including the following: •The mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year, which expose our business and operating results to increased volatility tied to individual customers; •New orders from our foundry/logic customers in the past several years have constituted a significant portion of our total orders. This concentration increases the impact that future business or technology changes within the foundry/logic industry may have on our business, financial condition and operating results; •In a highly concentrated business environment, if a particular customer does not place an order, or if they delay or cancel orders, we may not be able to replace the business.”

Annual report 2026A · The company itself

“We use a wide range of materials in the production of our products, including custom electronic and mechanical components, and we use numerous suppliers to supply these materials. Generally, we do not have guaranteed supply arrangements with our suppliers.”

Annual report 2026A · The company itself

“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. Our efforts to procure these chips contributed to an increase in purchase commitments in fiscal 2026. We estimate that the additional costs to procure these DRAM chips will continue to have an adverse impact on our gross margin in 27 Table of Contents fiscal 2027.”

Annual report 2026A · The company itself

“Success in the industries in which we serve, including the semiconductor and PCB industries depends, in part, on the continual improvement of existing technologies and rapid innovation of new solutions.”

Annual report 2026A · The company itself

“We must continue to make significant investments in R&D in order to enhance the performance, features and functionality of our products, to keep pace with competitive products and to satisfy customer demands.”

Annual report 2026A · The company itself

“In addition, we at times engage in collaborative technology development efforts with our customers and suppliers, and these collaborations may constitute a key component of certain of our ongoing technology and product R&D projects. The termination of any such collaboration, or delays caused by disputes or other unanticipated challenges that may arise in connection with any such collaboration, could significantly impair our R&D efforts, which could have a material adverse impact on our business and operations.”

Annual report 2026A · The company itself

“iii Table of Contents PART I ITEM 1.BUSINESS The Company KLA Corporation and its majority-owned subsidiaries (“KLA” or the “Company,” and also referred to as “we,” “our,” “us” or similar references) are suppliers of industry-leading equipment and services that enable innovation throughout the electronics industry. We provide advanced process control and process-enabling solutions for manufacturing wafers, reticles/masks, chemicals/materials, integrated circuits (“ICs” or “chips”), packaged ICs and printed circuit boards (“PCBs”), as well as comprehensive support and services across our installed base.”

Annual report 2026A · The company itself

“We are organized into three reportable segments: Semiconductor Process Control, Specialty Semiconductor Process and PCB and Component Inspection. Within the Semiconductor Process Control segment, our comprehensive portfolio of inspection, metrology and software products, as well as related services, help IC, wafer, reticle/mask and chemical/materials manufacturers achieve target yields throughout the entire fabrication process, from R&D to final volume production.”

Annual report 2026A · The company itself

“Within the Specialty Semiconductor Process segment, we develop and sell advanced vacuum deposition and etching process tools, which are used by a broad range of specialty semiconductor customers, including manufacturers of microelectromechanical systems (“MEMS”), radio frequency (“RF”) communication semiconductors, and power semiconductors for automotive and industrial applications.”

Annual report 2026A · The company itself

“The Semiconductor Process Control segment offers a comprehensive portfolio of inspection, metrology, chemistry process control and software products and related services, which support the semiconductor ecosystem from R&D to final volume production. For IC manufacturing, our systems support the production of all chip types including advanced logic, DRAM, 3D NAND, power devices, MEMS, legacy design node chips and more.”

Annual report 2026A · The company itself

“Our reticle systems support quality control during the manufacturing of optical and EUV reticle types.”

Annual report 2026A · The company itself

“In addition, we face a number of risks specific to ongoing changes in the semiconductor industry, as a significant majority of our sales are our process control and yield management products sold to semiconductor manufacturers.”

Annual report 2026A · The company itself

“We derive a substantial percentage of our revenues from sales of inspection products. As a result, any delay or reduction of sales of these products could have a material adverse effect on our business, financial condition and operating results.”

Annual report 2026A · The company itself

“Customers We count among our largest customers the leading semiconductor, semiconductor-related and electronic device manufacturers in Asia, the U.S. and Europe.”

Annual report 2026A · The company itself

“We focus on providing comprehensive resources for the full breadth of process control, process-enabling and yield management solutions for manufacturing and testing wafers and reticles, a wide variety of ICs, PCBs, IC substrates and packaging as well as general materials research.”

