Overview
KLA Corporation
KLAC · NASDAQQ1 FY2027Semiconductors · Process Control Equipment
Since the Report + 3.9%
Revenue grew 28.9% year over year, EPS beat the estimate by 3.4%; the stock rose 3.9% in its first reaction.
- RevenueQ1
- $4.14B
- ▲ 28.9% YoY · Beat Estimate by 2.4%
- EPSAdjusted
- $1.22
- Estimate $1.18 · Beat by 3.4%
Verdict
BUYKLA beat the Market Expectation with record revenue of $4.14B, 2.4% above estimates. Its $4.7B revenue guidance for the December quarter is also 4.7% above estimates. The stock rose 3.9% after hours; the number to watch now is the 62.7% gross margin, pressured by memory costs.
Close on Report DayOct 28
$158.77▲ 3.9%Report-Day Move
- Market Cap(Today)
- ≈ $215 B
- 1Y Return(At Report)
- + 32%
- P/E(At Today's Price · $4.10 · Trailing 12M)
- 40.3
- Net Margin(Trailing 12M)
- 35.6%
Earnings Summary
In 30 Seconds- Revenue of $4.14B beat estimates by 2.4%, and adjusted EPS of $1.22 beat by 3.4%.
- December-quarter revenue guidance of $4.7B is 4.7% above estimates, but gross margin eases to 62.5% on memory costs.
- The stock rose 3.9% after hours as management projected a wafer equipment market above $200B in 2027.
The Numbers
Adjusted Operating Margin
46.1%
Company Record · Year Ago 43.2%
Adjusted Gross Margin
62.7%
Year Ago 62.5% · Target 63 – 64%
Free Cash Flow
$1.34B
▲ 25.4% YoY · 32.3% of Revenue
Stock Reaction
▲ 3.9%
After Hours · Price Oct 28 Close
Quarterly Revenue ($ Billion)
3.21
Q1 FY26 · $3.21 B
3.30
Q2 FY26 · $3.30 B · QoQ + 2.7%
3.42
Q3 FY26 · $3.42 B · QoQ + 3.6%
3.66
Q4 FY26 · $3.66 B · QoQ + 7.1%
4.14
Q1 FY27 · $4.14 B · QoQ + 13.1% · YoY + 28.9%
4.5–4.9
Q2 FY27E · 4.5–4.9 · QoQ + 13.6% · YoY + 42.6%
- Q1 FY26
- Q2 FY26
- Q3 FY26
- Q4 FY26
- Q1 FY27
- Q2 FY27E
Q2 FY27 Company Guidance
- Revenue4.5 – 4.9 billion4.5 billion4.9 billion
Midpoint 4.70 · Market Expectation 4.494.7% Above Estimate ▲
- Adjusted EPS1.33 – 1.55 $1.33 $1.55 $
Midpoint 1.44 · Market Expectation 1.365.9% Above Estimate ▲
- Adjusted Gross Margin61.5% – 63.5%61.5%63.5%
Midpoint 62.5% · Last Quarter 62.7%0.2 Point Contraction ▼
- GAAP EPS1.30 – 1.52 $1.30 $1.52 $
Midpoint 1.41 · Last Quarter 1.1819.5% Sequential Increase ▲
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±9.0% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Semiconductor Process Control$3.75 BShare 90.8%▲ 29.5% YoY
- PCB and Component Inspection$242 MShare 5.9%▲ 27.8% YoY
- Specialty Semiconductor Process$139 MShare 3.4%▲ 16.5% YoY
Key Metrics
Operating Cash Flow
$1.53 B
▲ 31.8% YoYPress Release
Service Revenue
$851 M
▲ 14.2% YoYPress Release
Capital Returns
$1.24 B
▲ 55.3% YoYPress Release
Share Repurchases
$936 M
▲ 71.7% YoYPress Release
Capital Expenditure
$195 M
▲ 103.1% YoYPress Release
Inventories
$4.09 B
Press Release
Shares are computed over the segment total: $4.14 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“KLA's September quarter beat the midpoint of our guidance ranges across all key metrics. This, coupled with our December quarter revenue guidance of approximately $4.7 billion, demonstrates the growth acceleration we planned for the second half of 2026. We expect momentum across our business to continue into the December quarter, and we're positioned to deliver significant growth in calendar 2027.”
- Backlog Keeps Growing
- Advanced Packaging Up 70%
- Outgrowing the Market in 2027
Summary and Review
Summary
KLA reported September-quarter revenue of $4.14 billion. That is a 28.9% increase year over year and 13.1% quarter over quarter. The Market Expectation was $4.04 billion, so revenue beat by 2.4%. Adjusted EPS came in at $1.22, 3.4% above the $1.18 estimate. The midpoint of December-quarter revenue guidance is $4.7 billion. That is 4.7% above the $4.49 billion estimate, so the revenue, earnings and guidance gates are all open.
