Financial Performance - Total revenues for the three months ended September 30, 2025, were $3,209.7 million, an increase from $2,841.5 million in the same period of 2024, representing a year-over-year growth of approximately 12.9%[157] - Net income for the three months ended September 30, 2025, was $1,121.0 million, up from $945.9 million in the same period of 2024, reflecting a year-over-year increase of approximately 18.5%[157] - Income before income taxes for the three months ended September 30, 2025, was $1.31 billion, an increase from $1.08 billion in the same period of 2024[182] - Provision for income taxes increased to $188.4 million in Q3 2025 from $132.8 million in Q3 2024, resulting in an effective tax rate of 14.4%, up from 12.3%[182] Revenue Breakdown - The services business accounted for approximately 23% of total revenues in the first quarter of fiscal 2026, driven largely by recurring "subscription-like" contracts[152] - Product revenues rose by 12% to $2,465,006,000, while service revenues increased by 16% to $744,690,000 during the same period[164] - Semiconductor Process Control segment revenues accounted for approximately 90% of total company revenue, increasing by 13% to $2,899,392,000[168] - PCB and Component Inspection segment revenues surged by 37% to $189,488,000, driven by advanced packaging products related to AI[168] - Revenues from Taiwan skyrocketed by 72% to $793,608,000, increasing its share of total revenues from 16.3% to 24.7%[170] Cost and Expenses - Gross margin for the three months ended September 30, 2025, was 61.3%, compared to 59.6% for the same period in 2024, indicating an improvement of 1.7 percentage points[157] - R&D expenses rose by 12% to $360,461,000, primarily due to increased employee-related expenses and engineering project material costs[174] - SG&A expenses increased by 7% to $268,988,000, with notable rises in supplies, facilities-related expenses, and depreciation[176] - Interest expense decreased by 14% to $71,075,000, attributed to reduced interest following a $750 million debt repayment[179] - Other expense (income), net showed a net fair value gain of $8.7 million, influenced by favorable foreign exchange fluctuations[181] Cash Flow and Capital Management - Cash, cash equivalents, and marketable securities totaled $4.68 billion as of September 30, 2025, compared to $4.49 billion as of June 30, 2025[186] - Net cash provided by operating activities was $1.16 billion for Q3 2025, up from $995.2 million in Q3 2024, driven by higher customer collections[187] - Net cash used in investing activities increased to $410.0 million in Q3 2025 from $171.0 million in Q3 2024, primarily due to higher net purchases of available-for-sale securities[188] - Net cash used in financing activities was $881.8 million in Q3 2025, compared to $837.7 million in Q3 2024, largely due to increased dividend payments[189] - Working capital increased to $6.85 billion as of September 30, 2025, up by $238.2 million from $6.61 billion as of June 30, 2025[198] Shareholder Returns - The company repurchased $545.1 million in shares and paid $254.0 million in dividends during the three months ended September 30, 2025, marking the 16th consecutive annual dividend increase[160] - The company declared a quarterly cash dividend of $1.90 per share in Q3 2025, up from $1.45 per share in the same period of 2024, totaling $254.0 million in dividends paid[191] Market and Industry Trends - The semiconductor industry is experiencing significant growth driven by high-performance computing and data centers, particularly due to the adoption of AI technologies[154] - Future growth is expected to be supported by increasing complexity and value of semiconductor packages, particularly for AI and high-performance computing applications[154] - Geopolitical factors, including government regulations and tariffs, have adversely impacted the company's results, but gross margin and overall financial performance improved in the three months ended September 30, 2025, compared to the same period in 2024[155] Company Structure - The company is organized into three reportable segments: Semiconductor Process Control, Specialty Semiconductor Process, and PCB and Component Inspection, each contributing to its diverse revenue streams[159] - As of September 30, 2025, the company had senior unsecured notes totaling $5.95 billion, with due dates ranging from fiscal 2029 through fiscal 2063[192] - The company maintained a credit rating of A from Fitch and S&P, and A2 from Moody's as of September 30, 2025, reflecting stable financial performance[199]

