管理層發言
Good afternoon. My name is Leo, and I will be your conference operator today. At this time, I would like to welcome everyone to the KLA Corporation March Quarter 2026 Earnings Conference Call. I will now turn the call over to Kevin Kessel, Vice President of Investor Relations and Market Analytics. Please go ahead.
Welcome to the March 2026 quarterly earnings call for KLA. I'm joined by our CEO, Rick Wallace; and CFO, Bren Higgins. We will discuss today's results as well as our outlook, which we released after the market closed and is available on our website along with supplemental materials. We are presenting today's discussion and metrics on a non-GAAP financial basis unless otherwise specified. We will not reference fiscal years in our discussion, all full year references we may refer to calendar years. The earnings material contain a detailed reconciliation of GAAP to non-GAAP results. KLA's IR website also contains future events presentations, corporate governance information and links to our SEC filings. Our comments today are subject to risks and uncertainties reflected in the disclosure of risk factors in our SEC filings. Any forward-looking statements, including those we make on the call today, are also subject to those risks, and KLA cannot guarantee those forward-looking statements will come true. Our actual results may differ significantly from those projected in our forward-looking statements. We will begin the call with Rick providing commentary on the business environment in our quarter, followed by Bren with financial highlights on our outlook. Now over to Rick.
Thanks, Kevin. KLA delivered strong results across the board for the March quarter with revenue of $3.415 billion, up 4% sequentially and 11% year-over-year driven by increased investment in leading-edge foundry logic and high bandwidth memory. Non-GAAP diluted EPS was $9.40 and GAAP diluted EPS was $9.12. We continue to see AI as a core driver of KLA's performance and an enabler for our growing momentum. Highlights in the quarter include KLA achieving the #1 position in process control for advanced wafer level packaging for 2025 due to continued customer adoption of KLA's packaging portfolio. We continue to see improving momentum in advanced packaging revenue growth and market share, and we now expect semiconductor process control product portfolio revenue for advanced packaging will grow from approximately $635 million in 2025 to approximately $1 billion in 2026, well above our prior estimates. KLA's service business was $775 million in the March quarter, up 16% year-over-year but down 1% sequentially due to the timing of revenue recognition. Consistent long-term growth in service is a key aspect of KLA's business model and delivers predictable cash flow to anchor our capital return strategy. Quarterly free cash flow was $622 million. Over the past 12 months, free cash flow was $4.0 billion, producing a free cash flow margin of 31%. Total capital returned in the March quarter was $875 million comprised of $626 million in share repurchases and $249 million in dividends. Total capital return over the past 12 months was $3.2 billion. Additionally, recently published industry research shows KLA increased its global share of both the overall wafer equipment and the process control market in 2025. This growing market leadership was highlighted by significant gains in advanced wafer-level packaging, where KLA increased its market share by 14 percentage points and achieved approximately 70% year-over-year revenue growth. KLA's market share also improved across basket inspection, optical pattern wafer inspection and electron beam inspection. Since 2021, KLA's process control share has grown by 360 basis points and is approximately 7x greater than the nearest competitor. Looking ahead to 2026 and 2027, our expectations for growth in the wafer equipment industry are accelerating. KLA's relevance has increased across all vectors of semiconductor manufacturing as process control enables a growing volume of design starts at the leading edge and supports the needs for increased performance and reliability in the production of high-bandwidth memory. It's important to distinguish that design activity and rising memory complexity are not the only catalyst driving benefits for KLA and process control. Faster product cycles, higher-value wafers and masks, rising design complexity and variability and the growing demand and complexity of advanced packaging all require significantly more process control solutions. These solutions shorten time to results by addressing process integration challenges in R&D and early fab ramp phases, while continuing to manage yield with strong design mix in high-volume manufacturing. Turning to services: as KLA systems become more technologically advanced and have longer service lifetimes in fabs, our service business continues to gain strategic importance, driven by rising customer expectations for tool performance and availability across all customer segments, creating a strong, predictable long-term tailwind for overall KLA revenue growth. KLA also recently held an Investor Day in March, detailing our position in the semi-sector market and our unique portfolio approach to solving customer process challenges and enhancing yield learning cycles within process control. We introduced new long-term revenue growth targets along with a 2030 financial model and increased our capital allocation to target over 90% of free cash flow. We also announced the 17th consecutive increase in our quarterly dividend level and an incremental $7 billion share repurchase authorization. KLA revised up its 13% to 17% revenue CAGR objective through 2030 reflecting strong growth across our key business segments and includes an increased long-term services revenue CAGR growth model of approximately 13% to 15%. Our long-term model assumes a baseline semiconductor industry growth CAGR of 11% from 2025 to 2030 and wafer equipment market growing 1% faster than the semiconductor industry to $215 billion, plus or minus $20 billion by 2030. Given the growing relevance of process control across all customer segments, we expect KLA to continue to outperform the wafer equipment market on the top line, driving operating leverage and continuing to deliver our best-in-class financial model. I'll close my remarks by saying that KLA's sustainable outperformance reinforces the strength of our leadership in process control. It also underscores the critical role KLA's suite of products and services play in enabling AI field growth in the semiconductor industry. Our consistent execution reflects the resilience of the KLA operating model, the talent of our global team and our disciplined approach to capital allocation focused on long-term investment and maximizing total shareholder value. With that, I'll turn the call over to Bren to discuss the quarter's financial highlights.
