Skip to content
    KLAC
    Earnings call· Jun 2026(Q4 FY26)

    KLA Q4 FY26 earnings call KLAC

    Jul 28, 2026 Source

    Executive summary

    KLA Q4 FY26 — Record Revenue and Strengthening AI-Driven Demand

    KLA reported record Q4 FY26 results, driven by accelerating AI infrastructure investment, continued strength in leading-edge foundry/logic, and increasing process control intensity. The company raised its CY26 wafer equipment market outlook and anticipates significant growth into CY27, positioning itself to capitalize on increasing semiconductor complexity and demand. Management highlighted strong customer engagement and proactive capacity expansion efforts to meet future demand.

    Highlights

    5

    • Record revenue of $3.66 billion, above the midpoint of guidance.

    • Non-GAAP diluted EPS of $1.05, at the upper end of guidance.

    • Advanced packaging process control systems revenue expected to grow to $1.1 billion in CY26, up more than 70% year-over-year.

    • KLA Services delivered $820 million revenue in Q4 FY26, up 17% year-over-year.

    • Wafer equipment market outlook raised to the low $150 billion range for CY26, up from $140 billion+.

    Concerns

    3

    • Gross margin impacted by approximately 100 basis points due to challenging memory pricing environment and tariff headwinds.

    • Operating expenses are forecasted to grow by roughly $15 million to $20 million sequentially over the next several quarters.

    • Lead times across the company are about 12 months, with certain products extending to 18-24 months, potentially limiting immediate upside.

    Guidance & targets

    21
    CategoryTargetConfidence
    Advanced Packaging Process Control Systems Revenue
    $1.1 billion
    high materiality
    High
    Wafer Equipment Market Outlook
    low $150 billion range
    high materiality
    High
    KLA Revenue Growth (H2 CY26 vs H1 CY26)
    approximately 20%
    medium materiality
    High
    Revenue
    $4 billion, plus or minus $200 million
    high materiality
    High
    Foundry/Logic Revenue (Semiconductor Process Control systems)
    approximately 73%
    medium materiality
    High
    Memory Revenue (Semiconductor Process Control systems)
    approximately 27%
    medium materiality
    High
    DRAM Revenue (Memory)
    approximately 90%
    low materiality
    High
    NAND Revenue (Memory)
    remaining 10%
    low materiality
    High
    Gross Margin
    62.5%, plus or minus 1 percentage point
    high materiality
    High
    Operating Expenses
    approximately $690 million
    medium materiality
    High
    Operating Expenses Growth
    grow by roughly $15 million to $20 million sequentially
    medium materiality
    Medium
    Other Income and Expense (Net)
    approximately $25 million expense
    low materiality
    High
    Planning Tax Rate
    14.5%
    low materiality
    High
    Non-GAAP Diluted EPS
    $1.16, plus or minus $0.10
    high materiality
    High
    GAAP Diluted EPS
    $1.14, plus or minus $0.10
    high materiality
    High
    Diluted Share Count
    approximately 1.312 billion shares
    low materiality
    High
    Overall Gross Margins
    62%, plus or minus
    medium materiality
    Medium
    Service Business Long-Term Growth
    13% to 15%
    medium materiality
    High
    Service Business Growth
    toward the higher end of the range
    medium materiality
    Medium
    WFE Spending Growth
    mid-20s type growth rate
    high materiality
    Medium
    Semi PC Business Growth vs Overall Company
    at least a few points faster
    low materiality
    Medium

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Semiconductor Process Control Systems (Foundry/Logic)
    Expected to increase in the September quarter, driven by continued strength in leading-edge foundry/logic.
    Revenue mix (Q1 FY27 forecast): ~73% of Semi PC systems revenue to semiconductor customers
    		————
    Semiconductor Process Control Systems (Memory)
    Expected to be a significant portion of Semi PC systems revenue, with DRAM dominating the memory mix. Memory is expected to be a bigger percentage in the December quarter and likely through H1 FY27.
    Revenue mix (Q1 FY27 forecast): ~27% of Semi PC systems revenue to semiconductor customersDRAM share (Q1 FY27 forecast): ~90% of Memory revenueNAND share (Q1 FY27 forecast): ~10% of Memory revenue
    		————
    Services
    Customers rely on KLA to maximize tool performance, productivity, and availability across a growing installed base. The service business has 80% contract-based revenue, providing predictability.
    		$820 million17%——
    Advanced Packaging Process Control Systems
    Expected revenue for calendar 2026, significantly above prior expectations and almost twice as fast as the advanced packaging market. Driven by accelerated share and adoption of systems designed for front-end.
    		approximately $1.1 billion>70%——
    Specialty Process, PCB and Component Inspection (Orbotech)
    Combined products from the Orbotech acquisition are expected to grow over 25% in calendar 2026, augmenting the company's growth momentum through high-performance compute packages and integration. Long-term growth rate is likely in the high single-digit range.
    		—>25%——

