KLA Q2 2026 KLA Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 KLA Corp Earnings Call
To the KLA Corporation December quarter, 2025 earnings conference call and webcast.
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I will now turn the call over to Kevin Kessel, Vice President of Investor Relations and market analytics. Please go ahead.
Welcome to the <unk>.
2025 quarterly earnings call I'm joined by our CEO, Rick Wallace and our CFO, Brian Hancock will discuss today's results as well as our March quarter and calendar 2026 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 all year references we make refer to calendar years.
The earnings materials contain a detailed reconciliation of GAAP to non-GAAP results.
IR website also contains future investor 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 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 rig providing commentary on the business environment and our quarter, followed by Brian with financial highlights and our outlook before I turn the call over to Rick I wanted to remind everyone that we're hosting our investor day on March 12, and invitations were recently emailed out.
Now over to Rick Thank.
Thank you Kevin.
I will summarize KLA is overall performance for 2025, and the December quarter as well as kind of the current industry landscape for 2025, KLA continued to deliver relative growth outperformance, along with strong profitability free cash flow generation and return to shareholders for.
For 2025 revenue grew 17% to a record $12 75 billion.
Our process control systems business outpacing the industry growth by several points.
Earnings per share grew 29% year over year, demonstrating the strong leverage in our model and KLA maintained industry, leading gross margins and operating margins of 62, 8% and 43, 6% respectively.
Company also grew free cash flow of 30% to $4 4 billion and returned $3 billion in a combination of dividends and share buybacks.
Tailings process control system revenue grew 19% and our service business grew 15% for the year in 2025 is expected to be another year of process control share growth for KLA.
Speaker #2: Please stand by. Your meeting is about to begin. Good afternoon. My name is Stephanie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the KLA Corporation December Quarter 2025 earnings conference call and webcast.
Demand for AI infrastructure, coupled with Payless industry leadership and process control positions the company, well and supporting all major growth vectors in semiconductor manufacturing.
Speaker #2: All participant lines have been placed in a listen-only mode to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.
<unk> advanced logic high bandwidth memory and advanced packaging.
The December quarter, Kelly delivered strong results across the board with revenue of $3 3 billion.
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non-GAAP diluted EPS of $8 85 and <unk>.
Speaker #2: Please limit yourself to one question and one follow-up question. Lastly, if you should need operator assistance, please press star zero. Thank you. I will now turn the call over to Kevin Kessel, Vice President of Relations and Analytics.
Diluted EPS of $8 68.
Highlights contributing to this performance includes 70% year over year revenue growth fueled by investment in leading edge foundry logic and high bandwidth memory and DRAM.
Speaker #2: Please go
Speaker #2: ahead. Welcome to December
AI remains a core driver of <unk> performance and a key factor in our growing industry leadership.
Speaker #3: 2025 quarterly earnings call. I'm joined by our CEO, Rick Wallace, and our CFO, Bren Higgins. We will discuss today's results as well as our March quarter and calendar 2026 outlook, which will be released after the market close and is available on our website along with supplemental materials.
<unk> solutions enable our customers to deliver products needed for AI. Our systems are also applying AI driven analytics to deliver actionable insights that streamline chip manufacturing and accelerated innovation and time to yield for next generation AI applications, we believe that our experience reflects.
Speaker #3: We are presenting today's discussion and metrics on a non-gap financial basis unless otherwise specified. All fully references we make refer to calendar years. Earnings materials contain a detailed reconciliation of gaps and non-gap results.
The compelling capabilities cost and power consumption available with GPU based compute architectures and is fueling the ongoing HBC infrastructure build out.
Speaker #3: KLA's website also contains future investor events, presentations, and links to our SEC filings. Our comments today are subject to risks and uncertainties reflected in a disclosure of risk factors in our SEC filings.
Looking ahead <unk> innovations with AI will produce actionable data for our customers and accelerate system performance reduce the cost of ownership and improve their return on investment and KLA systems.
Speaker #3: Any forward-looking statements, including those we make on the call today, are subject to those risks, and KLA cannot guarantee those forward-looking statements will come true.
In the December quarter, KLA continued to grow in advanced packaging, the rising to pant manned for more powerful systems of chips.
Speaker #3: Our initial 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 and our quarter, followed by Brenda with financial highlights and our outlook.
Is driving advanced packaging and increasing the value of process control and the chip package, which has fueled significant growth in this expanding market for KLA.
Speaker #3: Before I turn the call over to Rick, I wanted to remind everyone that we are hosting our investor day on March the 12th and invitations will recently emailed out.
KLA continues to see strong momentum in advanced packaging revenue growth and market share with calendar 2025, total systems revenue of approximately $950 million representing over 70% year over year growth.
Speaker #3: Now over to Rick.
Speaker #4: Thank you, Kevin. I will summarize KLA's overall performance for 2025 and the December quarter, as well as cover the current industry landscape. For 2025, KLA continued to deliver relative growth outperformance along with strong profitability free cash flow generation and return to shareholders.
And as we look forward to telling calendar 2026, we expect this momentum to continue with year over year percentage growth expectations in the mid to high teens, driven by faster than market growth for our process control products.
Speaker #4: For 2025, revenue grew 17% to a record $12.745 billion, with our process control systems business outpacing the industry growth by several points. Earnings per share grew 29% year over year, demonstrating the strong leverage in our model.
<unk> services business grew to $786 million in the December quarter up 6% sequentially and 18% year over year.
Speaker #4: And KLA maintained industry-leading gross margins and operating margins of 62.8% and 43.6%, respectively. Company also grew free cash flow 30% to $4.4 billion and returned $3 billion in a combination of dividends and share buybacks.
This was the 16th consecutive year of annual service revenue growth with a compounded annual growth rate greater than 12% over that timeframe.
Finally, the December quarter remained strong for both free cash flow and capital returns quarterly.
Quarterly free cash flow was a record $1 $2 6 billion.
Speaker #4: KLA's process control system revenue grew 19%, and our service business grew 15% for the year, and 2025 is expected to be another year of process control share growth for KLA.
Capital return in the December quarter was $797 million comprise.
Comprised of $548 million in share repurchase and $250 million in dividends total capital returns over the past 12 months was $3 billion.
Speaker #4: The demand for AI
Speaker #4: infrastructure coupled with KLA's industry leadership and process control positions the company well in supporting all major growth vectors in semiconductor manufacturing including advanced logic, high bandwidth memory, and advanced packaging.
The industry dynamics to support the demand for AI infrastructure reinforce <unk> growing relevance for our customers and our broad product portfolio plays a critical role in enabling customer success. Additionally, the emerging and fast growing advanced packaging market further strengthens <unk> relative position <unk>.
Finally, rising semiconductor content across diverse end markets, coupled with strategic investments in legacy nodes remains a key driver of dependable long term growth for KLA in the semiconductor equipment industry with that I will turn the call over to Brian to discuss the quarter's financial highlights.
Thanks, Rick dailies December quarter results reflect strong year over year growth with an industry leading margin profile. The results also exemplify our market leadership consistent business execution and the dedication of our global teams and meeting customer commitments.
Revenue was $3 3 billion above the guidance midpoint of $3 225 billion.
non-GAAP diluted EPS was $8 85 and.
And GAAP diluted EPS was $8 68.
Each above the midpoint of their respective guidance ranges.
Margin was 62, 6% 60 basis points above the midpoint of guidance due to stronger than modeled service performance and manufacturing efficiencies.
Operating expenses were $653 million.
<unk> $384 million in R&D and $269 million in SG&A.
Operating margin was 42, 8%.
Other income and expense net was $32 million a.
Our quarterly effective tax rate was 15%.
At the guided tax rate of 14% non-GAAP earnings per share would have been $8 99.
non-GAAP net income was $1 7 billion GAAP net income was $1. One 5 billion cash flow from operations was $1 37 billion and free cash flow was $1 $2 6 billion.
The company had 132 million diluted weighted average shares outstanding for the quarter.
The breakdown of revenue by reportable in end markets and major products and regions can be found within the shareholder letter and slides.
Moving to the balance sheet <unk> ended the quarter with $5 $2 billion in total cash cash equivalents and marketable securities and debt of $5 9 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.
Over the past five years free cash flow has grown at a 20% compound annual growth rate above the 16% revenue compound annual growth rate over the same period.