Thanks, Rick. KLA's March quarter results reflect strong year-over-year growth with an industry-leading margin profile, highlighting our market leadership, consistent execution and the dedication of our global teams in meeting customer commitments. Revenue was $3.415 billion, above the guidance midpoint of $3.35 billion. Non-GAAP diluted EPS was $9.40 and GAAP diluted EPS was $9.12, each above the midpoint of the respective guidance ranges. Gross margin was 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 were $670 million and included $389 million in R&D and $281 million in SG&A. Operating expenses were higher than expected, principally due to component materials timing and other reserve adjustments. Operating margin was 42.6%. Other income (expense) net was $9 million in income. The variance relative to guidance was due to a significant mark-to-market gain of a strategic supply investment. The quarterly effective tax rate was 15.4% versus the guided tax rate of 14.5% and non-GAAP earnings per share would have been $0.10 higher to $9.50. A breakdown of revenue by reportable segments and end markets, major products and regions can be found within the shareholder letter and slides. Moving to the balance sheet: KLA ended the quarter with $5.0 billion in total cash, cash equivalents and marketable securities and debt of $5.95 billion. The company has a flexible and attractive bond maturity profile supported by investment-grade ratings from all three major rating agencies. KLA generates consistent strong free cash flow, driven by our high-performing operating model. Over the past five calendar years, free cash flow has grown at approximately a 20% CAGR, above the revenue CAGR of 16% over the same period. This growth, coupled with resilience across business cycles, enables a comprehensive capital return strategy, featuring double-digit dividend growth and share repurchases to support long-term shareholder value creation. This strategy prioritizes predictable, assertive capital deployment and remains an important differentiator of the KLA investment thesis. Now turning to the industry outlook for 2026, which continues to strengthen across all segments. We expect the wafer equipment market, which includes advanced packaging, to exceed $140 billion in 2026. The strength of demand and customer engagement and ensuring KLA has the capacity to support numerous new fab projects currently under construction has led to unprecedented demand visibility from our customers. While normally, we would not comment on 2027 growth rates in April of 2026, this demand environment gives us confidence in 2027 visibility for the wafer equipment market. Today, we expect the 2027 year-over-year growth rate to be higher than our growth rate expectations for 2026. KLA has strong business momentum, expanding market share and higher process control intensity at the leading edge across all segments. Given all this, we are well positioned to continue to increase our share of the overall market in 2026 and 2027. The strong customer momentum that we are experiencing is reflected in our growing systems backlog and sales funnel. We continue to expect quarter-to-quarter revenue growth throughout 2026 and strong business momentum leading into 2027. For 2026, we expect sequential revenue growth for the company to accelerate, leading to high-teen revenue growth year-over-year in the semiconductor process control systems business to grow over 20%. KLA's June quarter guidance is for revenue of $3.575 billion, plus or minus $200 million. Foundry logic revenue from semiconductor customers is forecasted to increase to approximately 82% and memory is expected to be approximately 18% of semi process control systems revenue to semiconductor customers. In memory, DRAM is expected to account for roughly 84% with NAND accounting for the remaining 16%. As always, these business mix approximations pertain solely to our semiconductor customers and do not fully reflect our total semiconductor process control systems revenue. Gross margin for the quarter is forecasted to be 61.75% plus or minus 1 percentage point. Although volume levels are up quarter-to-quarter, product mix is modestly weaker than in the March quarter. As discussed last quarter, the guidance also includes the persistent impact of elevated DRAM ship costs for the company's image processing computers that ship with our systems, creating a headwind to the company's gross margins. While the memory pricing environment remains challenging in the near term, we have secured the required supply to meet our build plan requirements. Our view of elevated memory pricing persisting through at least calendar 2026 is unchanged. And we continue to see a roughly 100 basis point negative impact on our gross margin over the next several quarters. Considering this impact, the tariff environment, along with product mix and volume expectations, our view of gross margins remains unchanged at approximately 62%, plus or minus 50 basis points in calendar 2026. Operating expenses are forecasted to be approximately $665 million in the June quarter. For 2026, we will continue to prioritize next-generation product development and company infrastructure investments to support expected revenue growth over the next several years, and we anticipate these expenses to grow by roughly $15 million sequentially throughout the calendar year. Our business model is designed to deliver 40% to 50% incremental operating margin leverage on revenue growth over the long run. Other model assumptions include other income and expense net of an approximately $25 million expense for the June quarter, and we expect it to remain at approximately this quarterly level for the calendar year. The planning tax rate is 14.5%. As always, we expect some quarter-to-quarter tax rate variance due to discrete items as we move throughout the year. In the June quarter, non-GAAP diluted EPS is expected to be $9.87, plus or minus $1, and GAAP diluted EPS is expected to be $9.66, plus or minus $1. EPS guidance is based on a fully diluted share count of approximately 131.4 million shares. In conclusion, our near-term revenue guidance reflects consistent growth and strong profitability. We expect our semiconductor process control systems business to outperform the wafer equipment market in 2026 driven by rising process control intensity and growth in advanced packaging. KLA continues to focus on delivering a differentiated product portfolio that