Group 1 - KLA Corporation (KLAC) is recognized as a top pick in the chip industry for 2026, alongside Nvidia and Broadcom, as investor interest shifts towards sustainable demand in AI infrastructure development [1] - KLAC stock has shown positive movement, surpassing the $1,220 level and nearing the upper end of its 52-week range, indicating strong investor confidence [2] - The semiconductor sector has experienced volatility, but spending on AI, logic, memory, and packaging remains robust, favoring companies like KLA that provide mission-critical equipment [3] Group 2 - KLA Corporation is a leading supplier of process control, inspection, and yield management solutions to the semiconductor industry, with a market capitalization exceeding $150 billion [4] - KLAC stock has significantly outperformed over the past year, rising from a 52-week low of $550 to trading above $1,220, outperforming the S&P 500 Index [5] - Valuation metrics indicate KLA is trading at around 35 times trailing earnings and 34.6 times forward earnings, with strong operating margins over 30%, return on equity exceeding 100%, and robust free cash flows [6]

Core Insights - KLA Corporation (KLAC) is expected to report first-quarter fiscal 2026 results on October 29, with projected revenues of $3.15 billion, indicating an 11% year-over-year increase [1][8] - Non-GAAP earnings per share (EPS) is anticipated to be $8.53, reflecting a 16.6% growth from the prior year [2][8] - The company has consistently surpassed earnings estimates in the past four quarters, with an average surprise of 6.16% [2] Revenue and Earnings Expectations - KLAC's revenue estimate for the upcoming quarter is $3.15 billion, close to the Zacks Consensus Estimate of $3.16 billion [1][8] - The expected non-GAAP EPS of $8.53 is slightly below the consensus mark of $8.55, which has remained unchanged over the past 30 days [2][8] Key Growth Drivers - The demand for advanced semiconductors and process control solutions is being driven by advancements in artificial intelligence (AI) [4] - The advanced packaging business is projected to grow significantly, with revenues expected to rise from over $500 million in calendar 2024 to $925 million in calendar 2025 [5] - Strong spending in the development of leading-edge logic nodes and high-bandwidth memory in DRAM is anticipated to contribute to KLAC's revenue growth [5] Margin Considerations - Gross margin is expected to be negatively impacted by weak systems revenues in the first quarter of fiscal 2026 [6] - Tariffs are identified as a headwind, although the negative impact is expected to be lower than previous guidance [6] Earnings Prediction Model - According to the Zacks model, KLAC has an Earnings ESP of 0.00% and a Zacks Rank of 2 (Buy), indicating a lower likelihood of an earnings beat [7]