On this page of StockholderLetter.com we present the latest annual shareholder letter from KLA CORP — ticker symbol KLAC. Reading current and past KLAC letters to shareholders can bring important insights into the investment thesis.

 •  9/23/2025 Letter Continued (Full PDF)
 •  9/21/2023 KLAC Stockholder Letter
 •  9/24/2024 KLAC Stockholder Letter
 •  More "Semiconductors" Category Stockholder Letters
 •  KLAC Benford's Law Stock Score = 84

KLAC Shareholder/Stockholder Letter Transcript:

2025 Letter to Stockholders
Dear Stockholders:
KLA   s Unique Position in the AI Era Sets the Stage for Sustained
Outperformance
KLA   s fiscal year 2025 performance reported record revenue, earnings per share, and free cash
flow. A significant factor fueling our record performance in FY25 was the rapid growth of
investment in the buildout for Artificial Intelligence (AI), which is fueling long-term expansion in the
semiconductor industry and driving differentiated outperformance for KLA. The investment in AI is
directly responsible for increasing the number of complex semiconductor designs, pushing faster
product cycles, enabling higher-value wafers, and expanding investment in advanced packaging
solutions.
Against this backdrop, yield management has become increasingly critical; therefore, KLA   s systems
and solutions are well-positioned to deliver high value to our customers. KLA   s market leadership in
process control helps customers improve yields, manage increasing complexity, and accelerate
time-to-market. These important factors drove our record results in FY25 and highlight how KLA is
uniquely positioned for sustained outperformance in the AI era.
FY25 Growth Fueled by AI Infrastructure, Advanced Packaging, and
Services
Total revenue increased 24% in FY25 to a record $12.2 billion, primarily driven by rising demand for
advanced process control systems, which support advanced logic and high-bandwidth memory
(HBM) investments for AI. Revenue in the Semi Process Control segment, comprising product and
service revenue from our Wafer Inspection, Reticle Inspection, and Metrology portfolios, increased
25% year-over-year and accounted for 90% of total revenue.
Revenue from our Specialty Semiconductor Process segment, which includes advanced deposition
and etch process tools, increased approximately 11% in FY25 and represented about 5% of
revenue.
Driven by products leveraging the portfolios of both our Semi Process Control and Specialty
Semiconductor Process segments, KLA delivered strong growth in advanced packaging in FY25, as
the increasing complexity of process control requirements creates new opportunities for KLA and
grows our share in this rapidly growing market. KLA is on track to take the leading market position
in advanced packaging process control in the current calendar year, with revenue exceeding
$925 million for advanced packaging applications.
Finally, the PCB and Component Inspection business faced headwinds in FY25, driven by the
ongoing softening in the PCB market, tied to declining demand for mobile and consumer
electronics. Despite this, segment revenue grew 13% year-over-year, primarily due to the strength
of AI-related packaging tools.
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KLA   s service revenue grew 15% year-over-year to $2.7 billion in FY25, reflecting the stability and
recurring nature of our Service model as well as the expanding installed base. Q4 FY25 marked the
52nd consecutive quarter of year-over-year Service growth. KLA   s Service business has delivered
consistent double-digit annual revenue growth, increasing more than 2.5 times since surpassing
$1 billion in revenue for the first time in 2019. Service revenue is driven predominantly by growth
in the installed base, increasing value of our contract offerings, and the extension of service
lifetimes. Furthermore, over 75% of the revenue generated is from recurring    subscription-like   
contracts, reflecting the growing value of advanced process control systems and Services in our
product portfolio.
Record Free Cash Flow & Consistent Capital Returns Underscore
KLA   s Commitment to Generating Shareholder Value
Free cash flow reached a record $3.7 billion in FY25, with a free cash flow margin of 31%, among
the top tier of the S&P 500 according to our analysis. Consistent strong free cash flow generation is
a cornerstone of KLA   s business model, supporting a comprehensive capital return strategy
featuring consistent dividend growth and increasing share repurchases over the long term.
In FY25, KLA raised its dividend level twice: first in September 2024 to $1.70 per share and again in
April 2025 to $1.90 per share, marking the 15th and 16th consecutive annual increases, respectively.
Also in April 2025, the Board of Directors authorized a new $5 billion share repurchase program.
Total capital returns to shareholders in FY25, which includes dividends and share repurchases, were
$3.1 billion, or approximately 82% of free cash flow. These actions underscore KLA   s strong
commitment to assertive capital return and confidence in the Company   s ability to deliver longterm total shareholder returns.
KLA   s balance sheet remains strong, with $4.5 billion in total cash, cash equivalents, and marketable
securities, $5.9 billion in debt, and an attractive bond maturity profile supported by investmentgrade ratings from all three agencies. In November 2024, KLA fully redeemed the $750 million of
4.650% Senior Notes that matured. KLA   s investment-grade credit ratings underscore the strength
of our balance sheet and the sustainability of our business and financial performance. We remain
disciplined in executing our capital management strategy, which involves investing in R&D to
strengthen our competitive advantages, growing free cash flow, and targeting returns to
stockholders of at least 85% of free cash flow over the long term.
The KLA Operating Model Guides our Strategic Objectives
The KLA Operating Model informs and guides the company as we execute our strategic objectives,
positioning us for sustainable outperformance relative to the industry. It also guides our critical
strategic objectives. These objectives drive our growth, ensure reliable operational excellence, and
differentiate us across increasingly diverse product and service offerings. Our strategic objectives
also form the foundation for KLA   s sustained technology leadership, wide competitive moat,
leading financial performance, strong free cash flow generation, and consistent capital returns to
shareholders.
Delivering Sustained Outperformance
In conclusion, FY25 was a successful year for KLA, as the company continued to execute our longterm strategic objectives and deliver strong growth fueled by advancements in AI and the
development of AI infrastructure.

