KLAC Q4 Earnings Beat on AI Demand, Revenues Increase Y/Y

KLA Corporation KLAC reported fiscal fourth-quarter 2026 non-GAAP earnings of $1.05 per share, up 11.7% year over year, and beat the Zacks Consensus Estimate by 5%.

Revenues increased 15.2% year over year to $3.66 billion and beat the consensus mark by 1.32%. Results benefited from AI infrastructure investment, leading-edge foundry/logic demand and rising process control intensity. Advanced packaging process control revenues are now expected to reach about $1.1 billion in calendar 2026.

KLAC Segment Growth Remains Broad-Based

Semiconductor Process Control revenues were $3.26 billion, accounting for 89% of revenues. The segment grew 13% year over year and 6% sequentially, supported by demand for inspection, metrology and related services across advanced logic, memory and packaging applications.

Specialty Semiconductor Process revenues rose 13% year over year to $160 million but declined 3% sequentially. 

PCB and Component Inspection revenues surged 56.5% year over year and 44% sequentially to $241.1 million, reflecting stronger demand tied to high-performance computing packages and integration.

KLA Product Mix Highlights Patterning Momentum

Wafer Inspection remained the largest product category, generating $1.78 billion, or 49% of revenues. Sales increased 1% year over year and 2% sequentially. 

Patterning revenues jumped 61% year over year and 18% sequentially to $728 million, representing 20% of the top line.

Services revenues advanced 17% year over year and 6% sequentially to $820 million, and accounted for 22% of revenues. Management noted that customers are running tools at high utilization, while the growing installed base and contract-heavy service model support visibility. About 80% of service revenues are contract-based.

KLAC End Markets Reflect Logic Leadership

Foundry and logic represented 79% of Semiconductor Process Control systems revenues to semiconductor customers. Memory accounted for the remaining 21%, reflecting demand for high-bandwidth memory and increasingly complex DRAM manufacturing processes.

Geographically, Taiwan generated 31% of total revenues, followed by China at 26% and North America at 18%. Korea contributed 10%, Japan 6%, Europe 5% and the Rest of Asia 4%.

KLA Margins Expand With Operating Leverage

The non-GAAP gross margin was 62.4%, at the upper end of guidance. A favorable service mix and manufacturing scale offset higher memory component costs and tariff pressures. Non-GAAP operating margin reached 43.7%, while incremental operating margin was 59%.

Non-GAAP operating expenses totaled $682 million, including $399 million in research and development (up 13% year over year) and $291.5 million in selling, general and administrative expenses (up 11% year over year).

KLAC Cash Flow Supports Shareholder Returns

KLAC ended the quarter with $4.90 billion in cash, cash equivalents and marketable securities and $5.89 billion in debt.

Cash flow from operations was $906 million, while free cash flow totaled $817 million. The company returned $876 million to shareholders during the quarter, comprising $571 million in share repurchases and $305 million in dividends.

Over the past 12 months, capital returns totaled $3.3 billion, while the free cash flow margin was 28%.

KLA Issues Strong First-Quarter Outlook

For the first quarter of fiscal 2027, KLA expects revenues of $4 billion (plus or minus $200 million). Non-GAAP diluted earnings are projected at $1.16 per share (plus or minus 10 cents), while non-GAAP gross margin is forecast at 62.5% (plus or minus 1 percentage point).

Foundry/logic is expected to account for about 73% of Semiconductor Process Control systems revenues to semiconductor customers, with memory at roughly 27%. Within memory, DRAM is projected at about 90% and NAND at 10%. Non-GAAP operating expenses are anticipated to be approximately $690 million.

KLA expects second-half calendar 2026 revenues to rise about 20% from the first half as supply capacity improves. Management also raised its calendar 2026 wafer fabrication equipment market outlook, including advanced packaging, to the low-$150 billion range and expects significant growth to continue in calendar 2027.

Zacks Rank & Upcoming Earnings to Watch

KLA currently has a Zacks Rank #2 (Buy).

Lumentum LITE, Arrow Electronics ARW and HubSpot HUBS are some better-ranked stocks in the broader Zacks Computer and Technology sector. Each of the three stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lumentum, Arrow Electronics and HubSpot are expected to report their quarterly results on Aug. 11, Aug. 6 and Aug. 5, respectively. Shares of HubSpot have dropped 40.7%, while Arrow Electronics and Lumentum have jumped 91.8% and 76.8%, year to date, respectively.

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