KLA Corporation (KLAC) — Earnings Preview Memo
Key Points
| Focus Area | Details |
|---|---|
| Upcoming Quarter | Q4 FY2026 (ending June 30, 2026) |
| Consensus Revenue | $3,602M (rounded, per consensus) |
| Guidance Revenue | $3,575M ± $200M |
| Consensus EPS (GAAP) | $0.97 (consensus; note: guidance is for $9.66 ± $1.00 GAAP EPS) |
| Guidance EPS (GAAP) | $9.66 ± $1.00 |
| Guidance Gross Margin | 60.72% ± 1.00% (GAAP); 61.75% ± 1.00% (non-GAAP) |
| Key Watch Items |
|
| YoY Comparable | Q4 FY2025 revenue was $3,175M; Q4 FY2026 consensus is +13% YoY |
Summary and Conclusions
- KLA is set to report Q4 FY2026 results with high expectations: Guidance and consensus both point to strong double-digit YoY revenue growth (+13%), with the company coming off a record year in 2025 and accelerating momentum through 2026.
- Guidance for Q4 FY2026 is robust: Revenue is guided to $3,575M ± $200M, with non-GAAP EPS of $9.87 ± $1.00 and gross margin of 61.75% ± 1.00%. Consensus is aligned.
- Key factors to watch: Execution on sequential revenue growth, advanced packaging outperformance (targeting ~$1B in 2026), service business growth (target 13–15% CAGR), and ability to manage supply chain/capacity constraints amid industry-wide demand.
- Margins under pressure from DRAM pricing: Management has flagged a ~100 bps gross margin headwind from elevated DRAM costs, expected to persist through 2026.
- Visibility into 2027 is unusually high: Management and customers are already planning for further growth in 2027, with new greenfield fabs and continued AI-driven demand.
- YoY comparable is not tough: Q4 FY2025 was strong, but Q4 FY2026 is expected to be meaningfully higher, so the company is not facing a difficult YoY comp.
Forward-Looking Table: Q4 FY2026 Guidance vs. Consensus
| Metric | Guidance (Q4 FY26) | Consensus (Q4 FY26) | Notes |
|---|---|---|---|
| Revenue ($M) | $3,575 ± $200 | $3,602 | Guidance midpoint aligns with consensus |
| GAAP Gross Margin (%) | 60.72 ± 1.00 | 61.87* | Consensus in line with guidance range |
| Non-GAAP Gross Margin (%) | 61.75 ± 1.00 | ||
| GAAP EPS | $9.66 ± $1.00 | $0.97* | Guidance is for $9.66; consensus figure appears anomalous* |
| Non-GAAP EPS | $9.87 ± $1.00 | ||
| FCF ($M) | Not guided; prior quarter FCF was $622M |
*Consensus EPS figure appears inconsistent with company guidance and prior actuals; use company guidance as primary reference.
Prior-Year Actuals: Q4 FY2025
| Metric | Q4 FY2025 Actual |
|---|---|
| Revenue ($M) | $3,175 |
| GAAP Gross Margin (%) | 63.2 |
| Non-GAAP Gross Margin (%) | 64.5 |
| GAAP EPS | $9.06 |
| Non-GAAP EPS | $9.38 |
| FCF ($M) | $1,065 |
What to Watch This Quarter
1. Revenue Growth and Segment Mix- Sequential and YoY growth: Q4 FY2026 guidance implies +13% YoY revenue growth. The company is targeting high teens revenue growth for the full year, with semi process control systems expected to grow over 20%.
- Advanced packaging: KLA now expects advanced packaging process control revenue to reach ~$1B in 2026 (up from $635M in 2025), representing >50% YoY growth. Watch for confirmation of this ramp and commentary on customer adoption, especially in logic and emerging SoIC/hybrid bonding applications.
- Service business: Service revenue grew 15% in 2025 and is running at a high-teens exit rate. The target is 13–15% CAGR. Monitor for continued strength and any commentary on contract penetration, tool lifetime, and margin mix.
2. Margins and Cost Pressures- Gross margin: Guidance is for 61.75% ± 1.00% (non-GAAP), with management flagging a persistent ~100 bps headwind from elevated DRAM costs for image processing computers. Tariff headwinds are also present but expected to moderate.
- Operating expenses: Guided to $665M for Q4, with sequential increases expected as the company invests in product development and infrastructure to support growth.
- Pricing power: Management has reiterated that KLA does not price based on scarcity or pass through component cost inflation directly, instead relying on value-based pricing and new product introductions to reset cost of ownership baselines.
3. Supply Chain and Capacity Constraints- Lead times and backlog: KLA has highlighted extended lead times and strong order flow, particularly for advanced products. The company is working to ramp supply chain capacity to meet customer schedules for new greenfield fabs in 2027.
- Execution risk: Any commentary on ability to deliver tools on time, manage supplier constraints (especially optics), and support customer ramps will be critical.
4. Market Share and Competitive Position- Share gains: KLA gained 80 bps of process control market share in 2025, now 7.5x larger than its nearest competitor. Watch for updates on share in electron beam, reticle inspection, and advanced packaging.
- Process control intensity: Management expects continued outperformance vs. WFE, driven by AI, large die, high-mix design environments, and advanced packaging.
5. 2027 and Long-Term Outlook- Visibility: Management has stated that 2027 growth is expected to be higher than 2026, with strong customer engagement and new fab projects. Any updates on customer slot commitments, backlog, and supply chain readiness for 2027 will be important.
- 2030 model: At Investor Day, KLA outlined a path to $26B revenue and $84 EPS by 2030, assuming 11% semi revenue CAGR, 12% WFE CAGR, and continued share gains.
How Did They Report Last Year? (Q4 FY2025)
- Q4 FY2025 was a strong quarter: Revenue of $3,175M, GAAP EPS of $9.06, non-GAAP EPS of $9.38, and gross margin of 63.2%. Free cash flow topped $1B for the first time.
- YoY comparison: Q4 FY2026 is expected to be up +13% YoY on revenue, with similar or slightly lower gross margins due to DRAM and tariff headwinds.
- No tough comp: The prior-year quarter was strong, but the current year is expected to be meaningfully higher, so KLA is not facing a difficult YoY comparable.
