Latest / Beta Finch - KLA - KLAC - EN / KLA Q4 2026 Earnings Analysis

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KLA Q4 2026 Earnings Analysis · Beta Finch - KLA - KLAC - EN

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  Speaker 1: Welcome to Beta Finch, your AI powered earnings breakdown of
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  Speaker 1: the numbers that move markets.
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  Speaker 2: I'm Alex and I'm Jordan. Today we're digging into KLA
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  Speaker 2: Corporation's June quarter fiscal twenty twenty six results. And Alex,
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  Speaker 2: this one's got some pretty ie popping AI infrastructure numbers
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  Speaker 2: in it.
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  Speaker 1: It really does. But before we get into it, quick disclaimer.
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  Speaker 1: This podcast is AI generated content for educational and entertainment
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  Speaker 1: purposes only. Nothing we discuss should be considered investment advice.
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  Speaker 1: Always to your own research and consult a qualified financial
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  Speaker 1: advisor before making any investment decisions.
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  Speaker 2: Good housekeeping. Okay, let's talk numbers. KLA makes process control
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  Speaker 2: and inspection equipment for semiconductor fabs, basically the tools that
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  Speaker 2: check weather chips are being made correctly. In this quarter,
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  Speaker 2: revenue hit a record three point six six billion dollars,
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  Speaker 2: up seven percent sequentially and fifteen percent year over year.
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  Speaker 1: And that beat the midpoint of their own guidance. Non
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  Speaker 1: gap EPs came in at one dollar and fifty cents,
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  Speaker 1: gap EPs at one dollar and four cents, both at
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  Speaker 1: the high end of their ranges. Oh and worth flagging
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  Speaker 1: for anyone checking historical charts. KLA did a ten to
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  Speaker 1: four on stock split effective June eleventh, so all these
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  Speaker 1: per share numbers are split adjusted.
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  Speaker 2: Good catch because that trips people up. Gross margin was
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  Speaker 2: sixty two point four percent, also above guidance, and operating
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  Speaker 2: margin was a very healthy forty three point seven percent.
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  Speaker 2: Free cash flow came in at eight hundred and seventeen
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  Speaker 2: million dollars, and they returned eight hundred and seventy six
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  Speaker 2: million dollars to shareholders, split between buybacks and dividends.
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  Speaker 1: So strong quarter across the board. But honestly, the guidance
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  Speaker 1: and the forward commentary is where this call gets interesting.
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  Speaker 1: CEO Rick Wallace and CFO Bran Higgins were pretty emphatic
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  Speaker 1: that momentum is accelerating, not just holding study right.
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  Speaker 2: They raise their Wafer fab Equipment WFE market outlook for
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  Speaker 2: all of twenty twenty six to roughly one hundred and
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  Speaker 2: fifty billion dollars, up from a prior one hundred and
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  Speaker 2: forty dollars billion plus estimate. That's the fourth time this
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  Speaker 2: year they've raised that.
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  Speaker 1: Number, fourth time, and management said they expect KLA's second
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  Speaker 1: half of calendar twenty twenty six revenue to grow about
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  Speaker 1: twenty percent over the first half. September quarter guidance alone
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  Speaker 1: is for four billion dollars in revenue plus or minus
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  Speaker 1: two hundred million dollars. That's another double digit sequential jump.
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  Speaker 2: The driver behind all of this is AI infrastructure, hyperscale
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  Speaker 2: data center build out, more complex chip designs, rising high
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  Speaker 2: bandwidth memory adoption, and advance packaging management. And basically said,
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  Speaker 2: every one of those trends increases process control intensity, meaning
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  Speaker 2: more of KLA's tools are needed per wafer.
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  Speaker 1: The advanced packaging story stood out to me. They now
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  Speaker 1: expect that business to hit about one point one billion
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  Speaker 1: dollars in calendar twenty twenty six, growth of more than
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  Speaker 1: seventy percent year over year, nearly double the growth rate
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  Speaker 1: of the packaging market itself. That's a big upward revision
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  Speaker 1: from their earlier high fifties percent estimate.
