Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”). All statements other than statements of historical fact may be forward-looking statements. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “could,” “would,” “should,” “expects,” “plans,” “anticipates,” “relies,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continues,” “thinks,” “seeks,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Such forward-looking statements include those regarding, among others: the impact of tariffs on our business; forecasts of the future results of our operations, including profitability; orders for our products and capital equipment generally; sales of semiconductors; the investments by our customers in advanced technologies and new materials; growth of revenue in the semiconductor industry, the semiconductor capital equipment industry and our business; technological trends in the semiconductor industry; future developments or trends in the global capital and financial markets; our future product offerings and product features; the success and market acceptance of new products; timing of shipment of order backlog; our future product shipments and product and service revenues; our future gross margins; our future research and development (“R&D”) expenses and selling, general and administrative (“SG&A”) expenses; international sales and operations; our ability to maintain or improve our existing competitive position; success of our product offerings; creation and funding of programs for R&D; results of our investment in leading edge technologies; the effects of hedging transactions; the effect of the sale of trade receivables and promissory notes from customers; the effect of future compliance with laws and regulations; our future effective income tax rate; our recognition of tax benefits; the effects of any audits or litigation; future payments of dividends to our stockholders; the completion of any acquisitions of third parties, or the technology or assets thereof; benefits received from any acquisitions and development of acquired technologies; sufficiency of our existing cash balance, investments, cash generated from operations and the unfunded portion of our Revolving Credit Facility (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) to meet our operating and working capital requirements, including debt service and payment thereof; future dividends, and stock repurchases; our compliance with the financial covenants under the Credit Agreement (as defined below in the “Revolving Credit Facility” section of “Liquidity and Capital Resources”) for our Revolving Credit Facility; the adoption of new accounting pronouncements; our repayment of our outstanding indebtedness; and our environmental, social and governance (“ESG”) related targets, goals and commitments.

Our actual results may differ significantly from those projected in the forward-looking statements in this report. Factors that might cause or contribute to such differences include, but are 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 (“BIS”) of the U.S. Department of Commerce (“Commerce”) rules and regulations (the “BIS Rules”) and their impact on our ability to sell products to and provide services to certain customers in People’s Republic of China (“China”);

*•*Risks related to recently announced tariffs;

*•*Costly intellectual property (“IP”) 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, diversity and inclusion or other ESG target, 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 such as the COVID-19 pandemic or terrorism and the adverse impact on our business operations;

*•*The war between Ukraine and Russia, escalation of hostilities 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 (“AI”);

*•*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;

*•*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 a more detailed discussion of these and other risk factors that might cause or contribute to differences from the forward-looking statements in this report, see Part II, Item 1A “Risk Factors” in this report as well as Part I, Item 1 “Business” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended June 30, 2024. You should carefully review these risks and also review the risks described in other documents we file from time to time with the Securities and Exchange Commission (“SEC”). You are cautioned not to place undue reliance on these forward-looking statements, and we expressly assume no obligation and do not intend to update the forward-looking statements in this report after the date hereof.

EXECUTIVE SUMMARY

We are a leading supplier of process control and yield management solutions and services for the semiconductor and related electronics industries. Our broad portfolio of inspection and metrology products, and related service, software and other offerings, support R&D and manufacturing of integrated circuits (“IC”), wafers and reticles. Our products, services and expertise are used by our customers to measure, detect, analyze and resolve critical and nanometric level product defects, helping them to manage manufacturing process challenges and to obtain higher finish product yields at lower cost. We also offer advanced technology solutions to address various manufacturing needs of printed circuit boards (“PCB”), specialty semiconductor devices and other electronic components, including advanced packaging, light-emitting diode (“LED”), power devices, compound semiconductor, and data storage industries, as well as general materials research. In addition, our services business has grown consistently each quarter on a year-over-year basis and has accounted for approximately 23% of our total revenues in recent years, due to increases in the installed base of KLA systems. Our services revenue, which is generated largely from recurring “subscription-like” contracts, increases the value of our contract offerings and extension of system lifetimes resulting from growth in legacy semiconductor markets.

Our semiconductor customers generally operate in one or both of the major semiconductor device manufacturing markets: memory and foundry/logic. The pervasive and increasing needs for semiconductors in many consumer and industrial products, the rapid proliferation of new applications for more advanced semiconductor devices, and the increasing complexity associated with leading edge semiconductor manufacturing drives demand for our process control and yield management solutions. Continuing advancement of innovation spurred by the performance, power and price benefits of being at the leading edge, increasing involvement in legacy nodes as semiconductor content increases, and innovation and growth of new enabling technologies are fueling long-term growth for the semiconductor equipment industry. End-market demand drivers that are expected to continue in the long term are related to AI including 2-nanometer chip technology, the deployment of 5G telecommunications technology and associated high-end mobile devices, the electrification and digitization of the automotive industry, the revival of personal computer demand and associated innovations to support remote work, virtual collaboration, remote learning and entertainment, and the growth of the Internet of Things (“IoT”).

Recently, the semiconductor industry environment has improved as the emergence of disruptive technologies such as AI and continuing advancement of innovation, as well as rising semiconductor content across end-markets and strategic investments in legacy nodes fuel growth. Our customers’ investments in AI as well as High-performance computing (“HPC”) continue to drive demand for our advanced packaging portfolio, which contributes to our success in market diversification. Our foundry/logic customers are slowly increasing their capital intensity, as they maintain a robust design environment and continue to scale as well as incorporate new technologies and larger die sizes. Additionally, technology development investments supporting AI and high bandwidth memory are improving the environment for memory device manufacturers. While we continue to invest in technological innovation, factors such as delays from customers in adopting new chips and technology methods, could impact process control capital intensity. Push out or cancellation of deliveries to our customers could still cause earnings volatility, due to the timing of revenue recognition as well as increased risk of inventory-related charges.

