KLA Q4 Earnings Call Highlights

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KLA (NASDAQ:KLAC) reported record June-quarter revenue and raised its outlook for the wafer equipment market, citing accelerating investment in artificial intelligence infrastructure, leading-edge logic, high-bandwidth memory and advanced packaging.

Chief Executive Officer Rick Wallace said revenue, profitability and earnings per share all exceeded the midpoint of the company’s guidance. Revenue reached $3.66 billion, up 7% sequentially and 15% from a year earlier, supported by demand tied to AI infrastructure and rising process-control requirements across semiconductor manufacturing.

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The company noted that all per-share figures were adjusted for its 10-for-one stock split completed June 11, 2026. Non-GAAP diluted earnings per share were $1.50, while GAAP diluted EPS were $1.04, both at the upper end of KLA’s respective guidance ranges.

Profitability, Cash Flow and Capital Returns

Chief Financial Officer Bren Higgins said gross margin was 62.4%, at the upper end of the company’s forecast, aided by a more favorable services mix and manufacturing scale. Those factors partly offset higher memory-component prices and tariff-related headwinds.

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Operating expenses totaled $682 million, including $399 million in research and development and $283 million in selling, general and administrative costs. Operating margin was 43.7%, while incremental operating margin was 59%.

• Non-GAAP net income was $1.39 billion; GAAP net income was $1.36 billion.
• Cash flow from operations totaled $906 million, and free cash flow was $817 million.
• KLA ended the quarter with $4.9 billion in cash equivalents and marketable securities and $5.9 billion in debt.
• The company returned $876 million to shareholders during the quarter, including $571 million in share repurchases and $305 million in dividends.

Over the past 12 months, KLA returned $3.3 billion to shareholders and generated a free-cash-flow margin of 28%, Higgins said.

AI, Advanced Packaging Drive Demand

Wallace said AI-related design activity, high-volume manufacturing adoption, faster product cycles and increasingly complex device architectures are raising process-control intensity. The company expects advanced-packaging process-control systems revenue to reach approximately $1.1 billion in calendar 2026, representing growth of more than 70% from a year earlier.

That outlook exceeds KLA’s prior expectation for high-50% growth and is nearly twice the projected growth rate for the advanced-packaging market, according to Wallace. He also said high-performance computing packages and integration are lifting demand for KLA’s specialty process, printed-circuit-board and component-inspection businesses, which the company expects to grow more than 25% in 2026.

KLA Services generated $820 million of revenue in the June quarter, up 17% year over year. Higgins said the company’s service business has a long-term growth target of 13% to 15%, with about 80% of its revenue tied to contracts. He expects growth to move toward the high end of that range as shipment levels rise and customers seek higher tool utilization and uptime.

Wafer Equipment Outlook Raised

KLA raised its calendar 2026 outlook for the wafer equipment market, including advanced packaging, to the low-$150 billion range. That compares with its prior forecast of more than $140 billion and an approximately $120 billion market in calendar 2025.

Higgins said the revised outlook reflects stronger customer schedules, new factories coming online and accelerating advanced-packaging demand. He said KLA expects second-half 2026 revenue to be approximately 20% higher than first-half revenue as supply becomes available for longer-lead-time areas of its supply chain.

The company also said it is planning for significant growth in calendar 2027, driven by investment in leading-edge logic and foundry, conventional DRAM, high-bandwidth memory, NAND and advanced packaging. Higgins said an industry view around a roughly $190 billion wafer-equipment market in 2027 would imply mid-20% growth, though he stressed that KLA is planning capacity to support more bullish demand cases.

Wallace said broader investment among leading-edge logic producers, rather than reliance on a single market leader, is contributing to the outlook. He added that process-control intensity is also improving in memory, particularly in high-bandwidth memory, where customization, integration and yield requirements increase the value of inspection and metrology tools.

September-Quarter Forecast

For the September quarter, KLA forecast revenue of $4 billion, plus or minus $200 million. The company expects foundry and logic customers to account for approximately 73% of semiconductor process-control systems revenue from semiconductor customers, with memory accounting for about 27%. Within memory, KLA expects DRAM to represent approximately 90% of the mix and NAND the remaining 10%.

Gross margin is projected at 62.5%, plus or minus one percentage point, while operating expenses are expected to be approximately $690 million. KLA forecast non-GAAP diluted EPS of $1.16, plus or minus $0.10, and GAAP diluted EPS of $1.14, plus or minus $0.10.

Higgins said KLA expects operating expenses to increase by roughly $15 million to $20 million sequentially over the next several quarters as it funds next-generation product development and infrastructure. The company’s long-term model targets incremental operating-margin leverage of 40% to 50% on revenue growth.

Management also said the company’s backlog, or remaining performance obligations, is expected to be about $12.5 billion when KLA files its quarterly report. Lead times across the company are approximately 12 months, with certain products requiring 18 to 24 months, Higgins said.

About KLA (NASDAQ:KLAC)

KLA is a provider of process control and yield management solutions for the semiconductor and related microelectronics industries. The company designs and manufactures equipment, software and services used by chipmakers to analyze and control manufacturing processes, detect defects, measure critical dimensions and improve yield across wafer fabrication, photomask and packaging operations. KLA's offerings are aimed at enabling production of advanced logic, memory, and specialty devices at progressively smaller technology nodes and more complex package structures.

Its product portfolio includes optical and e-beam inspection systems, metrology tools for critical dimension and film measurement, mask and reticle inspection platforms, as well as enterprise software and data analytics that aggregate process data and drive automated process control.

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