KLAC Q3 2026 Earnings Call Summary

Revenue: $3.415 billion, up 4% sequentially and 11% year-over-year.
Non-GAAP Diluted EPS: $9.40; GAAP Diluted EPS: $9.12.
Gross Margin: 62.2%, slightly above guidance.
Operating Margin: 42.6%.
Free Cash Flow: $622 million for the quarter; $4 billion over the past 12 months, with a free cash flow margin of 31%.
Capital Returned: $875 million, including $626 million in share repurchases and $249 million in dividends.

KLA achieved the #1 position in process control for advanced wafer-level packaging in 2025, with expectations for revenue growth in this segment to reach approximately $1 billion in 2026.
The service business grew to $775 million, up 16% year-over-year, indicating strong demand for KLA’s advanced services.
KLA's market share in the wafer equipment and process control markets increased significantly, with a 14 percentage point gain in advanced wafer-level packaging.
The company held an Investor Day in March, announcing a new long-term revenue growth target of 13% to 17% CAGR through 2030, and a $7 billion share repurchase authorization.

2026 Revenue Guidance: Expected to reach $3.575 billion, plus or minus $200 million, with high teen revenue growth anticipated year-over-year in semiconductor process control systems.
2027 Outlook: Strong demand visibility suggests growth will exceed 2026 expectations, driven by new fab projects and increased process control intensity.
Gross Margin Forecast: Approximately 62%, plus or minus 50 basis points, with expectations of continued headwinds from elevated DRAM pricing.

Memory Pricing Environment: Continues to be challenging, with expected headwinds impacting gross margins by approximately 100 basis points.
Operating Expenses: Higher than expected due to material timing and reserve adjustments.
Supply Chain Constraints: While KLA is better positioned for growth, there are concerns about the overall industry’s capacity to meet demand, particularly in 2027.
China Market Dynamics: Growth in China is expected to be slower than the overall wafer equipment market, which may impact KLA's performance in that region.

Demand Visibility: KLA is experiencing strong demand across all segments, with customers eager to secure capacity for new fab projects. The urgency is driven by anticipated growth in AI and semiconductor manufacturing.
Advanced Packaging Growth: The advanced packaging market is expected to grow significantly, with KLA's revenue in this segment projected to increase from $635 million in 2025 to $1 billion in 2026.
Pricing Strategy: KLA maintains a disciplined pricing strategy based on cost of ownership improvements rather than market scarcity, which could limit margin expansion despite high demand.
Technological Developments: Discussions on the adoption of metrology technologies indicate a cautious approach to new methods, with a focus on cost and efficiency in production environments.

This summary encapsulates KLA's strong performance in Q3 2026 while highlighting strategic initiatives and challenges that may impact future growth.

KLAC — KLA Corporation