KLA Corporation

KLA reported June quarter revenue of $3.66 billion, up 7% sequentially and 15% year over year, versus guidance of $3.575 billion. Non-GAAP diluted EPS was $1.05 and GAAP diluted EPS was $1.04; gross margin was 62.4%; operating margin was 43.7%; non-GAAP net income was $1.39 billion; GAAP net income was $1.36 billion. Cash flow from operations was $906 million and free cash flow was $817 million. For September quarter guidance, KLA guided revenue to $4.0 billion plus or minus $200 million, gross margin to 62.5% plus or minus 1 percentage point, operating expenses to about $690 million, non-GAAP EPS to $1.16 plus or minus $0.10, and GAAP EPS to $1.14 plus or minus $0.10. Management also raised its 2026 wafer equipment market outlook, including advanced packaging, to approximately the low $150 billion range, up from $140 billion plus, and said second-half 2026 KLA revenue growth should be about 20% over first half.

Rick Wallace described the quarter as strong and tied the growth to AI infrastructure, leading-edge foundry/logic, HBM adoption, and advanced packaging. He emphasized that KLA is on the critical path of AI build-outs and said customer engagement and visibility have improved materially since Investor Day. His tone was confident and upbeat, especially on the company’s positioning for second-half 2026 and calendar 2027.

Bren Higgins highlighted the quarter’s profitability profile: 62.4% gross margin, 43.7% operating margin, $906 million of operating cash flow, and $817 million of free cash flow. He said gross margin benefited from a better-than-modeled services mix and scale, partially offset by memory pricing pressure and tariff headwinds, and noted memory cost pressure was about 100 basis points and likely a bit more, potentially continuing through 2027. On capital allocation, KLA returned $876 million to shareholders in the quarter, including $571 million in buybacks and $305 million in dividends, and ended with $4.9 billion in cash and marketable securities and $5.9 billion of debt.

Analysts focused on gross margin trajectory, pricing power, service growth, China competition, 2027 WFE assumptions, and whether KLA’s revenue should outgrow the broader equipment market. Management said memory pricing remains a headwind but should eventually move toward a tailwind as new products and pricing actions flow through, and reiterated a long-term gross margin framework around 60% to 65%. They also said service growth should trend toward the higher end of the 13% to 15% long-term target, backed by 80% contract-based revenue, and that competitive dynamics in process control have not changed, with KLA still seeing itself as a net share gainer.