Annual report 2026A · The company itself

“Our semiconductor customers generally operate in one or both of the major semiconductor device manufacturing markets: memory and foundry/logic.”

Annual report 2026A · The company itself

“We are exposed to risks associated with a highly concentrated customer base. Our customer base, particularly in the semiconductor industry, historically has been highly concentrated due to corporate consolidation, acquisitions and business closures. In this environment, orders from a relatively limited number of manufacturers have accounted for, and are expected to continue to account for, a substantial portion of our sales.”

Annual report 2026A · The company itself

“High-performance computing (“HPC”) and data centers, supported by increasing adoption of AI, are contributing to industry growth and these trends are expected to continue to influence industry investment during fiscal year 2027. AI-related demand is driving innovation and investment at the leading edge and we believe our portfolio of products is uniquely positioned to support leading-edge semiconductor manufacturing and ongoing AI infrastructure buildout.”

Annual report 2026A · The company itself

“Increasing complexity and value of semiconductor packages, particularly for AI and HPC applications, is also driving significant growth in our advanced packaging business.”

Annual report 2026A · The company itself

“Backlog Our backlog, primarily consisting of sales orders where written customer requests have been received, increased from $7.86 billion as of June 30, 2025, to $12.57 billion as of June 30, 2026, due to strong demand driven by the AI infrastructure buildout.”

Annual report 2026A · The company itself

“Industry and Technology Risks Ongoing changes in the technology industry, including AI-related developments and changes in semiconductor manufacturing processes, customer investment patterns and end-market demand, could expose our business to significant risks.”

Annual report 2026A · The company itself

“We operate in industries that have historically been cyclical, including the semiconductor industry, and customer purchasing decisions are highly dependent on local and global economic conditions, industry conditions, capital spending patterns and AI-related investment trends.”

Annual report 2026A · The company itself

“Heavy investments in the capacity and infrastructure needed to support AI-driven semiconductor growth have elevated our customers’ capital spending. While AI adoption is likely to continue and grow, the sustainability of such elevated investments cannot be assured.”

Annual report 2026A · The company itself

“We cannot predict the pace or trajectory of AI development or the extent to which AI-driven disruption will affect the semiconductor industry, and AI technologies may disrupt the broader semiconductor supply chain and ecosystem in ways that are difficult to predict. The implementation of AI can be costly and there is no guarantee that our use of AI will enhance our technologies, benefit our business operations or produce products and services that are preferred by our customers.”

Annual report 2026A · The company itself

“Our key R&D activities during the fiscal year ended June 30, 2026 involved the development of process control and process-enabling solutions for front end semiconductors and advanced packaging.”

Annual report 2026A · The company itself

“We are exposed to risks related to the development, adoption, governance and use of AI by us, our competitors and other third parties. We are increasingly incorporating AI capabilities into the development of technologies and our business operations, and into our products and services.”

Annual report 2026A · The company itself

“Manufacturing, Raw Materials and Supplies We perform system design, assembly and testing in-house and use an outsourcing strategy to manufacture components and major subassemblies. Our in-house manufacturing activities consist primarily of assembling and testing components and subassemblies acquired from third-party vendors and integrating those subassemblies into our finished products.”

Annual report 2026A · The company itself

“Within the Specialty Semiconductor Process segment, we develop and sell advanced vacuum deposition and etching process tools, which are used by a broad range of specialty semiconductor customers, including manufacturers of microelectromechanical systems (“MEMS”), radio frequency (“RF”) communication semiconductors, and power semiconductors for automotive and industrial applications.”

Annual report 2026A · The company itself

“In addition to our efforts to develop new technologies from internal sources, part of our growth strategy is to pursue acquisitions and acquire new technologies from external sources. We may also enter into definitive agreements for and consummate acquisitions of, or significant investments in, businesses with complementary products, services and/or technologies.”

Annual report 2026A · The company itself

“Within the PCB and Component Inspection segment, we enable electronic device manufacturers to inspect, test and measure PCBs, IC substrates and packaged ICs to verify their quality, pattern the desired electronic circuitry on the relevant substrate and perform three-dimensional shaping of metalized circuits on multiple surfaces.”