supports customer technology road maps and production efficiency, driving our long-term relevance and growth expectations. Our operating model drives our best-in-class execution. Our focus on customer success, innovative solutions and operational excellence enables industry-leading financial performance and consistent predictable capital returns. As we detailed at our March Investor Day, KLA's business is uniquely positioned to capitalize on today's technology inflection points and growth drivers. We are encouraged by strengthening customer confidence and engagement, which informs our business forecast. The long-term secular trends driving semiconductor industry demand and investments in wafer equipment are compelling and represent a relative performance opportunity for KLA over the next several years. KLA's business has gone from being primarily indexed to leading-edge R&D investment and fab capacity ramps to now addressing all fab phases in wafer equipment enabling leading-edge process development, time to results in fab capacity ramps and optimizing yield in a high-volume manufacturing environment. In addition, the growing investment in custom silicon, particularly among hyperscalers developing their own custom chips, has led to a proliferation of new higher-value design starts and increased demand on our customers to deliver performance, volume and time to market. As design mix and complexity grows, so does the need for process control. As a result, KLA has seen consistent growth in process control intensity as each new chip design requires rigorous inspection, metrology and yield optimization solutions. KLA is uniquely positioned to benefit from these trends as we expand our market leadership and deliver differentiated value to our customers. That concludes our prepared remarks. Kevin, please begin the Q&A.
Thank you, Bren. Operator, can you please provide instructions and then begin the Q&A session.
分析師問答
Operator provides instructions on how to ask questions. We'll now take our first question from C.J. Muse with Cantor Fitzgerald.
I guess first question I would love to dig a little bit deeper in terms of your extended lead times and visibility into '27. Can you kind of speak to where in the portfolio, kind of what end markets and how you kind of see that progressing into perhaps soon having visibility into 2028.
Yes, CJ, thanks for the question. It's really broad-based. Certainly, we're seeing backlogs build. And so order flow is very high. Customer engagement as we talk about slot planning into next year is also very strong. So I think when you take that, couple it with now we're working really hard here to make sure that we can enable the capacity to meet our customer timelines. But most of our focus and discussion is on how do we address the opportunities in '27 — lots of new greenfield opportunities. So I think customers want to make sure that they're in the queue to align with their construction schedules. And I think it's pretty broad-based across our product portfolio. Certainly, most of it is more leading-edge centric. So it's the most advanced products in the product families.
Yes. Just to build on that, CJ, the conversations I've had with customers in the last few months, there's a higher level of urgency around securing capacity for our customers that I remember seeing. And I think it's indicative and speaks to the demand that they're feeling from their customers. And so there's a huge amount of interest and push to make sure that they can get slots assigned. And I think the other realization they all have is that they're not alone in doing this. So the whole industry is trying to support that growth as we go forward. So there's no question '27 is going to be a massive buildup.
Perfect. And maybe as a quick follow-up. I guess as you think about the sequential going to the high teens in the second half, should we be thinking about kind of $49 billion, $15 billion as the right framework for calendar 2016 revenues?
Yes, I think so. If you just take the commentary, getting the high teens, it gets you into the 15-ish range — and I think when you look at the second half and we'll call it 15% to 20% type second-half sequential growth or growth over the first half, it puts you up into that ballpark. I think you're thinking about it the right way.
We'll move on now to Stacy Rasgon with Bernstein Research.
At the Analyst Day, you talked about a 2030 model, which had a $250 million W&C and like $1.4 billion in semis and I mean it's looking increasingly likely that we might get to those kinds of levels like this year or next year. I guess maybe you could talk a little bit more about the underlying assumptions for that long-term model? And maybe it's a little craft asset, like why isn't it higher, given where we're sitting right now and what you guys are seeing?
Great question. I think a couple of things are driving the increased revenue. And I think the number you're referring to that might be closer to what we talked about for 2030 is the semi revenue number, not the equipment number. And the reason the semi revenue is going higher, faster is pricing. And so there's been more elasticity, especially around memory and that pricing that's driven that number up. So when we talk about 2030, we talk about a normalized level of capital intensity associated with the revenue that we said would be in the range of $1.3 billion to $1.5 billion. If we had to redo that today, there are a lot of reasons why you'd push that up from that — as you know, that was six weeks ago. So things have changed. But I think the numbers around equipment haven't moved nearly as fast as the numbers around semi revenue associated with pricing. Does that help?
Yes, that actually does help. And I guess just for a quick follow-up. There's been some news flow — apologize if you maybe mentioned this on the call or not, but there's a new law about bands for a Huahong. And I guess, is there any implication of that on you? And just, I guess, how are you thinking overall about the kind of trajectory as you go forward from yours, has your thinking there changed at all?
So we got the letter. I'm not going to say too much about it other than we're still looking at it. The impact on the company in terms of our Q2 guidance and the commentary around 2026, I would say, is fairly immaterial. It's focused on not all affiliated fabs. So the impact, I would say, is fairly immaterial and contemplated in the guidance we provided.