We are organized into three reportable segments as follows:

Semiconductor Process Control: a comprehensive portfolio of inspection, metrology and data analytics products as well as related service offerings that help IC manufacturers achieve target yields throughout the semiconductor fabrication process, from R&D to final volume production.
Specialty Semiconductor Process: advanced vacuum deposition and etching process tools used by a broad range of specialty semiconductor customers.
PCB and Component Inspection: a range of inspection, testing and measurement, and direct imaging for patterning products used by manufacturers of PCBs, flat panel displays (“FPD”), advanced packaging, microelectromechanical systems (“MEMS”) and other electronic components. In March 2024, we made the decision to exit the Display business by announcing the end of manufacturing of most Display products, but will continue to provide services to the installed base of Display products for existing customers.

A majority of our revenues are derived from outside the U.S., and include geographic regions such as China, Taiwan, Korea, Japan, Europe and Israel, and Rest of Asia. China remains a major region for manufacturing of legacy node logic and memory chips, adding to its role as the world’s largest consumer of ICs. Additionally, a significant portion of global FPD and PCB manufacturing has migrated to China. Chinese government initiatives around self-sustainability are propelling China to expand its domestic manufacturing capacity and attracting investment from semiconductor manufacturers from Taiwan, Korea, Japan and the U.S. Although China is currently seen as an important long-term growth region for the semiconductor and electronics capital equipment sector, the U.S. government has tightened export controls for commodities, software, and technology (collectively, “items”) destined to China over the past several years. In the last few years, Commerce has adopted regulations and added certain China-based entities to the U.S. Entity List (a list of parties that are generally ineligible to receive U.S.-regulated items without prior licensing from BIS), restricting our ability to provide products and services to such entities without an export license. In addition, Commerce has imposed export licensing requirements on China-based customers that are military end users or engaged in military end uses, as well as requiring our customers to obtain an export license when they use certain semiconductor capital equipment based on U.S. technology to manufacture products connected to certain entities on the U.S. Entity List.

In addition, in October 2022, BIS issued the 2022 BIS Rules (the “2022 BIS Rules”), which imposed export licensing requirements for certain U.S. semiconductor and high-performance computing technology (including wafer fab equipment), for the use of such technology for certain end uses in China, and for the provision of support by U.S. Persons to certain advanced IC fabs located in China. In particular, the 2022 BIS Rules impose export license requirements effectively on all KLA products and services to customers located in China that fabricate:

a. Non-planar ICs (e.g., FinFET or GAAFET) or 14/16nm and below logic ICs;

b. NAND ICs at 128 layers and above; and

c. DRAM ICs using a “production” technology node of 18 nanometer half-pitch or less.

KLA is also restricted from providing certain U.S. origin tools, software and technology to certain wafer fab equipment manufacturers located in China, absent an export license.

In October 2023, BIS issued additional rules that went into effect in November 2023 (the “2023 BIS Rules”). These 2023 BIS Rules are 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 arms embargoed countries, including China. The 2023 BIS Rules adjust the parameters included in the 2022 BIS Rules that determine whether an advanced computing chip is restricted and impose new measures to address risks of circumvention of the controls established by the 2022 BIS Rules. The 2023 BIS Rules are very complex and, in January 2024, KLA, among other companies, submitted comments to the BIS on the 2023 BIS Rules.

Furthermore, in December 2024 and January 2025, the U.S. government again issued incremental regulations (the “2024 BIS Rules” and the “2025 BIS Rules,” respectively) 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. We are taking appropriate measures to comply with all BIS Rules, and will continue to apply for export licenses, when required, to avoid disruption to our customers’ operations. To the extent that we or our customers are able to obtain export licenses in the future, we will increase remaining performance obligations (“RPO”) for the products we can ship to the customers or services we can provide the customers under the export license. There can be no assurance that export licenses applied for by either us or our customers, now or in the future, will be granted.

The possible negative effects on our future business of export licenses not being granted could be material and could disrupt our supply chain and product shipment, and impair our ability to complete product development in a timely manner, or our ability to support existing customers of covered products or supply customers of covered products outside the impacted regions, and may require us to transition certain operations out of one or more of the identified countries. Failure to obtain export licenses could also result in a substantial reduction to our RPO or require us to return substantial deposits received from customers in China for purchase orders.

The recent imposition of tariffs by the U.S. government, along with countermeasures taken by foreign countries, will have an adverse impact on our results of operations. There is uncertainty around the ultimate duration, size and substance of the tariffs, including reciprocal actions against the U.S. by other countries.

We are continuously assessing the aggregate potential impact of government regulations and tariffs on our financial results and operations. See Part II, Item 1A “Risk Factors” in this report for more information regarding how such actions by the U.S. government or another country could significantly impact our ability to provide our products and services to existing and potential customers, especially in China, and adversely affect our business, financial condition and results of operations.

The following table sets forth some of our key quarterly unaudited financial information:


(Dollar amounts in thousands, except net income per share)	Three Months Ended
March 31, 2025				December 31, 2024				September 30, 2024				June 30, 2024				March 31, 2024
Total revenues	$	3,063,029			$	3,076,851			$	2,841,541			$	2,568,735			$	2,359,830
Costs of revenues	$	1,175,689			$	1,221,461			$	1,147,431			$	1,010,551			$	993,885
Gross margin	61.6		%		60.3		%		59.6		%		60.7		%		57.9		%
Net income(1)(2)	$	1,088,416			$	824,527			$	945,851			$	836,446			$	601,541
Diluted net income per share(3)	$	8.16			$	6.16			$	7.01			$	6.18			$	4.43

(1)For the explanation why our net income increased to $1.09 billion in the three months ended March 31, 2025 compared to the three months ended March 31, 2024, refer to the “Results of Operations” section below, as the change is a result of movements in various income statement line items.

(2)Our net income for the three months ended December 31, 2024 included pre-tax goodwill and purchased intangible assets impairment charges of $239.1 million. Our net income for the three months ended March 31, 2024 included a pre-tax goodwill impairment charge of $70.5 million. For additional details, refer to Note 6 “Goodwill and Purchased Intangible Assets” in the Notes to the Consolidated Financial Statements and Note 7 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

(3)Diluted net income per share is computed independently for each of the quarters presented based on the weighted-average fully diluted shares outstanding for each quarter. Therefore, the sum of quarterly diluted net income per share information may not equal annual (or other multiple-quarter calculations of) diluted net income per share.