Annual report 2026A · The company itself

“Export controls, sanctions and other trade-related regulations issued by Commerce and other governmental authorities may limit our ability to sell certain products or provide certain services to certain customers, particularly in 11 Table of Contents China, and may significantly harm our business, results of operations, financial condition and cash flows, unless we are able to obtain required licenses. We maintain significant operations outside the United States, and existing and evolving trade restrictions imposed by the U.S. and other governments could significantly disrupt our global operations.”

Annual report 2026A · The company itself

“In October 2022, Commerce published the 2022 BIS Rules, which introduced restrictions related to semiconductor, semiconductor manufacturing, supercomputer and advanced computing items and end uses. These rules impose restrictions on our ability to sell, ship and support certain equipment and otherwise conduct business with certain counterparties, primarily including China-based companies involved in advanced semiconductor manufacturing.”

Annual report 2026A · The company itself

“In October 2023, Commerce issued the 2023 BIS Rules designed to update export controls on advanced computing semiconductors and semiconductor manufacturing equipment, as well as items that support supercomputing applications and end uses, to certain D1, D4 and/or D5 countries in Supplement No. 1 of Part 740 of the U.S. EAR, including China.”

Annual report 2026A · The company itself

“In December 2024 and January 2025, Commerce again issued incremental 2024 BIS Rules and 2025 BIS Rules, adding even more companies to the U.S. Entity List and revising the definition of advanced DRAM, further restricting our ability to provide certain items and services to facilities in China producing advanced DRAM ICs.”

Annual report 2026A · The company itself

“Commerce may continue to add China-based entities to the U.S. Entity List and impose other end use or end user export restrictions, which could disrupt or prevent our product shipments to China-based entities, and further disrupt our revenue recognition, business operations and our ability to support our customers in China.”

Annual report 2026A · The company itself

“Our business depends upon the capital expenditures of semiconductor, semiconductor-related and electronic device manufacturers, which are driven by current and anticipated market demand for ICs and the products that use them.”

Annual report 2026A · The company itself

“While we do not consider our business to be seasonal, it has historically been cyclical with respect to these manufacturers’ capital equipment procurement practices and is affected by their investment patterns across global markets, industry downturns, broader economic conditions, customer consolidation, and political and regulatory change.”

Annual report 2026A · The company itself

“We operate in industries that have historically been cyclical, including the semiconductor industry, and customer purchasing decisions are highly dependent on local and global economic conditions, industry conditions, capital spending patterns and AI-related investment trends.”

Annual report 2026A · The company itself

“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.”

Annual report 2026A · The company itself

“Regulations that impact trade, including the imposition of export controls and tariffs, have had an adverse impact on our results of operations. Such actions by the U.S. government or another country could significantly impact our ability to provide products and services to existing and potential customers, especially in China, and adversely affect our business, financial condition and results of operations.”

Annual report 2026A · The company itself

“In April 2025, Commerce announced the initiation of investigations into the effects on U.S. national security of imports of semiconductors under Section 232 of the Trade Expansion Act of 1962. The scope of the investigations includes semiconductors, semiconductor manufacturing equipment and their derivative products, including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics and other components.”

Annual report 2026A · The company itself

“Tariffs imposed on U.S. goods by other countries may harm demand for our products from customers in those regions, or may cause our customers in those regions to push out or cancel previously placed purchase orders. In addition, we have had to return deposits given to us by our customers upon cancellation of their purchase orders.”

Annual report 2026A · The company itself

“The U.S. tariffs have increased our cost of revenues due to the increase in the cost of importing foreign sourced components to our U.S. facilities to build the products that we manufacture in the U.S.”

Annual report 2026A · The company itself

“Commerce may continue to add China-based entities to the U.S. Entity List and impose other end use or end user export restrictions, which could disrupt or prevent our product shipments to China-based entities, and further disrupt our revenue recognition, business operations and our ability to support our customers in China.”

Annual report 2026A · The company itself

“Our revenue from sales of products and provision of services to customers in China was 30%, 33% and 43% for fiscal years 2026, 2025 and 2024, respectively, and future revenue from China as a percentage of our overall revenue may decline as a result of the current and future Commerce rules and regulations.”