Broader thoughts on China: I think when you look at China overall, it's playing out more or less consistent with the way we've talked about it. I think if you look at overall spending in China, it's more or less flat, maybe a little bit up — has been fairly flat in terms of spending levels over the last few years. And so what's driving our business is what's happening at the leading edge. I would expect that the China growth rate is probably lower than where the overall WFE growth rate is projected to be here moving forward.
We'll move next to Harlan Sur with JPMorgan.
On your 2026 WFE outlook now $140 billion plus of kind of high-teens percentage type of growth outlook. On the incremental upside this year, is it being driven by new brick-and-mortar sort of greenfield programs being pulled forward or are customers just accelerating technology migrations on existing capacity or maybe focusing on improving yields on existing capacity? Any color there? And then on the '27, now you are saying WFE will go faster than '26 versus your prior view of in line or better. Looking at your order book, is that a continuation of the broad-based spending growth across segments, foundry, logic, memory advanced packaging? Or is there a particular segment that is driving the strong growth? Any color there would be helpful as well.
Yes. So I think around the baseline view, just the urgency from customers to take slots or take deliveries — as we have moved here into better visibility into the second half, we're seeing nothing more than just general urgency across different segments with our customer base. And that caused us to increment the views of industry growth upwards. If you look at 2027, obviously, you've got a lot of new fab projects out of greenfield activity, both on the logic side and memory. I think you'll also see some greenfield activity in flash. And packaging plays a role also. So I think it's really pretty broad-based across all our different customer segments.
I appreciate that. And then your services business grew 15% last year with an exit run rate of about 18%. That strong growth carried into the March quarter with 16% year-over-year growth. You guys just outlined the long-term CAGR at Investor Day of 13% to 15% growth rate. In the current environment, just given the very high customer utilization for advanced services offerings, obviously lots of focus on driving as much output and yield per fab as possible. How should we think about the services growth profile this year?
I think the service will be in the range as we move across this year. Obviously, a lot of the shipments that we're shipping this year will start to flow into service as you move into next year and beyond. So I think that's an accelerant to, we'll call it, higher-end-of-the-range growth opportunities as we move over the next couple of years. But more or less, we're trending in services in line with the target range. We would expect to be within it.
We'll move on to Krish Sanker with TD Cowen.
The first one, I think, Rick or Bren, I think the visibility angle was pretty interesting. How much of that is really driven by true demand? Like the customers doing buildouts maybe in '28 versus trying to ensure that you have enough capacity or even personnel who needs to be trained and service the tools. So how much do you think — how much of that do you think is actually true demand versus setting you up for what could be potential demand? Then I have a follow-up.
I'm sorry, it's a little hard to hear. So the question is — is the demand real? Is that the question? Or do we think we're getting orders in anticipation of shortages?
No, no, I was just wondering how much of it is actually true demand versus customers making sure that there's enough capacity and service personnel, et cetera, people looking like buildouts, et cetera.
Well look, I think our customers, given they're going to — these are significant investments, they're going to open these fabs. I mean part of the discussions are not only around tools and tool delivery timing, but also our support resources, our installation resources, applications, which are people that are out there working with our customers to drive value out of the tools, and that the service teams are there to support. So it's really across the company that we're in position to support what they expect to be a pretty significant ramp in terms of business activities as those fabs come up to higher levels of productivity.
Got it. And then a quick follow-up. It seems like some of the incremental WFE demand this year is coming from the CPU titles. But like Intel last week spoke about incremental capacity coming from Intel 3 and Intel 7, which are prior nodes where I believe the initiatives are already being solved. So will the incremental CPU demand actually benefit KLA or not as much?
Certainly, it's something we've talked about over the last year — that we're encouraged by the broadening of investment at the leading edge. And so that has been, I think, good for KLA. Our collaboration levels are very high with our customers. And so if you look at what we're — the easiest way to drive efficiency out of the existing installed bases is to drive yield. And so that plays to KLA's ability to help drive learning cycles and drive yield in a high-volume manufacturing environment. So I think we're well positioned. We're encouraged by the engagement levels really across the installed base and the broader participation. I think that lends itself to a pretty robust leading-edge environment as we go forward.
We'll move on now to Joe Quatrochi with Wells Fargo.
Yes. Maybe just a follow-up on that. I guess, like when we think about your customers trying to obviously drive higher yield to drive higher output, is that a bigger driver for potential incremental process control system sales for you? Or is it largely flowing through the service line?
Well, it absolutely drives process control sales. It drives both, but the process control, especially if they're dealing with fabs that are already up but don't have a particularly high yield and if they've changed die size — so that's the challenge, I think, that they're dealing with when they're trying to put out more capability to support AI. And I think that's a different factor that's driving a lot of the activity around process control. And you even heard — I mean, Intel was public about increasing their metrology usage as you heard on their call. So we're definitely seeing, in general, because there's a shortage in the industry, the easiest lever anyone can use is to get more yield out of the existing capacity that they have. Even the leaders have gone back to prior nodes and added process control because they recognize that's a faster way to get more — that's far less true in historical cycles when they're meeting demand. So once you see utilizations go way up on leading edge, the only lever you have left is you can build new fabs. But the thing you can do before that is try to squeeze out more yield. I think one of the other benefits we see is just the product types change that our customers are shipping serving different parts of the market, and the need for different capability arises — it might be different than how they originally set up the fab to run a different type of parts or different mix of parts. So that tends to create opportunities for us because new and different capabilities are required to support different higher-performance compute markets, for example.
