KLA Corp. (NASDAQ:KLAC)

The analysis of the quarterly financial metrics reveals notable trends in profitability and leverage over the observed periods.

Return on Assets (ROA)

ROA exhibited a generally upward trend from September 2020, rising from approximately 13.85% to peak levels around 26.37% in mid-2022. Following this peak, there was a gradual decline throughout late 2022 and into 2023, decreasing from roughly 25.79% to a low near 17.45% by early 2024. From this point onward, ROA steadily recovered, reaching over 25% by mid-2025. This fluctuation indicates a phase of increasing operational efficiency or asset profitability until mid-2022, followed by a period of reduced asset returns, and subsequently a recovery phase.

Financial Leverage

The financial leverage ratio started at approximately 3.39 in late 2020 and declined slowly to 2.89 by the end of 2021, suggesting reduced reliance on debt relative to equity during that time. However, in mid-2022, there was a sharp and significant spike in leverage, peaking at nearly 9.0. This outlier likely reflects an extraordinary financing event or accounting change. After this spike, the leverage ratio decreased steadily through late 2024 and mid-2025, descending below the early 2021 levels to around 3.42, indicating a return to more conservative capital structure management.

Return on Equity (ROE)

ROE showed a strong growth trajectory from 46.99% in late 2020 to an extraordinary peak exceeding 237% in mid-2022, closely aligning with the leverage spike observed. This extraordinary increase suggests that heightened financial leverage substantially amplified equity returns during this period. Following this peak, ROE declined progressively but remained robust, staying above 80% from early 2024 through mid-2025. Despite the reduction from peak values, the sustained high ROE suggests continued strong profitability and effective equity utilization.

In summary, the trends indicate that increased financial leverage in mid-2022 greatly influenced the surge in ROE, while ROA growth was more moderate and experienced a characteristic rise and trough pattern. The subsequent deleveraging phase aligned with normalization of ROE levels, and the company demonstrated recovery in asset profitability towards the end of the period. The interplay between leverage and profitability metrics underscores the impact of capital structure on equity returns during the analyzed timeframe.

Net Profit Margin

The net profit margin demonstrated an overall upward trend from September 2020 to December 2025, beginning at 21.76% and reaching 33.41% by the end of the period. A significant increase occurred during the initial quarters, peaking around 36.57% in December 2021. Following this peak, the margin gradually declined through late 2023, stabilizing in the range of 27% to 30%. Starting in early 2024, a recovery trend was observed, with margins rising consistently toward the end of the period.

Asset Turnover

Asset turnover ratios showed steady improvement from 0.64 in September 2020 to a peak of 0.78 in March 2023, reflecting enhanced efficiency in using assets to generate revenue. After this peak, the ratio experienced a decline through late 2024, falling to around 0.64 to 0.65. However, the asset turnover rebounded in the last few quarters, closing near 0.76 by mid-2025.

Financial Leverage

Financial leverage exhibited considerable volatility during the reviewed period. It began at moderate levels around 3.39 in late 2020 and gradually decreased to 2.89 by September 2021. Subsequently, a sharp spike occurred in June 2022, where leverage surged to 8.99, indicating increased debt or liabilities relative to equity. This spike was followed by a steady decline back toward more moderate levels, reaching 3.42 by mid-2025. This pattern suggests a temporary but significant shift in the company’s capital structure during 2022.

Return on Equity (ROE)

Return on equity showed a strong upward trajectory from 46.99% in September 2020, peaking at an extraordinary 237.04% in June 2022. This extreme value coincides with the spike in financial leverage, implying that leverage strongly influenced ROE during that quarter. After this peak, ROE declined but remained elevated relative to the initial period, consistently staying above 80% from early 2023 through mid-2025. The pattern indicates that while ROE moderated after the spike, the company maintained a high capacity to generate returns on shareholder equity.

Tax Burden

The tax burden ratio exhibits moderate fluctuations over the periods analyzed. Starting around 0.9 in late 2020, it sees a brief rise to slightly above 1.0 in late 2021 before gradually normalizing to approximately 0.87 by mid-2025. This indicates some variability in effective tax rates impacting net profitability but stabilizing in recent periods.

Interest Burden

Interest burden starts near 0.9 in late 2020 and generally trends upward, reaching around 0.96 in mid-2022. After that peak, there is a mild decline settling near 0.91 to 0.94 through mid-2025. This suggests that interest expenses relative to earnings before interest and taxes (EBIT) have been relatively stable with a slight initial increase, then a modest easing in recent quarters.

EBIT Margin

The EBIT margin shows a positive trajectory from approximately 27% in late 2020 to above 40% by early 2025, despite some small ebbs and flows. Notably, a peak near 40.5% occurs in late 2022, followed by a decline into the mid-30% range in 2023, then a consistent recovery resuming growth toward 40.7% by mid-2025. The overall trend reflects improving operational profitability over the long term.

Asset Turnover

Asset turnover ratio starts near 0.64 in late 2020, showing gradual improvement to around 0.78 by early 2023. A subsequent decline brings the ratio back near 0.64 in mid-2024, but the metric recovers promptly to 0.76 by mid-2025. This pattern highlights varying efficiency in asset utilization, with phases of enhancement interspersed with periods of reduced asset productivity.

Financial Leverage

Financial leverage is relatively stable between 2.89 and 3.39 from late 2020 through mid-2022, when it abruptly spikes to 8.99. After this significant elevation, leverage decreases steadily through subsequent periods, reaching approximately 3.42 by mid-2025. The sharp peak suggests a temporary increase in debt or a reduction in equity, followed by a controlled deleveraging process.

