KLA Corporation Conference Call Summary Company Overview - **Company**: KLA Corporation (NasdaqGS: KLAC) - **Date of Conference**: December 03, 2025 - **Speaker**: Brian Higgins, CFO Key Industry Insights Equipment Market Trends - The wafer fabrication equipment (WFE) market is expected to see modest growth in the first half of 2026, with an acceleration in the second half driven by high-performance computing and advanced packaging [6][12] - KLA has experienced mid-teens revenue growth and high 20% EPS growth in 2025, indicating strong market positioning and execution [6][12] - The company anticipates a WFE market size between $105 billion and $110 billion for 2025, with advanced packaging contributing an additional $11 billion [14] Drivers of Growth - Investment in leading-edge technology nodes, particularly the two-nanometer node, is expected to drive growth, with high-bandwidth memory and advanced packaging being significant contributors [9][10] - The design environment has improved since the seven-nanometer node, leading to increased process control intensity and efficiency [7][8] - KLA's share of the WFE market has increased, with expectations of further share gains due to broadening investments in leading-edge technology [15][16] Regional Market Dynamics - The Chinese market is projected to be modestly down, with KLA's share of the market declining from 40% in 2024 to mid-20s in 2026 due to export controls and market access issues [22][24][25] - The impact of the BIS rule change is estimated to have cost KLA approximately $300 million in expected revenue [25] Financial Performance Revenue and Margins - Advanced packaging revenue reached approximately $925 million in 2025, up 70% year-over-year, indicating strong demand in the logic segment [35][36] - Gross margin is guided at 62% for the quarter, with expectations of maintaining this level in the coming year despite tariff headwinds [44][47] Service Business Growth - KLA's service business is growing at a rate of 12%-14%, driven by high customer reliance on process control systems and increased contract pricing [48][52] - The average life of KLA systems has increased, contributing to a growing installed base and service revenue [51][52] Competitive Landscape - KLA faces limited competition in the advanced process control market, particularly in China, where domestic alternatives are not yet formidable [30][31] - The company is optimistic about engaging with new customers and expanding its market presence as the foundry market broadens [32][34] Conclusion - KLA Corporation is well-positioned for growth in the semiconductor equipment market, driven by advancements in technology nodes, strong demand for process control, and a robust service business. The company is navigating challenges in the Chinese market while capitalizing on opportunities in advanced packaging and high-performance computing.

Summary of Semiconductor Capital Equipment Conference Call Industry Overview - The conference call focuses on the **Semiconductor Capital Equipment** industry, specifically discussing the **Wafer Fabrication Equipment (WFE)** market forecast for 2026 and 2027, driven by **DRAM** and **TSMC** [1][2][5]. Key Points and Arguments Market Forecast - The WFE market forecast for 2026 is maintained at **$129 billion** (up **11%** year-over-year), while the 2027 forecast is revised up from **$137 billion** to **$145 billion** (up **13%**) [2][5]. - The growth is attributed to strong demand in **DRAM** and **foundry logic**, with a notable increase in **NAND** demand being moderated [2][5]. DRAM Insights - **DRAM** is expected to grow by **17%** in 2026 and **12%** in 2027, entering a new paradigm with a projected **25%** bit growth compared to **16%** from 2022 to 2025 [3][32]. - Major suppliers like **Micron**, **Hynix**, and **Samsung** are required to accelerate their greenfield projects significantly to meet this demand [3][32]. NAND Insights - **NAND** demand is projected to grow by **28%** in 2026 and **26%** in 2027, driven by the rise of **eSSDs** [3][52]. - The required NAND WFE is estimated to be approximately **$13-16 billion**, with half of this coming from upgrades and the other half from greenfield projects, including contributions from **YMTC** [3][52]. Foundry Logic - **Foundry Logic** is expected to grow by **6%** in 2026 and **11%** in 2027, with potential upside risks if TSMC's equipment mix increases from **75%** to **80%** [3][4][31]. Bull Case Scenarios - The bull case for 2026 includes a potential **$2.5 billion** upside for TSMC if their equipment mix increases, alongside extended purchase orders from hyperscalers for NAND [4][31]. - Upside risks for 2027 include renewed foundry investments from **Intel**, accelerated logic investments in **China**, and increased memory bit demand [4][31]. Financial Projections - Revenue and EPS estimates for **AMAT**, **LAM**, and **KLA** have been revised up by an average of **3.3%** and **4.7%**, respectively, with price targets increased by an average of **9.6%** [5][19]. - The 2027 revenue and EPS forecasts are above consensus by **5.3%** and **4.7%**, indicating a conservative outlook that may allow for further revisions if market conditions improve [5][19]. Regional Insights - The WFE revenue by region shows significant contributions from **China**, **Korea**, and **Taiwan**, with projections indicating continued resilience in these markets [23][21]. Additional Considerations - The call emphasizes the importance of greenfield projects and the need for major players to adapt to changing market dynamics, particularly in DRAM and NAND sectors [32][52]. - The cyclical nature of the NAND market is highlighted, with expectations for spending to resume, indicating a recovery phase post-2025 [66]. This summary encapsulates the critical insights and projections discussed during the conference call, providing a comprehensive overview of the semiconductor capital equipment landscape for the upcoming years.

