KLA Corporation (KLAC) — Earnings Preview Memo
Key Points
| Theme | Details |
|---|---|
| Upcoming Quarter | Q1 FY2027 (Sep 2026): Consensus revenue $4,040M; guidance $4,000M +/- $200M. |
| Recent Performance | Q4 FY2026 (Jun 2026): Revenue $3,658M (+15% YoY), non-GAAP EPS $1.05 (post-split). |
| Growth Trajectory | FY2026 revenue +12% YoY to $13,579M; FY2027 consensus +34% YoY to $18,114M. |
| Guidance Uptrend | WFE market outlook raised multiple times in 2026; now low $150B for 2026, $190B+ for 2027. |
| Key Watch Items | Supply chain execution, gross margin trajectory, process control share gains, advanced packaging growth, service growth, pricing power vs. cost inflation. |
| Comparables | Coming off a strong year; YoY comparables are not tough but set a high bar for continued outperformance. |
Most Important Factors to Watch Next Quarter
| Factor | Why It Matters | Current Context / Guidance |
|---|---|---|
| Revenue Growth | Validates demand, execution, and market share gains. | Q1 FY27 guidance: $4,000M +/- $200M; consensus: $4,040M. |
| Gross Margin (%) | Indicates pricing power, cost management, and mix. | Q1 FY27 guidance: 62.5% +/- 1.0% (non-GAAP); recent actuals at upper end of range. |
| Process Control Share Gains | Core to thesis; outgrowing WFE is key to premium valuation. | Management expects continued share gains, especially in advanced packaging and HBM-related memory. |
| Advanced Packaging Revenue | Fastest-growing segment; critical for AI/compute buildout. | FY26: $1.1B (+70% YoY, nearly 2x market growth); watch for continued acceleration and share expansion. |
| Service Revenue Growth | Recurring, high-margin, counter-cyclical; supports FCF and capital returns. | FY26: $3.1B (+17% YoY); long-term target 13–15% CAGR, trending toward high end as tool shipments accelerate. |
| Supply Chain & Capacity | Ability to deliver into record backlog and support bullish WFE scenarios. | Lead times 12–24 months for some products; capacity investments ongoing; backlog at $12.6B (up 60% YoY). |
| Pricing Power vs. Cost Pressures | Memory/DRAM cost inflation has been a headwind; ability to pass through or offset is key for margins. | Memory cost headwind >100 bps on gross margin; new product introductions are main lever for price resets. |
| Mix: Foundry/Logic vs. Memory | Mix shift impacts intensity, margins, and share opportunity. | FY26: Foundry/logic ~65%, memory rising in 2H and into FY27; greenfield DRAM/NAND expected to drive growth. |
Recent Results and Year-Over-Year Comparables
Quarterly Financials — Actuals
| Quarter | Revenue ($M) | YoY Growth | Gross Margin (%) | Non-GAAP EPS (post-split) | Notes |
|---|---|---|---|---|---|
| Q4 FY2026 | 3,658 | +15% | 62.4 | $1.05 | Above guidance midpoint |
| Q3 FY2026 | 3,415 | +11% | 62.2 | $0.94 | |
| Q2 FY2026 | 3,297 | +7% | 62.6 | $0.94 | |
| Q1 FY2026 | 3,210 | +13% | 62.5 | $0.88 | |
| Q4 FY2025 | 3,175 | 62.9 | $0.94 | Pre-split EPS $9.38 |
Annual Financials — Actuals
| Fiscal Year | Revenue ($M) | YoY Growth | Gross Margin (%) | Non-GAAP EPS (post-split) | Notes |
|---|---|---|---|---|---|
| FY2026 | 13,579 | +12% | 62.4 | $3.76 | Strong year, driven by AI/packaging |
| FY2025 | 12,156 | 62.2 | $3.33 |
Segment Highlights
| Segment | FY2026 Revenue ($M) | YoY Growth | Commentary |
|---|---|---|---|
| Semiconductor Process Control | 12,245 | +12% | Outperformed WFE; share gains in advanced packaging |
| Service | 3,126 | +17% | High contract penetration, recurring, resilient |
| Advanced Packaging (Process Control) | 1,100 | +70% | Nearly 2x market growth; share up to 7–8% from 2% in '23 |
Forward Consensus and Guidance
Quarterly Guidance and Consensus
| Period | Revenue Guidance ($M) | Consensus Revenue ($M) | Gross Margin Guidance (%) | Non-GAAP EPS Guidance (post-split) | Notes |
|---|---|---|---|---|---|
| Q1 FY2027 | 4,000 +/- 200 | 4,040 | 62.5 +/- 1.0 | $1.16 +/- $0.10 | Guidance above Q4 actuals; strong ramp |
| Q2 FY2027 | 4,495 | Consensus only | |||
| Q3 FY2027 | 4,683 | Consensus only | |||
| Q4 FY2027 | 4,911 | Consensus only |
Annual Guidance and Consensus
| Fiscal Year | Consensus Revenue ($M) | YoY Growth | Consensus Gross Margin (%) | Consensus EPS (post-split) | Notes |
|---|---|---|---|---|---|
| FY2027 | 18,114 | +34% | 62.6 | $5.38 | Street expects acceleration |
Management Commentary and Intra-Quarter Color
- WFE Market Outlook: Management has raised its 2026 WFE market expectation four times this year, now at "low $150 billion" (from $140B+), with 2027 consensus at $190B+ (mid-20s % growth). Visibility into 2027 and even early 2028 is described as "unprecedented," with backlog and order funnel at record levels.