Richard Wallace: the annual growth rate greater than 12% over that timeframe. Finally, the December quarter remained strong for both free cash flow and capital returns. Quarterly free cash flow was a record $1.26 billion. Total capital return in the December quarter was $797 million, comprised of $548 million in share repurchase and $250 million in dividends. Total capital returns over the past 12 months was $3 billion. The industry dynamics to support the demand for AI infrastructure reinforce KLA's growing relevance for our customers, and our broad product portfolio plays a critical role in enabling customer success. Additionally, the emerging and fast-growing advanced packaging market further strengthens KLA's relative position.
Richard Wallace: the annual growth rate greater than 12% over that timeframe. Finally, the December quarter remained strong for both free cash flow and capital returns. Quarterly free cash flow was a record $1.26 billion. Total capital return in the December quarter was $797 million, comprised of $548 million in share repurchase and $250 million in dividends. Total capital returns over the past 12 months was $3 billion.
This growth coupled with resiliency across business cycles.
Enable a comprehensive capital return strategy that features double digit dividend growth and share repurchases to support long term shareholder value creation.
Turning to the outlook the industry outlook for 2026 has strengthened over the past few months.
We expect the core <unk> market to grow in the high single to low double digits, reaching the low $120 billion range up from approximately $110 billion in 2025.
The industry dynamics to support the demand for AI infrastructure reinforce KLA's growing relevance for our customers, and our broad product portfolio plays a critical role in enabling customer success. Additionally, the emerging and fast-growing advanced packaging market further strengthens KLA's relative position.
In addition, we expect the advanced packaging component of the market to grow at a similar rate to approximately $12 billion for a total market forecast in the mid $130 billion range and increase in the low double digits versus our forecast for 2005.
Richard Wallace: Finally, rising semiconductor content across diverse end markets, coupled with strategic investments in legacy nodes, remains a key driver of dependable, long-term growth for KLA and the semiconductor equipment industry. With that, I'll turn the call over to Bren to discuss the quarter's financial highlights.
Finally, rising semiconductor content across diverse end markets, coupled with strategic investments in legacy nodes, remains a key driver of dependable, long-term growth for KLA and the semiconductor equipment industry. With that, I'll turn the call over to Bren to discuss the quarter's financial highlights.
Customer spending profile is expected to broadened across all major end markets.
Given kla's strong business momentum.
<unk> market share and higher process control intensity at the leading edge across all segments. We begin 2026, well positioned to outperform and increase our share of the overall market.
Bren Higgins: Thanks, Rick. KLA's December quarter results reflect strong year-over-year growth with an industry-leading margin profile. The results also exemplify our market leadership, consistent business execution, and the dedication of our global teams in meeting customer commitments. Revenue was $3.3 billion, above the guidance midpoint of $3.225 billion. Non-GAAP diluted EPS was $8.85, and GAAP diluted EPS was $8.68, each above the midpoint of the respective guidance ranges. Gross margin was 62.6%, 60 basis points above the midpoint of guidance, due to stronger than modeled service performance and manufacturing efficiencies. Operating expenses were $653 million and included $384 million in R&D and $269 million in SG&A. Operating margin was 42.8%. Other income and expense net was $32 million.
Bren Higgins: Thanks, Rick. KLA's December quarter results reflect strong year-over-year growth with an industry-leading margin profile. The results also exemplify our market leadership, consistent business execution, and the dedication of our global teams in meeting customer commitments. Revenue was $3.3 billion, above the guidance midpoint of $3.225 billion.
We are experiencing strong customer momentum has accelerated over the past three months and is reflected in our system backlog and sales funnel.
Our view today is that the first half of 2026 revenue will grow mid single digits compared to the second half of 2025 with accelerating growth in the second half of calendar year.
Non-GAAP diluted EPS was $8.85, and GAAP diluted EPS was $8.68, each above the midpoint of the respective guidance ranges. Gross margin was 62.6%, 60 basis points above the midpoint of guidance, due to stronger than modeled service performance and manufacturing efficiencies. Operating expenses were $653 million and included $384 million in R&D and $269 million in SG&A. Operating margin was 42.8%. Other income and expense net was $32 million.
Customer lead times for our products are increasing due to supply constraints limiting first half growth potential across many of our products.
Daily as unique product portfolio differentiation and value proposition are focused on enabling technology transitions.
Gross margin was 62.6%, 60 basis points above the midpoint of guidance due to stronger-than-modeled service performance and manufacturing efficiencies.
Celebrating process node capacity ramps and ensuring yield entitlement in high volume manufacturing.
Operating expenses were $653 million and included $384 million in R&D and $269 million in SG&A.
Market environment, and the complexity of our customers' technology Roadmaps are compelling.
Operating margin was 42.8%.
Bren Higgins: The quarterly effective tax rate was 15%. At the guided tax rate of 14%, non-GAAP earnings per share would have been $8.99. Non-GAAP net income was $1.17 billion, GAAP net income was $1.15 billion, cash flow from operations was $1.37 billion, and free cash flow was $1.26 billion. The company had 132 million diluted weighted average shares outstanding for the quarter. The breakdown of revenue by reportable and end markets, and major products and regions, can be found within the shareholder letter and slides. Moving to the balance sheet, KLA ended the quarter with $5.2 billion in total cash, cash equivalents, and marketable securities, and debt of $5.9 billion.
The quarterly effective tax rate was 15%. At the guided tax rate of 14%, non-GAAP earnings per share would have been $8.99. Non-GAAP net income was $1.17 billion, GAAP net income was $1.15 billion, cash flow from operations was $1.37 billion, and free cash flow was $1.26 billion. The company had 132 million diluted weighted average shares outstanding for the quarter. The breakdown of revenue by reportable and end markets, and major products and regions, can be found within the shareholder letter and slides. Moving to the balance sheet, KLA ended the quarter with $5.2 billion in total cash, cash equivalents, and marketable securities, and debt of $5.9 billion.
Presenting both challenges and opportunities for KLA to maintain its relative to our performance.
Other income and expense, net was 32 million.
The quarterly effective tax rate was 15%.
And this industry environment, we remain focused on supporting customers investing for the future executing product roadmaps and driving productivity across the enterprise.
At the guided tax rate of 14%, non-GAAP earnings per share would have been $8.99.
Kla's March quarter guidance is as follows revenue of 335 billion plus or minus $150 million.
Non-gaap. Net income was 1.17 billion. Gaap. Net income was 1.15 billion. Cash flow. From operations was 1.37 billion and free cash flow was 1.26 billion.
Andre logic revenue from semiconductor customers is forecasted to be consistent with the December quarter at approximately 60% and memory is expected to be approximately 40% of semi process control systems revenue to semiconductor customers.
The company had 132 million diluted weighted average shares outstanding for the quarter.
The breakdown of Revenue by reportable and end markets and major products. And regions can be found within the shareholder letter and slides
Within memory DRAM is expected to be roughly 85% and then the remaining 15%.
Moving to the balance sheet, KLA ended the quarter with $5.2 billion in total cash.
As always these business mix approximations pertains solely to our semiconductor customers and do not reflect our total semiconductor process control systems revenue.
Bren Higgins: 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 5 years, free cash flow has grown at a 20% compound annual growth rate, above the 16% revenue compound annual growth rate over the same period. This growth, coupled with resiliency across business cycles, helps enable a comprehensive capital return strategy that features double-digit dividend growth and share repurchases to support long-term shareholder value creation. Turning to the outlook, the industry outlook for 2026 has strengthened over the past few months. We expect the core WFE market to grow in the high single to low double digits, reaching the low $120 billion range, up from approximately $110 billion in 2025.
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 5 years, free cash flow has grown at a 20% compound annual growth rate, above the 16% revenue compound annual growth rate over the same period.
Equivalents and marketable securities and debt of $5.9 billion.
Gross margin for the quarter is forecasted to be 61, 75% plus or minus one percentage point.
The company has a flexible and attractive bond maturity profile, supported by investment-grade ratings from all three major rating agencies.
Although volume levels are relatively consistent quarter to quarter product mix has modestly weaker versus the December quarter.
Haley, we generate consistent, strong free cash flow driven by our high-performing operating model.
<unk> also includes the incremental impact of the rapidly escalating cost of DRAM chips used in the company's image processing computers that shipped with our systems, creating a headwind to our gross margin expectations.