Company Overview - KLA Corporation (KLAC) is a leading U.S.-based semiconductor equipment company with a market cap of $154.4 billion, specializing in advanced process-control and yield-management systems for chip manufacturing [1] - The company is headquartered in Milpitas, California, and provides tools for inspection, metrology, and defect detection to enhance efficiency and production yields in semiconductor manufacturing [1][2] Financial Performance - KLA reported $3.21 billion in revenue for Q1, reflecting a year-over-year increase of approximately 13% [5] - The company has an annual revenue exceeding $12 billion and employs around 15,000 people [2] Stock Performance - KLAC shares have experienced an 8.5% decline from their 52-week high of $1,284.47, reached on October 30 [3] - Over the past three months, KLAC shares have gained 31.5%, outperforming the SPDR S&P Semiconductor ETF (XSD), which increased by about 9.6% during the same period [3] - In the past 52 weeks, KLAC has gained 86%, significantly outpacing XSD's 29.3% increase [3] - Year-to-date, KLAC shares are up 87.6%, compared to XSD's 32.1% rise [3] Market Sentiment - Analysts have recently turned more bullish on KLAC, with Citigroup raising its price target from $1,060 to $1,450 following strong Q1 results [5] - The stock's consensus rating has shifted to "Moderate Buy," reflecting improved confidence in KLA's performance and outlook [5][6] Competitive Position - KLA has significantly outperformed its rival, Applied Materials, Inc. (AMAT), which has seen a decline of 47.2% over the past 52 weeks and 55.1% year-to-date [6] - The consensus rating for KLAC from 26 analysts is "Moderate Buy," with a mean price target of $1,269.75, indicating an 8% premium to its current price levels [6]

Core Insights - Zacks Premium offers various tools to help investors make informed decisions and enhance their confidence in the stock market [1] - The Zacks Style Scores provide a unique rating system for stocks based on value, growth, and momentum characteristics, aiding investors in selecting securities with high potential for market outperformance [2][3] Zacks Style Scores Overview - Stocks are rated from A to F based on their value, growth, and momentum, with higher scores indicating a better chance of outperforming the market [3] - The Style Scores are categorized into four types: Value Score, Growth Score, Momentum Score, and VGM Score, each focusing on different investment strategies [3][4][5][6] Value Score - The Value Score identifies attractive and discounted stocks using various financial ratios such as P/E, PEG, and Price/Sales, appealing to value investors [3] Growth Score - The Growth Score assesses stocks based on projected and historical earnings, sales, and cash flow, targeting growth investors interested in sustainable long-term growth [4] Momentum Score - The Momentum Score helps investors capitalize on price trends by analyzing short-term price changes and earnings estimate revisions [5] VGM Score - The VGM Score combines the three Style Scores to identify stocks with the best value, growth potential, and momentum, serving as a strong indicator alongside the Zacks Rank [6] Zacks Rank Integration - The Zacks Rank utilizes earnings estimate revisions to guide investors in building successful portfolios, with 1 (Strong Buy) stocks historically yielding an average annual return of +23.93% since 1988 [7][8] - To maximize returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [9] Company Spotlight: KLA Corporation - KLA Corporation, based in San Jose, CA, specializes in process diagnostics and control equipment for semiconductor manufacturing, with a diverse product portfolio [11] - Currently rated 3 (Hold) on the Zacks Rank, KLA has a VGM Score of B and a Growth Style Score of B, indicating a projected year-over-year earnings growth of 6.4% for the current fiscal year [12] - With positive earnings estimate revisions and a history of earnings surprises, KLA is positioned as a potential growth investment [12][13]

