tapebrief
KLAC · Q2 2026

KLAC · Q3 2026 Earnings

Bullish

KLA Corporation

Reported April 29, 2026

30-second summary

KLA printed $3.42B in Q3 FY2026 revenue (+11.5% YoY, +3.6% QoQ) and $9.40 non-GAAP EPS, beating the prior-quarter guide midpoints of $3.35B and $9.08. The bigger signal is the framing change: CY2026 revenue growth is now "high teen" with process control systems growing "over 20%" (vs. last quarter's "high-single to low-double" core WFE framing), advanced packaging revenue is sized at ~$1B in 2026 (up from ~$1.1B implied last quarter — but on a $635M 2025 base, +57% YoY, well above the prior "mid-to-high teens" CY2026 growth target), and management broke protocol to flag 2027 growth above 2026. The Q4 guide of $3.575B ±$200M implies +12.8–19.2% YoY off the $3.17B prior-year base — the sequential acceleration management committed to three quarters ago is now arriving.

Headline numbers

EPS

Q3 FY2026

$9.40

Revenue

Q3 FY2026

$3.42B

+11.5% YoY

Gross margin

Q3 FY2026

61.1%

Free cash flow

Q3 FY2026

$0.62B

Operating margin

Q3 FY2026

34.4%

Key financials

Q3 FY2026
MetricQ3 FY2026YoYQ2 FY2026QoQ
Revenue$3.42B+11.5%$3.30B+3.5%
EPS$9.40—$8.85+6.2%
Gross margin61.1%—61.4%-29bps
Operating margin34.4%—40.4%-592bps
Free cash flow$0.62B—$1.26B-50.6%

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ3 FY2026$3.35B +/- $150M$3.415B+$65M above guide midpointBeat
Non-GAAP EPSQ3 FY2026$9.08 +/- $0.78$9.40+$0.32 above guide midpointBeat
GAAP EPSQ3 FY2026$8.85 +/- $0.78$9.12+$0.27 above guide midpointBeat
Non-GAAP Gross MarginQ3 FY202661.75% +/- 1.00%61.15%in-line (within range 60.75%–62.75%)Met
GAAP Gross MarginQ3 FY202660.62% +/- 1.00%61.15%in-line (above midpoint but within range)Met

New guidance

MetricPeriodGuideYoY
RevenueQ4 FY2026$3.575B +/- $200M+12.8-19.2% YoY
Non-GAAP EPSQ4 FY2026$9.87 +/- $1.00—
GAAP EPSQ4 FY2026$9.66 +/- $1.00—
Non-GAAP Gross MarginQ4 FY202661.75% +/- 1.00%—
GAAP Gross MarginQ4 FY202660.72% +/- 1.00%—

Reaffirmed unchanged this quarter: Calendar 2026 Gross Margin (Approximately 62% +/- 50 basis points)

Segment performance

Q3 FY2026
SegmentQ3 FY2026YoY
Semiconductor Process Control$3.084B+12.6%
Specialty Semiconductor Process$0.164B+4.8%
PCB and Component Inspection$0.168B-0.5%
Product Revenue$2.640 billion—
Service Revenue$0.775 billion—

Profitability

Q3 FY2026
SegmentQ3 FY2026
Operating Cash Flow (Q3)$707.5 million
Free Cash Flow (Q3)$622.3 million
Operating Cash Flow (LTM)$4.40 billion
Free Cash Flow (LTM)$4.01 billion

Other KPIs

Q3 FY2026
SegmentQ3 FY2026
Capital Returns (Q3)$874.8 million
Quarterly Dividend per Share$2.30

Management tone

Q4'25 "we don't need 125 [WFE]" → Q1'26 "growth year, 2H accelerating" → Q2'26 low-$120B core WFE → Q3'26 "high teen" growth with explicit 2027 acceleration call.

Management broke its own protocol to quantify 2027. The Q2 framing put CY2026 at high-single/low-double-digit growth and stopped there; this quarter management volunteered, "While normally we would not comment on 2027 growth rates in April of 2026, this demand environment gives us confidence in 2027 visibility for the wafer equipment market." That sentence — flagged explicitly as out-of-protocol — is the most aggressive forward signal KLA has issued in this cycle. The two-quarter sequence has gone from refusing to quantify CY2026 (Q4'25) to quantifying CY2027 above CY2026 (Q3'26).

CY2026 revenue growth was reframed upward by roughly 500–800bps in a single quarter. Last quarter's "high-single to low-double-digit" core WFE framing has been replaced by "high teen revenue growth year-over-year and the semiconductor process control systems business to grow over 20%." The number has moved up at every quarterly checkpoint, but this is the largest single-quarter reframing of the cycle. The Bank of America comparison from Q2 — where KLA's growth was set against Lam's +23% — has effectively been closed.

Advanced packaging was rebased and accelerated. Last quarter framed CY2025 packaging at ~$950M; this quarter management used a $635M base for 2025 going to ~$1B in 2026. The revised base reflects a tighter definition (semiconductor process control product portfolio for advanced packaging specifically), and on that base CY2026 growth is ~57%, materially above the prior "mid-to-high teens" target. Management cited 70% YoY growth in advanced wafer-level packaging revenue and a 14-point market share gain in that subsegment.