In addition, we continue to focus on returning cash to our investors, making $506.7 million in share repurchases and paying $225.8 million in dividends in the three months ended March 31, 2025. We increased the dividend in the September 2024 quarter to $1.70 per share per quarter, which is our 15th consecutive annual dividend increase. Refer to the “Liquidity and Capital Resources” section below for more information on our strong cash flow generation and strategy of returning excess cash to our stockholders.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical experience and evaluate them on an ongoing basis to ensure that they remain reasonable under current conditions. Actual results could differ from those estimates. We discuss the development and selection of the critical accounting estimates with the Audit Committee of our Board of Directors on a quarterly basis, and the Audit Committee has reviewed our related disclosure in this Quarterly Report on Form 10-Q.

There have been no material changes in our critical accounting estimates since our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 30, 2024 for a complete description of our critical accounting estimates.

Goodwill and Long-Lived Assets

We assess goodwill for impairment annually as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Events or changes in circumstances that could affect the likelihood that we will be required to recognize an impairment charge for goodwill include, but are not limited to, declines in our stock price or market capitalization, declines in our market share and declines in revenues or profits at our reporting units. Any impairment charge could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge. We performed the required annual goodwill impairment testing for all reporting units as of February 28, 2025, and concluded that goodwill was not impaired. As a result of our qualitative assessment, we determined that it was not necessary to perform the quantitative assessment.

During the second quarter of fiscal 2025, we noted a continued deterioration of the long-term forecast for our PCB business, which is part of our PCB and Component Inspection reportable segment, and completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. These two events triggered goodwill impairment tests in the second quarter of fiscal 2025, resulting in a total goodwill impairment charge of $230.4 million in the PCB and Component Inspection reportable segment and no goodwill impairment charge in the Specialty Semiconductor Process reportable segment.

During the second quarter of fiscal 2024, we identified an impairment indicator within our PCB and Component Inspection reportable segment that resulted in a total goodwill impairment charge of $192.6 million in the three months ended December 31, 2023. See Note 7 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for further details.

During the third quarter of fiscal 2024, we decided to exit the Display business by announcing the end of manufacturing of most Display products but continue to provide services to the installed base of Display products for existing customers, which resulted in a total goodwill impairment charge of $70.5 million in the three months ended March 31, 2024. See Note 7 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for further details.

Long-lived assets, including both tangible and purchased intangible assets, are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Events or changes in circumstances that could affect the likelihood that we will be required to recognize an impairment charge for long-lived assets primarily include declines in our operating cash flows from the use of these assets. In connection with the evaluation of goodwill for impairment in the second quarter of fiscal 2025, described above, we assessed our tangible and purchased intangible assets for impairment, resulting in a total purchased intangible assets impairment charge of $8.7 million in the PCB and Component Inspection reportable segment during the quarter.

During the second quarter of fiscal 2024, we recorded impairment losses related to purchased intangible assets of $26.4 million in the PCB and Component Inspection reportable segment.

During the third quarter of fiscal 2024, in connection with the Company's decision to exit the Display business, an immaterial purchased intangible asset abandonment charge was recorded. No impairments were identified for other long-lived assets in the third quarter of fiscal 2025 or 2024.

The tests of goodwill and long-lived assets for impairment are explained further in Note 6 “Goodwill and Purchased Intangible Assets” in the Notes to the Consolidated Financial Statements. Determining fair values utilized in our impairment calculations involves the use of significant estimates and assumptions, including revenue forecasts, terminal growth rate, tax rate and a weighted average cost of capital adjusted for company-specific risk. There can be no assurance that the estimates and assumptions used will prove to be an accurate prediction of the future. If our assumptions are not realized, or if there are future changes in any of the assumptions due to a change in economic conditions or otherwise, it is possible that a further impairment charge may need to be recorded in the future.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, including those recently adopted and the expected dates of adoption as well as estimated effects, if any, on our Condensed Consolidated Financial Statements of those not yet adopted, see Note 1 “Basis of Presentation” to our Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

Revenues and Gross Margin

Revenues

Our business is affected by the concentration of our customer base and our customers’ capital equipment procurement schedules as a result of their investment plans. Our product revenues in any particular period are impacted by the amount of new orders we receive during that period and, depending upon the duration of manufacturing and installation cycles, in the preceding periods. Revenue is also impacted by average customer pricing, customer revenue deferrals associated with volume purchase agreements, the effect of fluctuations in foreign currency exchange rates, increased trade restrictions as discussed in the “Executive Summary” section above and the availability of government incentives for semiconductor capital investments. A significant portion of our revenues continues to be generated in Asia, where a substantial portion of the world’s semiconductor manufacturing capacity is located, and we expect that trend to continue.

Service revenues are generated from product maintenance and support services, as well as billable time and material service calls made to our customers. 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.


	Three Months Ended March 31,						Q3 FY25 vs. Q3 FY24
(Dollar amounts in thousands)	2025			2024
Revenues:
Product	$	2,393,821		$	1,769,369		$	624,452	35	%
Service	669,208			590,461			78,747		13	%
Total revenues	$	3,063,029		$	2,359,830		$	703,199	30	%
Costs of revenues	$	1,175,689		$	993,885		$	181,804	18	%
Gross margin	61.6		%	57.9		%


	Nine Months Ended March 31,						Q3 FY25 YTD vs. Q3 FY24 YTD
(Dollar amounts in thousands)	2025			2024
Revenues:
Product	$	7,000,672		$	5,527,842		$	1,472,830	27	%
Service	1,980,749			1,715,670			265,079		15	%
Total revenues	$	8,981,421		$	7,243,512		$	1,737,909	24	%
Costs of revenues	$	3,544,581		$	2,917,522		$	627,059	21	%
Gross margin	60.5		%	59.7		%

The following is a summary of revenues by geographic region, based on ship-to location, for the indicated periods:


	Three Months Ended March 31,								Q3 FY25 vs. Q3 FY24
(Dollar amounts in thousands)	2025				2024
Revenues:
Taiwan	$	988,470	32	%	$	433,916	18	%	$	554,554	128	%
China	792,884		26	%	996,885		42	%	(204,001)		(20)	%
Korea	378,548		12	%	201,290		9	%	177,258		88	%
Japan	338,651		11	%	267,045		11	%	71,606		27	%
North America	293,980		10	%	246,993		10	%	46,987		19	%
Europe and Israel	170,056		6	%	129,350		6	%	40,706		31	%
Rest of Asia	100,440		3	%	84,351		4	%	16,089		19	%
Total	$	3,063,029	100	%	$	2,359,830	100	%	$	703,199	30	%


	Nine Months Ended March 31,								Q3 FY25 YTD vs. Q3 FY24 YTD
(Dollar amounts in thousands)	2025				2024
Revenues:
China	$	3,083,713	34	%	$	3,050,609	42	%	$	33,104	1	%
Taiwan	2,331,672		26	%	1,214,518		17	%	1,117,154		92	%
North America	1,081,114		12	%	761,319		11	%	319,795		42	%
Korea	974,656		11	%	731,783		10	%	242,873		33	%
Japan	755,834		9	%	792,179		11	%	(36,345)		(5)	%
Europe and Israel	449,142		5	%	421,148		6	%	27,994		7	%
Rest of Asia	305,290		3	%	271,956		3	%	33,334		12	%
Total	$	8,981,421	100	%	$	7,243,512	100	%	$	1,737,909	24	%

Product revenues during the three and nine months ended March 31, 2025 increased compared to the three and nine months ended March 31, 2024, from $1.77 billion to $2.39 billion for the quarter and from $5.53 billion to $7.00 billion for the nine months, primarily due to strong demand for many of our products, especially in our inspection portfolio.

Service revenues during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024, from $590.5 million to $669.2 million, and increased during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024, from $1.72 billion to $1.98 billion. These increases were primarily due to an increase in our installed base.

The product and service revenue generation from our customers in China contributed to our overall revenue increase, with that region recording the largest amount of revenues in the nine months ended March 31, 2025, accounting for 34% of total revenues, and accounting for 42% of total revenues during both the three months and nine months ended March 31, 2024. Our revenues from our customers in China accounted for 26% of our overall revenues during the three months ended March 31, 2025. There are multiple factors affecting our revenues from our customers in that region. Many Chinese customers, encouraged by the growth potential of certain semiconductor markets and Chinese government initiatives around self-sustainability in domestic semiconductor production, continued to increase their semiconductor-related investments, even as more stringent U.S. restrictions were issued regarding providing certain U.S. origin tools, software and technology to certain wafer fab equipment manufacturers in China, absent an export license. Our customers in Taiwan contributed to the increased revenues with increased investments in process control to meet leading edge demand driven by innovation and growth of new technologies like AI, with that region recording 32% and 26% of total revenues during the three and nine months ended March 31, 2025, respectively, compared to 18% and 17% in the three and nine months ended March 31, 2024, respectively. The remaining regions accounted for less than 20% of total revenues individually in all periods.

Revenues by segment**(1)**


	Three Months Ended March 31,				Q3 FY25 vs. Q3 FY24
(Dollar amounts in thousands)	2025		2024
Revenues:
Semiconductor Process Control	$	2,738,817	$	2,096,005	$	642,812	31	%
Specialty Semiconductor Process	156,500		130,649		25,851		20	%
PCB and Component Inspection	168,552		133,399		35,153		26	%
Total revenues for reportable segments	$	3,063,869	$	2,360,053	$	703,816	30	%


	Nine Months Ended March 31,				Q3 FY25 YTD vs. Q3 FY24 YTD
(Dollar amounts in thousands)	2025		2024
Revenues:
Semiconductor Process Control	$	8,069,711	$	6,425,562	$	1,644,149	26	%
Specialty Semiconductor Process	445,241		407,433		37,808		9	%
PCB and Component Inspection	467,615		412,474		55,141		13	%
Total revenues for reportable segments	$	8,982,567	$	7,245,469	$	1,737,098	24	%

(1)Segment revenues exclude corporate allocations and the effects of changes in foreign currency exchange rates. For additional details, refer to Note 16 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements.

The following is a summary of revenues by major product categories for the indicated periods:


(Dollar amounts in thousands)	Three Months Ended March 31,									Q3 FY25 vs. Q3 FY24
2025					2024
Revenues:
Wafer Inspection	$	1,495,685	49	%		$	987,709	42	%		$	507,976	51	%
Patterning	636,415		21	%		539,296		23	%		97,119		18	%
Specialty Semiconductor Process	138,376		4	%		116,449		5	%		21,927		19	%
PCB and Component Inspection	104,254		3	%		68,332		3	%		35,922		53	%
Services	669,208		22	%		590,461		25	%		78,747		13	%
Other	19,091		1	%		57,583		2	%		(38,492)		(67)	%
Total	$	3,063,029	100	%		$	2,359,830	100	%		$	703,199	30	%


(Dollar amounts in thousands)	Nine Months Ended March 31,									Q3 FY25 YTD vs. Q3 FY24 YTD
2025					2024
Revenues:
Wafer Inspection	$	4,427,238	49	%		$	3,164,391	43	%		$	1,262,847	40	%
Patterning	1,743,504		20	%		1,512,168		21	%		231,336		15	%
Specialty Semiconductor Process	394,165		4	%		364,830		5	%		29,335		8	%
PCB and Component Inspection	270,489		3	%		216,794		3	%		53,695		25	%
Services	1,980,749		22	%		1,715,670		24	%		265,079		15	%
Other	165,276		2	%		269,659		4	%		(104,383)		(39)	%
Total	$	8,981,421	100	%		$	7,243,512	100	%		$	1,737,909	24	%

The primary factors impacting the performance of our segment revenues are summarized as follows:

Revenues from our Semiconductor Process Control segment during the three months ended March 31, 2025 increased $642.8 million, or 31%, compared to the three months ended March 31, 2024, and increased $1.64 billion, or 26%, during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024, primarily due to

the resumption of growth in the industry demonstrated by the strong demand for many of our products, especially those in our inspection portfolio, along with higher service revenue from an increase in our installed base. Semiconductor Process Control segment revenues were approximately 89% and 90% of total company revenue in the three and nine months ended March 31, 2025, respectively, which is consistent with the segment's approximately 89% of total company revenues in both the three and nine months ended March 31, 2024. Defect Inspection and Patterning product revenues increased during the three and nine months ended March 31, 2025 compared to the three and nine months ended March 31, 2024 as customers in Taiwan and Korea increased investments in process control to meet leading edge demand driven by innovation and growth of new technologies like AI, partially offset by lower revenues in the China region.