That's very helpful. Maybe as a follow-up, I was wondering if you could maybe talk about your own lead times and just kind of thinking about your own supply chain and kind of I think last quarter, you talked about maybe things being tight from a component standpoint in the first half of this year, I mean really opening up in the second half. And obviously, you've increased your WFE guidance now a couple of times. Just how do we think about KLA's capacity to support this ramp as we continue to increase into 2027?
So thanks, Joe. I think the thing that surprised us was the slope and duration of how quickly the business started to ramp into the first half. And so that did put some constraints on our ability to scale from an overall supply chain capacity point of view in the first half of 2026. As we move into 2027 and some of the context we provided and some of my comments earlier around growth rate in the second half, I think we're much better positioned to support this ramp and support customer requirements. And as we look at 2027, as I said earlier, our focus has been really to ensure that we have the capacity to support the different forecasts that are out there. So we feel pretty comfortable about the guidance we gave today and our ability to support that and then some. We always try to think about all the conceivable opportunities as we plan along our supply chain. And so there's a tremendous amount of focus across the company to ensure that we have that capacity to support what looks to be a very strong environment next year. And then as we said earlier, we're hiring a lot too. We need to make sure we've got our installation resources and service resources to be able to support the tools after we ship them.
Joe, the folks in our operations and service teams know that we're matching the urgency in providing capability to our customers that our customers are sharing with us. So this is a time — like I said, I've not seen this before, but there's such broad demand at record speed. So we're working very hard to support that. Historically, we've always done it, but it's going to take a lot of work.
We'll move on now to Timothy Arcuri with UBS.
Bren, I just wanted to come back to this idea that you're outgrowing WFE this year. You're guiding up sort of high teens. I think the general consensus among all the other companies is that WFE is growing like mid-20s. So is it that you just think that WFE growth is too high, maybe your baseline for WFE last year is more like 120 or something. So actually, you don't think there'll be even high teens. Is that — is that how you get to the concept that you're going to outgrow this year?
Well, yes, I think you're right. I think the baseline is about $120 billion, and that aligns with where the various third parties are. And if you do kind of a consensus view of all the different forecasts that are out there, you end up somewhere more or less in that ballpark in terms of where 2025 growth rates were. And if you look at the different relative performance of the different players, it does imply that 2025 was a pretty good year, greater than 10% growth. So from a baseline point of view, we see it at about $120 billion, growing to about $140 billion plus, as we said, which translates into this call it mid- to high-teen growth rate. If you look at the semi process control systems business, as I said in the prepared remarks, we expect our systems business to grow in excess of 20%. So that aligns with our view of growth. As we talked about at Investor Day, we spent a lot of time trying to explain how we're defining the market. Everybody, of course, defines it in different ways. But we believe that the approach that we've taken lines up with third parties. I think there's a lot of opportunity out there that starts to span not just traditional WFE, but also advanced packaging parts of the market. And as we've seen our revenue inflect in that part of the market, we think it's appropriate — if you're going to measure yourself on share of market that you get the numerator, but you also get the denominator, right? So that's how we see it, and that's what informs the forecast that we have here.
Okay. Got it. And then I guess just, Rick, I wanted to ask you about the pushout of High-NA. And just like what the puts and takes are for you? I mean, I can see on one hand, you've got like 25% to 30% direct attached to litho. So maybe that's a bad thing that is pushing up. But on the other hand, there's going to be some other process things that get more complex and things like that, which obviously would actually help you. So how do you weigh those puts and takes?
Thanks, Tim. There's no change in the High-NA forecast from everything that we've modeled. It's exactly what we've modeled and started talking about a couple of years ago. So in that sense, this is what we're talking about when we put out the 2030 plan. However, High-NA has puts and takes, as you say. Ultimately, it's going to be better if people are printing smaller geometries and the defectivity challenges are going to be greater. But it's also the case that that's not going to happen until the economics support it. So I'd say for us, it's a push. It's going to happen; it's going to extend the timeline for which people could keep getting benefit out of existing litho. That's good for the industry. But it is in our model. So there was no change from our expectations.
Tim, I think the attach rate to litho historically when scaling was driving the innovation in the process road map, that was more true than it is today. Today, you have architecture changes, you have the nature of a high-mix design environment. We talked a lot about larger die and what that means in terms of defect density, the value of that die and how that translates to how much you're willing to invest to ensure that those die are good and are performing at spec. Process and performance requirements are much more significant. So there's a lot of drivers there for process control that's beyond just traditional litho scaling. If you look — we need a lot to drive the scaling road map, as Rick said, it's important. It's good for the industry, but it's not the only factor that drives process control intensity. The 2-nanometer node has higher intensity than the 3-nanometer node and the amount of EUV layers hasn't changed all that much from node to node. So I think that gives you an indication that it's not the only factor that influences how customers invest in our products.