I am proud of how the global KLA team continues to demonstrate resilience and adaptability in the
face of dynamic market changes. This reflects the unique KLA culture, which is grounded in our
values and our commitment to delivering value for customers, employees, stockholders, and
partners. As we position the company for continued growth at the leading edge and explore new
growth opportunities in areas such as advanced packaging, we will continue to deliver on our
commitments.
As KLA continues to execute against our commitments to customers, we have also made strides in
environmental, social, and governance (ESG) initiatives. KLA   s recently published annual Global
Impact Report goes into more detail on this topic.
KLA remains well-positioned at the forefront of technological innovations, including playing a
critical role in enabling AI technologies. Our investment in the long-term continues to be a top
priority, given it is an essential ingredient that drives our sustained success and relative
outperformance. The semiconductor and electronics landscapes are constantly changing and
expanding across new geographies. Broadening customer interest is driven by more technology
innovation than ever at the leading edge, as well as expansion and investment in legacy nodes to
establish local semiconductor manufacturing and more resilient supply chains.
In FY25, we delivered strong relative performance, guided by the KLA Operating Model and
reflecting the focused commitment of our world-class global teams. FY25 results demonstrate KLA   s
unique position for sustained outperformance in the AI era, guided by the KLA Operating Model
and the consistent execution of our Strategic Objectives, which deliver superior long-term
shareholder value.
Sincerely,
Richard P. Wallace
President and Chief Executive Officer

Note on Forward-Looking Statements
Statements in this letter other than historical facts, such as statements pertaining to: (1) the growth
outlook of the semiconductor markets; and (2) our long-term revenue growth targets and other longterm financial results are 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:
unexpected delays, difficulties, and expenses in executing against our ESG targets, goals and
commitments, including, but not limited to, our efforts to reduce GHG emissions, as well as 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; costly intellectual property disputes that could result
in our inability to sell or use the challenged technology; risks related to the legal, regulatory and tax
environments in which we conduct our business; increasing attention to 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; our ability to identify suitable acquisition targets and successfully integrate and
manage acquired businesses; climate change, earthquake, flood or other natural catastrophic events,
public health crises such as the COVID-19 pandemic or terrorism and the adverse impact on our
business operations; the war between Ukraine and Russia, and the conflicts in 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 rules 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 cash 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 R&D is subject to audit, and potential termination or penalties; we may incur
significant restructuring charges or other asset impairment charges or inventory write offs; 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
letter, please refer to KLA   s Annual Report on Form 10-K for the year ended June 30, 2025, and other
subsequent filings with the Securities and Exchange Commission (including, but not limited to, the



 9/23/2025 Letter Continued (Full PDF)