Beta Finch - KLA - KLAC - EN

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**ALEX:** Welcome to Beta Finch, your AI-powered earnings breakdown! I'm Alex, joined as always by Jordan, and today we're digging into KLA Corporation — ticker KLAC — and their September quarter results. And Jordan, I'll just say it up front: this one's a blowout.

**JORDAN:** It really is, Alex. Record revenue, record margins, and a 2027 outlook that sounds almost aggressive. I'm excited to get into it.

**ALEX:** Before we do — quick housekeeping. This podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions.

**JORDAN:** Important stuff. Okay, let's talk numbers.

**ALEX:** So KLA makes process control and inspection equipment for semiconductor manufacturing — basically the tools that check wafers for defects as chipmakers build increasingly complex chips. This quarter, September 2026, they posted revenue of $4.14 billion. That's a record, up 13% sequentially and 29% year-over-year.

**JORDAN:** And here's the headline that really jumped out at me — operating margin above 46% for the first time ever in company history. 46.1%, to be exact, up 240 basis points from the prior quarter.

**ALEX:** That's a remarkable number for a hardware company. Gross margin came in at 62.7%, non-GAAP EPS was $1.22, GAAP EPS $1.18 — both beating the midpoint of guidance. Free cash flow was $1.34 billion. Pretty much every metric beat expectations.

**JORDAN:** And it's not slowing down — guidance for the December quarter is about $4.7 billion in revenue, plus or minus $200 million. That implies the back half of calendar 2026 grows roughly 25% over the first half. That's a massive acceleration.

**ALEX:** Right, and CEO Rick Wallace was clear about why: AI infrastructure investment, leading-edge foundry and logic demand, and rising "process control intensity" — basically, as chips get more advanced and complex, you need more inspection and metrology steps per wafer. That plays directly into KLA's wheelhouse.

**JORDAN:** Let's talk about the big strategic story here, though — because the 2027 outlook is really what's driving the stock. CFO Bren Higgins raised the 2026 wafer fab equipment market forecast to the mid-$150 billion range, and — this is the eye-popping part — they now expect the 2027 wafer equipment market to exceed $200 billion.

**ALEX:** Exceed $200 billion. That's a jump from an already-raised 2026 number. And management said their visibility into 2027 is "unprecedented" — that's a strong word to use on an earnings call.

**JORDAN:** It really is, and it's backed up by tangible stuff — growing backlog, a strengthening sales funnel, and numerous greenfield fab projects across foundry, logic, and DRAM. This isn't just a vibes-based forecast; customers are locking in multi-year capacity commitments.

**ALEX:** One thing I found fascinating from the Q&A was the DRAM conversation. An analyst pointed out that KLA's DRAM-related revenue jumped around $450 million quarter-over-quarter, which is a huge swing for a market where KLA has a relatively modest overall share. Rick Wallace explained it's about rising "intensity" — DRAM makers, especially with HBM for AI chips, are now treating yield almost like "printing money," as Bren put it, so they're buying a lot more inspection equipment per wafer than they used to.

**JORDAN:** That intensity comment stuck with me too. Bren actually said some DRAM products now see process control intensity similar to leading-edge logic — that's a real structural shift, not just a cyclical blip. And they expect memory to be about 60% of the business mix in the second half of 2027.

**ALEX:** Advanced packaging was another bright spot — on track for $1.1 billion in revenue for 2026, growing over 70% year-over-yea

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Welcome to Beta Finch, your AI-powered earnings breakdown. Here's the KLA Corporation script.

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**ALEX:** Welcome to Beta Finch, your AI-powered earnings breakdown of the numbers that move markets. I'm Alex.

**JORDAN:** And I'm Jordan. Today we're digging into KLA Corporation's June quarter fiscal 2026 results — and Alex, this one's got some pretty eye-popping AI-infrastructure numbers in it.

**ALEX:** It really does. But before we get into it — quick disclaimer. This podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions.

**JORDAN:** Good housekeeping. Okay, let's talk numbers. KLA makes process control and inspection equipment for semiconductor fabs — basically the tools that check whether chips are being made correctly. And this quarter, revenue hit a record $3.66 billion, up 7% sequentially and 15% year-over-year.

**ALEX:** And that beat the midpoint of their own guidance. Non-GAAP EPS came in at $1.50, GAAP EPS at $1.04 — both at the high end of their ranges. Oh, and worth flagging for anyone checking historical charts: KLA did a 10-for-1 stock split effective June 11th, so all these per-share numbers are split-adjusted.

