KLA Q1 Revenue Rises 29% as Wafer Inspection Drives Growth

KLA Corporation (NASDAQ: KLAC) reported a 29% year-over-year increase in fiscal first-quarter revenue, led by strong growth in wafer inspection and other semiconductor process-control products. The company generated $4.14 billion of revenue for the quarter ended September 30, 2026, and projected $4.7 billion, plus or minus $200 million, for the December quarter.

Non-GAAP gross margin was 62.7%, while non-GAAP operating margin reached 46.1%. Non-GAAP net income was $1.60 billion, equivalent to diluted earnings of $1.22 per share. GAAP diluted earnings were $1.18 per share.

Semiconductor process control leads growth

Semiconductor Process Control remained KLA’s largest reportable segment, accounting for 91% of quarterly revenue. Segment sales rose 29% from a year earlier and 15% sequentially to $3.75 billion.

Within the company’s major product categories, wafer inspection revenue increased 37% year over year and 19% from the prior quarter to $2.11 billion. Patterning revenue rose 29% year over year and 18% sequentially to $862 million. Services generated $850 million, up 14% from a year earlier and 4% sequentially.

Specialty Semiconductor Process revenue totaled $242 million, an increase of 28% year over year and unchanged sequentially. PCB and Component Inspection revenue rose 16% from a year earlier but declined 13% from the preceding quarter to $140 million.

Foundry and logic customers represented approximately 72% of Semiconductor Process Control system revenue, with memory accounting for the remaining 28%. These percentages cover system-only sales to those customer groups and do not represent KLA’s entire customer base.

China was KLA’s largest geographic market during the quarter at 34% of revenue, followed by Taiwan at 25%, North America at 15% and Korea at 12%. Europe and Japan each represented 5%, while the rest of Asia contributed 4%.

Cash generation supports shareholder returns

KLA produced $1.34 billion of free cash flow in the September quarter, representing a 32% free cash flow margin and 83% conversion of non-GAAP net income. The company repurchased $936 million of shares and paid $305 million in dividends during the period.

Over the latest 12 months, KLA generated $4.0 billion of free cash flow, with a 28% margin. It returned $2.68 billion through share repurchases and $1.11 billion through dividends over the same period. The company said it remains committed to returning more than 90% of free cash flow to shareholders over the long term through dividends and buybacks.

KLA ended the quarter with $4.74 billion in cash, cash equivalents and marketable securities, $8.02 billion of working capital and $5.72 billion of debt. Its outstanding bonds had a weighted average interest rate of 4.67%, excluding interest-rate swap effects, and a weighted average maturity of 17.8 years.

December-quarter outlook

For the second quarter of fiscal 2027, management expects revenue of $4.7 billion, plus or minus $200 million. Non-GAAP gross margin is projected at 62.5%, plus or minus one percentage point. KLA forecast GAAP diluted earnings of $1.41, plus or minus $0.11, and non-GAAP diluted earnings of $1.44, plus or minus $0.11.

The outlook assumes approximately $710 million of non-GAAP operating expenses, $25 million of net other income and expense, a non-GAAP effective tax rate of about 14.5%, and roughly 1.306 billion diluted shares.

KLA expects foundry and logic customers to account for about 60% of December-quarter Semiconductor Process Control system revenue, with memory representing approximately 40%. Within memory, DRAM is expected to comprise about 84% and NAND about 16%.

The company cautioned that its outlook is subject to semiconductor-industry cyclicality, changes in customer investment patterns and end-market demand, and its concentrated customer base. Other identified uncertainties include evolving U.S. export rules affecting sales and services to certain customers in China, tariffs and other trade restrictions, international conflicts, foreign-exchange and interest-rate fluctuations, cybersecurity threats, supply constraints, and the availability and cost of critical components and materials.