KLA Corporation (NASDAQ:KLAC) KLA Corp. shares are trading lower on Friday amid renewed concerns over AI investment and weakness across the semiconductor sector.
The pullback comes despite the company reporting strong first-quarter fiscal 2027 results and issuing a positive outlook.
• KLA stock is among today’s weakest performers. What’s behind KLAC decline?
Earnings Snapshot
KLA reported adjusted EPS of $1.22, exceeding the analyst consensus of $1.18. Revenue reached $4.14 billion, surpassing the $4.04 billion estimate and increasing from $3.21 billion a year earlier.
CEO Rick Wallace said the September quarter exceeded the midpoint of guidance across key metrics, reflecting the stronger growth the company anticipated in the second half of 2026.
Growth was driven by AI-related demand for leading-edge chips and advanced packaging. KLA expects advanced packaging process-control revenue to reach approximately $1.1 billion in 2026, growing nearly twice as fast as the overall market.
Services revenue increased 14% year over year to $850 million, supported by a larger installed base and higher equipment utilization.
KLA’s backlog and customer visibility also continued to improve, with new fabrication projects, memory demand and advanced packaging expected to support further growth.
Outlook and Growth Drivers
For the December quarter, KLA expects adjusted EPS of $1.33-$1.55, compared with the $1.38 analyst estimate, and revenue of $4.5 billion-$4.9 billion, versus expectations of $4.54 billion.
Management forecasts the wafer-fab equipment (WFE) market, including advanced packaging, to reach the mid-$150 billion range in 2026 and exceed $200 billion in 2027. It expects second-half 2026 revenue to be approximately 25% higher than the first half as supply-chain capacity improves.
Foundry and logic customers are expected to contribute 60% of semiconductor process-control revenue, with memory accounting for 40%.
CFO Bren Higgins expects KLA to continue growing sequentially in 2027, supported by investments in leading-edge foundry and logic, new DRAM capacity, rising high-bandwidth memory (HBM) demand and advanced packaging. Higher process-control requirements in conventional memory are also expected to contribute to growth.
Management sees increasing chip complexity, larger device sizes, higher performance requirements and advanced packaging as long-term growth drivers, while emphasizing disciplined execution and capital allocation.
Analyst View and Price Target Revisions
Following the results, several brokerages revised their price targets for KLA:
- JPMorgan: Analyst Harlan Sur maintained an Overweight rating and raised the price target from $238 to $240.
- Citigroup: Analyst Atif Malik lowered the price target from $290 to $275, while maintaining a Buy rating.
- UBS: Analyst Timothy Arcuri maintained a Neutral rating and lowered the price target from $190 to $180.
- Wells Fargo: Analyst Joseph Quatrochi reiterated an Overweight rating and lowered the price target from $245 to $210.
- Susquehanna: Analyst Mehdi Hosseini maintained a Neutral rating and cut the price target from $215 to $190.
- Stifel: Analyst Brian Chin lowered the price target from $250 to $230, while maintaining a Buy rating.
- Cantor Fitzgerald: Analyst C.J. Muse reiterated an Overweight rating and lowered the price target from $325 to $225.
Susquehanna analyst Hosseini also revised his estimates following KLA’s September-quarter results. Although the WFE market is expected to grow by well over 10% annually and reach an annualized run rate of approximately $300 billion by the end of 2028, Hosseini expects KLA to expand more slowly than the broader industry.
A Morgan Stanley analyst highlighted KLA’s expectation that memory will account for 40% of its product mix in 2027, representing a stronger outlook than previously anticipated. Following discussions with CFO Bren Higgins, the analyst revised an earlier cautious view of DRAM demand.
The analyst said KLA’s weaker performance relative to etch and deposition equipment providers in 2026 reflected a shift toward upgrades at existing facilities and, more importantly, limited tool availability.
DRAM manufacturers wanted to purchase more KLA equipment as stronger memory pricing increased the value of each incremental yield improvement. Larger HBM dies and greater logic integration are also pushing process-control requirements for certain DRAM products into the mid-teens, compared with 12%-13% across advanced DRAM overall.
The analyst sees potential for these requirements to increase further.
KLAC Stock Price Activity: KLA shares were down 5.03% at $159.01 at the time of publication Friday.
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