Revenues in the Specialty Semiconductor Process segment, which comprises etching and deposition solutions for advanced packaging and specialty semiconductor markets, during the three and nine months ended March 31, 2025 increased compared to the three and nine months ended March 31, 2024 primarily due to increased revenue from advanced packaging, along with higher service revenue from an increase in our installed base. Specialty Semiconductor Process revenues were approximately 5% of total revenue during both the three and nine months ended March 31, 2025 and approximately 6% of total revenues during both the three and nine months ended March 31, 2024.
Revenues in the PCB and Component Inspection segment during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024, primarily due to increased revenue from packaging products related to AI. Revenues in the PCB and Component Inspection segment during the nine months ended March 31, 2025 increased compared to the nine months ended March 31, 2024, primarily due to increased revenue from packaging products related to AI and a settlement received in the second quarter of fiscal 2025 related to cancellation of a technology project by a major FPD customer that resulted in our decision to exit the Display business in the third quarter of fiscal 2024. These increases were partially offset by decreased revenues during the relatively soft market in the first half of fiscal year 2025. PCB and Component Inspection segment revenues were approximately 6% and 5% of total revenue during the three and nine months ended March 31, 2025, respectively, and approximately 6% of total revenues during both the three and nine months ended March 31, 2024.

Gross margin

Our gross margin fluctuates with revenue levels and product mix and is affected by variations in costs related to manufacturing and servicing our products, including our ability to scale our operations efficiently and effectively in response to prevailing business conditions.

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, 2024	57.9%	59.7%
Revenue volume of products and services	2.7%	1.8%
Mix of products and services sold	(0.6)%	(1.6)%
Manufacturing labor, overhead and efficiencies	0.5%	0.4%
Other service and manufacturing costs	1.1%	0.2%
March 31, 2025	61.6%	60.5%

Changes in gross margin from revenue volume of products and services reflect our ability to leverage existing infrastructure to generate higher revenues. Changes in gross margin from the mix of products and services sold reflect the impact of changes within the composition of product and service offerings. Changes in gross margin from manufacturing labor, overhead and efficiencies reflect our ability to manage costs and drive productivity as we scale our manufacturing activity to respond to customer requirements, and amortization of intangible assets. Changes in gross margin from other service and manufacturing costs include the impact of customer support costs, including the efficiencies with which we deliver services to our customers, and the effectiveness with which we manage our production plans and inventory risk.

The increase in our gross margin during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is primarily due to a higher revenue volume of products and services sold and more lower other service and manufacturing costs, partially offset by a less profitable mix of products and services sold. The increase in our gross margin during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 is primarily due to a higher revenue volume of products and services sold and more favorable manufacturing labor, overhead and efficiencies, partially offset by a less profitable mix of products and services sold.

Segment gross profit**(1)**


	Three Months Ended March 31,				Q3 FY25 vs. Q3 FY24
(Dollar amounts in thousands)	2025		2024
Segment gross profit:
Semiconductor Process Control	$	1,765,194	$	1,343,467	$	421,727	31	%
Specialty Semiconductor Process	83,827		69,280		14,547		21	%
PCB and Component Inspection	81,099		(949)		82,048		8,646	%


	Nine Months Ended March 31,				Q3 FY25 YTD vs. Q3 FY24 YTD
(Dollar amounts in thousands)	2025		2024
Segment gross profit:
Semiconductor Process Control	$	5,145,053	$	4,148,335	$	996,718	24	%
Specialty Semiconductor Process	229,443		219,859		9,584		4	%
PCB and Component Inspection	194,162		96,036		98,126		102	%

(1) Segment gross profit is calculated as segment revenues less segment costs of revenues and excludes corporate allocations, amortization of intangible assets and the effects of changes in foreign currency exchange rates. For additional details, refer to Note 16 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements.

The primary factors impacting the performance of our segment revenues are summarized as follows:

Gross profit in the Semiconductor Process Control segment during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024 primarily due to a higher revenue volume of products and services sold. Gross profit in the segment during the nine months ended March 31, 2025 increased compared to the nine months ended March 31, 2024 primarily due to a higher revenue volume of products and services sold, partially offset by a less favorable mix of products and services sold.
Gross profit in the Specialty Semiconductor Process segment during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024 primarily due to increased revenue from advanced packaging, along with higher service revenue from an increase in our installed base. Gross profit in the Specialty Semiconductor Process segment during the nine months ended March 31, 2025 remained relatively flat compared to the nine months ended March 31, 2024.
Gross profit in the PCB and Component Inspection segment during the three and nine months ended March 31, 2025 increased compared to the three months ended March 31, 2024 primarily due to the non-cash expenses to write off excess and obsolete inventory related to the discontinued Display product lines in the third quarter fiscal 2024 as well as a higher revenue volume of packaging products sold in fiscal 2025.

Research and Development

R&D expenses may fluctuate with product development phases and project timing as well as our R&D efforts. As technological innovation is essential to our success, we may incur significant costs associated with R&D projects, including compensation for engineering talent, engineering material costs and other expenses.