Return on Equity (ROE)

ROE shows a strong upward trend from roughly 47% in late 2020 to an extraordinary peak of 237% in mid-2022. This drastic rise correlates with the spike in financial leverage and indicates amplified returns possibly driven by increased debt levels. Following this peak, ROE declines over the following quarters to stabilize between 82% and 92% in mid-2025, which remains substantially elevated compared to earlier periods, reflecting sustained high profitability and efficient equity use despite reduced leverage.

Net Profit Margin

The net profit margin exhibited an overall increasing trend from September 2020 through December 2021, rising from 21.76% to a peak of approximately 36.57%. Following this peak, a gradual decline is observed until December 2023, reaching around 27.98%. However, after this period, the margin began to recover, demonstrating a steady upward movement, ultimately reaching 33.41% by June 2025. This pattern suggests an initial phase of strong profitability, followed by a period of contraction, and subsequent recovery.

Asset Turnover

Asset turnover started at 0.64 in September 2020 and experienced a general increase, peaking at 0.78 in March 2023. After this peak, a noticeable decline occurred, reducing the ratio to 0.64 by June 2024. In the final observed quarters, the asset turnover ratio rebounded slightly, climbing back to 0.76 by June 2025. The pattern indicates fluctuating efficiency in generating revenue from assets, with periods of improved utilization followed by phases of reduced activity, then a moderate recovery.

Return on Assets (ROA)

The ROA showed a marked upward trajectory between September 2020 and June 2022, increasing from 13.85% to 26.37%. This phase reflects enhanced profitability relative to asset base. Subsequent to this peak, ROA declined steadily to approximately 17.45% by March 2024, indicating downward pressure on returns. Following this trough, ROA trends upwards, reaching 25.28% by June 2025. This movement is consistent with the fluctuations observed in both net profit margin and asset turnover, as ROA is a function of these metrics.

Summary and Insights

Over the observed periods, the company experienced distinct phases in profitability and asset utilization. Initial quarters were characterized by increasing profit margins and asset efficiency, culminating in peak performance around early 2022 to early 2023. This was followed by a period of contraction seen in all three key indicators, suggesting external or internal challenges impacting profitability and operational efficiency. The later quarters show recovery signs, indicating potential strategic adjustments or market conditions favoring improved performance. The correlation between net profit margin, asset turnover, and ROA throughout the timeline highlights the interdependent nature of cost management and asset efficiency in driving overall returns.

Tax Burden Ratio

The tax burden ratio remained relatively stable, fluctuating slightly around 0.87 to 0.90 throughout the observed periods. There was a noticeable dip below 0.9 beginning in September 2022, where it stabilized near 0.87 by the end of the timeline. This indicates a modest reduction in tax expense relative to income before tax in the later periods.

Interest Burden Ratio

The interest burden ratio demonstrated a gradual increase from 0.90 in September 2020 to peaks near 0.96 in mid-2022, followed by a slight decline to around 0.91-0.94 in the more recent quarters. This suggests that interest expenses as a proportion of earnings before interest and taxes have remained relatively low, with some minor fluctuations indicating manageable interest costs.

EBIT Margin

The EBIT margin showed a generally positive trend, increasing from 26.81% in September 2020 to a high of over 40% in September 2022. After this peak, the margin experienced a gradual decline, falling to approximately 34.61% by March 2024. However, it rebounded again, reaching nearly 40.69% by June 2025. This pattern suggests an overall improvement in operational efficiency with some volatility, followed by recovery in profitability toward the end of the period.

Asset Turnover

Asset turnover ratios increased steadily from 0.64 in September 2020 to a peak of 0.78 in March 2023, indicating improved efficiency in using assets to generate sales. A decline followed, reaching a low of 0.64 again in March 2024, accompanied by a recovery trend that brought the ratio back to approximately 0.76 by mid-2025. This reflects fluctuations in asset utilization efficiency over time, with an eventual return to stronger performance levels.

Return on Assets (ROA)

ROA rose significantly from 13.85% in September 2020 to a peak of roughly 26.37% in June 2022, indicative of enhanced profitability and asset utilization. Subsequent quarters witnessed a decline to approximately 17.45% by March 2024, before rebounding to around 25.28% in June 2025. This suggests that the company experienced a cycle of increased returns on assets, followed by a period of contraction, and then a recovery phase toward the end of the observed timeline.

Tax Burden

The tax burden ratio demonstrates relative stability over the periods, fluctuating slightly around values close to 0.87 to 0.9. A notable peak occurred at the end of September 2021 with a ratio of 1.03, indicating a period of increased tax burden, after which the ratio declined and stabilized near 0.87 through to June 2025. This suggests a generally consistent tax impact on earnings after the initial spike.

Interest Burden

The interest burden ratio shows a gradual and steady increase over time, moving from 0.90 in September 2020 to 0.94 in June 2025. The ratio mostly remains above 0.9 throughout the periods, indicating that interest expenses have a relatively small and slightly increasing impact on earnings before tax.

EBIT Margin

The EBIT margin displays an overall upward trend from approximately 27% in late 2020 to over 40% by mid-2025. The margin peaks around the period between September 2022 and March 2023, slightly dipping afterwards but recovering again towards the last periods. This signifies improving operational efficiency and profitability before interest and taxes across the observed timeframe, with some short-term volatility.

Net Profit Margin

The net profit margin exhibits strong growth from roughly 22% in September 2020 to over 33% by June 2025. There is a peak in September 2021 at above 36%, followed by a moderate decline and a subsequent gradual increase beginning in late 2023. The trend indicates solid overall profitability after all expenses and taxes, aligning with improved margins seen in EBIT, although the variations suggest occasional pressure on net earnings during the mid-cycle periods.