KLA (KLAC) Risk Factor Changes

agencies typically have the right to terminate funding programs at any time in their sole discretion, or a project may be terminated by mutual agreement if the parties determine that the project’s goals or milestones…

There are risks associated with our receipt of government funding.

In addition, in our commercial agreements, from time to time in the normal course of business, we indemnify third parties with whom we enter into contractual relationships, including customers, suppliers and lessors,…

and conditions.

•Obligations to comply with restrictive and financial covenants as noted in the above risk factor and Note 7 “Debt” to our Consolidated Financial Statements.

If we fail to comply with these covenants, we will be in default and our borrowings may become immediately due and payable.

In certain circumstances involving a change of control followed by a downgrade of the rating of a series of our Senior Notes by at least two of Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”) and Fit…

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.

Our business would be harmed if we do not receive parts, materials and subassemblies sufficient in number and performance to meet our production requirements and product specifications in a timely, cost-effective and…

Our industry includes large manufacturers with substantial resources to support customers worldwide.

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.

Business Model and Capital Structure Risks

Additionally, AI algorithms or training methodologies may be flawed, and datasets may contain irrelevant, insufficient or biased information, which can cause errors in outputs.

We are increasingly incorporating AI capabilities into the development of technologies and our business operations, and into our products and services.

We are exposed to risks related to the development, adoption, governance and use of AI by us, our competitors and other third parties.

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…

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,…

•Certain customers have undergone significant ownership changes, created alliances with other companies, experienced management changes or have outsourced manufacturing activities, any of which may result in additiona…

Numerous countries are evaluating their existing tax laws due, in part, to recommendations made by the Organization for Economic Co-operation and Development’s (“OECD”) Base Erosion and Profit Shifting (“BEPS”) project.

The enactment of the Inflation Reduction Act (“IRA”) introduced a corporate alternative minimum tax (“CAMT”).

We earn profits in, and are therefore potentially subject to taxes in, the U.S.

In addition, the market price for our common stock is volatile and has fluctuated significantly during recent years.

Disruption of our manufacturing facilities, other operations, suppliers, or customers due to climate change, natural disasters, public health crises, terrorism, acts of war or other catastrophic events could result in…

Any impact to the availability, integrity or confidentiality of our IT Systems or Confidential Information can materially adversely impact our business, operations and financial condition directly, or indirectly by im…

through our third-party providers or the supply chain, including social engineering, phishing, or other events or developments that we may be unable to anticipate or fail to mitigate, including, but not limited to, fi…

In the conduct of our business, we and certain of our third-party providers collect, use, transmit and store data on information systems and networks, including systems, software, hardware and networks owned and maint…

performance against the same.

Our ESG efforts have included, and may in the future include further adoption, or expansion, of certain ESG practices or policies, which may require us to expend additional resources to implement or to forego certain…

incorporate new technologies or processes, or revise process inputs, among other things, which may cause us to incur significant costs or otherwise adversely impact our business performance.

Additionally, we are subject to various domestic and international environmental laws and regulations, including those that control and restrict the use, transportation, emission, discharge, storage, and disposal of c…

The U.S.

Recently announced and future U.S.

We may lose revenue in future periods related to anticipated sales to customers in China unless we are able to replace their orders with other customer orders for which either an export license has been obtained or is…

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.

In addition, a decline in the condition of the global financial markets could adversely impact the market values or liquidity of our investments.

•We are subject to risks related to receivables factoring, banking arrangements, and compliance with certain settlement agreements with the government; and

•We may not have sufficient financial resources to repay indebtedness when due, and our leveraged capital structure may divert resources from operations, investments, dividends, stock repurchases and other corporate u…

•We are exposed to risks related to the development, adoption, governance and use of AI by us, our competitors, customers, and other third parties.

•We are exposed to fluctuations in foreign currency exchange rates, interest rates, the market values of our portfolio investments and the market price of our common stock;

•Natural disasters, climate-related events, public health crises, acts of terrorism or war, and other catastrophic events, could disrupt our operations, customer operations or global supply chains for lengthy periods…

•We may be unable to attract, retain and motivate key personnel;

•Legal, regulatory and tax environments in which we conduct our business;

•IP disputes can be expensive and could result in an inability to use or sell our products in certain jurisdictions;

•Export controls, sanctions and other laws, rules, regulations or orders that may limit our ability to sell products or provide services to certain customers, particularly in China;

Historically, we have recorded restructuring charges related to our prior global workforce reductions, large excess

application of such provisions, and a court of law may not interpret or apply such provisions in our favor, any of which could result in an obligation for us to pay material damages to third parties and engage in cost…

our borrowings, which could disrupt our operations and result in a material adverse impact on our business, financial condition or stock price.

Our industry includes large manufacturers with substantial resources to support customers worldwide.

The timing, length and severity of the up-and-down cycles in the industries in which we serve are difficult to predict.

Ongoing changes in the technology industry, as well as the semiconductor industry in particular, could expose our business to significant risks.