Process control was reframed from a feature-level benefit into systemic necessity. The Q&A language — "faster product cycles, higher value wafers and masks, rising design complexity and variability, and the growing demand and complexity of advanced packaging all require significantly more process control solutions" — places intensity gains as structural and reinforcing rather than tied to any single node transition. This is a different argument than the EUV+HBM intensity stack KLA presented at Investor Day, and it is broader.

Capital returns posture stepped up materially. The 17th consecutive dividend raise plus a $7B incremental buyback authorization plus a >90% of FCF target is more aggressive than the standard cadence — management is signaling that even at elevated CY2026/2027 investment, the cash conversion supports return acceleration. The China affiliate-rule recovery from last quarter and the FCF compression this quarter (working capital build) make the >90% target meaningful as a forward commitment, not just a backward-looking statement.

Recurring themes management leaned on this quarter:

AI as core performance driver and enabler for sustained growthAdvanced packaging market leadership and revenue expansionProcess control intensity increasing across all design and manufacturing phasesService business as predictable long-term growth tailwindMarket share gains and outperformance of wafer equipment marketStrong customer demand visibility and unprecedented backlog

Risks management surfaced:

Elevated DRAM chip costs impacting gross margins with roughly 100 basis point negative impact through 2026Tariff environment creating uncertainty on costsProduct mix volatility affecting quarterly marginsForward-looking statements subject to risks and uncertainties in SEC filingsMemory pricing environment remaining challenging in near term

Q&A highlights

CJ Muse · Cantor Fitzgerald

Deep dive on extended lead times and visibility into 2027, including where in the portfolio backlogs are building, which end markets are driving demand, and progression toward 2028 visibility.

Management highlighted broad-based backlogs and high order flow with strong customer engagement on 2027 slot planning. Most growth is leading-edge centric. They emphasized urgency from customers to secure capacity, noting this is the highest level of urgency they've seen. 2026 calendar revenues estimated at $15B+ range with high-teens second-half sequential growth.

WFE guidance increased to $140B+ for 2026 (from $135-140B)High-teens revenue growth expected for 202615-20% second-half sequential growth targeting $15B+ calendar 2026 revenueBroad-based demand across product portfolio, most advanced products

Stacey Rasgun · Bernstein Research

Why are semiconductor revenues tracking toward 2030 model targets already (1.4B in semis) and aren't the long-term model assumptions higher given current demand? Also, impact of Huawei ban on China trajectory.

Management clarified that the $1.4B figure refers to semi-revenue (not equipment), driven primarily by pricing elasticity particularly in memory. The 2030 model had equipment assumptions that haven't moved as fast as semi-revenue. Regarding China: the Huawei ban impact is immaterial to Q2 guidance and 2026 outlook. China overall spending is flat to slightly up; expects China growth to be lower than overall WFE growth going forward.

2030 model anticipated equipment revenue 1.3-1.5x range but would be higher if redone todaySemi-revenue driving faster growth due to pricing elasticity, especially memoryHuawei ban impact: immaterial to Q2 guidance and 2026 commentaryChina WFE spending: flat to slightly up, lower growth rate than overall WFE projected

Harlan Suhr · JPMorgan

Is 2026 WFE upside from greenfield fab projects being pulled forward or from technology migrations and yield improvements on existing capacity? For 2027, is broad-based growth across all segments (foundry, logic, memory, packaging) or concentrated? Outlook for services growth given high customer utilization and advanced offerings.

2026 uplift driven by general urgency across all segments to secure slots/deliveries, not specific to one driver. 2027 growth is broad-based including greenfield logic/memory and emerging flash activity with packaging growth. Services expected to track within 13-15% guidance range with acceleration potential as tools shipped in 2026 flow into service revenue in 2027+.

Services growth 15% in 2025 with negative run rate of ~18%Services grew 16% YoY in March quarterGuidance for services 13-15% growth rangeServices expected to accelerate to higher end of range in 2027+ as 2026 shipments flow into service revenue

Chris Senker · TD Cowen

How much of the visibility is driven by true demand versus customers hoarding capacity to ensure they have enough personnel and service resources? Given Intel's incremental CPU capacity coming from Intel 3/Intel 7 legacy nodes, will KLA benefit as much from this demand?

Management emphasized customers must open fabs for significant capex investments, requiring tools, service resources, installation support, and applications engineering. On Intel capacity: broadening at leading and near-leading edge helps KLA; collaboration is high. Efficiency gains drive process control intensity; yield improvements benefit KLA regardless of node legacy vs. cutting-edge. Intel publicly stated increased metrology usage.