This growth, coupled with resiliency across business cycles, helps enable a comprehensive capital return strategy that features double-digit dividend growth and share repurchases to support long-term shareholder value creation. Turning to the outlook, the industry outlook for 2026 has strengthened over the past few months. We expect the core WFE market to grow in the high single to low double digits, reaching the low $120 billion range, up from approximately $110 billion in 2025.
Over the past five years, free cash flow has grown at a 20% compound annual growth rate, above the 16% revenue compound annual growth rate over the same period.
This pricing environment has changed profoundly over the past two to three months and has been highlighted regularly and industry press and analysts reports.
This growth, coupled with resiliency across business cycles, helps enable a comprehensive capital return strategy that features double-digit dividend growth and share repurchases to support long-term shareholder value creation.
While we expect this pricing environment to be transitory.
Turning to the outlook, the industry outlook for 2026 has strengthened over the past few months.
Current modeling suggests that this situation will persist through 2026 and have a roughly 75 to 100 basis points negative impact on gross margins for the calendar year.
As DRAM capacity additions accelerate over the next several quarters. We expect this cost dynamic to improve as we exit the calendar year and we are modeling a return to a normalized pricing environment for our memory requirements and our longer term business forecast.
Bren Higgins: In addition, we expect the advanced packaging component of the market to grow at a similar rate to approximately $12 billion, for a total market forecast in the mid-$130 billion range, an increase in the low double digits versus our forecast for 2025. Customer spending profile is expected to broaden across all major end markets. Given KLA's strong business momentum, expanding market share, and higher process control intensity at the leading edge across all segments, we begin 2026 well positioned to outperform and increase our share of the overall market. We are experiencing strong customer momentum that has accelerated over the past three months and is reflected in our system backlog and sales funnel.
In addition, we expect the advanced packaging component of the market to grow at a similar rate to approximately $12 billion, for a total market forecast in the mid-$130 billion range, an increase in the low double digits versus our forecast for 2025. Customer spending profile is expected to broaden across all major end markets.
We expect the core WFC Market to grow and the high single to low, double digits reaching the low 120 billion range up from approximately 110 billion dollars in 2022, 2025
In addition, we expect the advanced packaging component of the market to grow at a similar rate to approximately $12 billion, for a total market forecast in the mid-$130 billion range.
Considering this impact coupled with product mix and volume expectations, we expect gross margins to be approximately 62% plus or minus 50 basis points in calendar 2026.
An increase in the low double digits versus our forecast for 2025.
Given KLA's strong business momentum, expanding market share, and higher process control intensity at the leading edge across all segments, we begin 2026 well positioned to outperform and increase our share of the overall market. We are experiencing strong customer momentum that has accelerated over the past three months and is reflected in our system backlog and sales funnel.
Customer spending profiles are expected to broaden across all major end markets.
Operating expenses are forecasted to be approximately $645 million in the March quarter.
For 2026, we continue to prioritize next generation product development and company infrastructure investments to support expected revenue growth over the next several years and.
Given Ka strong business momentum expanding market, share and higher process control intensity at the Leading Edge across all segments. We Begin 2026. Well, positioned to outperform and increase our share of the overall Market.
And we anticipate these expenses to grow by roughly $15 million sequentially throughout the year.
Bren Higgins: Our view today is that the first half of 2026 revenue will grow mid-single digits compared to the second half of 2025, with accelerating growth in the second half of the calendar year. Customer lead times for our products are increasing due to supply constraints, limiting first half growth potential across many of our products. KLA's unique product portfolio differentiation and value proposition are focused on enabling technology transitions, accelerating process node capacity ramps, and ensuring yield entitlement and high volume manufacturing. Market environment and the complexity of our customers' technology roadmaps are compelling, presenting both challenges and opportunities for KLA to maintain its relative outperformance. In this industry environment, we remain focused on supporting customers, investing for the future, executing product roadmaps, and driving productivity across the enterprise.
Our view today is that the first half of 2026 revenue will grow mid-single digits compared to the second half of 2025, with accelerating growth in the second half of the calendar year. Customer lead times for our products are increasing due to supply constraints, limiting first half growth potential across many of our products. KLA's unique product portfolio differentiation and value proposition are focused on enabling technology transitions, accelerating process node capacity ramps, and ensuring yield entitlement and high volume manufacturing.
We are experiencing strong customer momentum that has accelerated over the past three months and is reflected in our system backlog and sales funnel.
Our business model is designed to deliver 40% to 50% incremental operating margin leverage on revenue growth over the long run.
Our view today is that the first half of 2026 revenue will grow mid-single digits compared to the second half of 2025.
Other model assumptions include other income and expense net of approximately $25 million for the March quarter.
With accelerating growth in the second half of the calendar year.
And expect it to remain at this quarterly level for the calendar year.
Customer lead times for our products are increasing due to supply constraints, limiting first half growth potential across many of our products.
For taxes, our established practice is to provide an effective tax rate assumption for the calendar year, when providing guidance for the March quarter.
Given expectations of geographic distribution of revenue and profit pillar to adoption and recent tax changes in the United States. The planning tax rate for 2026 was 14, 5%.
Market environment and the complexity of our customers' technology roadmaps are compelling, presenting both challenges and opportunities for KLA to maintain its relative outperformance. In this industry environment, we remain focused on supporting customers, investing for the future, executing product roadmaps, and driving productivity across the enterprise.
Value proposition is focused on enabling technology transitions, accelerating process node capacity ramps, and ensuring yield entitlement and high-volume manufacturing.
The market environment and the complexity of our customers' technology roadmaps are compelling.
We would expect some quarter to quarter tax rate variance due to discrete items.
Presenting both challenges and opportunities for KA, to maintain its relative outperformance.
For the March quarter, non-GAAP diluted EPS is expected to be $9 eight.
Plus or minus 78.
Bren Higgins: KLA's March quarter guidance is as follows: revenue of $3.35 billion ±$150 million. Foundry Logic revenue from semiconductor customers is forecasted to be consistent with the December quarter at approximately 60%, and memory is expected to be approximately 40% of semi-process control systems revenue to semiconductor customers. Within memory, DRAM is expected to be roughly 85% and NAND the remaining 15%. As always, these business mix approximations pertain solely to our semiconductor customers and do not reflect our total semiconductors process control systems revenue. Gross margin for the quarter is forecasted to be 61.75% ±1 percentage point. Although volume levels are relatively consistent quarter to quarter, product mix is modestly weaker versus the December quarter.
KLA's March quarter guidance is as follows: revenue of $3.35 billion ±$150 million. Foundry Logic revenue from semiconductor customers is forecasted to be consistent with the December quarter at approximately 60%, and memory is expected to be approximately 40% of semi-process control systems revenue to semiconductor customers.
In this industry environment, we remain focused on supporting customers investing for the future, executing product roadmaps, and driving productivity across the enterprise.
And GAAP diluted EPS is expected to be $8 85.
Plus or minus 78 cents.
EPS guidance is based on a fully diluted share count of approximately 131 7 million shares.
Koz March quarter guidance is as follows revenue of 3.35 billion plus or minus 150 million.
In conclusion, our near term revenue guidance reflects consistent growth and relative strength.
We expect to outperform the market in 2026, driven by multiple tailwind driving rising process control intensity and growth in advanced packaging.
Within memory, DRAM is expected to be roughly 85% and NAND the remaining 15%. As always, these business mix approximations pertain solely to our semiconductor customers and do not reflect our total semiconductors process control systems revenue. Gross margin for the quarter is forecasted to be 61.75% ±1 percentage point. Although volume levels are relatively consistent quarter to quarter, product mix is modestly weaker versus the December quarter.
Foundry logic revenue from semiconductor customers is forecasted to be consistent with the December quarter at approximately 60%, and memory is expected to be approximately 40% of semi-processed controls systems revenue to semiconductor customers.
KLA continues to focus on delivering a differentiated product portfolio that addresses customers' technology roadmap requirements and production efficiency objectives, which are driving our longer term relevance and growth expectations.
Within memory, dram is expected to be roughly 85% and then the remaining 15%.
As always, these business numbers pertain solely to our semiconductor customers and do not reflect our total semiconductor process control systems revenue.
Daily operating model guys are best in class execution.
Our focus on customer success innovative solutions and operational excellence drives industry, leading financial performance enabled us, enabling us to return capital consistently and predictably.
Gross margin for the quarter is forecasted to be 61.75% plus or minus 1 percentage point.