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Core Insights - KLA Corporation (KLAC) reported first-quarter fiscal 2026 non-GAAP earnings of $8.81 per share, exceeding the Zacks Consensus Estimate by 3.04% and reflecting a year-over-year increase of 20.2% [1][8] - Revenues rose 13% year over year to $3.21 billion, surpassing the Zacks Consensus Estimate by 1.72% [1][8] Segment Performance - Semiconductor Process Control revenues, which account for 90.3% of total revenues, increased 12.6% year over year to $2.89 billion, with Foundry & Logic contributing approximately 74% and Memory 26% [2] - Specialty Semiconductor Process revenues decreased 6.7% year over year to $119.8 million, representing 3.7% of total revenues [2] - PCB and Component Inspection revenues increased 37.3% year over year to $189.5 million, making up 5.9% of total revenues [3] Revenue Breakdown - Product revenues, accounting for 76.8% of total revenues, rose 12.2% year over year to $2.46 billion, while service revenues increased 15.6% year over year to $744.7 million [4] - Wafer Inspection revenues increased 12% year over year to $1.53 billion, while Patterning revenues rose 16% year over year to $668 million [5] Geographic Revenue Distribution - Taiwan and China were the leading contributors to revenue, accounting for 25% and 39% respectively, followed by Korea, Japan, and North America each at 9% [5] Operating Metrics - The non-GAAP gross margin for the first quarter was 62.5%, exceeding the guidance midpoint [6][8] - R&D expenses increased 11.5% year over year to $360.5 million, while SG&A expenses rose 7.1% year over year to $269 million [6][7] Financial Position - As of September 30, 2025, cash, cash equivalents, and marketable securities totaled $4.68 billion, with long-term debt remaining at $5.88 billion [9] - Cash flow from operating activities was $1.16 billion, with free cash flow at $1.07 billion for the quarter [9] Shareholder Returns - KLA repurchased $545 million worth of shares and paid $254 million in dividends during the first quarter [10] Future Guidance - For the second quarter of fiscal 2026, KLA expects revenues of $3.225 billion, with non-GAAP earnings projected at $8.70 per share [11]

Group 1 - US stock index futures experienced slight declines, with Nasdaq futures down 0.35%, S&P 500 futures down 0.24%, and Dow futures down 0.33% [1] - Major European indices collectively fell, with Germany's DAX down 0.15%, UK's FTSE 100 down 0.61%, France's CAC down 0.91%, and the Euro Stoxx 50 down 0.52% [1] - OpenAI is reportedly planning to apply for an IPO as early as 2026, with a potential valuation of up to $1 trillion [1] - Alphabet, Google's parent company, reported record Q3 revenue of $102.3 billion, with a 34% year-over-year increase in cloud computing revenue [1] - Microsoft reported Q1 FY2026 revenue of $77.67 billion and earnings per share of $3.72, both exceeding expectations; however, Azure and other cloud revenue fell short of buyer expectations [1] - Meta's Q3 revenue was $51.2 billion, with net profit declining to $2.7 billion due to one-time tax expenses; the company raised its full-year capital expenditure guidance [1] Group 2 - Eli Lilly reported a 54% year-over-year revenue increase to $17.6 billion in Q3, raising its full-year revenue forecast [2] - Merck's Q3 sales reached $17.28 billion, with adjusted earnings per share of $2.58, both exceeding expectations [2] - Stellantis reported a 13% year-over-year revenue increase to €37.2 billion in Q3, noting that US tariffs have caused approximately €1 billion in losses this year [2] - Shell's Q3 adjusted profit was $5.43 billion, surpassing expectations; the company announced a $3.5 billion stock buyback plan [2] - ServiceNow reported Q3 revenue of $3.41 billion, with adjusted earnings per share of $4.82, both exceeding expectations; the company plans a 1-for-5 stock split [2] - eBay's Q3 sales grew 9% year-over-year to $2.82 billion, with adjusted earnings per share of $1.36, exceeding expectations [2] - Carvana, a US used car retailer, reported a 54.5% year-over-year revenue increase to $5.65 billion in Q3, with earnings per share of $1.03, which fell short of analyst expectations [2] - KLA Corporation, a semiconductor testing equipment manufacturer, reported a 13% year-over-year revenue increase to $3.21 billion in Q1 FY2026, with adjusted earnings per share of $8.81, exceeding expectations [2] - Novo Nordisk is reportedly increasing its bid for Metsera, while Pfizer's $4.9 billion acquisition may face uncertainties [2] Group 3 - S&P has downgraded Strategy's credit rating to junk status at B-, citing significant "currency mismatch" risks [3]

Group 1: AI Chip Industry Overview - The global AI chip industry is experiencing a bullish market atmosphere, driven by significant investments from major tech companies like Microsoft, Google, and Meta in AI computing infrastructure [1][7] - NVIDIA has reached a market capitalization of $5 trillion, becoming the first company to achieve this milestone [1] - Semiconductor equipment suppliers have seen substantial stock price increases, reflecting the growing demand for AI chip manufacturing capabilities [1][4] Group 2: Lasertec's Market Performance - Lasertec's stock surged by 21%, reaching a market value of $17.5 billion, marking its largest increase in over a year [2] - Analysts expect Lasertec's revenue to grow by 27%, positioning it as a key beneficiary in the AI chip wave [2][3] - The company specializes in EUV mask actinic inspection, which is critical for the AI chip supply chain [2][3] Group 3: Semiconductor Equipment Demand - The demand for semiconductor equipment is rising due to the expansion of AI computing needs and significant investments in AI infrastructure [7][8] - Companies like ASML, Applied Materials, and KLA are expected to benefit from the increasing complexity and performance requirements of advanced CPU/GPU packaging [9] - The AI infrastructure investment wave is projected to reach $2 trillion to $3 trillion, indicating a robust growth trajectory for the semiconductor equipment sector [7][8]

