Earnings Recap — Q4 FY2026
CY Q3 2026 · Reported July 28, 2026 · Beat 7 of last 7 quarters
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KLA's record quarter and raised outlook underscore the accelerating AI infrastructure buildout, with advanced packaging and HBM driving process control intensity. The company's raised WFE market forecast and second-half acceleration signal sustained capital investment across leading-edge logic, memory, and packaging, reinforcing KLA's critical role in enabling AI compute scaling.
KLA delivered record revenue of $3.66 billion, up 7% sequentially and 15% year-over-year, with non-GAAP EPS of $1.05 at the upper end of guidance. Gross margin of 62.4% benefited from favorable services mix and manufacturing scale, partially offset by memory pricing and tariff headwinds. Services revenue grew 17% year-over-year to $820 million, and advanced packaging process control revenue is now expected to reach ~$1.1 billion in calendar 2026, up over 70% year-over-year. The company raised its calendar 2026 WFE market outlook to approximately $150 billion and guided September quarter revenue to $4.0 billion, reflecting accelerating second-half growth.
Management raised the calendar 2026 WFE market outlook to approximately $150 billion, up from $140 billion plus, and reiterated expectations for significant growth in calendar 2027, with consensus around $190 billion. They guided September quarter revenue to $4.0 billion ± $200 million, implying second-half 2026 growth of about 20% over the first half. Gross margin guidance for September is 62.5% ± 1 point, with operating expenses expected to grow $15-20 million sequentially over the next several quarters. Management emphasized strengthening demand signals, expanding visibility, and capacity additions to support accelerating growth into 2027, while noting memory pricing headwinds persist but should normalize over time.
“Since our March Investor Day, demand signals across AI infrastructure have strengthened materially, supported by accelerating hyperscale data center investment, rising AI compute requirements and broader adoption of AI-enabled applications.”
on AI demand acceleration
“We now expect our advanced packaging process control systems revenue to grow to approximately $1.1 billion in calendar 2026, up more than 70% year-over-year, above our prior expectation of high 50% growth and almost 2x faster than the advanced packaging market.”
on Advanced packaging growth
“We are raising our expectation for the wafer equipment market, including advanced packaging, to approximately the low $150 billion range in calendar 2026, up from our prior expectation of $140 billion plus and mid-20% growth above the approximate $120 billion level in calendar 2025.”
on WFE market outlook
How are you thinking about gross margin trajectory into 2027 and 2028, given additional supply coming online and mix shift to tools?
Bren Higgins noted gross margin benefits from operating leverage, but memory pricing headwinds persist and may continue through 2027. New product introductions will allow cost structure adjustments and pricing. He expects gross margins to move consistent with the 60-65% incremental model and improve through 2027.
Given the raised WFE outlook, how should we think about your growth profile and the sustainability of WFE growth into 2027?
Bren Higgins said 2026 growth is driven by strengthening customer schedules and packaging inflection. For 2027, consensus is around $190 billion, implying mid-20% growth, similar to 2026. He noted they are planning for more bullish scenarios to ensure capacity.
How do you view competition in China and the moat for process control?
Rick Wallace highlighted KLA's competitive moat from high-mix, low-volume nature, algorithm development, and 1,600-1,700 applications engineers. He noted that where KLA is allowed to compete, it does well, and process control is difficult to replicate.