KLA Corp reported fourth-quarter results that exceeded Wall Street expectations, but shares dropped 9% in extended trading as the company's outlook, while above consensus, was deemed insufficient to counter broader market concerns. The Milpitas, California-based semiconductor equipment maker posted record revenue of $3.66 billion, up 15.1% year-over-year, beating the $3.60 billion consensus estimate.
Adjusted earnings per share came in at $1.05, surpassing the $1.00 analyst forecast compiled by FactSet. The company forecast first-quarter revenue of $4 billion, plus or minus $200 million, ahead of the average estimate of $3.92 billion, and adjusted earnings of $1.16 per share, plus or minus 10 cents, above the $1.14 consensus. Despite these beats, the stock declined amid what CFRA analyst Brooks Idlet described as 'selling pressure' and a market 'hoping for blowout results' to counter bearish narratives on hyperscaler spending and Chinese competition.
Outlook and Market Context
KLA CEO Rick Wallace said the company sees momentum accelerating in the second half of 2026 and continuing into 2027, driven by AI infrastructure buildout and new growth in advanced packaging. Management raised its 2026 wafer equipment market outlook to approximately $150 billion and projects 20% revenue growth in the second half versus the first half. KLA also expects its advanced packaging revenue to grow 70% year-over-year, nearly double the market rate. The company reported record revenue, citing accelerating AI infrastructure investment and strength in leading-edge foundry and logic.
KLA shares have risen more than 57% year-to-date through the regular session, driven by demand from foundries and memory-chip makers expanding capacity for generative AI applications. However, the stock is on pace for its worst month since 1987. The company completed a 10-for-1 stock split in June 2026, with all per-share metrics adjusted accordingly.
KLA provides process control and yield management systems for semiconductor manufacturing, and its tools become more critical as chipmakers adopt smaller, more complex production nodes. Management noted 'unprecedented' visibility, with the order funnel and backlog expected to reach approximately $12.5 billion. The company also highlighted that 80% of its service revenue is contract-based, providing stable visibility, and that its services business grew 17% year-over-year.
Gross margins face headwinds from a challenging memory pricing environment and tariff impacts, which management expects to persist through 2027, impacting margins by over 100 basis points. Operating expenses are projected to increase by $15 million to $20 million sequentially over the next several quarters, while management targets 40% to 50% incremental operating margins on revenue growth over the long run. Supply chain constraints for long lead time materials limited first-half performance but are expected to ease in the second half of 2026. KLA is securing long-term capacity agreements with suppliers for optical components to support demand through 2029 and beyond.