We'll move on now to Jim Schneider with Goldman Sachs.
I was wondering if you could maybe address your expectation for the advanced packaging market and your revenue growth there in calendar '26. And maybe just kind of talk about how that's likely to kind of filter as we go throughout the year.
Yes. It's a pretty exciting part of our story. Of course, we spent a lot of time talking about how that market has moved to the need for more front-end-like requirements and how well the KLA portfolio is positioned here. We talked about it exceeding somewhere in the range of $1 billion in business in advanced packaging for our process control business this year, growing from about $635 million in 2025. One of the great things that we're starting to see also is as the packaging market has evolved and more nanometer-level inspection is required, there's a need for more precision and more capability from the tool set. So as we look at 2026, we're actually seeing meaningful revenue increases across some of our more advanced systems as we talked about that that was going to come, and we're starting to see that both in terms of front-end-like packaging, but also emerging 2.5D packaging as 2.5D is happening, driving hybrid volume requirements and so on. So we're pretty excited about the growth in that part of the market for us. It's likely one of the top growing markets certainly in overall packaging, and we expect it to continue to grow into next year.
And I was wondering if you could maybe provide a little bit of color — given your extended order book and higher visibility, can you see your way clear to a point in time in the future where you would expect the process control intensity to really step up and start to materially outgrow the overall WFE envelope you're forecasting?
Well, the last five years, we gained roughly 160 basis points of share, and that translated into about a 6.5% growth rate for KLA above the market baseline. If you go back to what we talked about at Investor Day, we thought that we could gain another 150 basis points plus share of the overall wafer equipment market, and that translates into about a 4.5% growth advantage for the company over the market baseline of WFE growth of 12%. So these are small increases, but on a pretty big base, and it translates into meaningful CAGR upside relative to the overall market. And that's our plan that then feeds into our $26 billion target for 2030.
We'll move on next to Charles Shi with Needham.
I have a question around some technology in metrology. There is a lot of discussion around x-ray versus optical for CD measurement in the front end, say in defect detection, those kinds of other stuff in hybrid bonding type of advanced packaging. And Rick, I'm sure you're familiar with all of this discussion around the debate around optical versus e-beam DUV versus actinic. I think you've said that when you can use optical, customers will stay with the optical, but is this new debate around metrology, x-ray versus optical, would you have the same view, maybe optical eventually wins or do you have some other starts? I understand you do have X-ray tools, but I want to get your thoughts.
I think that the history of inspection and measurement in the industry is you move to the highest capability tool that can do the job, and then you go to the cost-of-ownership play. So whatever can do the job most efficiently. And we talked about the rollout, for example, in our wafer inspection portfolio where you might use e-beam during characterization along with high-end optical. But then if you can possibly go to higher throughput, lower cost, you do. The case of X-ray is interesting because in some ways, when we introduced Axion a few years ago, that was a product that was really solving a problem that could only be solved in failure analysis. And the challenge with that was getting the technology to work, getting adoption and getting proof of concept with enough players that they would make the change. We've done that, but it took quite a while because the industry is remarkably aggressive in new technology development, but slow in making changes in manufacturing except for when it has to. So I think the question is, is there a capability that you can use and can you drive more with x-ray and can you do it? The answer is you might be able to do it, but the question is, is it something you can do in production? You can do it to debug the process. Even with e-beam, what we're seeing now with our portfolio is we might use our e-beam system coupled with our inspection system to tune that inspection system, but offload as much as we can to higher throughput. So I think there's a scenario in which you see that that's what happens with X-ray as well. You want to have the capability, but the problem is always eventually the cost. And if it's something that is so out of control that the only way you can do it is with massive amounts of very expensive inspection and metrology, you are not going to do it, and you're going to figure out another process. So I think the answer is yes, there's a lot of work going on, and there are people that are really focused on getting something to work, but that's different than what they'll use in volume production. As a company, we've always focused on the difference between the characterization, development phase and what you can pan out. So when we laid out our 2030 plan, we obviously work very closely with our customers on their packaging road maps and what we anticipated was having capability across our portfolio to solve all the needs they have, including in their development phase. So I don't think you're going to see a quick adoption of X-ray anytime soon. Those of us who have been around a while remember there was an x-ray lithography company 30 years ago. So it's not a new idea to leverage x-rays, it's the cost and throughput that are really challenging. I hope that helps.
And just to build on that, the market size, most of the adoption has been in memory. The market size today is roughly, I'll call it, $75 million to $100 million. And I'd say we have probably about, call it, 60% share of the overall market. I think as adoption starts to increase as maybe more production opportunities become available, you could see that moving up into the $150 million range over the next few years. But the challenges of the productivity of the tool and how that then translates into volume production, as Rick said, have been the biggest challenge, and I think have affected the pace of adoption for that technology.
