Source: Motley Fool transcript (published 04/29/2026); call date Wednesday, April 29, 2026 at 2:00 p.m. PT. Participants: Rick Wallace (CEO), Bren Higgins (CFO), Kevin Kessel (IR). NOTE: Figures pre-10:1 stock split (split effective before Q4 FY26 call).
Richard Wallace, CEO: KLA delivered strong results across the board for the March quarter with revenue of $3.415 billion, up 4% sequentially and 11% year-over-year, driven by increased investment in leading-edge foundry logic and high bandwidth memory. Non-GAAP diluted EPS was $9.40 and GAAP diluted EPS was $9.12. We continue to see AI as a core driver of KLA's performance and an enabler for our growing momentum.
Highlights in the quarter include KLA achieving the #1 position in process control for advanced wafer-level packaging for 2025. We continue to see improving momentum in advanced packaging revenue growth and market share, and we now expect semiconductor process control product portfolio revenue for advanced packaging to grow from approximately $635 million in 2025 to approximately $1 billion in 2026, well above our prior estimates.
KLA's service business was $775 million in the March quarter, up 16% year-over-year but down 1% sequentially due to the timing of revenue recognition. Quarterly free cash flow was $622 million; total capital returned in the March quarter was $875 million, comprised of $626 million in share repurchases and $249 million in dividends.
Recently published industry research shows KLA increased its global share of both the overall wafer equipment and the process control market in 2025. KLA increased its market share in advanced wafer-level packaging by 14 percentage points with ~70% year-over-year revenue growth. Since 2021, KLA's share of process control has grown by 360 basis points and is approximately 7x greater than the nearest competitor.
Looking ahead to 2026 and 2027, our expectations for growth in the wafer equipment industry are accelerating. KLA recently held an Investor Day in March, detailing our 2030 financial model: a 13% to 17% revenue CAGR objective through 2030, a long-term services CAGR of approximately 13% to 15%, a baseline semiconductor industry growth CAGR of 11% from 2025 to 2030, and a WFE market growing 1% faster than the semiconductor industry to $215 billion, plus or minus $20 billion, by 2030. We increased our capital allocation to target over 90% of free cash flow, announced the 17th consecutive increase in our quarterly dividend, and an incremental $7 billion share repurchase authorization.
Bren Higgins, CFO: KLA's March quarter results reflect strong year-over-year growth with an industry-leading margin profile. Revenue was $3.415 billion, above the guidance midpoint of $3.35 billion. Non-GAAP diluted EPS was $9.40 and GAAP diluted EPS was $9.12, each above the midpoint of the respective guidance ranges. Gross margin was 62.2%, 45 basis points above the midpoint of guidance, driven by better-than-modeled service business mix and manufacturing scale. Operating expenses were $670 million, including $389 million in R&D and $281 million in SG&A. Operating margin was 42.6%. KLA ended the quarter with $5 billion in total cash and marketable securities and debt of $5.95 billion.
On the industry outlook for 2026, we expect the wafer equipment market, which includes advanced packaging, to exceed $140 billion in 2026. This demand environment gives us confidence in 2027 visibility for the wafer equipment market — today we expect the 2027 year-over-year growth rate to be higher than our growth rate expectations for 2026. We expect sequential revenue growth for the company to accelerate, leading to high-teens revenue growth year-over-year in 2026, with the semiconductor process control systems business to grow over 20%.
KLA's June quarter guidance is for revenue of $3.575 billion, plus or minus $200 million. Foundry logic is forecasted to increase to approximately 82% and memory approximately 18% of semi process control systems revenue; in memory, DRAM ~84% and NAND ~16%. Gross margin for the quarter is forecasted to be 61.75% plus or minus 1 percentage point. The guidance includes the persistent impact of elevated DRAM chip costs for image processing computers, a headwind of roughly 100 basis points to gross margin over the next several quarters. Our view of gross margins remains ~62% plus or minus 50 basis points in calendar '26. Operating expenses are forecasted to be approximately $665 million in the June quarter. In the June quarter, non-GAAP diluted EPS is expected to be $9.87, plus or minus $1, and GAAP diluted EPS is expected to be $9.66, plus or minus $1.
Operator: [Q&A — selected]
C.J. Muse (Cantor): Extended lead times and visibility into '27 — can you see into 2028?
Bren Higgins: It's broad-based — backlogs building, order flow very high, slot planning into next year very strong. Most of our focus is on addressing the opportunities in '27, lots of new greenfield opportunities. Customers want to make sure they're in the queue aligned with their construction schedules.
Kevin Kessel: The conversations I've had with customers in the last few months show a higher level of urgency around securing capacity than I remember seeing. There's no question '27 is going to be a massive buildup.
Stacy Rasgon (Bernstein): The 2030 model had specific semi revenue levels; why isn't it higher given where we sit?