Bren Higgins: This guidance also includes the incremental impact of the rapidly escalating cost of DRAM processing computers that ship with our systems, creating a headwind to our gross margin expectations. This pricing environment has changed profoundly over the past 2 to 3 months, and has been highlighted regularly in industry press and analyst reports. While we expect this pricing environment to be transitory, current modeling suggests that this situation will persist through 2026, and have a roughly 75 to 100 basis points negative impact on gross margins for the calendar year. As DRAM capacity additions accelerate over the next several quarters, we expect this cost dynamic to improve as we exit the calendar year, and we are modeling a return to a normalized pricing environment for our memory requirements and our longer-term business forecasts.
This guidance also includes the incremental impact of the rapidly escalating cost of DRAM processing computers that ship with our systems, creating a headwind to our gross margin expectations. This pricing environment has changed profoundly over the past 2 to 3 months, and has been highlighted regularly in industry press and analyst reports.
Although volume levels are relatively consistent quarter to quarter product. Mix is modestly, weaker versus the December quarter.
Daily business is uniquely positioned to capitalize on today's technology inflections in growth drivers, we are encouraged by strengthening customer cost confidence and engagement, which informs our business forecast.
This guidance also includes the incremental impact of the rapidly escalating cost of dram ship. Assessing computers that ship with our systems.
Creating a headwind to our gross margin expectations.
The long term secular trends driving semiconductor industry demand and investments in WSI and advanced packaging are compelling and represent a relative performance opportunity for KLA over the next several years.
While we expect this pricing environment to be transitory, current modeling suggests that this situation will persist through 2026, and have a roughly 75 to 100 basis points negative impact on gross margins for the calendar year. As DRAM capacity additions accelerate over the next several quarters, we expect this cost dynamic to improve as we exit the calendar year, and we are modeling a return to a normalized pricing environment for our memory requirements and our longer-term business forecasts.
This pricing environment has changed profoundly over the past two to three months, and has been highlighted regularly in industry, press, and analyst reports.
<unk> business has gone from being primarily indexed to leading edge R&D investment in fab capacity ramp to now addressing our growth phases in wip and advanced packaging, enabling leading edge process development time to results in fab capacity ramps and optimizing yield and a high volume production environment.
While we expect this pricing environment to be transitory current modeling, suggests that this situation will persist through 2026 and have a roughly 75 to 100 basis points negative impact on Gross margins for the calendar year.
Bren Higgins: Considering this impact, coupled with product mix and volume expectations, we expect gross margins to be approximately 62%, ±50 basis points in calendar 2026. Operating expenses are forecasted to be approximately $645 million in the March quarter. For 2026, we 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 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 approximately $25 million for the March quarter, and expected to remain at this quarterly level for the calendar year.
Considering this impact, coupled with product mix and volume expectations, we expect gross margins to be approximately 62%, ±50 basis points in calendar 2026. Operating expenses are forecasted to be approximately $645 million in the March quarter. For 2026, we 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 year.
In addition to growing investment in custom silicon, particularly among hyperscale is 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.
As dram capacity additions, accelerate over the next several quarters. We expect this cost Dynamic to improve as we exit the calendar year and we are modeling our return to a normalized pricing environment for our memory requirements and our longer term business forecasts.
Considering this impact coupled with product mix and volume expectations. We expect gross margins to be approximately 62% plus or minus 50 basis points and calendar 2026.
William and time to market.
The design mix and complexity grows so does the need for advanced process control as a result, Hayley has seen consistent growth in process control intensity as each new chip design requires rigorous inspection metrology and yield optimization solutions.
Operating expenses are forecasted to be approximately $645 million in the March quarter.
For 2026, we continue to prioritize next-generation product development and company infrastructure investments to support expected revenue growth over the next several years.
<unk> is uniquely positioned to benefit from these trends as we expand our market leadership and deliver differentiated value to our customers.
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 approximately $25 million for the March quarter, and expected to remain at this quarterly level for the calendar year.
And we anticipate these expenses to grow by roughly 15 million sequentially throughout the year.
Our business model is designed to deliver 40% to 50% incremental operating margin leverage.
That concludes our prepared remarks, Kevin please begin the Q&A.
On Revenue growth over the long run.
Thank you Brian operator can you please provide the instructions and begin the Q&A session.
Other model, assumptions include other income and expense net of approximately 25 million for the March quarter.
Bren Higgins: For taxes, our established practice is to provide an effective tax rate assumption for the calendar year when providing guidance for the March quarter. Given expectations of geographic distribution of revenue and profit, Pillar Two adoption, and recent tax changes in the United States, the planning tax rate for 2026 is 14.5%. We would expect some quarter-to-quarter tax rate variance due to discrete items. For the March quarter, non-GAAP diluted EPS is expected to be $9.08 ±$0.78, and GAAP diluted EPS is expected to be $8.85 ±$0.78. EPS guidance is based on a fully diluted share count of approximately 131.7 million shares. In conclusion, our near-term revenue guidance reflects consistent growth and relative strength.
For taxes, our established practice is to provide an effective tax rate assumption for the calendar year when providing guidance for the March quarter. Given expectations of geographic distribution of revenue and profit, Pillar Two adoption, and recent tax changes in the United States, the planning tax rate for 2026 is 14.5%. We would expect some quarter-to-quarter tax rate variance due to discrete items. For the March quarter, non-GAAP diluted EPS is expected to be $9.08 ±$0.78, and GAAP diluted EPS is expected to be $8.85 ±$0.78. EPS guidance is based on a fully diluted share count of approximately 131.7 million shares. In conclusion, our near-term revenue guidance reflects consistent growth and relative strength.
And expected to remain at this quarterly, level for the calendar year.
Thank you at this time I'd like to ask a question. Please press star one on your telephone keypad, if you wish to remove yourself from the queue. You may do so by pressing star two.
For taxes, these are established. Our practice is to provide an effective tax rate assumption for the calendar year when providing guidance for the March quarter.
Mind you to please mute your line when introduced and if possible pick up your handset for optimal sound quality.
In the interest of time, we ask you. Please limit yourself to one question and one follow up.
Given our expectation for geographic distribution of revenue and profit, the pillar to adoption, and recent tax changes in the United States, we are using a planning tax rate of 14.5% for 2026.
We will now take our first question from Vivek Arya with Bank of America Securities.
We would expect some quarter to quarter tax rate, variance due to discrete items.
Yeah.
Thanks for taking my question for the first one.
Yeah.
Your forecast for WMC for this year yesterday, your peer reported and suggested that <unk> could grow over 20% I think I said, 23% and you're suggesting something in the high single to low double. So I was hoping you could clarify what is kind of the apples to apples inclusion.
For the March quarter, non-gaap diluted EPS is expected to be $9.08, plus or minus 78 cents and GAP. Diluted EPS is expected to be 8.85 plus or minus 78 cents.
EPS guidance is based on a fully diluted share count of approximately 131.7 million shares.
Bren Higgins: We expect to outperform the market in 2026, driven by multiple tailwinds, driving rising process control intensity and growth in advanced packaging. KLA continues to focus on delivering a differentiated product portfolio that addresses customers' technology roadmap requirements and production efficiency objectives, which are driving our longer-term relevance and growth expectations. The KLA operating model guides our best-in-class execution. Our focus on customer success, innovative solutions, and operational excellence drives industry-leading financial performance, enabling us to return capital consistently and predictably. KLA's business is uniquely positioned to capitalize on today's technology inflections and growth drivers. We are encouraged by strengthening customer cost, confidence, and engagement, which informs our business forecast. The long-term secular trends driving semiconductor industry demand and investments in WFE and advanced packaging are compelling, and represent a relative performance opportunity for KLA over the next several years.
We expect to outperform the market in 2026, driven by multiple tailwinds, driving rising process control intensity and growth in advanced packaging. KLA continues to focus on delivering a differentiated product portfolio that addresses customers' technology roadmap requirements and production efficiency objectives, which are driving our longer-term relevance and growth expectations. The KLA operating model guides our best-in-class execution. Our focus on customer success, innovative solutions, and operational excellence drives industry-leading financial performance, enabling us to return capital consistently and predictably.
In conclusion, our near-term, Revenue guidance, reflects consistent growth and relative strength.
Or exclusion.
And then part of that.
Advanced packaging only grows I think in that same base high single to low double but.
We expect to outperform the market in 2026, driven by multiple tailwinds, including rising process control intensity and growth in advanced packaging.
