Executive Summary
KLA delivered a strong QQ1 2026 quarter, underscored by revenue of $3.21 billion and non-GAAP diluted EPS of $8.81 (GAAP EPS $8.47), with a robust gross margin of 62.5% and non-GAAP operating margin of 43.2%. The company generated $1.161 billion of cash flow from operations and $1.07 billion in free cash flow, supporting a disciplined capital return program that included $545 million in share repurchases and $254 million in dividends in the quarter, and a 16th consecutive dividend increase announced earlier in 2025. Management highlighted AI infrastructure investments, rapid adoption of advanced packaging, and expanding process control intensity as key growth drivers, while noting China-related export controls as a near-term headwind with an estimated $300 million to $350 million revenue impact through calendar 2026. The December quarter guidance calls for revenue of $3.225 billion ± $150 million with a 62% gross margin, and GAAP/Non-GAAP EPS of $8.46 ± $0.78 and $8.70 ± $0.78, respectively. The long-run thesis centers on KLA’s differentiated process control portfolio, the expanding served markets in advanced packaging, and a multi-year growth trajectory that should allow it to outperform mid-to-high single-digit WFE growth while generating durable cash flow and shareholder value. Near-term risks include China-related market access restrictions and macro Cyclicality in WFE spend, but management remains confident in near-term demand and the runway for packaging and AI-driven design complexity.
Key Performance Indicators
Key Insights
Revenue: $3.20969B; Gross Profit: $1.96663B; Gross Margin: 61.27% (guidance midpoint 60.0%); Non-GAAP OpEx: $618.0M; Non-GAAP Operating Margin: 43.2%; Operating Income: $1.33718B; Net Income (non-GAAP): $1.12104B; GAAP Net Income: $1.12084B; EPS (GAAP): $8.47; EPS (Diluted, non-GAAP): $8.81; Tax Rate: 14.1%; Cash from Ops: $1.16159B; Free Cash Flow: $1.06570B; Cash & ST Investments: $4.683B; Total Debt: $5.885B; NetDebt: $3.939B; Cash at End of Period: $1.946B; Share Repurchases: $545.1M; Di...
Financial Highlights
Revenue: $3.20969B; Gross Profit: $1.96663B; Gross Margin: 61.27% (guidance midpoint 60.0%); Non-GAAP OpEx: $618.0M; Non-GAAP Operating Margin: 43.2%; Operating Income: $1.33718B; Net Income (non-GAAP): $1.12104B; GAAP Net Income: $1.12084B; EPS (GAAP): $8.47; EPS (Diluted, non-GAAP): $8.81; Tax Rate: 14.1%; Cash from Ops: $1.16159B; Free Cash Flow: $1.06570B; Cash & ST Investments: $4.683B; Total Debt: $5.885B; NetDebt: $3.939B; Cash at End of Period: $1.946B; Share Repurchases: $545.1M; Dividends Paid: $254.0M; 12-month Free Cash Flow: $3.90B; Lead Times: normalized to roughly 7–9 months; Backlog/RPO: disclosed previously as $7.9B in prior quarter, later changed disclosure approach; December Quarter Guidance: Revenue $3.225B ± $150M; Gross Margin 62% ±1ppt; OpEx ~$635M; Other Income/Expense net ~$32M expense; Tax Rate ~14%; GAAP EPS $8.46 ± $0.78; Non-GAAP EPS $8.70 ± $0.78; Shares ~132M.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
3.21B |
25.07% |
4.79% |
| Gross Profit |
1.97B |
23.52% |
4.20% |
| Operating Income |
1.34B |
27.04% |
2.83% |
| Net Income |
1.12B |
34.02% |
3.00% |
| EPS |
8.51 |
36.82% |
3.65% |
Management Commentary
Key takeaways from management comments on the earnings call, grouped by themes:
- Performance and profitability: Management emphasized the quarter’s strength across revenue, margins, and cash flow, noting a record quarterly cash flow and a double-digit YoY improvement in profitability. Quote: 'KLA delivered strong results across the board in the September quarter with revenue of $3.21 billion and non-GAAP diluted EPS of $8.81.' (Rick Wallace)
- Growth drivers and market positioning: The company highlighted AI infrastructure investments, process control intensity, and rapid growth in advanced packaging as core catalysts for demand. Quote: 'The advanced packaging market is also expected to grow more than 20% compared to last year.' (Bren Higgins)
- 2025–2026 outlook and guidance: Despite China-related headwinds, KLA maintained a constructive stance on WFE growth and packaging momentum, guiding December quarter revenue ~$3.225B and continuing to expect 40–50% incremental margin leverage over the long run. Management signaled a broader spending profile for 2026 across WFE and packaging.
- China exposure and policy risk: Management quantified the China impact as roughly $300M–$350M of revenue across December 2025 through calendar 2026, distributed roughly evenly across H1 and H2. They also noted that restrictions are a risk to the top-line long-run, but the core business model remains resilient.
KLA delivered strong results across the board in the September quarter with revenue of $3.21 billion and non-GAAP diluted EPS of $8.81.
— Richard Wallace
The advanced packaging market is also expected to grow more than 20% compared to last year.
— Bren Higgins
Forward Guidance
Management guidance for the December quarter: Total revenue of $3.225B ± $150M; Foundry/Logic ~59% of Semi Process Control revenue; Memory ~41% (DRAM ~78% of Memory; NAND ~22%); Gross Margin ~62% ±1ppt; Operating Expenses ~$635M; Other income/expense net about $32M expense; Effective tax rate ~14%; GAAP diluted EPS ~$8.46 ± $0.78; Non-GAAP diluted EPS ~$8.70 ± $0.78; Fully diluted share count ~132M. The 2026 outlook contemplates a broader WFE and advanced packaging spend with an expectation of mid- to high-single-digit WFE growth in 2025 and a continued positive trajectory into 2026, aided by sustained process control intensity and packaging maturity. They anticipate first-half 2026 revenue to be roughly flat to modestly up versus the second half of 2025, with accelerating growth in the second half, tempered by the China revenue impact. They estimate the China-related revenue impact for 2026 to be around $300–$350M, spread across H1 and H2. Key factors to monitor include: (1) the rate of ramp for advanced packaging and HBM DRAM adoption, (2) the persistence of lead times and order-book dynamics, (3) China policy developments and export controls, (4) capacity expansions by memory and logic players, and (5) developments in pellicle-related and back-end inspection applications. Overall, the guidance assumes a stable macro backdrop, healthy backlog conversion, and continued share gains in advanced packaging and high-end WFE segments.