KLA Corp. (NASDAQ:KLAC)

The financial performance, as measured by economic profit, demonstrates a generally positive trend over the observed period. Net operating profit after taxes (NOPAT) increased significantly from 2020 to 2022, plateaued in 2023, experienced a slight decrease in 2024, and then increased again in 2025. Invested capital consistently increased throughout the period, while the cost of capital fluctuated modestly. These factors combined to produce a fluctuating, but overall increasing, economic profit.

NOPAT Trend

NOPAT exhibited substantial growth between 2020 and 2022, rising from US$1,310,622 thousand to US$3,432,493 thousand. This growth slowed considerably in 2023, with a marginal increase to US$3,464,285 thousand. A slight decline was observed in 2024, decreasing to US$3,284,868 thousand, followed by a recovery and increase to US$3,852,307 thousand in 2025. This suggests potential operational efficiencies initially driving profit, followed by stabilization and a subsequent resurgence.

Cost of Capital Trend

The cost of capital showed a moderate increase from 18.81% in 2020 to 19.61% in 2021. It then decreased slightly to 18.98% in 2022 before rising again to 19.47% in 2023 and 19.74% in 2024. The cost of capital continued to increase, reaching 20.06% in 2025. These fluctuations may reflect changes in market conditions or the company’s risk profile.

Invested Capital Trend

Invested capital consistently increased throughout the period, growing from US$6,592,642 thousand in 2020 to US$9,244,891 thousand in 2025. This steady increase indicates ongoing investment in the business, potentially supporting future growth. The rate of increase appears relatively consistent year-over-year.

Economic Profit Trend

Economic profit increased significantly from US$70,855 thousand in 2020 to US$820,585 thousand in 2021, and further to US$1,899,901 thousand in 2022. It experienced a slight decrease to US$1,804,016 thousand in 2023, followed by a decrease to US$1,531,200 thousand in 2024. Economic profit then rebounded strongly to US$1,997,711 thousand in 2025, reaching a new high. This demonstrates the company’s ability to generate returns exceeding its cost of capital, although with some volatility.

Overall, the observed trends suggest a business that has generally improved its economic profit generation, despite some short-term fluctuations. The continued investment in capital, coupled with increasing NOPAT in the later years, indicates a positive trajectory. Monitoring the cost of capital and its impact on economic profit will be crucial for sustained performance.

The financial performance over the reviewed periods demonstrates notable fluctuations and growth patterns in key profitability metrics.

Net Income Attributable to KLA

The net income shows a strong upward trajectory from 1,216,785 thousand US dollars in mid-2020 to 3,381,277 thousand US dollars by mid-2023, indicating a substantial increase in profitability over the initial years. However, there is a decline in mid-2024 to 2,761,896 thousand US dollars, suggesting a temporary setback or increased expenses during this period. This is followed by a significant recovery and peak at 4,061,643 thousand US dollars in mid-2025, marking the highest profit level recorded in these periods.

Net Operating Profit After Taxes (NOPAT)

NOPAT trends closely follow the net income pattern, starting at 1,310,622 thousand US dollars in mid-2020 and rising steadily to 3,464,285 thousand US dollars by mid-2023. There is a minor decline to 3,284,868 thousand US dollars in mid-2024, aligning with the net income dip and possibly indicating operational challenges or market factors impacting earnings. By mid-2025, NOPAT recovers to 3,852,307 thousand US dollars, reflecting improved operational efficiency and profitability.

Overall, the data indicates robust growth in profitability over the five-year span with a minor interruption around mid-2024. The subsequent recovery in the latest period suggests resilience and effectiveness in addressing prior challenges.

The financial data reveals notable fluctuations in the taxation-related expenses over the analyzed periods.

Provision for Income Taxes

This item exhibits a generally increasing trend with some volatility. Starting from approximately 101.7 million USD in mid-2020, the provision saw a significant rise to 283.1 million USD by mid-2021. However, it then decreased to 167.2 million USD in mid-2022 before sharply increasing again to 401.8 million USD in mid-2023. The upward momentum continued, reaching 428.1 million USD in mid-2024 and further increasing to 582.8 million USD by mid-2025. Overall, there is a clear upward trajectory with a notable dip in the middle of the period.

Cash Operating Taxes

Cash operating taxes show a consistent and marked upward trend over the time horizon. Beginning at 224.5 million USD in mid-2020, the figure rose steadily to 360.2 million USD in mid-2021 and further climbed to 553.4 million USD by mid-2022. This increase continued substantially, reaching 805.2 million USD in mid-2023. A temporary decrease occurred in mid-2024 to 600.4 million USD, after which the amount surged again to a peak of 854.9 million USD by mid-2025. Despite the single-year decline in mid-2024, the overall pattern is one of significant growth in cash operating tax payments.

In summary, both provision for income taxes and cash operating taxes show increasing trends over the five-year period, indicative of either growth in taxable income, changes in tax rates, or adjustments in tax accounting. The volatility in the provision for income taxes suggests variability in anticipated tax expenses, while the cash operating taxes generally increase, reflecting the actual cash outflows related to tax payments with a minor temporary decline. These trends highlight growing fiscal obligations and possibly evolving tax strategies or financial conditions during the period analyzed.

The annual financial data reveals several notable trends in the company's capital structure from 2020 to the projected figures in 2025.

