KLA Corp. (NASDAQ:KLAC)

The financial leverage ratios demonstrate notable fluctuations over the analyzed periods. Initially, debt to equity steadily declines from 1.25 to 0.85 between September 2020 and December 2021, indicating a reduction in reliance on debt relative to shareholders' equity. However, a sharp increase occurs in June 2022, with the ratio rising dramatically to 4.75, followed by a gradual decline to 1.18 by September 2025, suggesting a temporary period of higher leverage that was subsequently mitigated.

Similarly, debt to capital decreases from 0.55 in September 2020 to 0.46 in December 2021 before spiking to 0.83 in June 2022. Despite this peak, it trends downward thereafter, reaching 0.54 by September 2025. This pattern is consistent with the debt to equity ratio, corroborating a short-term increase in debt financing that was later reduced.

The debt to assets ratio exhibits a comparable trend, decreasing from 0.37 to 0.29 between September 2020 and December 2021, then surging to 0.53 in June 2022. Post-peak, it steadily declines again to 0.36 by September 2025. This indicates that the proportion of assets financed through debt rose significantly during mid-2022 but was subsequently curtailed.

Financial leverage follows a parallel trajectory, dropping from 3.39 to 2.89 through December 2021, sharply increasing to 8.99 at June 2022, then declining continuously to 3.27 by September 2025. This measure further confirms the pattern of increased debt-induced risk during mid-2022, with progressive deleveraging afterward.

Interest coverage ratios reflect a generally positive trend. Starting at 9.97 in September 2020, the ratio increases steadily to a peak of 22.76 in June 2022. Following this peak, it decreases moderately but remains strong, holding at 17.75 by September 2025. This suggests improved ability to cover interest expenses during the earlier periods, even amid rising leverage, with maintained adequate coverage subsequently despite debt level adjustments.

In summary, there is clear evidence of a strategic shift characterized by initial deleveraging through late 2021, followed by a substantial increase in leverage around mid-2022. This peak appears to have been managed effectively, as indicated by the gradual reduction in leverage ratios and sustained strong interest coverage. The overall pattern suggests careful management of the capital structure, balancing debt levels with earning capacity to maintain financial stability across the periods.

Debt Ratios

Generally declined from late 2020 to late 2021, surged markedly mid-2022, then trended downward through 2025.

Financial Leverage

Mirrored debt ratio trends with a sharp peak mid-2022 followed by steady reduction.

Interest Coverage

Consistently strong and increasing to mid-2022, followed by a slight decline but remaining at comfortable levels.

The analysis of the financial data reveals significant fluctuations and notable trends in debt, equity, and their relationship over the observed periods.

Total Debt

The total debt remained relatively stable from late 2020 through early 2022, ranging approximately between 3.4 billion and 3.7 billion US dollars. A sharp increase occurred in mid-2022, where debt surged to over 6.6 billion US dollars. After this peak, total debt demonstrated a gradual decline, decreasing to below 5.9 billion by the end of 2024, and then stabilizing around 5.9 billion into 2025.

Total Stockholders' Equity

Stockholders' equity showed a steady upward trend from approximately 2.7 billion US dollars at the end of September 2020 to over 4 billion by early 2022. Subsequently, equity experienced a steep decline in mid-2022, dropping sharply to about 1.4 billion US dollars. From this low point, equity recovered progressively, surpassing previous levels and reaching nearly 5 billion US dollars by the third quarter of 2025.

Debt to Equity Ratio

The debt to equity ratio started at 1.25 at the end of September 2020 and consistently decreased to a low of 0.85 by December 2021, indicating an improvement in the balance between debt and equity. However, this was followed by a sharp spike to 4.75 in mid-2022, reflecting the sudden increase in debt and decrease in equity at that time. After this spike, the ratio declined steadily, reaching 1.18 by the third quarter of 2025, suggesting a gradual restoration of financial stability and a more balanced capital structure.

In summary, the data indicate a period of relative stability in debt and equity until early 2022, followed by significant volatility characterized by a large increase in debt and concomitant decline in equity, leading to a high leverage position mid-2022. This was succeeded by a trend of deleveraging and equity recovery through subsequent periods, ultimately approaching a healthier financial position by mid-2025.

Total Debt

Over the examined periods, total debt exhibited a fluctuating trend with a notable surge in the middle quarters. It remained relatively stable around 3.4 million thousand US dollars from late 2020 through early 2022. However, total debt increased sharply, peaking at approximately 6.7 million thousand US dollars by mid-2022. Following this peak, the debt gradually declined to about 5.9 million thousand US dollars by the end of 2024, remaining fairly constant thereafter at slightly above that level approaching 5.9 million through late 2025.

Total Capital

Total capital generally increased throughout the entire time frame. Beginning at roughly 6.2 million thousand US dollars in late 2020, there was a consistent upward trajectory with minor fluctuations. The capital grew steadily beyond the 8 million mark by mid-2022 and continued to expand, exceeding 10.8 million thousand US dollars by the latter months of 2025. This reflects growth in the company’s capital base over the periods analyzed.