Maybe a quicker one as a second question. You gave that advanced packaging revenue outlook from $635 million to $1 billion. But if I recall correctly, one quarter ago, you were basically calling advanced packaging probably a much lower growth. It feels like that was a significant upward revision to advanced packaging revenue outlook. May I ask what was the big upward revision about? I mean, it happened just over the last 60 to 90 days — what's changed from a quarter ago?
So a quarter ago, we thought the overall growth rate in process control for advanced packaging was somewhere in excess of 30%. Obviously, if you do the math on the numbers we've talked about, we're now in the upper 50% range in terms of growth. There's clearly been — and one thing about packaging is it's generally a shorter lead-time business. And there's clearly been momentum from a number of customers for additional capacity this year. We didn't have the visibility to it going into this calendar year, and we see it growing more. I think it's going to be a bit more of a second-half dynamic in terms of half-to-half growth. But it has absolutely picked up over the last 90 days or so. I think competitive positioning and the need for more capability, as I talked about earlier, are big drivers. So semiconductor process control for advanced packaging growing to roughly $1 billion up from about $635 million translates into the high-50% range.
We'll move on now to Srini Pajjuri with RBC Capital Markets.
I have a clarification — sorry, I've been jumping between calls here. It looks like you're raising the WFE number to about $140 billion versus $135 to $140 billion at the Analyst Day. But at the same time, your annual guidance, revenue guidance is still for high teens. I understand high teens can mean a lot of things. Just trying to see if I'm reading that correctly, if you can kind of give me some additional color on that number.
Yes. I think that we're talking about a pretty small adjustment from where we were about six weeks ago, but we think it's $140 billion plus and I think that, as I said, I'm pretty comfortable with the guidance that we provided. I would say it probably translates into consistent with the stronger view of the industry that translates into probably a little bit stronger view of 2026 for KLA than we thought six weeks ago. But we've got nine months to go here, and we have a number of opportunities to provide an update to that forecast. So we're pretty excited, and we'll see how the second half plays out in terms of opportunities to reduce the risk and increase our views of performance here for the year. But I think that's as good as we can do for now.
Yes, that's fair enough. And then on 2027, just a few clarifications, Bren. So you're obviously guiding for high teens or better. It seems like — I'm assuming WFE is at least growing in one or maybe you continue to outperform WFE as you've been doing over the past few years. Just trying to understand the moving pieces there. I know you said it's fairly broad-based, but can you maybe parse it out by end market, memory versus logic, what you're seeing also. What's your base case assumption for China WFE from next year?
Yes. So I think that if you look at the greenfield opportunities, which I think is more for DRAM but also in the flash market, memory is probably a few percent higher than this year. So this year, memory is about, we'll call it, roughly 38% of spend and logic around 62% for process control spend. I think it's probably closer to a little more memory focus into next year. I don't want to quantify it too precisely here. I don't think much has changed on our view on China — in terms of how we're modeling it, our general view on China is that it grows at a slower rate than overall WFE. And we haven't seen it change much at least in terms of KLA's business levels over the last couple of years. So I would say you'll see us more along those lines. Now it's more greenfield, less around technology upgrades. And so that drives a different dynamic. And with the rising process control intensity that we're seeing in memory, we feel very good about how well we're positioned for that activity into next year. Logic foundry continues to be very broad-based. Legacy is pretty weak this year, so I would think legacy probably has some upside into next year, but I don't want to quantify it yet.
We'll move next to Shane Brett with Morgan Stanley.
My first question is on margin. I want to assume that your customers are likely fighting for KLA shipment slots at the moment. Just how should we think about your ability to take advantage of this demand via margin? I'm especially curious in the context of your memory customers, given you have seen a gross margin headwind due to higher DRAM pricing, but shouldn't we be able to pass this cost on earlier than the historical one-year pricing pass-through cycle?
Shane, we don't price based on scarcity at KLA — our pricing is based on cost-of-ownership improvements from one generation to the next. We're pretty disciplined about that, and that translates into meeting our customers' view of incremental performance and incremental cost-of-ownership improvement. If you start to price based on scarcity, I would expect that your customers would want symmetry with that. That's not how we think about it. At KLA, it's much more about the value that we offer, value-based pricing and how we're able from product type to product type to deliver new capability at better cost of ownership to our customers. So I think we do a pretty good job around that at KLA. The memory headwind is something we think ultimately will normalize out in the future. I don't think it's going to be gone soon, but we feel pretty good about the supply that we have to be able to support the growth outlook we've talked about. And as I talked about at Investor Day, our new product introduction cadence is very important because it allows us to introduce new products, rethink how we're pricing that incremental value and how we share it with customers. So I think we feel pretty good about how we're positioned. And the last thing you're going to do is go to a customer in the middle of a transaction or middle of a buy and change pricing — it doesn't work that way. So I think we're pretty good and feel confident.
Got it. That's very clear. And for my follow-up, this is more of a clarification on advanced packaging. So I understand you see your business growing over 50% in packaging. But your process peers are now also talking about 50% plus growth. Correct me if I'm wrong, but does that mean that relative to your initial packaging guide of approximately $12 billion that you disclosed in late January, we should be looking at closer to $13 billion or $14 billion for this year?