That's very surprising given how fast the AI market is growing and the correlation of that advanced packaging market to AI. So basically if you could just give us the apples to apples.
Kala continues to focus on delivering, a differentiated product portfolio. That addresses customers, technology roadmap requirements.
And production, efficiency objectives.
which are driving our longer-term relevance and growth expectations.
KLA operating model guides our best-in-class execution.
Why such a big disconnect.
Between your view of WMC growth versus what your peers suggested yesterday.
Hey, Vivek, it's brand so I did talk about this a little bit in the letter, but I think one of the issues that has become.
KLA's business is uniquely positioned to capitalize on today's technology inflections and growth drivers. We are encouraged by strengthening customer cost, confidence, and engagement, which informs our business forecast. The long-term secular trends driving semiconductor industry demand and investments in WFE and advanced packaging 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 ramp, to now addressing all growth phases in WFE and advanced packaging, enabling leading-edge process development, time to results in fab capacity ramps, and optimizing yield in a high-volume production environment.
Our focus on customer success, innovative solutions, and operational excellence drives industry-leading financial performance, enabling us to return capital consistently and predictably.
A little bit noisy over the last couple of years has been the rise of advanced packaging as a market and the inclusion of it and Wip forecast I think you and I talked about this in your conference back in June was that.
Koz business is uniquely positioned to capitalize on today's technology, selections, and growth drivers. We are encouraged by strengthening customer cost confidence and engagement, which informs our business forecasts.
Who what do people exactly included in these numbers and it varies a little bit across analysts and across companies.
Bren Higgins: KLA's business has gone from being primarily indexed to leading-edge R&D investment and fab capacity ramp, to now addressing all growth phases in WFE and advanced packaging, enabling leading-edge process development, time to results in fab capacity ramps, and optimizing yield in a high-volume production 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 advanced process control. As a result, KLA is seeing 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.
The next several years.
If you look at our forecast our view on consistent traditional core wf fee in 2025 was about approximately and we will see how people report, but approximately $110 billion and that the advanced packaging market as we look at the total market is is roughly in that $11 billion range. So we'll call it the low <unk>.
Ali's business has gone from being primarily indexed to leading-edge R&D investment and fab capacity ramp, to now addressing all growth phases in wafer fab and advanced packaging—enabling leading-edge process development, time to results in fab capacity ramps, and optimizing yield in a high-volume production 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 advanced process control.
In addition.
The growing investment in custom silicon.
<unk> as.
As we look at 2026 looking at it in the same way, we see advanced packaging growing somewhere in excess of 12 billion. So it will probably be.
Particularly among hyperscalers developing their own custom chips, this 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.
Double digits, we'll see it tends to be a quicker turn business. So we'll see how that plays out and that core WMD is is rising from 110, as we said to about one somewhere in the low 100, <unk>. So I think when you add the two together you end up in the mid $1 <unk>, which is I think consistent with what.
As a result, KLA is seeing 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.
The design mix and complexity grows, so does the need for advanced process control. As a result, KLA has seen consistent growth and process control intensity.
As each new ship, design requires rigorous inspection Metrology and yield optimization Solutions.
What Lam said yesterday, but thats how to think about the market I don't know how they think about it and what they include and what they don't we try to capture all elements of the market as it relates to process and process control.
Bren Higgins: That concludes our prepared remarks. Kevin, please begin the Q&A.
Koz uniquely positioned to benefit from these Trends is to expand our Market leadership and deliver differentiated value to our customers.
That concludes our prepared remarks Kevin, please begin the Q&A.
Kevin Kessel: Thank you, Brian. Operator, can you please provide the instructions and begin the Q&A session?
Kevin Kessel: Thank you, Brian. Operator, can you please provide the instructions and begin the Q&A session?
Operator: Thank you. At this time, if you'd like to ask a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing star two. We remind you to please unmute your line when introduced, and if possible, pick up your handset for optimal sound quality. In the interest of time, we ask you, please, limit yourself to one question and one follow-up. We'll now take our first question from Vivek Arya with Bank of America Securities.
Operator: Thank you. At this time, if you'd like to ask a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing star two. We remind you to please unmute your line when introduced, and if possible, pick up your handset for optimal sound quality. In the interest of time, we ask you, please, limit yourself to one question and one follow-up. We'll now take our first question from Vivek Arya with Bank of America Securities.
Thank you, Brian. Uh, operator, can you please provide the instructions and begin the Q&A session?
And.
And so that's how we look at it overall.
In terms of what happens on the wafer.
Film frame.
Advanced component and so on so that's how we see hopefully that helps.
Thank you at this time. If you'd like to ask a question, please press star 1 on your telephone keypad, if you wish to remove yourself from the queue, you may do so, by pressing star 2,
Rick just to add one part of that question on the growth of packaging, we're talking to our customers. They are frustrated with the shelves that they have available so part of what's slowing down the growth. This year is their ability to have their factories built support packaging because of the growth. So that's why we see it more.
We remind you to please unmute your line when introduced, and, if possible, pick up your handset for optimal sound quality.
in the interest of time, we ask you, please limit yourself to 1 question and when follow-up
We'll now take our first question from V.C. Arya with Bank of America Securities.
Vivek Arya: Thanks for taking my question. For the first one, you know, your overall forecast for WFE for this year, you know, yesterday, your peer reported and suggested that WFE could grow over 20%. I think they said 23%, and you're suggesting something in the high singles to low double. So I was hoping you could clarify what is kind of the apples to apples inclusion or exclusion, and then part of that, you know, you're suggesting advanced packaging only grows, I think, in that same pace, high single to low double. But that's very surprising given how fast the AI market is growing and just the correlation of that advanced packaging market to AI.
Vivek Arya: Thanks for taking my question. For the first one, you know, your overall forecast for WFE for this year, you know, yesterday, your peer reported and suggested that WFE could grow over 20%. I think they said 23%, and you're suggesting something in the high singles to low double. So I was hoping you could clarify what is kind of the apples to apples inclusion or exclusion, and then part of that, you know, you're suggesting advanced packaging only grows, I think, in that same pace, high single to low double.
Sure.
You'll see a lot more growth in 2007 as a result of that there is demand, but I think it's a matter of getting.
The facility is ready, which is a theme generally right now with our customers. So I think on a go forward, we're just going to aggregate it and I think that helps but what I tried to do is provide over the last several months or so.
Some disaggregation.
<unk> view of what traditional core Wi Fi the same wf, we we've looked at over the last multiple decades and what the advanced packaging.
But that's very surprising given how fast the AI market is growing and just the correlation of that advanced packaging market to AI. So basically, if you could just give us apples to apples, you know, why such a big disconnect between your view of WFE growth versus what your peers suggested yesterday?
Market looks like as you add the two together and you get to the mid <unk> as we look at 2026.
Okay and for my follow up just two clarifications one is what's your assumption of China.
Vivek Arya: So basically, if you could just give us apples to apples, you know, why such a big disconnect between your view of WFE growth versus what your peers suggested yesterday?
<unk> kind of absolute.
Percentage growth, how much was China WMC as part of that.
Uh, thanks for taking my question. Um, for the first 1, um, you know, your uh, over, you know, your forecast for WFC for this year. Um, you know, yesterday, your your reported and suggested that WFC could grow over 20%, I think they said 23%, um, and you're suggesting something in the high singles to load. So I was hoping you could clarify, what is uh, kind of the Apples to Apples, uh, inclusion or exclusion. Um and then part of that, you know, you're suggesting Advanced packaging only grows. Um, I think, uh, in in that same Pace High single to low double, uh, but uh, that's very surprising given how fast the AI Market is growing. And just uh the correlation of that, uh, Advanced packaging Market, uh, to AI. So basically, if you could just give us Apples to Apples. Um, you know, uh why such a big disconnect uh, between your view of wfb growth versus what your peers suggested um yesterday.
Bren Higgins: ... Hey, Vivek, it's Brad. So I did talk about this a little bit in the letter, but I think one of the issues that has become a little bit noisy over the last couple of years has been the rise of Advanced Packaging as a market. And the inclusion of it in WFE forecasts back in June was that, you know, what do people exactly include in these numbers? And it varies a little bit across analysts and across companies. If you look at our forecast, our view on consistent traditional core WFE in 2025 was around approximately, and we'll see how people report, but approximately $110 billion, and that the Advanced Packaging market, as we look at it, the total market, is roughly in that $11 billion range.