Debt to Capital Ratio

The debt to capital ratio depicted a decrease from 0.55 in late 2020 down to 0.46 by the end of 2021, indicating a period of deleveraging or relative capital increase compared to debt. Thereafter, the ratio abruptly increased to 0.83 by mid-2022, coinciding with the spike in total debt. This heightened leverage level then progressively declined over subsequent quarters, reaching 0.54 by late 2025. This trend reflects the initial reduction in leverage, followed by a significant increase, and then a gradual move towards lower leverage in the latter stages.

Overall Insights

The data reveal a meaningful shift in capital structure during the period, with a pronounced debt accumulation phase occurring mid-2022. The increase in total debt did not correspond with a proportional increase in total capital during that period, resulting in a spike in leverage as shown by the debt to capital ratio. Subsequent quarters demonstrate a rebalancing phase, where leverage was reduced through a combination of stable or slightly decreasing debt and continued growth in total capital. The company’s capital base grew substantially over the observed periods, signifying capacity for additional financing or investment activities. The management of leverage appears dynamic and responsive to changing financial or market conditions, aiming to optimize the capital structure over time.

Total debt

The total debt exhibited relatively stable levels around 3.4 million USD thousand between September 2020 and March 2022, with a notable surge occurring in June 2022, when the debt nearly doubled to approximately 6.7 million USD thousand. Following this sharp increase, total debt gradually decreased over subsequent quarters, stabilizing near 5.9 million USD thousand from December 2022 through December 2024. A slight uptick in total debt is observed again in the first quarter of 2025, maintaining around 5.9 million USD thousand through September 2025.

Total assets

Total assets showed a consistent upward trend throughout the entire period under review. Starting at approximately 9.3 million USD thousand as of September 2020, total assets increased continuously each quarter, reaching about 16.3 million USD thousand by September 2025. This reflects sustained growth in asset base, with no significant declines or plateaus, indicating expansion and asset accumulation over time.

Debt to assets ratio

The debt to assets ratio decreased from 0.37 in September 2020 to a low of 0.29 by December 2021, implying a strengthening balance sheet with debt becoming a smaller fraction of assets. However, a sharp rise to 0.53 was observed in June 2022, corresponding to the increase in total debt noted earlier. After this peak, the ratio steadily declined over the subsequent quarters, reducing to approximately 0.36 by September 2025. This pattern suggests an initial increase in leverage followed by gradual deleveraging and improved capitalization.

Total Assets

Total assets generally demonstrate a consistent upward trajectory over the periods analyzed, increasing from approximately $9.32 billion in late September 2020 to around $16.32 billion by late September 2025. The growth is steady with no significant interruptions or declines, reflecting an expanding asset base. There is a slight deceleration in growth between late 2024 and 2025, but the overall trend remains strong and positive.

Total KLA Stockholders’ Equity

Stockholders’ equity shows a marked increase from about $2.75 billion at the end of September 2020 to nearly $5.0 billion by the end of September 2025, effectively backing the expansion of total assets. However, there is an unusual sharp decline observed in mid-2022, where equity drops abruptly from over $4 billion to approximately $1.4 billion. Following this drop, equity begins a recovery trajectory with steady increases in subsequent quarters, nearing $5 billion again by late 2025. This anomaly indicates a significant event affecting equity in mid-2022, followed by stabilization and growth thereafter.

Financial Leverage

The financial leverage ratio decreases gradually from 3.39 in September 2020 to a low of 2.89 by September 2021, suggesting a reduction in the relative amount of debt financing compared to equity at that time. However, there is a dramatic spike in leverage to 8.99 in mid-2022, coinciding with the sharp equity drop previously noted, which indicates a substantial increase in debt or a significant decrease in equity. From that point, the leverage ratio steadily declines each quarter, reaching 3.27 by late 2025. This reduction in leverage after mid-2022 reflects efforts to deleverage or rebuild equity, restoring a more balanced financial structure over time.

Earnings before interest and tax (EBIT)

The EBIT demonstrated an overall upward trend from September 2020 through September 2022, increasing from approximately 523 million USD to over 1.14 billion USD. Following this peak, EBIT declined sharply in the first half of 2023, reaching around 849 million USD by June 2023. After this dip, EBIT gradually recovered through the remainder of 2023 and into 2024, reaching levels above 1.16 billion USD by March 2024. Subsequently, EBIT showed some volatility but generally remained high, culminating around 1.38 billion USD by September 2025.

Interest expense

Interest expense remained relatively stable during the initial periods, fluctuating moderately in the range of approximately 38 to 44 million USD through mid-2022. A significant increase occurred by September 2022, where interest expense nearly doubled to approximately 74 million USD. This elevated level of interest expense was maintained consistently through 2023 and 2024, with minor fluctuations between roughly 71 to 83 million USD. Toward the latter quarters in 2025, interest expense exhibited a slight decreasing trend, ending near 71 million USD.

Interest coverage ratio

The interest coverage ratio, calculated as EBIT divided by interest expense, depicted a strong improving trend from September 2020 (approximately 9.97) to mid-2022, peaking at around 22.76 in June 2022. This suggested increasing capacity to cover interest obligations during this period of rising EBIT. However, following the substantial increase in interest expense around September 2022, the coverage ratio declined steadily through 2023, falling to a low near 11 in December 2023. Thereafter, it began to improve progressively, climbing to approximately 17.75 by September 2025. This indicates a recovery in the company’s ability to manage interest obligations amid fluctuating EBIT and elevated interest expenses.