**JORDAN:** Good catch, because that trips people up. Gross margin was 62.4%, also above guidance, and operating margin was a very healthy 43.7%. Free cash flow came in at $817 million, and they returned $876 million to shareholders — split between buybacks and dividends.

**ALEX:** So strong quarter across the board. But honestly, the guidance and the forward commentary is where this call gets interesting. CEO Rick Wallace and CFO Bren Higgins were pretty emphatic that momentum is accelerating, not just holding steady.

**JORDAN:** Right, they raised their wafer fab equipment — WFE — market outlook for all of 2026 to roughly $150 billion, up from a prior $140 billion-plus estimate. That's the fourth time this year they've raised that number.

**ALEX:** Fourth time. And management said they expect KLA's second half of calendar 2026 revenue to grow about 20% over the first half. September quarter guidance alone is for $4 billion in revenue, plus or minus $200 million — that's another double-digit sequential jump.

**JORDAN:** The driver behind all of this is AI infrastructure — hyperscale data center buildout, more complex chip designs, rising high-bandwidth memory adoption, and advanced packaging. Management basically said every one of those trends increases "process control intensity," meaning more of KLA's tools are needed per wafer.

**ALEX:** The advanced packaging story stood out to me. They now expect that business to hit about $1.1 billion in calendar 2026, growth of more than 70% year-over-year — nearly double the growth rate of the packaging market itself. That's a big upward revision from their earlier high-50s percent estimate.

**JORDAN:** And that ties back to the Orbotech acquisition from 2019 — Rick called it out directly, saying the thesis around rising chip-package value is really playing out now. Combined with their specialty semiconductor and PCB businesses, that whole segment is expected to grow over 25% this year.

**ALEX:** Services was another bright spot — $820 million in revenue, up 17% year-over-year. And in the Q&A, Bren mentioned services should accelerate toward the high end of their 13-15% long-term target range next year, since 80% of that revenue is contract-based, which gives nice visibility.

**JORDAN:** Speaking of Q&A, there were some great exchanges. One analyst pushed hard on gross margins, given memory pricing headwinds — Bren estimated that's costing them over 100 basis points right now, and said that pressure likely continues into 2027. But he still expects ma

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**BETA FINCH PODCAST SCRIPT**

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**ALEX:** Welcome to Beta Finch, your AI-powered earnings breakdown where we turn quarterly reports into conversations you'll actually want to hear. I'm Alex, and I'm joined by my co-host Jordan. Today we're diving into KLA Corporation's Q3 2026 results - and wow, what a quarter this was.

Before we jump in, I need to share an important disclaimer: This podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions.

**JORDAN:** Thanks Alex. And speaking of wow - KLA absolutely crushed it this quarter. Revenue hit $3.415 billion, which was not only up 4% sequentially but also 11% year-over-year. That beat their internal forecasts too.

**ALEX:** Right, and the earnings per share story is even better - $9.40 non-GAAP EPS. But Jordan, what really caught my attention was their forward-looking commentary. They're basically saying 2027 is going to be massive for the semiconductor equipment industry.

**JORDAN:** Exactly. CEO Rick Wallace made some pretty bold statements about visibility into 2027. He said there's "unprecedented demand visibility" from customers and that normally they wouldn't comment on 2027 growth rates in April of 2026, but the demand environment is giving them that confidence. They expect 2027 year-over-year growth to be higher than 2026.

**ALEX:** Let's break down what's driving this optimism. KLA is the leader in process control equipment - think of them as the quality control experts for semiconductor manufacturing. Every time chip makers need to inspect their wafers or measure critical dimensions, they're likely using KLA tools.

**JORDAN:** And AI is clearly the rocket fuel here. The company specifically called out AI as "a core driver of KLA's performance." They're seeing increased investment in leading-edge foundry logic and high bandwidth memory - both critical for AI applications. What's fascinating is they raised their advanced packaging revenue outlook from $635 million to approximately $1 billion for 2026.

**ALEX:** That's a 57% increase! Advanced packaging is becoming crucial as chip companies try to pack more performance into smaller spaces. It's like upgrading from a studio apartment to a high-rise - you need much more sophisticated tools to make sure everything fits perfectly.

**JORDAN:** The numbers tell a compelling story about market share too. KLA increased their global share in both overall wafer equipment and process control markets in 2025. In advanced packaging specifically, they gained 14 percentage points of market share and saw 70% year-over-year revenue growth.