Bren Higgins: ... Hey, Vivek, it's Brad. So I did talk about this a little bit in the letter, but I think one of the issues that has become a little bit noisy over the last couple of years has been the rise of Advanced Packaging as a market. And the inclusion of it in WFE forecasts back in June was that, you know, what do people exactly include in these numbers? And it varies a little bit across analysts and across companies. If you look at our forecast, our view on consistent traditional core WFE in 2025 was around approximately, and we'll see how people report, but approximately $110 billion, and that the Advanced Packaging market, as we look at it, the total market, is roughly in that $11 billion range.
<unk> hundred 20 plus billion.
Definition kind of all in WMC, how much was China and then what are your assumptions about where China would do that.
Hey Rebecca, it's Brian. So I I did talk about this a little bit in the letter but I I think 1 of the issues that has become
And then how much your supply constraints limiting your growth is there a way to quantify.
Right, how much growth, you're kind of leaving on the table because of those supply constraints and how much are the limited growth. This year. Thank you.
All right there is a lot in there for China. Our expectation is that China is flattish maybe slightly positive modest growth in 2026. It was modestly negative in 2025 for the company as a percent of.
As a percent of our revenue, we think it'll be somewhere in the mid <unk>.
20% to high 20% range.
Bren Higgins: So we'll call it the low $120s. As we look at 2026, looking at it in the same way, we see advanced packaging growing somewhere in excess of $12 billion. So, you know, it'll probably be in double digits. We'll see. It tends to be a quicker turn business, so we'll see how that plays out. And that core WFE is rising from $110, as we said, to about somewhere in the low $120s. So I think when you add the two together, you end up in the mid $130s, which is, I think, consistent with what Lam said yesterday. But that's how to think about the market. I don't know how they think about it and what they include and what they don't.
So we'll call it the low $120s. As we look at 2026, looking at it in the same way, we see advanced packaging growing somewhere in excess of $12 billion. So, you know, it'll probably be in double digits. We'll see. It tends to be a quicker turn business, so we'll see how that plays out. And that core WFE is rising from $110, as we said, to about somewhere in the low $120s. So I think when you add the two together, you end up in the mid $130s, which is, I think, consistent with what Lam said yesterday.
As we look at it I think if you look at the total China WSB inclusive of the restricted Fabs, we see China somewhere in the call. It in the mid maybe mid mid $30 billion range mid to high $30 billion range in 2026.
Uh, a little bit noisy over the last couple of years has been the rise of advanced packaging as a market and the inclusion of it in wfb 4 conference. Uh, back in June, was that, you know, that, you know, who what do people exactly include in these numbers and, and it varies a little bit across analysts and across companies. Um, if you look at our forecast, our view on, on consistent, traditional core wfe in 2025 was around approximately and we'll see how people report but approximately 100 and 10 billion dollars and that the advanced packaging Market. As we look at it, the total Market is is roughly in that 11 billion dollar range. So we'll call it the low 120s as we look at 20
Anything on the supply constraints.
Look I think as it relates to the first half.
We're virtually sold out across most of our products given the lead time of our products are decisions that were driving in the first half our decisions with data in the middle of 2025 generally.
But that's how to think about the market. I don't know how they think about it and what they include and what they don't. We try to capture all elements of the market as it relates to process and process control, and so that's how we look at it overall, in terms of what happens on the wafer, film frame, advanced component, and so on. So, that's how we see it. Hopefully, that helps.
2026. Looking at it in the same way, we see Advanced packaging growing somewhere in excess of 12 billion. So, you know, it'll probably be in in double digits, we'll see. It tends to be a, a quicker turn business. So we'll see how that plays out and that core wfe is is rising from 110. As we said to about 1 somewhere in the in the low 120s. So I think when you add the 2 together, you end up in the mid 130s which is, I think consistent with what uh what lamps said yesterday, but that's how to think about the market. I I don't know how they they think about
Bren Higgins: We try to capture all elements of the market as it relates to process and process control, and so that's how we look at it overall, in terms of what happens on the wafer, film frame, advanced component, and so on. So, that's how we see it. Hopefully, that helps.
As we move into the second half and as we talked about in the prepared remarks, we see the second half accelerating versus the first half we have a little bit more flexibility.
About it and what they include and what they don't, we try to capture all elements of the market as it relates to process and process control. And, um,
There are constraints in terms of what our customers are asking for we're seeing our lead times extend their facility readiness dynamics that that will play a role in terms of timing of shipments.
Uh, and so that's how we look at it overall, in terms of what happens on the way for, uh, film frame.
Richard Wallace: And one back, Rick, just to add one part of that, the question on the growth of packaging. When we're talking to our customers, they are frustrated with the shelves that they have available. So part of what's slowing down the growth this year is their ability to have their factories built to support packaging because of the growth. So that's why we see it more; we'll see a lot more growth in 2027 as a result of that. There is demand, but I think it's a matter of getting the facilities ready, which is a theme generally right now with our customers.
Richard Wallace: And one back, Rick, just to add one part of that, the question on the growth of packaging. When we're talking to our customers, they are frustrated with the shelves that they have available. So part of what's slowing down the growth this year is their ability to have their factories built to support packaging because of the growth. So that's why we see it more; we'll see a lot more growth in 2027 as a result of that. There is demand, but I think it's a matter of getting the facilities ready, which is a theme generally right now with our customers.
The one good thing is is it given.
All of the visit.
New facility or Greenfield visibility, we have is it does give us pretty good confidence as we look out into 2027 and most of our conversations today about new orders are for delivery deliveries late in 2006 and into 'twenty seven so.
It's pretty clear from a visibility point of view, we feel pretty pretty good about our ability to ramp the business.
that there is demand, but I think it's a matter of getting
Look back to 2022, I think we did a pretty good job in terms of ramping to support a pretty robust environment.
Bren Higgins: So I think as I go forward, we're just gonna aggregate it, and I think to me, that helps. But what I tried to do was provide over the last several months or so, some disaggregation, disaggregated view of what's traditional core WFE, the same WFE we've looked at over the last multiple decades, and what the advanced packaging market looks like as you add the two together, and you get to the mid-30s, low 30s as we look at 2026.
Bren Higgins: So I think as I go forward, we're just gonna aggregate it, and I think to me, that helps. But what I tried to do was provide over the last several months or so, some disaggregation, disaggregated view of what's traditional core WFE, the same WFE we've looked at over the last multiple decades, and what the advanced packaging market looks like as you add the two together, and you get to the mid-30s, low 30s as we look at 2026.
The facilities are ready, which is a theme generally right now with our customers.
And so I think that that those practices and our investments in how we manage our supply chain.
so I think on the go forward, we're just going to aggregate it and I think they maybe that helps but what I try to do is provide over the last several months or so uh
Some disaggregation.
We'll play through in terms of.
Our ability to satisfy demand as we look out over the next 12 months 24 months.
Thank you.
Thank you we'll take our next question from Harlan sur with JP Morgan.
Disagreed view of what's traditional core WFV? The same WFV we've looked at over the last multiple decades, and what the advanced packaging market looks like as you add the two together, and you get to the mid-30s, 1:30, as we look at 2026.
Vivek Arya: Okay. And for my follow-up, just kind of two clarifications. One is, what's your assumption of China WFE kind of absolute, you know, percentage growth? You know, how much was China WFE as part of that $100+ billion, in your definition, kind of all-in WFE, how much was China? And then what are your assumptions about what China would do this year? And then how much are your supply constraints limiting your growth? Is there a way to quantify right, how much growth you're kind of leaving on the table because of your, you know, where are those supply constraints, and how much are they limiting your growth this year? Thank you.
Vivek Arya: Okay. And for my follow-up, just kind of two clarifications. One is, what's your assumption of China WFE kind of absolute, you know, percentage growth? You know, how much was China WFE as part of that $100+ billion, in your definition, kind of all-in WFE, how much was China? And then what are your assumptions about what China would do this year? And then how much are your supply constraints limiting your growth? Is there a way to quantify right, how much growth you're kind of leaving on the table because of your, you know, where are those supply constraints, and how much are they limiting your growth this year? Thank you.
Hey, good afternoon, Thanks for taking my question.
Your core process control systems business delivered yet another strong year of <unk> outperformance I think it grew one.
One 8% versus $25 does feel like 10 to 12 within this.