Annual report 2026A · The company itself

“We depend on information technology for our business and are exposed to risks related to cybersecurity threats and cyber incidents affecting our, our customers’, suppliers’ and other service providers’ systems and networks.”

Annual report 2026A · The company itself

“Cybersecurity incidents affecting our customers could result in substantial delays in our ability to ship to those customers or install our products, which could result in delays in revenue recognition or the cancellation of orders, and cybersecurity incidents affecting our suppliers could result in substantial delays in our ability to obtain necessary components for our products from those suppliers, which could hamper our ability to ship our products to our customers and service them, harming our results of operations.”

Annual report 2026A · The company itself

“High-performance computing (“HPC”) and data centers, supported by increasing adoption of AI, are contributing to industry growth and these trends are expected to continue to influence industry investment during fiscal year 2027. AI-related demand is driving innovation and investment at the leading edge and we believe our portfolio of products is uniquely positioned to support leading-edge semiconductor manufacturing and ongoing AI infrastructure buildout.”

Annual report 2026A · The company itself

“Backlog Our backlog, primarily consisting of sales orders where written customer requests have been received, increased from $7.86 billion as of June 30, 2025, to $12.57 billion as of June 30, 2026, due to strong demand driven by the AI infrastructure buildout.”

Annual report 2026A · The company itself

“In April 2025, the Chinese government imposed export controls on seven of the seventeen elements classified as rare earth elements. In October 2025, the Chinese government imposed additional restrictions and licensing requirements on certain rare earth elements, some of which became effective immediately on the announcement date and other portions of the regulations became effective in November 2025. The Chinese government imposed export controls on an additional five rare earth elements and certain license requirements for items made outside of China that incorporate controlled rare earth elements.”

Annual report 2026A · The company itself

“Rare earth elements are critical to certain components contained in our products. If our suppliers are unable to provide the components necessary to make our products because of restrictions placed on their access to rare earth elements or products derived from rare earth elements, our business, financial condition and results of operations could be materially harmed.”

Annual report 2026A · The company itself

“Our ability to recognize revenue from a particular customer may also be negatively impacted by the customer’s funding status, which could be weakened not only by rising interest rates, adverse business conditions or inaccessibility to capital markets for any number of macroeconomic or company-specific reasons, but also by funding limitations imposed by the customer’s unique organizational structure.”

Annual report 2026A · The company itself

“Our ability to pay interest and repay the principal amount of our current indebtedness is dependent upon our ability to manage our business operations, our credit rating, the ongoing interest rate environment and the other risk factors discussed in this Item 1A.”

Annual report 2026A · The company itself

“Borrowings under our Revolving Credit Facility bear interest at a floating rate, and an increase in interest rates, particularly in the current environment of rising interest rates, would require us to pay additional interest on any borrowings, which may have an adverse effect on the value and liquidity of our debt and the market price of our common stock could decline.”

Annual report 2026A · The company itself

“Our supply chain strategy incorporates considerations for ethical labor practices, responsible minerals sourcing, and Responsible Business Alliance and SEMI guidelines, and increasing regulatory expectations regarding the environmental, social and/or geographic provenance of materials or components may at times require us to incorporate further such considerations into our supply chain strategy.”

Annual report 2026A · The company itself

“Our Workforce As of June 30, 2026, we had approximately 17,000 regular full-time employees and approximately 200 part-time and temporary employees in facilities located in 18 major regions. Approximately 31% of our regular full-time employees are located in the U.S., 19% in Europe and Middle Eastern countries and 50% in Asia, with approximately 21% engaged in manufacturing, 27% in R&D, 27% in customer service, 4% in sales and marketing and 21% in other roles.”

Annual report 2026A · The company itself

“The expansion of high technology companies worldwide and the elevated demand for talent from the growth in demand for semiconductors in recent years has increased competition for qualified personnel. Competition for engineering and other technical personnel in many areas of the world in which we operate is especially intense due to the proliferation of technology companies worldwide.”

Annual report 2026A · The company itself

“A majority of our total revenues are derived from outside the U.S., and we maintain significant operations outside the U.S. We are exposed to numerous risks as a result of the international nature of our business and operations. We expect these conditions to continue in the foreseeable future.”