**ALEX:** Now let's talk about the elephant in the room - supply chain constraints. During the Q&A, management acknowledged they're dealing with unprecedented demand urgency from customers. CFO Brent Higgins said customers are showing "a higher level of urgency around securing capacity" than he's seen before.

**JORDAN:** This creates an interesting dynamic. On one hand, it's validation of incredibly strong demand. On the other hand, it means KLA has to rapidly scale operations, hire more people, and ensure they can deliver. The good news is they seem confident about supporting the 2027 ramp.

**ALEX:** Speaking of 2027, let's dig into their industry outlook. They're expecting the wafer equipment market to exceed $140 billion in 2026 - that's up from previous estimates of $135-140 billion. But here's the kicker: they think their semiconductor process control systems business will grow over 20% in 2026, significantly outpacing the broader market.

**JORDAN:** The geographic and end-market mix is interesting too. For the June quarter, they're forecasting foundry logic to be about 82% of revenue with memory at 18%. Within memory, DRAM is expected to be 84% and NAND 16%. This heavy foundry weighting reflects t

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**BETA FINCH PODCAST SCRIPT**

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**ALEX:** Welcome to Beta Finch, your AI-powered earnings breakdown where we turn complex quarterly reports into digestible insights. I'm Alex, and I'm joined as always by my co-host Jordan. Today we're diving into KLA Corporation's Q2 2026 earnings - that's ticker KLAC for those following along.

Before we jump in, I need to share an important disclaimer: This podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions.

Jordan, KLA just posted some pretty impressive numbers. Walk us through the headline figures.

**JORDAN:** Alex, these results are really something. KLA delivered $3.3 billion in revenue for Q2, which represents 17% year-over-year growth. But here's what really caught my attention - their earnings per share jumped 29% to $8.85 on a non-GAAP basis. That's some serious operating leverage right there.

**ALEX:** That leverage is exactly what you want to see in a capital equipment company. And they're not just growing - they're throwing off serious cash. What did free cash flow look like?

**JORDAN:** Record-breaking, Alex. They hit $1.26 billion in quarterly free cash flow, and for the full year they generated $4.4 billion - that's 30% growth year-over-year. They returned $3 billion to shareholders through dividends and buybacks. For a company with their market cap, that's substantial capital allocation.

**ALEX:** Now, KLA is a semiconductor equipment company, specifically focused on process control - think inspection and measurement tools that ensure chips are made correctly. What's driving this growth?

**JORDAN:** It's really the AI story, Alex. CEO Rick Wallace was crystal clear that AI infrastructure demand is a core driver. Their tools are essential for manufacturing the advanced chips needed for AI applications - everything from leading-edge foundry logic to high-bandwidth memory, or HBM.

What's fascinating is they're seeing process control intensity increase dramatically, especially in memory. Wallace mentioned that DRAM manufacturing now looks "much more similar to what logic did not that long ago" in terms of requiring sophisticated inspection tools.

**ALEX:** That's a key point about intensity. Can you break that down for our listeners?

**JORDAN:** Absolutely. Process control intensity basically means how much inspection and measurement equipment you need per dollar of total semiconductor equipment spending. As chips get more complex - smaller features, more layers, tighter specifications - you need proportionally more of KLA's tools.

In DRAM memory, they're seeing about 100 basis points of intensity increase with EUV lithography adoption, and another 100 basis points with HBM. That's essentially doubling their addressable market per chip produced.

**ALEX:** Speaking of markets, let's talk guidance. What's KLA expecting for 2026?

**JORDAN:** Here's where it gets interesting. For the full year, they're guiding for mid-single digit revenue growth, but CFO Bren Higgins emphasized that growth will accelerate in the second half. They're expecting the core wafer fab equipment market to grow high single to low double digits to about $120 billion, plus an additional $12 billion advanced packaging market.

But there's a constraint story here, Alex.

**ALEX:** Right, supply constraints. This came up multiple times in the Q&A. What's the issue?

**JORDAN:** Two main problems. First, KLA themselves are constrained by long lead-time components, especially optics. Higgins said decisions they made last summer are affecting what they can ship in the first half of 2026. Their lead times are extending because demand is so strong.

But second, and this is crucial - their customers are also constrained. Multiple executives mentioned that chipmakers are "frustrated with the shells that they ha

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