Financial Trends -- 7/10
KLA is the >55%-share leader in semiconductor process control (inspection/metrology), the
picks-and-shovels franchise levered to rising design complexity, AI/HBM, and advanced packaging.
The financial profile is high quality — best-in-class margins, prodigious FCF, a steadily shrinking
share count, and near-zero net leverage growth. The reason this is a 7 and not a 9-10 is
trajectory: revenue YoY growth decelerated hard through CY2025 (from ~24-30% to
single digits) before re-accelerating in the most recent quarter, and reported FCF was lumpy/down in
the latest print. Margins are expanding but capped near a ~62% gross-margin ceiling by
DRAM-component costs, tariffs, and mix. No penalty modifiers.
Weight: 25%
GAAP Op Margin
41.2%
+860 bps YoY | Expanding
FCF (5yr CAGR)
~18%
FY25 $3.75B | Lumpy latest qtr
Share Count
Declining
-14% over 5yr | No dilution
Quarterly Revenue Trajectory ($M)
Decelerated, then re-accelerated: +23.7% (CQ4'24) peaked ~+29.8% (CQ1'25),
fell to +7.2% (CQ4'25), then re-accelerated to +11.5% (CQ1'26).
The trajectory factor the rubric weights most heavily is the reason this dimension is a 7 rather
than a 9-10. Management's CY2026 framing was raised from mid-single-digit to high-teens growth,
with SPC systems guided >20% in CY2026 — consistent with the recent inflection back up.
Quarterly Margins (%)
GAAP operating margin expanded +860 bps YoY (32.6% → 41.2%) and ~+1,170 bps
off the CQ4'23 trough — the cleaner read on secular operating leverage. But the near-term nuance
is real: non-GAAP gross margin is effectively flat in a tight ~60-63% band,
management-capped near 62% ±50 bps on DRAM-component costs and tariffs, and non-GAAP operating
margin has slid ~160 bps off its 44.2% peak (CQ1-CQ2'25) to 42.6%.
Annual Financial Summary (FY ends June 30)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $6,919M | $9,212M | $10,496M | $9,812M | $12,156M |
| Rev YoY | — | +33.1% | +13.9% | -6.5% | +23.9% |
| Non-GAAP EPS | $14.55 | $21.15 | $25.37 | $23.74 | $33.28 |
| EPS YoY | — | +45.4% | +20.0% | -6.4% | +40.2% |
| GAAP Op Income ($M) | $2,489M | $3,654M | $3,995M | $3,346M | $4,775M |
| Free Cash Flow ($M) | $1,953M | $3,005M | $3,328M | $3,031M | $3,747M |
| FCF YoY | — | +53.9% | +10.7% | -8.9% | +23.6% |
| Diluted Shares (M) | 155.4 | 151.6 | 140.2 | 136.2 | 133.8 |
| Long-Term Debt ($M) | $3,423M | $6,661M | $5,891M | $5,880M | $5,884M |
Key trends
- Revenue compounding at ~15% CAGR: From $6.9B (FY2021) to $12.2B (FY2025), through a FY2024 cyclical dip (-6.5%) and a FY2025 rebound (+23.9%) — characteristic of WFE cyclicality, not structural deterioration
- Non-GAAP EPS compounding at ~23% CAGR: $14.55 to $33.28, on operating leverage plus a ~14% share-count reduction
- FCF compounding at ~18% CAGR: $1.95B to $3.75B, positive every year and every quarter
- Share count declining -14% over 5 years: 155.4M to 133.8M, buyback-driven with no dilution
- Debt flat since FY2023: ~$5.9B; grew far slower than revenue, near-zero net leverage growth
Segment Revenue ($M, quarterly)
| Segment | CQ2'24 | CQ3'24 | CQ4'24 | CQ1'25 | CQ2'25 | CQ3'25 | CQ4'25 | CQ1'26 |
|---|---|---|---|---|---|---|---|---|
| Semi Process Control | $2,308M | $2,575M | $2,756M | $2,739M | $2,878M | $2,899M | $3,005M | $3,084M |
| Specialty Semi | $121M | $128M | $160M | $157M | $142M | $120M | $141M | $164M |
| PCB / Component Insp. | $140M | $138M | $161M | $169M | $154M | $189M | $152M | $168M |
| Total | $2,569M | $2,842M | $3,077M | $3,063M | $3,175M | $3,210M | $3,297M | $3,415M |
Growth is almost entirely Semi Process Control ($2,308M → $3,084M, +12.6% latest YoY),
which is ~90% of revenue. Specialty Semiconductor ($121M → $164M) and PCB/Component Inspection
($140M → $168M) are choppy and small — together <10% of revenue.