    Operational metrics

    21
    Non-GAAP Diluted EPS
    $1.05at the upper end of the respective guidance ranges
    Q4 FY26

    Reported on a non-GAAP basis.

    GAAP Diluted EPS
    $1.04at the upper end of the respective guidance ranges
    Q4 FY26

    Reported on a GAAP basis.

    Gross margin
    62.4%at the upper end of our guidance range
    Q4 FY26

    Reported on a non-GAAP basis.

    Operating expenses
    $682 million
    Q4 FY26

    Reported on a non-GAAP basis.

    Operating margin
    43.7%
    Q4 FY26

    Reported on a non-GAAP basis.

    Incremental operating margin
    59%
    Q4 FY26

    Reported on a non-GAAP basis.

    Non-GAAP net income
    $1.39 billion
    Q4 FY26

    Reported on a non-GAAP basis.

    GAAP net income
    $1.36 billion
    Q4 FY26

    Reported on a GAAP basis.

    Diluted weighted average shares outstanding
    1.315 billion
    Q4 FY26

    Adjusted for 10-for-1 stock split effective June 11, 2026.

    Cash, cash equivalents and marketable securities
    $4.9 billion
    Q4 FY26

    Balance sheet item.

    Total debt
    $5.9 billion
    Q4 FY26

    Balance sheet item, supported by investment-grade ratings.

    Share repurchases
    $571 million
    Q4 FY26

    Part of capital return to shareholders.

    Dividends paid
    $305 million
    Q4 FY26

    Part of capital return to shareholders.

    Total capital returns
    $3.3 billion
    TTM Q4 FY26

    Total capital returned to shareholders over the past 12 months.

    Free cash flow margin
    28%
    TTM Q4 FY26

    Free cash flow margin over the past 12 months.

    Service business contract-based revenue
    80%
    current

    Provides predictability and visibility for the service business.

    Applications engineers
    1,600, 1,700
    current

    Worldwide applications engineers, contributing to KLA's competitive moat.

    WFE market growth
    mid-20%above the approximate $120 billion level in calendar 2025
    CY26

    Expected growth rate for the wafer equipment market in calendar 2026.

    Advanced packaging market growth
    mid- to high 30s
    CY26

    Expected growth rate for the advanced packaging market in calendar 2026.

    KLA growth vs advanced packaging market
    close to 2x
    CY26

    KLA's advanced packaging process control systems revenue growth relative to the overall market growth.

    Lead times (company-wide)
    about 12-month range
    current

    Lead times across the company, with some products having longer lead times.

    Industry KPIs

    4
    MetricValueDetails
    Lead times12-month rangemonths
    Services installed base$820 millionUSD
    Wfe industry spend outlooklow $150 billion rangeUSD
    End market segment revenue mixFoundry/Logic: ~73%, Memory: ~27%%

    Orderbook & backlog

    1
    Backlog (RPO)$12.5 billionend of June

    grow pretty consistently over the last couple of quarters

    Expected to continue to grow given the order funnel.

    Risks & headwinds

    3
    Memory pricing environment and tariff headwindsthrough 2027

    approximately 100 basis points impact on gross margin

    Mitigation: Expects normalization on the pricing front to move from a headwind to a tailwind in 2027; new products allow for cost structure changes and pricing adjustments.

    Operating expense growthnext several quarters

    grow by roughly $15 million to $20 million sequentially over the next several quarters

    Mitigation: Prioritizing next-generation product development and company infrastructure investments to support expected revenue growth; business model designed to deliver 40-50% incremental operating margin leverage on revenue growth.