(Dollar amounts in thousands)	Three Months Ended March 31,							Q3 FY25 vs. Q3 FY24
2025				2024
R&D expenses	$	338,043			$	321,590		$	16,453	5	%
R&D expenses as a percentage of total revenues	11		%		14		%

R&D expenses during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024 primarily due to an increase in employee-related expenses of $11.4 million and an increase in engineering project material costs of $6.4 million.


(Dollar amounts in thousands)	Nine Months Ended March 31,							Q3 FY25 YTD vs. Q3 FY24 YTD
2025				2024
R&D expenses	$	1,007,345			$	953,222		$	54,123	6	%
R&D expenses as a percentage of total revenues	11		%		13		%

R&D expenses during the nine months ended March 31, 2025 increased compared to the nine months ended March 31, 2024 primarily due to an increase in employee-related expenses of $51.2 million and an increase in depreciation expense of $6.5 million, partially offset by a decrease in engineering project material costs of $5.9 million.

Our future operating results will depend significantly on our ability to produce products and provide services that have a competitive advantage in our marketplace. To do this, we believe we must continue to make substantial and focused investments in our R&D. We remain committed to product development in new and emerging technologies.

Selling, General and Administrative


	Three Months Ended March 31,						Q3 FY25 vs. Q3 FY24
(Dollar amounts in thousands)	2025			2024
SG&A expenses	$	248,905		$	237,514		$	11,391	5	%
SG&A expenses as a percentage of total revenues	8		%	10		%

SG&A expenses during the three months ended March 31, 2025 increased compared to the three months ended March 31, 2024 primarily due to increases in the following areas: depreciation expense of $5.5 million, promotional expenses of $2.1 million and engineering project material costs of $1.3 million, partially offset by a decrease in employee-related expenses of $2.8 million.


(Dollar amounts in thousands)	Nine Months Ended March 31,							Q3 FY25 vs. Q3 FY24
2025				2024
SG&A expenses	$	767,028			$	714,403		$	52,625	7	%
SG&A expenses as a percentage of total revenues	9		%		10		%

SG&A expenses during the nine months ended March 31, 2025 increased compared to the nine months ended March 31, 2024 primarily due to increases in the following areas: employee-related expenses of $10.4 million, facility-related expenses of $7.8 million, promotional expenses of $7.0 million, depreciation expense of $6.2 million, travel expenses of $5.9 million consulting costs of $4.0 million and engineering project material costs of $3.4 million.

Impairment of Goodwill and Purchased Intangible Assets

During the second quarter of fiscal 2025, we noted a continued deterioration of the long-term forecast for our PCB business, which is part of our PCB and Component Inspection reportable segment, and completed an internal reorganization affecting the composition of reporting units within our Specialty Semiconductor Process and PCB and Component Inspection reportable segments. These two events triggered goodwill and purchased intangible assets impairment tests, which resulted in a $239.1 million goodwill and purchased intangible assets impairment charge in the PCB and Component Inspection reportable segment.

During the second quarter of fiscal 2024, we noted a significant deterioration of the long-term forecast for our PCB and Display businesses. As a result, we recorded a $219.0 million goodwill and purchased intangible asset impairment charge for the PCB and Display reporting unit during the three months ended December 31, 2023.

During the third quarter of fiscal 2024, we made the decision to exit the Display business but continue to provide services to the installed base for the discontinued product lines. As a result, we recorded a $70.5 million goodwill impairment charge and an immaterial amount of purchased intangible assets were abandoned. See Note 6 “Goodwill and Purchased Intangible Assets” in the Notes to the Consolidated Financial Statements in this Form 10-Q as well as Note 7 “Goodwill and Purchased Intangible Assets” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for further details.

Restructuring Charges

Restructuring charges were $0.6 million and $2.0 million for the three months ended March 31, 2025 and 2024, respectively. Restructuring charges were $5.6 million and $3.9 million for the nine months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, the accrual for restructuring charges was $5.7 million.

For additional information, refer to Note 17 “Restructuring Charges” to our Condensed Consolidated Financial Statements.

Interest Expense and Other Expense (Income), Net

Other expense (income), net is comprised primarily of realized gains or losses on sales of marketable securities, gains or losses from revaluations of certain foreign currency denominated assets and liabilities as well as foreign currency contracts, interest-related accruals (such as interest and penalty accruals related to our tax obligations) and interest income earned on our invested cash, cash equivalents and marketable securities.


(Dollar amounts in thousands)	Three Months Ended March 31,							Q3 FY25 vs. Q3 FY24
2025				2024
Interest expense	$	71,889			$	79,981		$	(8,092)	(10)	%
Other expense (income), net	$	(35,930)			$	(45,622)		$	9,692	21	%
Interest expense as a percentage of total revenues	2		%		3		%
Other expense (income), net as a percentage of total revenues	(1)		%		(2)		%

Interest expense during the three months ended March 31, 2025 decreased compared to the three months ended March 31, 2024 primarily due to reduced interest expense from our $750.0 million debt repayment in the second quarter of fiscal 2025.

The change in other expense (income), net during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to higher net foreign exchange loss of $9.0 million.


(Dollar amounts in thousands)	Nine Months Ended March 31,							Q3 FY25 YTD vs. Q3 FY24 YTD
2025				2024
Interest expense	$	229,041			$	228,417		$	624	—	%
Other expense (income), net	$	(121,323)			$	(104,515)		$	(16,808)	(16)	%
Interest expense as a percentage of total revenues	3		%		3		%
Other expense (income), net as a percentage of total revenues	(1)		%		(1)		%

Interest expense during the nine months ended March 31, 2025 remained relatively flat compared to the nine months ended March 31, 2024.

The change in other expense (income), net during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 was primarily due to higher interest income of $25.6 million, partially offset by a higher net fair value loss of $7.2 million from an equity security and lower net foreign exchange gains of $2.4 million.

