KLA (KLAC) Q3 FY26 earnings call: guidance and Q&A

Where in the portfolio and end markets is KLA seeing extended lead times and strong visibility into 2027, potentially 2028?

Visibility is broad-based, driven by building backlogs and strong customer engagement for slot planning into 2027. Most demand is for leading-edge products, and customers are showing high urgency to secure capacity for new greenfield fab projects, indicating a 'massive buildup' in 2027.

“the conversations I've had with customers in the last few months, there's a higher level of urgency around securing capacity for our customers that I can remember seeing.”

asked by Christopher Muse · answered by Richard Wallace

Given current market trends, why isn't the 2030 model for WFE and semi revenue higher, as current levels seem to be approaching the 2030 targets sooner?

The increase in semi revenue is primarily due to pricing, especially in memory, rather than equipment. The 2030 model assumes a normalized capital intensity. While the semi revenue number might be pushed up if re-evaluated today, equipment numbers haven't moved as fast. The WFE target of $215 billion +/- $20 billion by 2030 is still relevant.

“the number you're referring to that might be closer to what we talked about for 2030 is the semi revenue number, not the equipment number. And the reason the semi revenue is going higher, faster is pricing.”

asked by Stacy Rasgon · answered by Richard Wallace

Is the incremental WFE upside for 2026 driven by new greenfield fabs or technology migrations? Also, how should we think about the Services growth profile for 2026 given high utilization and advanced offerings?

The 2026 WFE upside is due to general urgency across segments for deliveries. For 2027, it's broad-based, including new greenfield fab projects in logic, memory (DRAM and flash), and packaging. Services growth will be in the 13-15% range for 2026, with current year shipments accelerating growth into 2027 and beyond.

“you've got a lot of new fab projects, a lot of greenfield activity, both on the logic side and memory. I think you'll also see some greenfield activity in flash. So -- and packaging will grow also.”

asked by Harlan Sur · answered by Bren Higgins

How much of the strong 2027 visibility is true demand versus customers trying to ensure KLA has enough capacity and personnel to support future needs?

It's true demand. Customers are making significant investments in new fabs and are engaging KLA not only for tool delivery but also for support resources, installation, applications, and service teams. This ensures KLA is positioned to support the significant ramp in business activities as fabs achieve higher productivity.

“our customers, given they're going to -- these are significant investments they're going to open these fabs. I mean part of the discussions are not only around tools and tool delivery timing, but also in our support resources, our installation resources, applications...”

asked by Sreekrishnan Sankarnarayanan · answered by Bren Higgins

Is customers' focus on driving higher yield for output a bigger driver for incremental process control system sales or for the service line?

It absolutely drives process control sales, especially for fabs with lower yields or changed die sizes. The easiest lever to get more yield from existing capacity, particularly with high utilization on leading edge, directly benefits KLA's ability to drive learning cycles and yield in high-volume manufacturing. It also creates opportunities when product types change, requiring new capabilities.

“the easiest lever anyone can use is to get more yield out of the existing capacity that they have. Even the leaders have gone back to prior nodes and added process control because they recognize that's a faster way to get more yield.”

asked by Joseph Quatrochi · answered by Richard Wallace

KLA is guiding to high-teens growth while WFE consensus is mid-20s. Is KLA's WFE baseline lower, or does it expect to outgrow? Also, what are the puts and takes for KLA from the High-NA EUV pushout?

KLA's WFE baseline for 2025 is ~$120 billion, growing to >$140 billion in 2026, which is mid-to-high teens growth. KLA's semi process control systems business is expected to grow >20%, outperforming WFE. For High-NA EUV, there's no change to KLA's forecast; it's a 'push' as it extends the timeline for process benefits, which is good for the industry. Process control intensity is driven by more than just litho scaling, including architecture changes and high-mix design environments.

“the baseline is about $120 billion, and that aligns with where the various third parties... If you look at the semi PC business... we expected it to grow, our systems business to grow in excess of 20%.”

asked by Timothy Arcuri · answered by Bren Higgins

What is KLA's expectation for advanced packaging revenue growth in 2026, and can KLA foresee a point where process control intensity materially outgrows overall WFE?

Advanced packaging process control revenue is expected to reach ~$1 billion in 2026, up from $635 million in 2025, representing high 50% growth. This is driven by momentum from customers for additional capacity and the need for more precision and capability in tools. KLA gained 160 bps of share in the last 5 years, translating to 6.5% growth above market. The Investor Day target is to gain another 150 bps+ share, leading to 4.5% growth above a 12% WFE growth baseline, which is meaningful CAGR upside.

“we talked about exceeding and being somewhere in the range of $1 billion in business and advanced packaging for our process control business this year, growing from about $635 million in 2025.”

asked by James Schneider · answered by Bren Higgins

How do KLA's updated WFE forecasts for 2026 (> $140B) and 2027 (higher growth) reconcile with sporadic market concerns about data center CapEx durability, and what level of hyperscaler AI CapEx do these WFE forecasts require?

Demand is well ahead of the industry's ability to supply. Hyperscaler CapEx numbers don't directly translate to WFE because the industry is underserving demand. The WFE growth is literally 'as fast as we can go' as an industry, constrained by fab construction. The current plans for 2026 and 2027 will not close the gap between demand and available silicon capacity, indicating a massive shortage through 2030.

“this equilibrium between what the CapEx, the hyperscaler guys say and the notion that you can draw a straight line to WFE, you just can't because they're -- we're way underserving those demands.”

asked by Edward Yang · answered by Richard Wallace