KLAKLAC reported first-quarter fiscal 2027 non-GAAP earnings of $1.22 per share, up 38.6% year over year. Earnings beat the Zacks Consensus Estimate by 3.39%.
Revenues increased 28.9% year over year to $4.14 billion and surpassed the consensus mark by 2.20%. Results benefited from AI infrastructure investments, leading-edge foundry/logic demand and rising process control intensity. Wafer Inspection revenues surged 37% year over year, reflecting robust demand for advanced semiconductor manufacturing equipment.
KLAC Segment Revenues Show Broad-Based Growth
Semiconductor Process Control revenues reached $3.75 billion, accounting for 91% of total revenues. The segment grew 29% year over year and 15% sequentially, supported by increasing investments in advanced logic, memory and packaging technologies.
Specialty Semiconductor Process revenues rose 16% year over year to $140 million but declined 13% sequentially. PCB and Component Inspection revenues increased 28% year over year to $242 million and remained flat sequentially, benefiting from technology transitions and stringent performance requirements in high-performance computing.
KLA Corporation Price, Consensus and EPS Surprise
KLA Corporation price-consensus-eps-surprise-chart | KLA Corporation Quote
KLA Product Mix Highlights Wafer Inspection Strength
Wafer Inspection remained the largest product category, generating $2.11 billion, or 51% of revenues. Sales increased 37% year over year and 19% sequentially, reflecting strong demand for inspection capabilities in increasingly complex semiconductor manufacturing processes.
Patterning revenues grew 29% year over year and 18% sequentially to $862 million, representing 21% of the top line. Services revenues advanced 14% year over year and 4% sequentially to $850 million, contributing 20% of revenues. Growth reflected an expanding installed base, longer equipment lifecycles and customers' increasing focus on equipment productivity and availability.
KLAC End Markets Reflect Foundry and Logic Leadership
Foundry and logic represented 72% of Semiconductor Process Control systems revenues to semiconductor customers. Memory accounted for the remaining 28%, supported by growing demand for advanced DRAM and high-bandwidth memory technologies.
Geographically, China contributed 34% of total revenues, followed by Taiwan at 25% and North America at 15%. Korea accounted for 12%, while Europe, Japan and the Rest of Asia represented 5%, 4% and 5%, respectively.
The company highlighted strengthening process control requirements in advanced packaging. KLA expects advanced packaging process control systems revenues to reach approximately $1.1 billion in calendar 2026, representing more than 70% year-over-year growth.
KLA Margins Expand Despite Component Cost Pressures
Non-GAAP gross margin was 62.7%, slightly above the midpoint of KLA's guidance.
Non-GAAP operating expenses totaled $688 million, including $395 million in research and development and $293 million in selling, general and administrative expenses. Management cited elevated memory component costs as a continuing margin headwind. Product cost reductions, improved memory efficiency and pricing initiatives are expected to help offset these pressures over time.
Non-GAAP operating margin expanded 240 basis points sequentially to a record 46.1%, reflecting revenue growth and operating leverage.
KLAC Cash Flow Supports Strong Shareholder Returns
KLAC ended the quarter with $4.74 billion in cash, cash equivalents and marketable securities, compared with $5.72 billion in carrying-value debt.
Cash flow from operations reached $1.53 billion, while free cash flow totaled $1.34 billion, representing a 32% margin. Capital expenditures were approximately $195 million, including investments supporting future capacity expansion.
The company returned $1.24 billion to shareholders during the quarter, comprising $936 million in share repurchases and $305 million in dividends. Over the trailing 12 months, capital returns totaled $3.79 billion, while free cash flow reached $4.04 billion.
KLA Issues Strong Second-Quarter Fiscal 2027 Outlook
For the second quarter of fiscal 2027, KLA expects revenues of $4.7 billion, plus or minus $200 million. Non-GAAP earnings are projected at $1.44 per share, plus or minus 11 cents, while non-GAAP gross margin is forecast at 62.5%, plus or minus 1 percentage point.
Foundry/logic is expected to account for approximately 60% of Semiconductor Process Control systems revenues to semiconductor customers, with memory contributing 40%. Within memory, DRAM is projected to represent 84% and NAND the remaining 16%. Non-GAAP operating expenses are anticipated at approximately $710 million.
The company raised its calendar 2026 wafer equipment market outlook, including advanced packaging, to the mid-$150 billion range and expects the market to exceed $200 billion in calendar 2027. KLA anticipates second-half calendar 2026 revenues to grow approximately 25% over the first half, supported by improving supply capacity, expanding backlog and sustained AI-related investments.
Zacks Rank & Upcoming Earnings to Watch
KLA currently has a Zacks Rank #2 (Buy).
ShopifySHOP, AMETEKAME and AffirmAFRM are some other top-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.
Both Shopify and AMETEK are expected to report their respective quarterly results on Nov. 3, while Affirm will report its results on Nov. 5. Shares of Affirm have dropped 1.5%, while Shopify and AMETEK have returned 4.5% and 20.8%, year to date, respectively.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
KLA Corporation (KLAC) : Free Stock Analysis Report
AMETEK, Inc. (AME) : Free Stock Analysis Report
Shopify Inc. (SHOP) : Free Stock Analysis Report
Affirm Holdings, Inc. (AFRM) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
