KLA shares traded at $159.01, down 5.03%, at publication on Friday amid renewed worries about AI investment and weakness throughout the semiconductor sector. The decline occurred despite strong fiscal 2027 first-quarter results and an upbeat forecast.
KLA reported $1.22 in adjusted earnings per share, above the analyst consensus of $1.18. Revenue increased from $3.21 billion a year earlier to $4.14 billion, beating the $4.04 billion estimate. CEO Rick Wallace said September-quarter performance surpassed guidance midpoints on key measures, reflecting the stronger growth KLA had anticipated for the second half of 2026. AI-related demand for advanced chips and advanced packaging drove growth. Services revenue rose 14% from a year earlier to $850 million as the installed equipment base expanded and equipment utilization increased.
KLA forecasts approximately $1.1 billion in advanced packaging process-control revenue for 2026, with growth nearly double the overall market's pace. KLA's backlog and visibility into customer plans continued improving. New fabrication projects, memory demand and advanced packaging are expected to sustain additional growth.
KLA forecasts December-quarter adjusted earnings per share between $1.33 and $1.55, against an analyst estimate of $1.38. KLA projects revenue between $4.5 billion and $4.9 billion for that quarter, compared with expectations of $4.54 billion. Management projects a 2026 wafer-fab equipment market, including advanced packaging, in the mid-$150 billion range. Management expects that market to surpass $200 billion in 2027. Management forecasts second-half 2026 revenue approximately 25% above first-half revenue as supply-chain capacity improves. Foundry and logic customers are expected to generate 60% of semiconductor process-control revenue. Memory customers are expected to provide the remaining 40%.
CFO Bren Higgins expects sequential growth to continue during 2027, supported by leading-edge foundry and logic investment, additional DRAM capacity, high-bandwidth memory demand and advanced packaging. Increased process-control needs in conventional memory are also expected to support growth. Management identifies more complex chips, larger devices, rising performance requirements and advanced packaging as long-term growth drivers. Management also emphasized discipline in execution and capital allocation.
Several brokerages changed KLA price targets after the results. Susquehanna analyst Hosseini updated estimates after the September-quarter results and expects KLA's growth to lag the broader industry. The wafer-fab equipment market is expected to expand by well over 10% annually and reach an annualized rate of approximately $300 billion by the end of 2028.
A Morgan Stanley analyst highlighted KLA's projection that memory will represent 40% of product mix in 2027, a stronger outlook than previously anticipated. The analyst reconsidered an earlier cautious assessment of DRAM demand after discussions with Higgins. The analyst attributed KLA's 2026 underperformance against etch and deposition equipment suppliers to more upgrades at existing facilities and, more importantly, constrained tool availability.
DRAM manufacturers sought additional KLA equipment because stronger memory prices made each incremental yield improvement more valuable. Larger high-bandwidth memory dies and increased logic integration are raising process-control requirements into the mid-teens for certain DRAM products. Advanced DRAM overall has process-control requirements of 12% to 13%. The Morgan Stanley analyst sees scope for those requirements to rise further.
KLA Reports Strong Q1 2027 Earnings Amid AI-Driven Growth and Sector Weakness
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Summary
KLA (NASDAQ:KLAC) shares dropped 5.03% to $159.01 on October 31, 2026, despite strong Q1 2027 earnings and a bullish outlook. The company reported adjusted EPS of $1.22, beating estimates of $1.18, with revenue rising to $4.14 billion. AI-driven demand for advanced chips and packaging fueled growth, with services revenue up 14% to $850 million. KLA sees $1.1 billion in advanced packaging revenue in 2026, double the market’s growth rate. Management expects the wafer-fab equipment market to hit $200 billion in 2027. Ecosystem growth in AI and crypto news is reshaping semiconductor demand.
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