Bren Higgins: Semi revenue is going higher, faster because of pricing — more elasticity, especially around memory. We talk about a normalized level of capital intensity associated with revenue in the range of $1.3 billion to $1.5 billion. If we had to redo it today, there are a lot of reasons to push that up. The numbers around equipment haven't moved nearly as fast as the numbers around semi revenue associated with pricing.
Stacy Rasgon: Any implication of the new export letter for you, and broader China?
Bren Higgins / Rick Wallace: We got the letter; impact on Q2 guidance and the commentary around '26 is fairly immaterial — focused on not all affiliated fabs. On China overall, spending is more or less flat over the last few years; what's driving our business is what's happening at the leading edge. China's growth rate is probably lower than the overall WFE growth rate.
Harlan Sur (JPMorgan): Is 2026 WFE upside from greenfield pull-in or technology migrations? And services growth profile?
Rick Wallace / Bren Higgins: It's urgency from customers to take slots/deliveries — nothing more than general urgency across different segments. For 2027, lots of new fab projects — greenfield on logic and memory, some in flash, and packaging too. On services: will be in the range across this year; a lot of shipments this year will flow into service next year and beyond — an accelerant to the higher end of the range over the next couple of years.
Srini Pajjuri (RBC): Is the visibility true demand or customers ensuring capacity?
Rick Wallace: These are significant investments — part of the discussions are around tools and delivery timing, but also our support resources, installation resources, applications, and service teams. It's really across the company that we're positioned to support what they expect to be a significant ramp.
Tim Arcuri (UBS): You're outgrowing WFE — do you think WFE growth is too high?
Bren Higgins: The baseline is about $120 billion for 2025, growing to $140 billion-plus, which is mid- to high-teens growth. We expect our systems business to grow in excess of 20%. There's a lot of opportunity spanning not just traditional WFE but also advanced packaging.
Tim Arcuri: High-NA pushout — puts and takes for you?
Rick Wallace: No change in the high-NA forecast — it's exactly what we modeled. For us it's a push. The attach rate to litho historically was more true; today architecture changes, high-mix design, larger die, and defect density matter more. The 2-nanometer node has higher process control intensity than 3-nanometer.
Jim Schneider (Goldman Sachs): Advanced packaging expectations for calendar '26?
Rick Wallace: We talked about exceeding $1 billion in business in advanced packaging this year, growing from about $635 million in 2025. We're seeing meaningful revenue increases across some of our more advanced systems, and packaging has moved to need more front-end-like requirements. It's likely one of the top-growing markets.
Jim Schneider: When does process control intensity materially outgrow the WFE envelope?
Rick Wallace: Over the last 5 years we gained ~160 basis points of share, translating to about 6.5% growth above market baseline. At Investor Day we said we could gain another 150+ bps of share, translating to a 4.5% growth premium over a 12% WFE baseline — feeding our $26 billion target for 2030.
Charles Shi (Needham): X-ray vs optical for CD metrology?
Rick Wallace: History is you move to the highest capability tool to debug, then go to cost-of-ownership. X-ray is interesting — Axion solved a problem in failure analysis. Adoption has been mostly in memory; the market is ~$75-100 million today with us at ~60% share; could move up to ~$150 million over the next few years, but productivity and cost remain the challenge.
Bren Higgins: On advanced packaging: a quarter ago we thought growth in the upper 30% range; now we're in the high 50s. There's been momentum from customers for additional capacity this year we didn't have visibility into going into the calendar year. Process control growing to ~$1 billion from ~$635 million is high-50s% growth.
Edward Yang (Oppenheimer): Is the DRAM supply procured through calendar '26 or longer?
Rick Wallace: Longer. I feel very good about our supply situation to support our build plans through next year.
Edward Yang: Bridge your '26 WFE view to hyperscaler AI CapEx?
Rick Wallace: We've had all these conversations with customers — on both the foundry/logic and memory side, with all these aggressive plans through '26 and '27 they're not going to close the gap; in some cases the gap has expanded. There's not enough silicon to support the plans people have. WFE is literally going as fast as we can as an industry.
Chris Caso (Wolfe): Does demand cap what you can ship in '26?
Rick Wallace: In the semiconductor industry, the first constraint is how many fabs you have. We look at the overall industry and what our customers are doing. You can't go from 140 to 200 in 2026; there's only so much you can add in 2027 — and those fabs have to be built now.
Chris Caso: Gross margins for the year?
Rick Wallace: Pretty consistent with last quarter's guidance — ~62% plus or minus 50 bps. Memory pricing is on the margin worse — the headwind is 100 bps now (was 75-100). Tariff headwind should become less as we move through the year. Mix is generally consistent.
Operator: Thank you, everybody. That concludes today's call.