Core Viewpoint - The semiconductor testing equipment manufacturer KLA reported Q1 FY2026 earnings with revenue of $3.21 billion, a 13% year-over-year increase, exceeding analyst expectations of $3.17 billion. Adjusted earnings per share were $8.81, also above the forecast of $8.61 [1] Revenue Performance - Q1 FY2026 revenue reached $3.21 billion, reflecting a 13% increase compared to the previous year [1] - The revenue surpassed analyst expectations, which were set at $3.17 billion [1] Earnings Per Share - Adjusted earnings per share for Q1 FY2026 were reported at $8.81, exceeding the anticipated $8.61 [1] Future Guidance - KLA anticipates Q2 FY2026 revenue to be approximately $3.23 billion, higher than the expected $3.18 billion, driven by strong demand for chip manufacturing tools [1] - The company projects that the ongoing U.S.-China trade tensions will reduce sales by $300 million to $350 million over the next five quarters [1]

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Company Performance - KLA reported quarterly earnings of $8.81 per share, exceeding the Zacks Consensus Estimate of $8.55 per share, and up from $7.33 per share a year ago, representing an earnings surprise of +3.04% [1] - The company posted revenues of $3.21 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.72%, and an increase from $2.84 billion year-over-year [2] - KLA has consistently surpassed consensus EPS estimates over the last four quarters [2] Stock Performance - KLA shares have increased approximately 91.4% since the beginning of the year, significantly outperforming the S&P 500's gain of 17.2% [3] - The current Zacks Rank for KLA is 2 (Buy), indicating expectations for the stock to outperform the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $8.55 on revenues of $3.16 billion, and for the current fiscal year, it is $34.83 on revenues of $12.9 billion [7] - The trend of estimate revisions for KLA was favorable ahead of the earnings release, which may influence future stock movements [5][6] Industry Context - KLA operates within the Electronics - Miscellaneous Products industry, which is currently ranked in the top 20% of over 250 Zacks industries, suggesting a positive outlook for the sector [8] - The performance of KLA's stock may also be influenced by the overall industry outlook [8]

Financial Data and Key Metrics Changes - KLA reported revenue of $3.21 billion for the September quarter, exceeding the guidance midpoint of $3.15 billion [6][11] - Non-GAAP diluted EPS was $8.81, while GAAP diluted EPS was $8.47, both above the guidance midpoint [11] - Gross margin improved to 62.5%, 50 basis points above the guidance midpoint, driven by a stronger product mix and manufacturing efficiencies [12] - Free cash flow reached $3.9 billion with a free cash flow margin of 31% [9] Business Line Data and Key Metrics Changes - Advanced packaging revenue is expected to exceed $925 million for calendar year 2025, representing a 70% year-over-year increase [8] - Service revenue grew to $745 million in the September quarter, up 6% sequentially and 16% year-over-year [8] - Non-GAAP operating margin was reported at 43.2% [12] Market Data and Key Metrics Changes - KLA anticipates mid to high single-digit growth in wafer fab equipment (WFE) for 2025, driven by investments in leading-edge foundry logic and memory [16] - The advanced packaging market is expected to grow more than 20% compared to the previous year [16] - The company estimates a revenue impact of approximately $300 million-$350 million due to export controls affecting certain customers in China [17] Company Strategy and Development Direction - KLA is focusing on expanding its market leadership in advanced packaging and process control, addressing all growth markets in WFE [9][10] - The company emphasizes a disciplined approach to capital allocation, aiming to maximize total shareholder value [10] - KLA's product portfolio is designed to support technology transitions and ensure yield entitlement in high-volume production [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the semiconductor industry's growth in 2026, with expectations for a broader spending profile compared to 2025 [17] - Customer discussions have become more constructive, indicating a growth year for the industry in 2026 [17] - The company remains focused on supporting customers and driving productivity across the enterprise [22] Other Important Information - KLA's total capital return in the September quarter was $799 million, including $545 million in share repurchases and $254 million in dividends [9] - The company announced a $5 billion share repurchase authorization and a 12% increase in quarterly dividends [14][15] Q&A Session Summary Question: Insights on WFE growth outlook - Management noted that the outlook is more about confidence in timing rather than a significant change in magnitude, with constructive discussions around leading-edge investments [29][30] Question: Decline in foundry/logic revenue - The decline is attributed to a reduction in China, which was elevated in the previous quarter, while leading-edge revenue is expected to increase [39][40] Question: Gross margin guidance - The guidance down is primarily due to product mix adjustments, with a consistent tariff impact [44][45] Question: Advanced packaging process control intensity - KLA's share of the advanced packaging market is expected to grow, with increasing process control intensity as designs become more complex [50][52] Question: AI spending impact on WFE - Management agreed that significant AI spending could translate to increased WFE demand, particularly in memory and advanced packaging [56][57] Question: Memory growth expectations - The company expects DRAM investment to grow next year, driven by strong customer announcements and increased spending [98][99] Question: Foundry-related revenue opportunities - There is a broadening of investment discussions with foundries, indicating a shift towards yield improvement tools [102][103]