- Growth Acceleration: "We anticipate this resulting in second half of calendar 2026 growth for KLA over the first half to be approximately 20% and positioning the company for continued sequential growth into calendar 2027."
- Advanced Packaging: "We now expect our advanced packaging process control systems revenue to grow to approximately $1.1 billion in calendar 2026, up more than 70% year-over-year, above our prior expectation of high 50% growth and almost 2x faster than the advanced packaging market."
- Service Business: "Service delivered $820 million revenue in [Q4], up 17% year-over-year... 80% of revenue is contract-based, so it provides a nice anchor for the company in terms of visibility moving forward."
- Gross Margin: "Gross margin was 62.4%. This was also at the upper end of our guidance range, driven by a more favorable services mix than model and manufacturing scale that served as positive offsets to the challenging memory pricing environment and tariff headwinds."
- Pricing Power: Memory/DRAM cost inflation remains a headwind (>100 bps impact on gross margin), but management expects new product introductions and operating leverage to help offset this over time. Direct price increases on existing orders are rare; resets occur with new product launches.
- Supply Chain: Lead times for some products are 12–24 months; optics/components remain the bottleneck. Management is investing in capacity and inventory to support the most bullish demand scenarios.
How Did They Report Last Year? Are Comps Tough?
- FY2026 was a strong year: Revenue +12% YoY, gross margin stable at 62.4%, non-GAAP EPS $3.76 (post-split).
- Q4 FY2026: Revenue $3,658M (+15% YoY), gross margin 62.4%, non-GAAP EPS $1.05 (post-split), all at or above guidance midpoints.
- Comps are not "tough" in the sense of lapping a down year, but the bar is high: KLA is coming off a period of double-digit growth, strong margin performance, and significant share gains, especially in advanced packaging and service. The challenge is sustaining or accelerating this pace as expectations and consensus have moved higher.
Summary and Conclusions
- KLA enters Q1 FY2027 with strong momentum, record backlog, and robust demand visibility through 2027.
- Consensus and guidance both call for a material step-up in revenue and continued best-in-class margins.
- Key factors to watch: Execution on supply chain and capacity, ability to sustain or expand gross margins despite cost headwinds, continued outperformance in process control share (especially in advanced packaging and HBM), and resilience/acceleration in service revenue.
- Comps are not tough in the traditional sense, but the company is lapping a very strong year, so the bar for further outperformance is high.
- Any signs of supply chain slippage, margin compression, or loss of share in key segments would be negative surprises. Conversely, upside to guidance, further upward revisions to WFE/market outlook, or evidence of pricing power would be positive catalysts.
Tables: Reference Data
Quarterly Actuals — Income Statement
| Quarter | Revenue ($M) | Gross Margin (%) | Non-GAAP EPS (post-split) |
|---|---|---|---|
| Q4 FY2026 | 3,658 | 62.4 | $1.05 |
| Q3 FY2026 | 3,415 | 62.2 | $0.94 |
| Q2 FY2026 | 3,297 | 62.6 | $0.94 |
| Q1 FY2026 | 3,210 | 62.5 | $0.88 |
Quarterly Guidance and Consensus
| Quarter | Guidance Revenue ($M) | Consensus Revenue ($M) | Guidance Gross Margin (%) | Guidance Non-GAAP EPS (post-split) |
|---|---|---|---|---|
| Q1 FY2027 | 4,000 +/- 200 | 4,040 | 62.5 +/- 1.0 | $1.16 +/- $0.10 |
Annual Actuals
| Fiscal Year | Revenue ($M) | Gross Margin (%) | Non-GAAP EPS (post-split) |
|---|---|---|---|
| FY2026 | 13,579 | 62.4 | $3.76 |
| FY2025 | 12,156 | 62.2 | $3.33 |
Conclusion
KLA is set to report another strong quarter, with expectations for continued revenue acceleration, robust gross margins, and further share gains in process control—especially in advanced packaging and service. The company is coming off a period of strong growth, so while comps are not "tough" in the sense of lapping a weak year, the bar for continued outperformance is high. Key watch items are execution on supply chain, margin resilience, and evidence of sustained pricing power and share gains. Any deviation from these trends will be closely scrutinized.