Core Viewpoint - KLA (KLAC) stock is considered a promising investment opportunity due to strong margins, a low-debt capital structure, and significant growth potential, as it is currently 11% below its 52-week high [1][3]. Performance and Growth Potential - KLAC has experienced a 76% increase in stock price year-to-date, with further growth potential due to solid fundamentals [3]. - The stock recently declined by nearly 6% amid a broader tech sell-off, indicating volatility in the market [3]. - Revenue is forecasted to exceed $925 million in 2025, representing a 70% annual increase [4]. - The September 2025 quarter achieved a 43% operating margin, supported by a favorable product mix and manufacturing efficiencies [5]. - The service sector grew by 16% year-over-year, reaching $745 million [5]. - KLA's free cash flow of $3.9 billion over the past year supports its low-debt capital structure, emphasizing strong momentum with a year-to-date return exceeding 80% [6]. Fundamentals Comparison - KLA's operating cash flow margin averages approximately 34.0%, with an operating margin of 38.9% over the last three years [12]. - The company has shown revenue growth of 22.1% over the last twelve months and 8.7% over the last three-year average [12]. - Despite its momentum, KLAC trades 11% below its 52-week high, indicating room for further growth [12]. Investment Criteria - KLA meets several investment criteria, including a market cap greater than $2 billion, high operating or cash flow margins, no significant revenue decline in the past five years, a low-debt capital structure, and strong momentum [13].

Core Insights - KLA Corporation is a leading semiconductor equipment manufacturer with a market cap of $149 billion, specializing in process control, metrology, and inspection systems for chip fabrication, playing a crucial role in advanced technologies like AI and 5G [1] Performance Summary - KLA shares have increased 81.1% over the past 52 weeks, significantly outperforming the S&P 500 Index's 12.3% rise, and are up 78.2% year-to-date compared to the S&P 500's 12.5% increase [2] - The stock has also outperformed the Invesco Semiconductors ETF, which rose 31.5% over the past 52 weeks [3] Financial Results - For the first quarter, KLA reported revenue of $3.21 billion, a 13% year-over-year increase, with GAAP diluted EPS of $8.47 and non-GAAP EPS of $8.81, indicating strong profitability [4] - The company provided Q2 guidance with expected revenue of approximately $3.23 billion, a non-GAAP gross margin near 62%, and non-GAAP EPS of roughly $8.70 [4] Analyst Expectations - Analysts project KLA's EPS to grow 6.4% year-over-year to $35.40 for the fiscal year ending June 2026, with a history of exceeding consensus estimates in the last four quarters [5] - The consensus rating among 26 analysts is a "Moderate Buy," consisting of ten "Strong Buy" ratings, one "Moderate Buy," and 15 "Holds" [5] Analyst Ratings Update - The consensus has become more bullish compared to a month ago, with Citigroup analyst Atif Malik reaffirming a "Buy" rating and raising the price target to $1,450 from $1,060, indicating a 36.8% increase [6]

Group 1 - Significant investors have taken a bullish stance on KLA, with 48% of trades being bullish and 28% bearish, indicating a positive sentiment in the options market [1] - The predicted price range for KLA over the recent three months is between $880.0 and $1620.0, suggesting a wide range of expectations among investors [2] - KLA is a leading manufacturer in the semiconductor wafer fabrication equipment market, specializing in semiconductor process control, and holds a majority market share [8] Group 2 - Recent options activity shows a mix of neutral and bearish sentiments, with notable trades including puts and calls at various strike prices [7] - Expert analysts have set an average price target of $1330.0 for KLA, with individual targets ranging from $1200 to $1450, reflecting a generally positive outlook [10][11] - The current trading volume for KLA is 643,410, with a slight decrease of -0.3%, indicating a stable trading environment [13]

