KLA posts record revenue driven by AI demand and advanced packaging, though investors exercise caution on growth sustainability.
The disconnect between operational performance and market reaction came into sharp focus this week when KLA Corporation reported record quarterly results but saw its shares tumble as much as 12 percent in early trading. The semiconductor equipment maker's stock fell to €149.50 before recovering slightly to €153.80 by Wednesday, closing down 9.78 percent on the session.
For the fourth quarter of fiscal 2026, KLA generated record revenue of $3.66 billion, a 15 percent increase from the same period last year and 7 percent higher than the prior quarter. Adjusted earnings per share came in at $1.05, topping the consensus estimate of $1.00. Gross margin held steady at 62.4 percent, while operating margin reached 43.7 percent.
Free cash flow totaled $817 million, representing a 28 percent margin. The company returned $876 million to shareholders through $571 million in share buybacks and $305 million in dividends. The order backlog stood at approximately $12.5 billion at quarter-end.
The artificial intelligence boom continues to be the primary growth engine, particularly in the advanced packaging segment. KLA now expects that business to generate around $1.1 billion in revenue for calendar 2026, representing 70 percent growth year-over-year—up from an earlier target of 58 percent. The services business also performed well, climbing 17 percent to $820 million.
CEO Rick Wallace said the momentum should accelerate through the second half of 2026 and extend well into 2027. The company raised its industry forecast for worldwide wafer fab equipment spending to roughly $150 billion for calendar 2026, up from its previous estimate of over $140 billion.
Despite the strong numbers, the outlook for the first quarter of fiscal 2027 gave investors pause. KLA guided for revenue in a range of $3.8 billion to $4.2 billion, with adjusted earnings per share expected between $1.06 and $1.26. While the midpoint of $4.0 billion sits above market expectations, the wide guidance range is being interpreted as a sign of management caution.
Analysts noted that expectations had become extraordinarily elevated after the stock rallied more than 57 percent since the start of the year. Deutsche Bank lowered its price target on the shares from $220 to $195 while maintaining a "Hold" rating, stating that while results came in slightly above estimates, the outlook remained subdued. Bernstein analyst Stacy Rasgon offered a more balanced view, noting that supply chain bottlenecks are gradually easing.
Broader concerns about export controls and regulatory uncertainty surrounding KLA's China business are also weighing on sentiment across the semiconductor sector. The relative strength index has dropped to 32.8, edging toward oversold territory. Still, the company maintains that the increasing complexity of advanced AI chips makes precise process control indispensable—a trend that should underpin the business well into 2027.