Provision for Income Taxes

The following table provides details of income taxes:


	Three Months Ended March 31,						Nine Months Ended March 31,
(Dollar amounts in thousands)	2025			2024			2025			2024
Income before income taxes	$	1,264,433		$	702,008		$	3,315,649		$	2,244,989
Provision for income taxes	$	176,017		$	100,467		$	456,855		$	319,539
Effective tax rate	13.9		%	14.3		%	13.8		%	14.2		%

The effective tax rate during the three months ended March 31, 2025 was lower compared to the three months ended March 31, 2024 due to a $70.5 million goodwill impairment charge during the three months ended March 31, 2024, which is non-deductible for income tax. Excluding the goodwill impairment charge, tax expense was higher as a percentage of income before taxes during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to the impact of the following items:

Tax expense increased by $18.7 million during the three months ended March 31, 2025 relating to a decrease in the proportion of our earnings generated in jurisdictions with tax rates lower than the U.S. statutory rate; partially offset by
Tax expense decreased by $6.1 million during the three months ended March 31, 2025 relating to an increase in the Foreign Derived Intangible Income deduction.

The effective tax rate during the nine months ended March 31, 2025 was lower compared to the nine months ended March 31, 2024 due to goodwill impairment charges which are non-deductible for income tax. There was a $230.4 million goodwill impairment charge during the nine months ended March 31, 2025 compared to a $263.1 million goodwill impairment charge during the nine months ended March 31, 2024.

Excluding the goodwill impairment charge, tax expense was higher as a percentage of income before taxes during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 primarily due to the impact of the following items:

Tax expense increased by $4.5 million during the nine months ended March 31, 2025 relating to a non-deductible decrease in the value of the assets held within our Executive Deferred Savings Plan; and
Tax expense increased by $3.1 million during the nine months ended March 31, 2025 relating to employee stock activity.

Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with acquisitions, R&D credits as a percentage of aggregate pre-tax income, non-taxable or non-deductible increases or decreases in the assets held within our Executive Deferred Savings Plan, the tax effects of employee stock activity and the effectiveness of our tax planning strategies. We also continue to monitor the adoption of Pillar Two relating to the global minimum tax in each of our tax jurisdictions to evaluate its impact on our effective income tax rate. For some of the jurisdictions that have adopted Pillar Two in their tax legislation, it was effective for us beginning in our current fiscal year and there was no material impact to our effective tax rate during the nine months ended March 31, 2025 .

For discussions on tax examinations, assessments and certain related proceedings, see Note 12 “Income Taxes” to our Condensed Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES


	As of			As of
(Dollar amounts in thousands)	March 31, 2025			June 30, 2024
Cash and cash equivalents	$	1,858,022		$	1,977,129
Marketable securities	2,170,600			2,526,866
Total cash, cash equivalents and marketable securities	$	4,028,622		$	4,503,995
Percentage of total assets	27		%	29		%

	Nine Months Ended March 31,
(In thousands)	2025			2024
Cash flows:
Net cash provided by operating activities	$	2,916,912		$	2,415,960
Net cash provided by (used in) investing activities	122,864			(1,338,193)
Net cash used in financing activities	(3,155,874)			(1,157,156)
Effect of exchange rate changes on cash and cash equivalents	(3,009)			(309)
Net decrease in cash and cash equivalents	$	(119,107)		$	(79,698)

Cash, Cash Equivalents and Marketable Securities

As of March 31, 2025, our cash, cash equivalents and marketable securities totaled $4.03 billion, which represents a decrease of $475.4 million from June 30, 2024. The decrease is primarily due to stock repurchases of $1.72 billion, repayment of debt of $750.0 million, cash used for payment of dividends and dividend equivalents of $650.6 million, capital expenditures of $234.9 million and tax withholding payments related to vested and released restricted stock units (“RSU”) of $78.5 million, partially offset by net cash provided by operating activities of $2.92 billion.

As of March 31, 2025, $999.3 million of our $4.03 billion of cash, cash equivalents and marketable securities were held by our foreign subsidiaries and branch offices. We currently intend to indefinitely reinvest $65.9 million of the cash, cash equivalents and marketable securities held by our foreign subsidiaries for which we assert that earnings are permanently reinvested. If, however, a portion of these funds were to be repatriated to the United States, we would be required to accrue and pay state and foreign taxes of approximately 1% - 22% of the funds repatriated. The amount of taxes due will depend on the amount and manner of the repatriation, as well as the location from which the funds are repatriated. We have accrued state and foreign tax on the remaining cash of $933.4 million of the $999.3 million held by our foreign subsidiaries and branch offices. As such, these funds can be returned to the U.S. without accruing any additional U.S. tax expense.

Cash Dividends

During the three months ended March 31, 2025, our Board of Directors declared a regular quarterly cash dividend of $1.70 per share on our outstanding common stock, which was paid on March 4, 2025 to our stockholders of record as of the close of business on February 24, 2025. During the same period in fiscal year ended June 30, 2024, our Board of Directors declared and paid a regular quarterly cash dividend of $1.45 per share on our outstanding common stock. The total amount of regular quarterly cash dividends and dividend equivalents paid during the three months ended March 31, 2025 and 2024 was $225.8 million and $197.2 million, respectively. The total amount of regular quarterly cash dividends and dividend equivalents paid during the nine months ended March 31, 2025 and 2024 was $650.6 million and $575.5 million, respectively. The amount of accrued dividend equivalents payable for regular quarterly cash dividends on unvested RSUs with dividend equivalent rights as of March 31, 2025 and June 30, 2024 was $14.2 million and $11.8 million, respectively. These amounts will be paid upon vesting of the underlying unvested RSUs as described in Note 9 “Equity and Long-term Incentive Compensation Plans” to our Condensed Consolidated Financial Statements.

Stock Repurchases

The shares of common stock repurchased under our stock repurchase program have reduced our basic and diluted weighted-average shares outstanding for the nine months ended March 31, 2025 and 2024. The stock repurchase program is intended, in part, to mitigate the potential dilutive impact related to our equity incentive plans and shares issued in connection with our Employee Stock Purchase Program as well as to return excess cash to our stockholders.

