KLA NASDAQ: KLAC reported March quarter 2026 results that management said reflected “strong results across the board,” driven by customer investment at the leading edge in foundry logic and High-Bandwidth Memory (HBM) and supported by growing momentum in advanced packaging and services.
March quarter results and demand drivers
President and CEO Rick Wallace said KLA generated revenue of $3.415 billion, up 4% sequentially and 11% year-over-year. Non-GAAP diluted EPS was $9.40 and GAAP diluted EPS was $9.12. Wallace attributed growth to “increased investment in leading-edge foundry logic and High-Bandwidth Memory,” adding that KLA continues to see AI as “a core driver” of performance.
Wallace also highlighted KLA’s position in advanced packaging, saying the company achieved the number one position in Process Control for Advanced Wafer-Level Packaging for 2025 due to customer adoption of KLA’s packaging portfolio. He said KLA is seeing “improving momentum” in advanced packaging revenue growth and market share.
Advanced packaging outlook raised
Management repeatedly emphasized advanced packaging as a key growth vector. Wallace said KLA now expects its semiconductor process control product portfolio revenue for advanced packaging to grow from approximately $635 million in 2025 to approximately $1 billion in 2026, which he described as “well above our prior estimates.”
In the Q&A, executives said the revised outlook reflects a faster pickup over the last 90 days and the shorter lead-time nature of the packaging business. Management said KLA’s prior view had been for process control advanced packaging growth “somewhere in excess of 30%,” but the updated expectation implies growth in the “upper 50% range.” Executives pointed to customer momentum for incremental capacity and increasing requirements for “more nanometer level inspection,” including demand tied to CoWoS and emerging SOIC packaging and hybrid bonding needs.
On the broader market, management said the overall advanced packaging market is “somewhere growing up in the range of about $13 billion” in 2026, representing roughly 30% growth from 2025.
Margins, cash flow, and capital returns
On the financial details, CFO Bren Higgins said revenue came in above the guided midpoint of $3.35 billion. Non-GAAP and GAAP EPS were each above the midpoint of their respective guidance ranges.
- Non-GAAP gross margin: 62.2%, 45 basis points above the midpoint of guidance, driven by “better-than-modeled service business mix and manufacturing scale due to higher business volume.”
- Operating expenses: $670 million (R&D $389 million; SG&A $281 million), higher than expected due to “prototype materials timing and other reserve adjustments.”
- Non-GAAP operating margin: 42.6%.
- Effective tax rate: 15.4% (Higgins noted that at the guided 14.5% tax rate, non-GAAP EPS would have been $0.10 higher).
KLA ended the quarter with $5.0 billion in cash, cash equivalents, and marketable securities and $5.95 billion in debt, which Higgins said is supported by an “attractive bond maturity profile” and investment-grade ratings.
Wallace said services revenue was $775 million, up 16% year-over-year and down 1% sequentially due to the timing of revenue recognition. Wallace and Higgins described services as strategically important due to longer tool lifetimes and rising customer expectations for availability and performance, while management said services growth is expected to trend within its target range.
Wallace reported quarterly free cash flow of $622 million and said free cash flow over the past 12 months was $4.0 billion, a 31% margin. He said total capital return in the March quarter was $875 million ($626 million of share repurchases and $249 million of dividends), and $3.2 billion over the past 12 months.
At its March investor day, Wallace said KLA increased its capital allocation target to over 90% of free cash flow, announced a 17th consecutive quarterly dividend increase, and added a $7 billion incremental share repurchase authorization.
June quarter guidance and full-year cadence
For the June quarter, management guided to revenue of $3.575 billion ± $200 million. Higgins said foundry logic is forecast to be approximately 82% of Semiconductor Process Control systems revenue to semiconductor customers and memory approximately 18%, with memory mix of roughly 84% DRAM and 16% NAND (noting these mix figures apply only to semiconductor customers).
June quarter gross margin is expected to be 61.75% ± 1 percentage point. Higgins cited a modestly weaker product mix and reiterated the “persistent impact” of elevated DRAM chip costs for image processing computers shipped with systems. Management said it continues to expect elevated memory pricing through at least calendar 2026 and sees “roughly a 100 basis point negative impact” on gross margin over the next several quarters. For calendar 2026, KLA maintained its gross margin view of approximately 62% ± 50 basis points, reflecting memory pricing headwinds and tariff-related impacts.
Operating expenses are expected to be approximately $665 million in the June quarter, and Higgins said the company anticipates operating expenses rising by roughly $15 million sequentially throughout calendar 2026 as it prioritizes product development and infrastructure investments. June-quarter non-GAAP EPS guidance is $9.87 ± $1 and GAAP EPS is $9.66 ± $1, based on a fully diluted share count of approximately 131.4 million.
In the Q&A, management agreed with an analyst’s framework that high-teen year-over-year growth could put 2026 revenue in the “15-ish” billion range, based on its commentary around second-half growth versus the first half.
Industry outlook, 2027 visibility, and capacity constraints
Higgins said the wafer equipment market, including advanced packaging, is expected to exceed $140 billion in 2026. He also said the “strength of demand and customer engagement” has created “unprecedented demand visibility” and led KLA to comment unusually early on 2027. Higgins said KLA now expects the 2027 year-over-year growth rate for the wafer equipment market to be higher than the company’s growth rate expectations for 2026.
Executives described visibility and lead times as “broad-based,” with high order flow, a building backlog, and active customer “slot planning into next year,” particularly for leading-edge-centric products. Wallace said customers are showing a level of urgency around securing capacity that he “can remember seeing,” adding, “There’s no question 2027’s gonna be a massive buildup.”
Management attributed the outlook to a mix of factors including new fab projects and greenfield activity across logic and memory, as well as packaging growth. In discussing 2027, Higgins suggested memory could be “a few % higher than this year,” and said the company is seeing rising process control intensity in memory.
On the ability to meet demand, management described constraints not only in KLA’s own supply chain and staffing—installation, applications, and service resources—but also the broader ecosystem and fab construction timelines. Wallace said that even if equipment suppliers could ship more, fabs still need to be built and equipped with complete manufacturing lines, limiting how quickly industry spending can scale.
Executives also addressed pricing and margins in the context of tight demand. Management said KLA does not price “based on scarcity,” describing its approach as value-based pricing tied to cost-of-ownership improvements from one generation to the next, rather than reacting mid-transaction to component price changes.
On China, management said spending has been “fairly flat” over the last few years and that China’s growth rate is expected to be lower than the overall wafer equipment growth rate moving forward. Regarding a letter tied to Huawei-related restrictions raised by an analyst, management said it was still reviewing the letter but described the impact on June-quarter guidance and 2026 commentary as “fairly immaterial” and “contemplated in the guidance.”
About KLA NASDAQ: KLAC
KLA is a provider of process control and yield management solutions for the semiconductor and related microelectronics industries. The company designs and manufactures equipment, software and services used by chipmakers to analyze and control manufacturing processes, detect defects, measure critical dimensions and improve yield across wafer fabrication, photomask and packaging operations. KLA's offerings are aimed at enabling production of advanced logic, memory, and specialty devices at progressively smaller technology nodes and more complex package structures.
Its product portfolio includes optical and e-beam inspection systems, metrology tools for critical dimension and film measurement, mask and reticle inspection platforms, as well as enterprise software and data analytics that aggregate process data and drive automated process control.
Recommended Stories
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider KLA, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and KLA wasn't on the list.
While KLA currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Discover the 10 Best High-Yield Dividend Stocks for 2026 and secure reliable income in uncertain markets. Download the report now to identify top dividend payers and avoid common yield traps.
Get This Free Report