Annual report 2026A · The company itself

“The recent escalation of conflicts in the region has heightened instability, disrupted airspace, and increased freight and insurance costs. Disruptions in shipping routes in the Red Sea could result in delays in shipping our products to customers, which could delay the timing of revenue recognition and create uncertainty related to timeliness of shipments from the region.”

Annual report 2026A · The company itself

“Current and proposed restrictions on per- and polyfluoroalkyl substances (“PFAS”) may negatively impact our supply chain due to potentially decreased availability, or non-availability, of PFAS-containing products or commercially feasible alternatives.”

Annual report 2026A · The company itself

“Operations at our manufacturing facilities and our assembly subcontractors and those of our suppliers, as well as our other operations and those of our customers, are subject to disruption for a variety of reasons, including work stoppages, acts of war, terrorism, public health crises, fire, earthquake, volcanic eruptions, drought, storms, extreme temperatures, energy shortages, spikes in energy demand or power blackouts, disruptions in the availability of water necessary for our operations, including in areas of relatively high water stress, flooding or other natural disasters. Certain of these events may become more frequent or intense as a result of climate change, or other environmental or social issues, which may in some instances also contribute to chronic changes such as sea-level rise or changes to meteorological or hydrological patterns that may also disrupt our or our suppliers’ operations or otherwise adversely impact our business.”

Annual report 2026A · The company itself

“The digitization of industries, including 5G markets, advances in healthcare and industrial applications, and the increasing adoption of electric vehicles and intelligence in automobiles, also supports leading-edge design node technology investments and capacity expansions.”

Annual report 2026A · The company itself

“The digitization of industries, including 5G markets, advances in healthcare and industrial applications, and the increasing adoption of electric vehicles and intelligence in automobiles, also supports leading-edge design node technology investments and capacity expansions.”

Annual report 2026A · The company itself

“Many of our large customers have more aggressive policies regarding engaging alternative, second-source suppliers for the products we offer and, in addition, may seek and, on occasion, receive pricing, payment, IP-related or other commercial terms that may have an adverse impact on our business and we may not be able to pass on the cost of inflation to our customers.”

Annual report 2026A · The company itself

“We outsource a number of services, including our transportation, information systems management and logistics management of spare parts and certain accounting and procurement functions, among others, to domestic and overseas third-party service providers.”

Annual report 2026A · The company itself

“The digitization of industries, including 5G markets, advances in healthcare and industrial applications, and the increasing adoption of electric vehicles and intelligence in automobiles, also supports leading-edge design node technology investments and capacity expansions.”

Annual report 2026A · The company itself

“International revenues accounted for approximately 87% of our total revenues in the fiscal year ended June 30, 2026 and 89% of our total revenues in both of the fiscal years ended June 30, 2025 and 2024.”

Annual report 2026A · The company itself

“Our future performance depends, in part, on our ability to continue to compete successfully in Asia, one of the largest markets for our equipment. Our business depends on capital expenditures from these manufacturers which, in turn, depend on many factors including general economic conditions, anticipated market demand, evolving government regulations and capacity constraints.”

Annual report 2026A · The company itself

“We maintain significant operations in Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, and a state of hostility varying in degree and intensity has led to security and economic challenges for Israel.”

Annual report 2026A · The company itself

“International revenues accounted for approximately 87% of our total revenues in the fiscal year ended June 30, 2026 and 89% of our total revenues in both of the fiscal years ended June 30, 2025 and 2024.”

Annual report 2026A · The company itself

“Our California operations are now primarily centralized in our Milpitas facility. The consolidation of our California operations into a single campus could further concentrate the risks related to any of the disruptive events described above, such as acts of war or terrorism, earthquakes, fires or other natural disasters, if any such event were to impact our Milpitas facility.”

Annual report 2026A · The company itself

“An earthquake could significantly disrupt our manufacturing operations, a significant portion of which are conducted in California, an area highly susceptible to earthquakes. It could also significantly delay our research and engineering efforts on new products, much of which is also conducted in California.”

Annual report 2026A · The company itself

“International revenues accounted for approximately 87% of our total revenues in the fiscal year ended June 30, 2026 and 89% of our total revenues in both of the fiscal years ended June 30, 2025 and 2024.”

Annual report 2026A · The company itself