Shane, we're growing in the high-50% range for advanced packaging process control as we said in the prepared remarks and the shareholder letter. The overall packaging market we think is growing to roughly about $13 billion, which is approximately 30% growth in the overall market from 2025. Our process control revenue is outgrowing that given the intensity and the types of tools required.
We'll move on now to Edward Yang with Oppenheimer.
Just following up on DRAM and the gross margin headwind. You mentioned having procured enough chips now. Is that through calendar year 2026 or possibly longer?
Longer. I feel very good about our supply situation going into to support our build plans through next year.
Great. And second question is on AI CapEx assumptions. A couple of hyperscalers reported tonight as well and some came in a little light on CapEx. Microsoft and Google were a bit lower for the quarter, Meta and Amazon were a bit higher. Given sporadic market concerns around data center CapEx durability, can you bridge your updated 2026 WFE view of greater than $140 billion and your expectation of growth in 2027 to the underlying AI infrastructure assumptions? Put differently, what level of hyperscaler end-customer AI CapEx would effectively be required to support the WFE forecast?
When we talk — I've had these conversations with customers recently about what their expected demand is and what kind of capacity they are bringing online. Within the last two weeks, I've had those conversations both on the foundry side and on the memory side. There's still — with all these very aggressive plans through 2026 and 2027 — they are not going to close the gap, and in some cases the gap has expanded from where it was a few months ago because of the demand. So this equilibrium between what the hyperscaler CapEx you all report and the notion that you can draw a straight line to WFE, you can't, because we're way underserving that demand. Our contention has been for quite a while that there's not enough silicon to be able to support the plans that people have. And so the WFE is literally just as fast as we can go as an industry. That's what we're seeing when we talk to our customers and their plans for build-out in 2027. The reason 2026 isn't bigger is because they can't build enough fast enough. To take the extreme, as some executives said publicly, there's going to be a massive shortage of semiconductor capacity through 2030. So nothing about the short term — that confuses a lot of people. What is talked about short term in terms of hyperscaler CapEx and the buffer between that and what's happening in terms of the ability of the industry to bring on all that capacity: there's a massive assumption in there that this thing is even close to filling that capacity and it's not.
We'll take our last question from Chris Caso with Wolfe Research.
Just as a follow-on to the prior question. It certainly sounds like demand is well ahead of the industry's ability to supply. Does that cap the amount that KLA can ship to customers and that the customers have clean room space to be able to put tools right now? I mean you talked about perhaps the opportunity to increase the view as the year goes on, but are we sort of towards the upper limits of what can be supplied in 2026 and we're just going to have to supply it in 2027 and 2028?
Yes, I think so. The way to think about this is we are an ecosystem, and it takes all the parts of the ecosystem to make it happen. When you look at constraints or limits, the first constraint is how many fabs do you have? How many shelves can you fill? Then you have to have enough equipment from all the different suppliers to be able to make a functioning line. So in many ways this is why we talk about the overall investment in the industry — you have to think about it in aggregate because let's say we could infinitely ship — there'd be nowhere to send it because you'd be sending it to fabs that haven't been built yet. That's why we look very closely at what the overall industry is doing, what our customers are doing. When we say you can get a marginal increase in 2026 to the numbers we're talking about, you can't go from $140 billion to $200 billion in 2026. There's only so much you can add in 2027 and those fabs have to be built now. When our customers say it's just not easy, it's because it takes a long time to build fabs and then to get the equipment and validate the lines. Even the fastest-build regions have big plans for expansion next year and they're still going to be short by the end of next year. That's how the whole system is working. So when we give our guidance for the year, it's what we can do, but it's also collectively what the industry can do. Does that make sense?
Yes, it does. That's clear. So the last question, I have something more mundane on gross margins for the year. I think you indicated you're kind of sticking with a view of 62% for the year. Can you talk about the pluses and minuses on that? I know you had some mix headwinds earlier, and there's some cost increases. So what should we be watching for on the gross margins this year?
Pretty consistent guidance with what we had last quarter. I would say the memory pricing environment is on the margin worse. I thought that the headwind was 75 to 100 basis points. I think it's 100 basis points now. Part of that has been the relative pricing on DDR4 versus DDR5, where pricing dynamics vary by type of memory. You still have tariff dynamics. I would expect as we move through the year, the tariff headwind that we have at KLA will become less, but it's still meaningful, I'll call it. I talked about 50 to 100 basis points of overall impact. I said we're operating at the middle to higher end of that range today, but would expect that to come down to the lower end of the range as we go through the year with some of the things we're doing operationally. Overall mix is generally pretty consistent with how we thought about it. So like anything else, there's always puts and takes. But in general, we said 62% plus or minus 50 basis points, and we still feel that that's an appropriate way to think about the company at the revenue guidance that we provided for the year.
Thank you, Chris, and thank you, everybody, for tuning in. We appreciate your support. Apologies for those that weren't able to get a question on this call. We will catch up offline. And with that, I'll turn the call back to the operator to provide any closing remarks.
Thank you. This concludes the KLA Corporation March Quarter 2026 Earnings Call and Webcast. Please disconnect your line at this time, and have a wonderful day.