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  Speaker 2: And that ties back to the Orbitec acquisition from twenty nineteen.
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  Speaker 2: Rick called it out directly, saying the thesis around rising
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  Speaker 2: chip package value is really playing out now. Combined with
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  Speaker 2: their specialty semiconductor and PCB businesses, that whole segment is
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  Speaker 2: expected to grow over twenty five percent this year.
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  Speaker 1: Services was another bright spot eight hundred twenty million dollars
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  Speaker 1: in revenue, up seventeen percent year over year, and in
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  Speaker 1: the Q and A Brenn mentions, Sir says should accelerate
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  Speaker 1: toward the high end of their thirteen to fifteen percent
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  Speaker 1: long term target range next year since eighty percent of
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  Speaker 1: that revenue is contract based, which gives nice visibility.
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  Speaker 2: Speaking of Q and A, there were some great exchanges.
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  Speaker 2: One analyst pushed hard on gross margins given memory pricing headwinds.
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  Speaker 2: Brinn estimated that's costing them over one hundred basis points
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  Speaker 2: right now and said that pressure likely continues in at
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  Speaker 2: twenty twenty seven, but he still expects margins to trend
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  Speaker 2: toward that sixty to sixty five percent incremental target as
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  Speaker 2: new products roll out with better cost structures.
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  Speaker 1: There was also a really pointed question about twenty twenty seven.
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  Speaker 1: WFE consensus is around one hundred and ninety billion dollars,
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  Speaker 1: which would be mid twenties percent growth similar to this year.
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  Speaker 1: Bren said they're planning for that, but also sizing their
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  Speaker 1: supply chain for more bullish scenarios in case demand comes
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  Speaker 1: in even.
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  Speaker 2: Higher, and that supply chain point was fascinating. They mentioned
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  Speaker 2: lee times of twelve months on average up to eighteen
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  Speaker 2: to twenty four months for certain products, and they're already
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  Speaker 2: doing capacity planning with suppliers for twenty twenty nine and
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  Speaker 2: beyond that. The company betting heavily that this upcycle has
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  Speaker 2: real legs.
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  Speaker 1: There is also a good moment on competition. An analyst
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  Speaker 1: asked about Chinese domestic competitors potentially taking share and process control.
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  Speaker 1: Rick was pretty confident, arguing the business has a much
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  Speaker 1: higher technical mode than something like lithography because of the
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  Speaker 1: high mixed, low volume nature of the work and the
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  Speaker 1: deep customer engagement needed.
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  Speaker 2: He didn't note KLA has loss some share in China
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  Speaker 2: specifically due to export restrictions rather than competitive losses, but
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  Speaker 2: said everywhere they're allowed to compete on a level playing field,
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  Speaker 2: they win.
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  Speaker 1: So, stepping back, what's the big picture here for listeners,
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  Speaker 1: KLA is essentially calling this an accelerating multi year upcycle
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  Speaker 1: driven by AI, not just a single strong quarter record.
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  Speaker 1: Revenue raised, guidance, raised, WFE outlook, and a CFO talking
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  Speaker 1: about supply planning three years.
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  Speaker 2: Out right, and the through line across foundry logic, high
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  Speaker 2: bandwidth memory and advanced packaging is that increasing chip complexity
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  Speaker 2: requires more inspection and process control, which is basically KLA's
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  Speaker 2: entire business model tailwind.
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  Speaker 1: That's a wrap on KLA's June quarter. Jordan, close us out.
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  Speaker 2: Before we go. Everything discussed is AI generated analysis for
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  Speaker 2: educational purposes. Past performance doesn't guarantee future results. Please do
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  Speaker 2: your own due diligence.
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  Speaker 1: With KLA guiding for continued acceleration into twenty twenty seven,
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  Speaker 1: this is one will be watching closely next quarter to
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  Speaker 1: see if that momentum holds.
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  Speaker 2: Thanks for listening to Beta Finch. We'll catch you next time.
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  Speaker 1: See you then,