Customer investment decisions require full ecosystem support: tools, installation, applications, service teamsBroadening of investment at leading/near-leading edge benefits KLAProcess control drives yield and efficiency on existing install basesIntel publicly increased metrology usage (visible on their earnings call)

Joe Quattrochi · Wells Fargo

Is process control system sales the bigger driver of incremental revenue vs. service, given customers focusing on yield and output? How is KLA positioned to support the ramp into 2027 given supply chain tightness in H1 2026?

Process control sales absolutely drive incremental revenue, especially on fabs needing yield improvements (e.g., after die size changes to support AI). KLA supply chain was tight in H1 2026 due to ramp speed/slope, but expects better positioning in 2027. Company is hiring extensively for install and service resources. Management confident in ability to support customer requirements.

Process control drives yield gains on existing capacity with changed die sizes/product mixesH1 2026 supply chain constraints due to ramp speed/slopeExtensive hiring for install and service resources underwayConfident ability to support 2027 ramp with capacity planning focus across company

Answers to last quarter's watch list

March quarter non-GAAP gross margin landing vs. the 61.75% ±1.00% guide — Printed 61.15%, -60bps below midpoint but within band. Management's "March is the CY2026 trough" framing is intact and the print did not fall below 61.0%, so the "transitory" DRAM cost characterization holds for now. The Q4 guide is reaffirmed at 61.75% ±1.00%, implying ~60bps of sequential GM recovery.
Continue monitoring
Whether H2 CY2026 revenue acceleration materializes — guide above ~$3.5B for Q4 FY2026 to validate — The Q4 FY2026 guide of $3.575B ±$200M cleared the $3.5B threshold at the midpoint, with the top of the band at $3.775B. Implied YoY growth of +12.8–19.2% off the $3.17B prior-year base validates the supply-unwinding thesis. Per Q&A, management characterized 2H sequential growth at 15–20% targeting $15B+ calendar 2026 revenue.
Resolved positively
Calendar-2026 process control share-of-wallet update with explicit number — Management quantified semiconductor process control systems CY2026 growth at "over 20%" — explicitly above CY2026 total WFE (now $140B+, up from $135–140B), which mechanically requires share gain. CJ Muse exchange directly confirmed this.
Resolved positively
DRAM intensity validation through HBM-specific design wins — Bernstein exchange addressed memory pricing elasticity driving model upside, but management did not break out a specific DRAM revenue step or quantify HBM-specific intensity gains beyond prior commentary. The narrative is intact but the specific quantification asked for did not arrive this quarter.
Continue monitoring
Whether the China affiliate-rule restoration holds through 1H'26 — Per Bernstein exchange, China spending is flat to slightly up, with overall China growth running below total WFE growth — i.e., the restoration is holding but the trajectory beyond 2026 is moderating. Huawei ban impact characterized as immaterial to Q4 guide and CY2026.
Resolved positively
Advanced packaging revenue toward the mid-to-high teens CY2026 growth target — ~$1.1B in CY2026 from a ~$950M CY2025 base — Management restated the base. CY2025 is now framed at ~$635M (semiconductor process control product portfolio for advanced packaging) growing to ~$1B in CY2026, i.e., +57% YoY — well above the prior mid-to-high teens target, with advanced wafer-level packaging specifically up 70% YoY and KLA gaining 14 points of market share. The base revision makes direct comparison messy, but the absolute trajectory is meaningfully stronger than the prior framing.
Resolved positively

What to watch into next quarter

Whether the June quarter prints near the top of the $3.775B band — the H2 acceleration thesis depends on continued sequential momentum. A print below $3.55B would suggest supply-side execution is lagging the demand pull.

Q4 FY2026 non-GAAP gross margin landing vs. the 61.75% ±1.00% guide and whether the implied 2H recovery off the 61.15% Q3 trough materializes — a print at or below 61.0% would mean DRAM cost drag is structural rather than transitory.

Whether KLA provides a numeric CY2027 WFE or revenue range on the next call — management has now signaled CY2027 growth above CY2026 but stopped short of quantification. A numeric range on the July call would be the next escalation; absence of one would suggest the verbal commitment is the limit.

CY2026 calendar revenue tracking toward the $15B+ Q&A target — implies a June quarter at ~$3.8B+ to hit the lower bound. Below that puts the verbal Q&A target at risk even with the formal guide met.

Advanced packaging quarterly run-rate toward the ~$1B CY2026 target — on the restated $635M CY2025 base, the implied 2H 2026 packaging revenue is materially higher than 1H. The June print is the first hard datapoint.

Whether services growth sustains at the 16% YoY March pace or compresses toward the 13–15% band — Harlan Sur's exchange flagged 2027 acceleration potential as 2026 shipments flow into service revenue; near-term, the June print confirms whether services is already running ahead of the long-term model.

Sources

  1. KLA Corporation Q3 FY2026 earnings press release (SEC EDGAR, exhibit 99.1): https://www.sec.gov/Archives/edgar/data/319201/000031920126000014/exhibit991earningsrelease3.htm
  2. KLA Corporation Q3 FY2026 earnings call — prepared remarks and Q&A excerpts (exchanges with Cantor Fitzgerald, Bernstein, JPMorgan, TD Cowen, Wells Fargo).

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