Total Reported Debt & Leases

The total reported debt and leases showed some volatility over the period analyzed. Initially, the debt level was approximately $3.57 billion in mid-2020, slightly decreasing to around $3.55 billion in mid-2021. Subsequently, there was a marked increase, with debt nearly doubling to about $6.77 billion by mid-2022. This peak was followed by a decline to approximately $6.06 billion in mid-2023. The debt rose again to an estimated $6.82 billion in mid-2024 before decreasing to roughly $6.09 billion by mid-2025. Overall, the company's debt levels experienced significant fluctuations, suggesting adjustments in financing strategy or capital needs during this period.

Total KLA Stockholders’ Equity

Stockholders’ equity grew from approximately $2.67 billion in mid-2020 to a peak near $3.38 billion in mid-2021. However, it then sharply declined to about $1.40 billion by mid-2022. This sudden drop contrasts with a recovery trend starting in mid-2023, when equity climbed back to nearly $2.92 billion, rising further to approximately $3.37 billion in mid-2024 and ultimately reaching an estimated $4.69 billion in mid-2025. This pattern indicates a strong rebound in equity after a significant contraction, possibly due to operational results, capital injections, or asset revaluations during this timeframe.

Invested Capital

Invested capital shows a consistent upward trend throughout the period examined. Starting at about $6.59 billion in mid-2020, it increased steadily each year to reach an estimated $9.24 billion by mid-2025. This gradual rise suggests ongoing investments in the business's productive assets, reflecting growth initiatives or expansion strategies employed by the company.

In summary, while invested capital demonstrated steady growth, the capital structure evidenced by debt and equity components experienced significant variability. The fluctuations in debt and equity, particularly the sharp decline and subsequent recovery in stockholders’ equity, signal dynamic financial management possibly responding to external conditions or strategic shifts. The overall increase in invested capital alongside these changes implies that the company is actively managing its financial resources to support its operations and growth outlook over the medium term.

The financial performance, as indicated by economic value added metrics, demonstrates a significant upward trend followed by a period of stabilization and renewed growth. Economic profit increased substantially from 2020 to 2022, then experienced a slight decrease in 2023 before recovering and projecting further growth. Invested capital consistently increased throughout the observed period, reflecting ongoing investment in the business. The economic spread ratio, a key indicator of profitability relative to capital employed, exhibits a corresponding pattern of growth, stabilization, and renewed expansion.

Economic Profit

Economic profit began at 70,855 thousand US dollars in 2020 and rose dramatically to 1,899,901 thousand US dollars by 2022. A modest decline to 1,804,016 thousand US dollars occurred in 2023, followed by a decrease to 1,531,200 thousand US dollars in 2024. Projections indicate a recovery, with economic profit reaching 1,997,711 thousand US dollars in 2025, surpassing the 2022 peak.

Invested Capital

Invested capital showed a consistent upward trajectory throughout the period. Starting at 6,592,642 thousand US dollars in 2020, it increased to 9,244,891 thousand US dollars in 2025. The rate of increase appears relatively stable, suggesting a consistent investment strategy.

Economic Spread Ratio

The economic spread ratio experienced the most pronounced changes. It rose from 1.07% in 2020 to a high of 23.53% in 2022, indicating a substantial improvement in the return generated on invested capital. The ratio decreased to 21.16% in 2023 and further to 17.24% in 2024, potentially reflecting the impact of the economic profit decline relative to the continued increase in invested capital. The projection for 2025 shows a recovery to 21.61%, suggesting a renewed improvement in profitability relative to capital employed.

The correlation between economic profit and the economic spread ratio is evident. While invested capital consistently increased, the fluctuations in economic profit directly influenced the economic spread ratio. The projected increase in economic profit for 2025 is expected to positively impact the economic spread ratio, bringing it closer to the levels observed in 2022.

The economic profit margin demonstrates a significant upward trend from 2020 to 2022, followed by a period of fluctuation and eventual increase. Economic profit itself exhibits substantial growth over the observed period, though with some variability.

Economic Profit Margin

In 2020, the economic profit margin was 1.20%. This value increased dramatically to 11.86% in 2021, and continued its ascent to 19.89% in 2022. A decrease was then observed in 2023, with the margin falling to 16.81%. This downward movement continued slightly in 2024, reaching 14.79%. However, the margin recovered in 2025, rising to 16.53%.

Economic Profit

Economic profit began at US$70,855 thousand in 2020. It experienced a substantial increase to US$820,585 thousand in 2021, and further growth to US$1,899,901 thousand in 2022. A slight decline occurred in 2023, with economic profit reported as US$1,804,016 thousand. In 2024, it decreased to US$1,531,200 thousand, before rebounding to US$1,997,711 thousand in 2025, exceeding the 2022 level.

The correlation between adjusted revenues and economic profit is apparent. While revenues increased consistently from 2020 to 2025, the economic profit margin did not always move in direct proportion, indicating changes in the cost of capital or operational efficiency impacting profitability. The most substantial margin expansion occurred between 2021 and 2022, coinciding with a significant increase in both economic profit and adjusted revenues. The dip in economic profit margin in 2023 and 2024, despite continued revenue growth, suggests a potential rise in costs or a less favorable capital structure during those years.

The recovery in economic profit margin in 2025, coupled with the highest economic profit value over the period, indicates a return to improved profitability and efficient capital allocation.