KLA(US:KLAC) Seeking Alphaยท2024-06-08 03:10Core Insights - KLA Corporation aims for a topline growth target of 9% to 11%, with expectations to reach $14 billion in sales and $38 in earnings by 2026 [1][34][26] - The company anticipates a mid-double-digit growth rate over the next couple of years, driven by increased investment in logic and foundry sectors [4][10] - KLA's service business is projected to grow at 12% to 14% through the cycle, supported by a high attach rate of over 90% for service contracts [3][7] Company Performance - KLA's systems business is expected to grow close to 10%, while the service business has shown resilience with mid-high single-digit growth despite lower utilization rates in the industry [3][7][9] - The company has a predictable service revenue stream, with about 75% of revenue coming from subscription-like contracts [3][8] - Gross margins are projected to be around 63%, with operating margins expected to exceed 42% as the company approaches its revenue targets [26][40] Market Dynamics - The wafer fab equipment (WFE) market is expected to see a recovery, with leading-edge investments driving demand, particularly in the context of AI and advanced packaging [19][20][66] - KLA's position in process control is significantly stronger than competitors, with a market share approximately five to six times larger than the nearest rival [35][64] - The company is preparing for growth in leading-edge investments, which require higher process control intensity compared to legacy investments [19][24][62] Future Outlook - KLA anticipates a favorable environment for DRAM and memory markets, with expectations of improved financial performance and supply-demand parity [32][74] - The company is focused on maintaining a strong supply chain to meet future demand, with lead times for products generally around nine months [57][72] - Advanced packaging is identified as a growth area, with KLA participating in various process steps that are expected to grow faster than overall WFE [66][69]