We earn profits in, and are therefore potentially subject to taxes in, the U.S.

The threat of terrorism targeted at, or acts of war in, the regions of the world in which we do business increases the uncertainty in our markets.

difficulties that may occur in connection with our ERP system or other systems (whether in connection with the regular operation, periodic enhancements, modifications or upgrades of such systems or the integration of…

Our global operations are dependent upon certain information systems, including telecommunications, the internet, our corporate intranet, network communications, email and various computer hardware and software applic…

We rely upon certain critical information systems for our daily business operations.

make and execute business and capital equipment investment plans or increase supply chain complexity, which may have an impact on our ability to source the materials necessary to manufacture our products.

We have controls and procedures designed to maintain compliance with U.S.

Over the past several years, there have been a variety of rules and regulations issued by Commerce that have had an impact on our ability to sell certain products and provide certain services to certain customers in C…

•Our government funding for R&D is subject to termination, audit and any further penalties;

•We may not receive components necessary to build our products in a timely manner;

•We may not be able to compete with new products introduced by our competitors;

•Prevailing local and global economic conditions may negatively affect the purchasing decisions of our customers; and

•Changes in accounting pronouncements and laws could have unforeseen effects.

•We may face disruptions if we cannot access critical information in a timely manner due to system failures;

•Tariffs and other trade restrictions;

Commercial, Operational, Financial and Regulatory Risks

We are exposed to additional risks related to our receipt of external funding for certain strategic development programs from various governments and government agencies, both domestically and internationally.

Although our standard commercial documentation sets forth the terms and conditions that we intend to apply to commercial transactions with our business partners, counterparties to such transactions may not explicitly…

which we may be a party at such time.

fiscal 2027.

A supplier may discontinue production of a particular part for any number of reasons, including the supplier’s financial condition or business operational decisions, which would require us to purchase, in a single tra…

In April 2025, the Chinese government imposed export controls on seven of the seventeen elements classified as rare earth elements.

standards and develop as well as offer competitive technology solutions in a timely manner with cost-effective products could result in loss of market share, unanticipated costs and inventory obsolescence, which would…

Furthermore, the regulatory framework for AI technologies is rapidly evolving, uncertain, and varies significantly by jurisdiction, with new laws and regulations being enacted or proposed in the United States, the Eur…

Although we strive to use AI technologies responsibly and have implemented internal processes and controls designed to identify and mitigate ethical and legal concerns related to our use of AI technologies, such proce…

The growth that we have experienced over the past few years has resulted in higher levels of backlog.

The timing, length and severity of the up-and-down cycles in the industries that we serve are difficult to predict.

customers may result in similar challenges, including the possibility of the successor entity or new management deciding to select a competitor’s products;

•Changes in demand for semiconductor chips due to changes in the timing, level of investment in, or technologies used in the buildout of data centers, including data-center buildout driven by demand for AI technologies;

•The focus on reducing energy usage and improving the environmental impact and sustainability associated with semiconductor manufacturing operations, including the availability of adequate and reliable energy sources

•AI-driven design, verification, testing, process-node development, chip-based architectures, advanced packaging and novel materials science may compress semiconductor development cycles, lower barriers to entry, acce…

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 sign…

domestic tax laws requiring a minimum tax rate of 15% (“top-up tax”) on income earned in the respective countries.

Because the interest rate swaps convert a portion of our fixed-rate debt to floating-rate debt, an increase in interest rates would require us to pay additional interest on the swapped debt, which may have an adverse…

In 2026, we entered into interest rate swaps which are designated as fair value hedges and allow us to convert a portion of our fixed-rate payments under the senior, unsecured long-term notes issued in June 2022 (“202…

We are exposed to risks associated with our interest rate hedging activities.

parts of Israel and attacks on marine vessels traversing the Red Sea.

We maintain significant operations in Israel.

The threat of terrorism targeted at, or acts of war in, the regions of the world in which we do business increases the uncertainty in our markets.

Our global operations are dependent upon certain information systems, including telecommunications, the internet, our corporate intranet, network communications, email and various computer hardware and software applic…

We rely upon critical information systems, including our ERP system, for daily business operations and financial reporting, and system failures, implementation issues, or limited access to critical information could a…

We are exposed to various risks related to the legal, regulatory and tax environments in which we perform our operations and conduct our business.

Additionally, while we are pursuing recovery of duties previously paid through the administrative refund process established by U.S.

In February 2026, the U.S.

We have faced delays and could face additional delays or denials in the export of our tools by regulatory agencies for national security or other regulatory concerns in the countries in which we do business, which cou…

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.

Commerce may continue to add China-based entities to the U.S.

In September 2025, Commerce released an interim final rule that further expands export control restrictions and licensing requirements for foreign entities 50% or more directly or indirectly owned by one or more liste…

China, and may significantly harm our business, results of operations, financial condition and cash flows, unless we are able to obtain required licenses.

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, par…