    Supply chain shortages for long lead time materialsH1 CY26

    impacted in the first half (CY26)

    Mitigation: Supply is coming online in the second half (CY26); actively engaging with critical suppliers and planning capacity agreements for 2029 and beyond.

    What to watch in Q1 FY27

    5

    Gross Margin Trajectory

    CY27
    Current62.5% +/- 1% (September quarter guidance)
    TargetContinued improvement, normalization of memory pricing headwinds

    Why it matters

    Gross margin trajectory is key to profitability, especially with ongoing memory pricing and tariff headwinds🌐.

    We talked about 2026 overall gross margins likely being in the 62%, plus or minus. Clearly, if you look at the guidance we provided expectations for next quarter, we're going to be above that. So we feel pretty good from a trajectory point of view.

    Q&A highlights

    6

    How should we think about the trajectory for gross margins into '27 and '28, considering new supply, mix shift to tools, and passing on inflation?

    Gross margin is benefiting from leverage but still faces a ~100bps headwind from memory pricing and tariffs, which is expected to continue into 2027 before normalizing. New products allow for cost structure changes and pricing adjustments. The company expects to operate within its 60-65% incremental gross margin model.

    “We talked about 2026 overall gross margins likely being in the 62%, plus or minus. Clearly, if you look at the guidance we provided expectations for next quarter, we're going to be above that. So we feel pretty good from a trajectory point of view.”

    asked by C.J. Muse · answered by Bren Higgins

    2 min read6 chapters

    Detailed Narrative

    01

    AI Infrastructure Expansion Driving Demand

    KLA is uniquely positioned on the critical path of AI infrastructure expansion, with AI-driven design activity and HBM adoption increasing demand for process control. The rapid expansion of the AI ecosystem requires more advanced logic and memory, new complex manufacturing and packaging flows, and additional KLA systems and services to ramp, yield, and sustain high-volume production. Demand signals across AI infrastructure have strengthened materially, supported by accelerating hyperscale data center investment and broader AI-enabled application adoption.

    02

    Accelerated Advanced Packaging Momentum

    Advanced packaging process control systems revenue is accelerating, expected to reach approximately $1.1 billion in calendar 2026, representing over 70% year-over-year growth. This significantly exceeds the prior expectation of high 50% growth and is almost twice as fast as the advanced packaging market. This growth is driven by faster product cycles, higher-value wafers and masks, more rigorous device performance specifications, and the adoption of new technologies like hybrid bonding.

    03

    Orbotech Acquisition Thesis Validation

    The 2019 Orbotech acquisition, centered around the rising value of the chip package, is proving successful. Combined products from this acquisition, including Specialty Process, PCB, and Component Inspection businesses, are expected to grow over 25% in calendar 2026. This momentum is augmented by high-performance compute packages and integration, demonstrating KLA's ability to drive product strategy and business execution in evolving markets.

    04

    Strengthening WFE Outlook and Visibility

    KLA raised its calendar 2026 wafer equipment market outlook to the low $150 billion range, up from $140 billion+, reflecting accelerating customer delivery expectations and strengthening demand across all segments. The company has unprecedented🌐 visibility into calendar 2027, with broad-based investment across leading-edge logic, foundry, DRAM (conventional and HBM), NAND, and advanced packaging driving continued capacity expansion. This sets the stage for significant growth in 2027.

    05

    Robust Process Control Competitive Moat

    KLA maintains a strong competitive position in process control due to its integrated technologies, deep customer engagement, and extensive applications engineering support, with 1,600-1,700 engineers worldwide. This expertise, combined with a focus on high-mix, low-volume markets and advanced algorithms, creates a significant competitive moat. The company's ability to help customers accelerate yield learning and improve productivity makes its offerings difficult for competitors to replicate.

    06

    Proactive Capacity Expansion and Supply Chain Management

    KLA is actively adding capacity and engaging with critical suppliers for long-lead-time materials, planning for needs into 2029 and beyond. This proactive approach aims to support expected demand and ensure the company can meet more bullish market scenarios. Despite some supply chain shortages impacting first-half calendar 2026 shipments, KLA expects supply to come online in the second half, enabling accelerated growth.

    AI-generated summary of the company’s earnings call. Not investment advice.