Core Insights - The article discusses the importance of quality control in semiconductor manufacturing, particularly for advanced AI chips, highlighting KLA Corp.'s technology as essential for chip manufacturers serving data center clients [1][7] - It emphasizes the potential investment opportunities in lesser-known tech companies that are addressing critical AI bottlenecks, despite the focus on larger players like NVIDIA [2][5] - The long-term outlook for AI and data center spending remains positive, even amidst recent market volatility [6] Group 1: KLA Corp. - KLA's quality control suite is crucial for inspecting chips throughout the manufacturing process, ensuring accurate fabrication of each layer [7] - The company forecasts $925 million in revenue from advanced packaging services in fiscal Q1 2026, representing a 70% year-over-year increase [8] - Despite a recent stock pullback, KLA's price consolidation in a bullish wedge pattern suggests a potential breakout could be imminent [9] Group 2: ARM Holdings - ARM Holdings has a unique business model, licensing out intellectual property rather than manufacturing its own chips, positioning it strongly within the AI ecosystem [10] - The Neoverse platform has achieved a 25% penetration rate in the data center CPU market, with ARM reporting over 34% year-over-year revenue growth in fiscal Q2 2026 [11] - ARM shares have faced volatility despite record revenue, with the stock potentially approaching a short-term bottom near the 200-day simple moving average [12][13] Group 3: Vertiv Holdings - Vertiv specializes in electrical thermal management, providing liquid-cooling systems essential for scaling data centers, which generate significant heat [14] - The company's liquid-cooling solutions are claimed to be 3,000 times more efficient than traditional air-cooling systems, with a projected 20% CAGR for its addressable market through the decade [15] - Following a strong earnings report and guidance raise, Vertiv's stock has seen a pullback, likely due to profit-taking, but the long-term uptrend remains intact [16][17]

Core Insights - Financial giants have shown a bearish sentiment towards KLA, with 40% of traders exhibiting bearish tendencies compared to 37% who are bullish [1] - The predicted price range for KLA is between $760.0 and $1360.0 based on recent options activity [2] - The average open interest for KLA options is 73.4, with a total volume of 325.00, indicating significant trading activity within the specified price range [3] Options Activity - A total of 27 unusual trades were identified for KLA, with 5 puts valued at $197,160 and 22 calls valued at $1,501,664 [1] - Noteworthy options activity includes various trades with different sentiments, such as bullish, neutral, and bearish, with significant trade prices and strike prices [9] - The current market status shows a mixed sentiment from analysts, with target prices ranging from $1135 to $1350 [12][13] Company Overview - KLA is a leading manufacturer of semiconductor wafer fabrication equipment, specializing in semiconductor process control [10] - The company holds a majority share in its market segment and serves top customers like TSMC and Samsung [10] - KLA's stock is currently priced at $1148.89, reflecting a decrease of 1.1% [15]

Core Insights - KLA Corporation (NASDAQ:KLAC) is highlighted as one of the best semiconductor equipment stocks to buy, with shares gaining over 89% year-to-date [1] - The company has received mixed analyst attention, with Barclays upgrading the stock to Overweight and raising the price target significantly from $700 to $1,200, citing insulation from declines in Chinese revenues [2] - KLA's fiscal first-quarter earnings report showed strong performance, with EPS of $8.81 and revenue of $3.21 billion, surpassing analyst expectations [3] Analyst Ratings - Barclays upgraded KLA Corporation from Equalweight to Overweight, reflecting confidence in the company's resilience against market fluctuations [2] - In contrast, Morgan Stanley downgraded the stock to Equalweight, adjusting the price target to $1,093 from $928 [3] Financial Performance - KLA Corporation reported fiscal first-quarter earnings of $8.81 per share and revenue of $3.21 billion, exceeding analyst estimates of $8.60 and $3.17 billion respectively [3]