Inspection significantly outperformed yet again collector third or cant remember fourth consecutive year growing 25% patterning growing 12%. How are you guys thinking about the growth in inspection and patterning relative to overall <unk> sort of low teens, both this year and given the focus on yield and manufacture.
<unk> would you expect a similar level or more of outperformance in process control for calendar 'twenty six.
Bren Higgins: All right, there's a lot in there. For China, our expectation is that China is flattish, maybe slightly positive, modest growth in 2026. It was modestly negative in 2025. For the company, as a percent of, as a percent of our revenue, we think it'll be somewhere in the mid-20% to high-20% range, as we look at it. I think if you look at the total China WFE, inclusive of the restricted fabs, we see China somewhere in the, we'll call it in the mid-, maybe mid-$30 billion range, mid- to high-$30 billion range, in 2026.
Bren Higgins: All right, there's a lot in there. For China, our expectation is that China is flattish, maybe slightly positive, modest growth in 2026. It was modestly negative in 2025. For the company, as a percent of, as a percent of our revenue, we think it'll be somewhere in the mid-20% to high-20% range, as we look at it. I think if you look at the total China WFE, inclusive of the restricted fabs, we see China somewhere in the, we'll call it in the mid-, maybe mid-$30 billion range, mid- to high-$30 billion range, in 2026.
And for my follow-up, uh, just kind of to clarifications, uh, 1 is what's your assumption of, uh, China? WFC kind of absolute, uh, you know, percentage, uh, growth, you know, how much was China wfp as part of that, you know, 120 plus billion, um, in your definition kind of all in WFC, how much was China? And then, what are your assumptions about what China would do to see it? And then how much are your supply constraints limiting? Your growth is, is there a way to quantify? Um, uh, right. How much growth you're kind of leaving on the table because of your, you know, where are those Supply constraints? And how much are the limiting your growth this year? Thank you.
Yes Harlan.
Thank you I think the recognizing the outperformance I think we're feeling really good about.
The trends that we're seeing especially in inspection and especially as they relate to the PDP products and to <unk> point I think.
All right, all right. There's a lot in there. Uh, for China, our expectation is that China is flattish—maybe slightly positive, modest growth in 2026. It was modestly negative in 2025 for the company as a percent of, uh, uh,
We've been trying to add capacity in that product line and probably.
We're going to need it based on our conversations with customers. So I think there'll be continued growth and everything about what we're seeing in the.
The build out for AI and talked about the increased designs for larger die and now what we're seeing in HBM, which has become a huge driver and in many ways. The bigger story is the change in intensity around memory.
As a percent of our Revenue, we think it'll be somewhere in the mid, uh, 20% to high 20% range. Uh, as we look at it, I, I think if you look at the total China wfb inclusive of the restricted, Fabs, we see China somewhere in the uh, we'll call it in the mid maybe uh mid mid 30 billion dollar range, maybe mid to high 30 billion dollar range uh in 2026.
Vivek Arya: Anything on supply constraints?
Vivek Arya: Anything on supply constraints?
Anything on Supply constraints. Uh,
<unk> has been pretty dramatic in terms of if we look back the last couple of years and they have a heavy usage of <unk>.
Bren Higgins: Look, I think as it relates to the first half, we're virtually sold out across most of our products. Given the lead time of our products, our decisions that we're driving the first half were decisions we made in the middle of 2025, generally. As we move into the second half, and as we talked about the prepared remarks, we see the second half accelerating versus the first half. We have a little bit more flexibility, but, you know, there are constraints in terms of what our customers are asking for. We're seeing our lead times extend. There are facility readiness dynamics that will play a role in terms of timing of shipments.
Bren Higgins: Look, I think as it relates to the first half, we're virtually sold out across most of our products. Given the lead time of our products, our decisions that we're driving the first half were decisions we made in the middle of 2025, generally. As we move into the second half, and as we talked about the prepared remarks, we see the second half accelerating versus the first half. We have a little bit more flexibility, but, you know, there are constraints in terms of what our customers are asking for. We're seeing our lead times extend. There are facility readiness dynamics that will play a role in terms of timing of shipments.
Advanced inspection to support that so.
Its good I mean, we're <unk>.
Looking at <unk>.
Modeling as we go forward and our customers have told US 26 is the expansion in.
In setting the stage for even more expansion seven and so we think we'll continue to see strong growth associated with that I think that the capacity I mean metrology is historically, a little closer tied to some of the capacity. So we will see some.
Relative to recovery and then radical is going to be very strong because it's so tied to the number of design starts and the challenges associated with advanced maps.
Bren Higgins: The one good thing is that given all the new facility or greenfield visibility we have, it does give us pretty good confidence as we look out into 2027, and most of our conversations today about new orders are for deliveries late in 2026 and into 2027. So, it's pretty clear from a visibility point of view, we feel pretty good about our ability to ramp the business. I think if you look back to 2022, I think we did a pretty good job in terms of ramping to support a pretty robust environment.
The one good thing is that given all the new facility or greenfield visibility we have, it does give us pretty good confidence as we look out into 2027, and most of our conversations today about new orders are for deliveries late in 2026 and into 2027. So, it's pretty clear from a visibility point of view, we feel pretty good about our ability to ramp the business. I think if you look back to 2022, I think we did a pretty good job in terms of ramping to support a pretty robust environment. And so I think that, you know, that those practices and our investments and how we manage our supply chain will play through in terms of our ability to satisfy demand as we look out over the next 12 to 24 months.
look, I think as it relates to the first half, uh, we're virtually sold out across most of our products given the lead time of our products, our decisions that were were were driving. The first half were decisions. We made in the middle of 2025 generally, uh, as we move into the second half. And as we talked about the prepared remarks, we see the second half, accelerating versus the first half. We have a little bit more flexibility, uh, but you know, there are constraints, uh, in terms of of what our customers are asking for. We're seeing our lead times extend their facility Readiness dynamics that, uh, that will be a play a role in terms of of timing of shipments.
If I Miss anything.
To your question about about relative performance I think despite the.
More mix related to memory.
As Rick talked about our performance in HBM is change in the intensity profile and so we feel pretty good about our ability to sustain the multiyear outperformance that we've seen so I think it's pretty exciting the portfolio is in a.
A really good place from an overall share point of view and we are seeing intensity rise in a number of a number of markets feel pretty good about it.
Bren Higgins: And so I think that, you know, that those practices and our investments and how we manage our supply chain will play through in terms of our ability to satisfy demand as we look out over the next 12 to 24 months.
Great. Thank you for that and for my follow up it's pretty well understood that all of these new sort of <unk>.
And then technology transitions.
You need a lot more inspection and metrology capabilities right, but on top of that given the industry's chip supply tightness.
Vivek Arya: Thank you.
Vivek Arya: Thank you.
Um the 1 good thing is, is that given the all the uh, new facility or Green Field visibility we have is it does give us pretty good confidence, as we look out into 2027 and most of our conversations today about new orders are are for deliveries late in 26 and, and into 27. So, uh, it's it's pretty clear from a visibility point of view. We feel pretty, uh, pretty good about our ability to ramp the business. Like, if you look back to 2022, I think we did a pretty good job in terms of of ramping to support a pretty robust environment. Uh, and and so, I think that, you know, that that those practices and our investments and how we manage our supply chain, uh, will play through in terms of, uh, of our ability to satisfy demand as we look out over the next 12 to 24 months,
Operator: Thank you. We'll take our next question from Harlan Sur with J.P. Morgan.
Operator: Thank you. We'll take our next question from Harlan Sur with J.P. Morgan.
Thank you.
We're looking to even further squeeze more supply for a given sort of current installed base I'm wondering is this and so their focus.
Thank you, we'll take our next question from Harland Sir. With JP Morgan.
Harlan Sur: Hey, good afternoon, and thanks for taking my question. Your core process control systems business delivered yet another strong year of WFE outperformance. I think it grew 20% versus 2025 WFE of, like, +10 to 12. Within this, inspection significantly outperformed yet again for, like, the third or, I can't remember, fourth or consecutive year, growing 25%, patterning growing 12%. How are you guys thinking about the growth in inspection and patterning relative to overall WFE view of sort of low teens growth this year? I mean, given the focus on yield and manufacturability, would you expect a similar level or more of outperformance in process control for calendar 2026?