Cash Flows Provided by Operating Activities

Historically, we have financed our liquidity requirements through cash generated from our operations. Net cash provided by operating activities during the nine months ended March 31, 2025 was $2.92 billion compared to $2.42 billion during the nine months ended March 31, 2024. This increase of $501.0 million resulted primarily from the following:

An increase in customer and other collections of approximately $760 million primarily driven by higher shipments;
An increase in interest income of approximately $26 million from higher cash balances and higher interest rates; and
A decrease in income tax payments of approximately $109 million as we paid off the delayed tax payments from prior fiscal year in October 2023 as a result of the California Flood Tax Relief; partially offset by
An increase in accounts payable payments of approximately $270 million;
An increase in employee-related payments of approximately $80 million;
An increase in other tax payments of approximately $35 million; and
An increase in debt interest payments of approximately $34 million from higher principal debt issued.

Cash Flows Provided by (Used in) Investing Activities

Net cash provided by (used in) investing activities during the nine months ended March 31, 2025 was $122.9 million compared to $(1.34) billion during the nine months ended March 31, 2024. This increase in cash provided resulted from an increase in net proceeds from sale of available-for-sale securities of $1.48 billion, a decrease in cash used in business acquisitions of $3.7 million and an increase in net proceeds from sales of trading securities of $1.2 million, partially offset by an increase in capital expenditures of $18.2 million, a decrease in proceeds from sale of assets of $4.9 million and $2.9 million of cash used for intellectual property acquisitions.

Cash Flows Used in Financing Activities

Net cash used in financing activities during the nine months ended March 31, 2025 was $3.16 billion compared to $1.16 billion during the nine months ended March 31, 2024. This increase in cash used resulted from an increase in cash used for repayment of debt of $750.0 million, a decrease in proceeds received from issuance of debt, net of issuance costs, of $735.0 million, increases in common stock repurchases of $458.8 million and payment of dividends and dividend equivalents of $75.1 million, partially offset by a decrease in tax withholding payments related to vested and released RSUs of $17.0 million.

Senior Notes

As of March 31, 2025, we had an aggregate principal amount of senior, unsecured notes totaling $5.95 billion (“Senior Notes”). For additional information on these Senior Notes, see Note 7 “Debt” to our Condensed Consolidated Financial Statements. In November 2024, we repaid $750.0 million of Senior Notes. As of March 31, 2025, we were in compliance with all of our covenants under the Indenture associated with the Senior Notes.

Revolving Credit Facility

We have in place a Credit Agreement (“Credit Agreement”) for an unsecured Revolving Credit Facility (“Revolving Credit Facility”) with a maturity date of June 8, 2027 that allows us to borrow up to $1.50 billion. Subject to the terms of the Credit Agreement, the Revolving Credit Facility may be increased by an amount up to $250.0 million in the aggregate. As of March 31, 2025, we had no outstanding borrowings under the Revolving Credit Facility. We were in compliance with all covenants under the Credit Agreement as of March 31, 2025 (the leverage ratio was 1.08 to 1.00, compared to a maximum leverage ratio of 3.50 to 1.00 on a quarterly basis covering the trailing four consecutive fiscal quarters for each fiscal quarter). Considering our current liquidity position, short-term financial forecasts and ability to prepay the Revolving Credit Facility, if necessary, we expect to continue to be in compliance with our financial covenants at the end of our fiscal year ending June 30, 2025.

For additional information on the Revolving Credit Facility, see Note 7 “Debt” to our Condensed Consolidated Financial Statements.

Material Cash Requirements

For details regarding our debt and other material cash commitments, refer to Note 7 “Debt” and Note 14 “Commitments and Contingencies,” respectively, to our Condensed Consolidated Financial Statements. For additional details regarding our material cash requirements, refer to “Material Cash Requirements” in the “Liquidity and Capital Resources” section of Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report Form on 10-K for the fiscal year ended June 30, 2024.

Off-Balance Sheet Arrangements

As of March 31, 2025, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial position, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Refer to Note 14 “Commitments and Contingencies” to our Condensed Consolidated Financial Statements for information related to indemnification obligations.

Working Capital

Working capital was $6.04 billion as of March 31, 2025, which represents an increase of $664.7 million compared to our working capital of $5.37 billion as of June 30, 2024. As of March 31, 2025, our principal sources of liquidity consisted of $4.03 billion of cash, cash equivalents and, marketable securities, as well as $1.50 billion availability under our Revolving Credit Facility. Our liquidity may be affected by many factors, some of which are based on the normal ongoing operations of the business, spending for business acquisitions, and other factors such as uncertainty in the global and regional economies and the semiconductor, semiconductor-related and electronic device industries. Although cash requirements will fluctuate based on the

timing and extent of these factors, we believe that cash generated from operations, together with the liquidity provided by existing cash and cash equivalents balances, marketable securities and our $1.50 billion Revolving Credit Facility, will be sufficient to satisfy our liquidity requirements associated with working capital needs, capital expenditures, cash dividends, stock repurchases and other contractual obligations, including repayment of outstanding debt, for at least the next 12 months.

Credit Ratings

Our credit ratings as of March 31, 2025 are summarized below:


Rating Agency			Rating
Fitch Inc.			A
Moody’s Investors Service			A2
S&P Global Ratings			A-

Factors that can affect our credit ratings include changes in our operating performance, the economic environment, conditions in the semiconductor and semiconductor capital equipment industries, our financial position, material acquisitions and changes in our business strategy.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE INITIATIVES

Please see Part I Item 1 “Business” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for a description of our ESG initiatives, with the following update. In January 2025, we entered into a long-term virtual power purchase agreement to purchase a portion of the output generated from a solar energy project for a fixed price. As part of this agreement, we will also receive renewable energy credits commensurate with the power we acquire. These credits can be applied against our greenhouse gas (“GHG”) emissions, accelerating the progress towards our goals of 100% renewable electricity across our global operations by 2030, reduction of our Scope 1 and 2 emissions from our 2021 baseline by 50% by 2030 and achievement of net zero Scope 1 and Scope 2 emissions by 2050. This agreement had no material impact on our results of operations, financial condition or cash flows during the quarter ended March 31, 2025.

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