The stock closed the regular session at $158.77 and rose 3.9% after hours to $164.96. The market did not read this report as a quarterly story; it read it as a 2027 story. Management raised its 2026 wafer equipment market estimate to the mid-$150 billion range. It expects the market to exceed $200 billion in 2027 and aims to outgrow it. It also stressed that its backlog keeps growing.
Score 84, verdict buy. All three gates opened above the 2% threshold, so the quarter is rated in the top band. The caveat is gross margin: at 62.7% it sits below the 63-64% target the company set in March. The cause is the rising cost of memory chips used in its systems. Supply also trails demand; the CFO said they could have shipped more. These two caveats pull the score down within the band, not out of it.
Full Review
Growth accelerated in the second half.
Revenue of $4.14 billion rose year over year for the tenth straight quarter. Sequential growth was 13.1%. Semiconductor process control carries the weight: $3.75 billion, up 29.5% year over year and 90.8% of segment revenue. PCB and component inspection grew 27.8% to $242 million. Specialty semiconductor process fell 12.7% sequentially; its annual growth was 16.5%. Service revenue was $851 million, up 14.2%. As the installed base grows, this revenue becomes steadier. According to the earnings call, advanced packaging process control revenue will reach about $1.1 billion in 2026. That means growth of more than 70%. Management expects the second half of 2026 to be about 25% larger than the first. The how to read earnings day guide helps put these numbers in context.
Operating margin at a record, gross margin under pressure.
Adjusted operating margin rose to 46.1%, the highest in company history. It was 43.2% a year ago and 43.7% last quarter. Revenue grew 28.9% while operating expenses grew far more slowly. Operating expenses were $688 million; about $710 million is guided for the December quarter. Gross margin tells a different story. Adjusted gross margin was 62.7%, only 0.2 points above 62.5% a year ago. December-quarter guidance is 62.5%, a 0.2-point contraction. The reason is the price of memory used in the systems' image processing units. CFO Bren Higgins said memory-efficiency work is under way. He expects gross margin to return to the 63-64% model from mid-2027. That date is an expectation, not a promise.
The bottleneck is supply, not demand.
Management said demand ran ahead of supply all year. Higgins openly acknowledged that they could have shipped more. Average lead times are about 12 months and longer for some next-generation products. Supply of long-lead optical parts is improving month by month. The call also noted one customer that cannot take tools because its clean room is delayed. Inventories rose to $4.09 billion at the end of September, up 12% from June. That build points to shipment preparation. The company expects annual capital spending to rise to $600-800 million over the next few years. This quarter it made a large land purchase in India for a new campus. Management says these investments support a multi-year investment cycle.
Strong cash, faster shareholder returns.
Operating cash flow was $1.53 billion, up 31.8% year over year. Free cash flow was $1.34 billion, or 32.3% of revenue. Trailing twelve-month free cash flow reached $4.04 billion. The company bought back $936 million of stock and paid $305 million in dividends. Total capital returns were $1.24 billion, 55.3% more than a year ago. This quarter the company returned nearly all of its cash generation to shareholders. See the share buybacks guide for the logic of buybacks and the cash flow guide for the source of the cash. The balance sheet holds $4.74 billion of cash and securities against $5.72 billion of long-term debt. The debt load is manageable relative to cash generation.
Next quarter, watch one line: gross margin.
Revenue visibility is high; the backlog is growing and lead times are close to a year. The number that would change the story is not revenue but adjusted gross margin. If it stays above the 62.5% midpoint in the December quarter, the memory cost pressure is being absorbed. In that case the record operating margin is sustainable. If margin drifts toward the 61.5% low end, rising revenue is converting less into profit. Then 2027 growth expectations would not carry through to EPS at the same pace. The second measure is quarterly revenue staying above $4.5 billion; below it, the supply bottleneck is lasting longer than expected. These two measures will show how solid the 2027 outlook is at the late-January report. What matters is not the size of the market but growing while protecting margin.
Looking Ahead
Strengths and Risks
6 Strengths · 5 RisksStrengths
6- Revenue of $4.14 billion beat estimates by 2.4%, and adjusted EPS beat by 3.4%.
- December-quarter revenue guidance of $4.7 billion is 4.7% above the Market Expectation.
- Adjusted operating margin reached 46.1%, the highest in company history.
- Advanced packaging process control revenue is expected to grow more than 70% in 2026 to about $1.1 billion.
- Management said the 2027 wafer equipment market will exceed $200 billion and KLA will outgrow it.
- Capital returns of $1.24 billion rose 55.3% year over year.
Risks
5- Memory prices are holding gross margin at 62.7%, and December guidance implies a 0.2-point contraction.
- Supply of long-lead optical parts still trails demand and limits shipments.
- Customer clean-room and power delays could push out tool deliveries.
- Slower China growth and U.S. export rules create uncertainty in that market.
- Inventories rose 12% in one quarter to $4.09 billion.
What to Watch
3- At the late-January 2027 report, the company will detail its 2027 market and customer segment expectations.
- Capital spending is planned to rise to $600-800 million a year over the next few years, including a new India campus.
- The gross margin benefit of memory-efficiency work is expected to show in the second half of 2027.
Upcoming Earnings
To Understand This