Free Cash Flow ($M, quarterly)
FCF is strong and growing on a trailing/annual basis (~18% CAGR) but
lumpy — the latest quarter's $622M (18.2% margin) is down 37% YoY off a
$1.26B CQ4'25 high, reflecting working-capital/timing rather than deterioration. FCF was positive
every quarter through the window; the single-quarter dip is the ugliest data point in the
financials and the main reason the dimension is a 7 rather than higher.
Share Count & Capital Return
- Share count declining steadily: 135.3M (CQ2'24) to 131.8M (CQ1'26); -14% over five years (155.4M FY2021 to 133.8M FY2025), buyback-driven with no dilution
- Disciplined capital return: 16th consecutive annual dividend increase (+12%) plus a fresh $5B buyback authorization announced FY2025Q3
Blemishes -- Trajectory, Not Deterioration
| Blemish | Detail | Penalty |
|---|---|---|
| Revenue Deceleration | Revenue YoY fell from ~24-30% (CQ4'24-CQ1'25) to single digits (+7.2% CQ4'25) through CY2025 before re-accelerating to +11.5% (CQ1'26). The rubric's biggest swing factor. | None |
| Op Margin Off Peak | Non-GAAP operating margin ~160 bps off its 44.2% peak (CQ1-CQ2'25) to 42.6%, on OpEx growth (+~$15M/qtr guide) and the DRAM-cost gross-margin drag. | None |
| Gross Margin Capped ~62% | Non-GAAP gross margin structurally capped near 62% ±50 bps by DRAM-component costs and tariffs — management's own framing, an externally-driven input-cost issue. | None |
| Lumpy Latest-Qtr FCF | FCF -37% YoY to $622M (18.2% margin) off a $1.26B CQ4'25 high — working-capital/timing, not deterioration; FCF positive every quarter. | None |
All four blemishes are trajectory/timing, not operational deterioration.
Revenue re-accelerated in the latest quarter, GAAP operating margin expanded +860 bps YoY, share
count fell, and debt was flat. No penalty modifiers apply: FCF was never negative, dilution was
anti-dilutive, GAAP operating income rose YoY, and debt grew slower than revenue.
Score Rationale
Score of 7/10 reflects a dominant, high-margin, cash-generative franchise that screens excellent on absolutes and most quality markers, held below a 9-10 by the trajectory factor the rubric weights most. No penalty modifiers applied.
Supports 7/10:
- 5yr revenue CAGR ~15%, non-GAAP EPS CAGR ~23%, FCF CAGR ~18%
- GAAP operating margin expanding +860 bps YoY (32.6% → 41.2%); ~+1,170 bps off the CQ4'23 trough
- Diluted share count declining -14% over five years, buyback-driven, no dilution
- Debt flat since FY2023 (~$5.9B), near-zero net leverage growth
- Revenue re-accelerated to +11.5% YoY in CQ1'26; management raised CY2026 to high-teens, SPC systems guided >20%
Held to 7 (trajectory nuance):
- Revenue YoY decelerated from ~24-30% to single digits through CY2025 before re-accelerating (the rubric's biggest swing factor)
- Non-GAAP operating margin ~160 bps off peak; gross margin structurally capped near 62% by DRAM-component costs/tariffs
- Reported FCF lumpy/down 37% YoY in the latest print on working-capital timing
Composite quality gate — positiveGrowingFcf: YES. FCF positive every quarter and growing annually ($1.95B FY2021 → $3.75B FY2025, +18% CAGR); the latest single quarter dipped on timing but the franchise is decisively positive-and-growing FCF.
Data sourced from Daloopa (company_id: 111). Fiscal year ends June 30. All financials in USD; quarters shown on a calendar basis.