Harlan Sur: Hey, good afternoon, and thanks for taking my question. Your core process control systems business delivered yet another strong year of WFE outperformance. I think it grew 20% versus 2025 WFE of, like, +10 to 12. Within this, inspection significantly outperformed yet again for, like, the third or, I can't remember, fourth or consecutive year, growing 25%, patterning growing 12%. How are you guys thinking about the growth in inspection and patterning relative to overall WFE view of sort of low teens growth this year? I mean, given the focus on yield and manufacturability, would you expect a similar level or more of outperformance in process control for calendar 2026?
Just as much on <unk>.
Technology transition, but on the existing capacity footprint trying to drive more supply via yield improvements better menu flexibility I'm wondering if this is also driving incremental demand for your process for both cylinder.
Hey, good afternoon, and thanks for taking my question. Um, your core Process Control Systems business delivered yet another strong year of WC performance. I think you grew 20% versus 2025 WFC of, like, plus 10 to 12% within this.
Yes, certainly I mean, we have seen in some cases.
<unk> penetration of technologies once the recognition was that two things have happened in some cases, if you go back in time, they would move from one technology or the next day not really pay much attention at the Pryor now theres more demand at the prior and if theyre getting advantages and the capabilities and the latest technology node, we see back penetration.
Inspection significantly outperformed yet again, for like the third or—I can't remember—fourth consecutive year, growing 25%. Patterning grew 12%. How are you guys thinking about the growth in inspection and patterning relative to overall WFCU of sort of low teens growth this year? I mean, given the focus on yield and manufacturability, would you expect a similar level or more of outperformance in process control for calendar '26?
Richard Wallace: Yeah, Harlan, it's Rick. Thank you. I think, recognizing the outperformance, I think we're feeling really good about the trends that we're seeing, especially in inspection and especially as they relate to the BBP products. And to Bren's point, I think, yeah, you know, we've been trying to add capacity in that product line, and probably, we're gonna need it based on our conversations with customers. So I think there'll be continued growth, and everything about what we're seeing in the build-out for AI, Bren talked about the increased designs, the larger die, and now what we're seeing in HBM, which has become a huge driver.
Richard Wallace: Yeah, Harlan, it's Rick. Thank you. I think, recognizing the outperformance, I think we're feeling really good about the trends that we're seeing, especially in inspection and especially as they relate to the BBP products. And to Bren's point, I think, yeah, you know, we've been trying to add capacity in that product line, and probably, we're gonna need it based on our conversations with customers. So I think there'll be continued growth, and everything about what we're seeing in the build-out for AI, Bren talked about the increased designs, the larger die, and now what we're seeing in HBM, which has become a huge driver.
To squeeze out to your point more yield right now because of the constraints and I think if you when we talked to all our customers. We hear common theme is they are constrained by the ability to build new fabs and new shelves.
Uh yeah, Harlow, it's Rick. Um, thank you. I I I think the recognizing the outperformance. I think we're feeling really good about
For the most part we're trying to do everything they can to optimize and then the pricing environment as such for them that that additional yield.
So thats the other factor that's driving them.
Thanks, Rick Thanks, Brent.
Richard Wallace: In many ways, the bigger story is the change in intensity around memory has been pretty dramatic in terms of if we look back the last couple of years, and the heavy, heavy usage of advanced inspection to support that. So it's good. I mean, it we're looking at a modeling as we go forward, and our customers have told us 2026 is expansion, and setting the stage for even more expansion in 2027. And so we think we'll continue to see strong growth associated with that. I think that the capacity, I mean, metrology is historically a little closer tied to some of the capacity, so, you know, we'll see some relative recovery, and then reticle is gonna be very strong, because it's so tied to the number of design starts and the challenges associated with advanced masks.
Thanks.
In many ways, the bigger story is the change in intensity around memory has been pretty dramatic in terms of if we look back the last couple of years, and the heavy, heavy usage of advanced inspection to support that. So it's good. I mean, it we're looking at a modeling as we go forward, and our customers have told us 2026 is expansion, and setting the stage for even more expansion in 2027. And so we think we'll continue to see strong growth associated with that. I think that the capacity, I mean, metrology is historically a little closer tied to some of the capacity, so, you know, we'll see some relative recovery, and then reticle is gonna be very strong, because it's so tied to the number of design starts and the challenges associated with advanced masks. Bren, am I missing anything?
Thank you we'll take our next question from Joe <unk> with Wells Fargo.
Yes, thanks for taking the question maybe just.
I understand that the supply trends that youre seeing in the first half any way that you can kind of help us understand.
What could growth as potentially kind of been first half versus second half. If you didn't have those supply constraints and then.
The build out for AI, Brent talked about the increased designs, the larger die. And now what we're seeing in hbm which has become a huge driver. And in many ways, a bigger story is the change in intensity around memory, uh, has has been pretty dramatic in terms of if we look back the last couple years and they have a heavy usage of uh, Advanced inspection to support that, so it's good. I mean, it it we're looking at a
Is it mostly just DRAM or is it also other.
Other components like optics and things.
Well, Joe the biggest long lead time aspect of our building materials and optical components. So to my earlier point about the lead time for that tends to be pretty long so that does.
Like I said, we're making decisions last summer that was affecting what we expect to ship in the first half of the year.
Richard Wallace: Bren, am I missing anything?
A modeling as we go forward. And and our customers have told us 26 is expansion, uh, and setting the stage for even more expansion in 27. And so, we think we'll continue to see strong growth associated with that. I think that the capacity. I mean, Metrology is historically a little closer, tied to some of the capacity. So, you know, we'll see some relative recovery and then reticle is going to be very strong, uh, because it's so tied to the number of design starts and the challenges associated with advanced math.
Bren Higgins: Yeah, I think to your question about relative performance, I think despite the, you know, more mix related to memory, as Rick talked about, our performance in HBM has changed in the intensity profile. And so we feel pretty good about our ability to sustain the multiyear outperformance that we've seen. So, I think it's pretty exciting. The portfolio is in a really good place from an overall share point of view, and we're seeing intensity rise in a number of markets, so we feel pretty good about it.
Bren Higgins: Yeah, I think to your question about relative performance, I think despite the, you know, more mix related to memory, as Rick talked about, our performance in HBM has changed in the intensity profile. And so we feel pretty good about our ability to sustain the multiyear outperformance that we've seen. So, I think it's pretty exciting. The portfolio is in a really good place from an overall share point of view, and we're seeing intensity rise in a number of markets, so we feel pretty good about it.
So that's probably the biggest factor we don't really look at what we could have done certainly in the last few months, we've seen a strengthening from customers or more demand in the first half and so I mean, the good thing about our differentiation and our market position is is that we can balance pretty well across our customers to <unk>.
Sure that we're trying to meet their needs at the same time, we're not we're not missing business or losing business. So.
Our lead times are extending our customers know that and so.
Right. Am I missing anything? Yeah, I think to your question about about relative performance, I think despite the the uh the you know, more mixed related to memory. Uh, as Rick talked about our, our performance in hbm has changed in the intensity profile and so we feel pretty good about our ability to to sustain the the multi-year outperformance that we've seen. So uh I think it's it's pretty exciting. The portfolio is in a really good place from a an overall share point of view and we're seeing intensity rise uh in a number of uh a number of markets. So feel free to go.
About it.
Harlan Sur: Great. Thank you for that. And for my follow-up, you know, it's pretty well understood that on all these new sort of advanced technology transitions, you do need a lot more inspection and metrology capabilities, right? But on top of that, you know, given the industry's chip supply tightness, your customers are looking to even further squeeze more supply for a given sort of current installed base. I'm wondering, is this, and so they're, they're focused, you know, just as much on technology transition, but on the existing capacity footprint, trying to drive more supply via yield improvements, better manufacturability. I'm wondering if this is also driving incremental demand for your process control solution?
Harlan Sur: Great. Thank you for that. And for my follow-up, you know, it's pretty well understood that on all these new sort of advanced technology transitions, you do need a lot more inspection and metrology capabilities, right? But on top of that, you know, given the industry's chip supply tightness, your customers are looking to even further squeeze more supply for a given sort of current installed base. I'm wondering, is this, and so they're, they're focused, you know, just as much on technology transition, but on the existing capacity footprint, trying to drive more supply via yield improvements, better manufacturability. I'm wondering if this is also driving incremental demand for your process control solution?
We're managing it accordingly.
But I don't think I could've done this or could have done that what can you do and so I think that the.
The nature of our conversations with customers and then we look to improve as we can as we move in the second half of 2006, we will we will see the business accelerate would expect second half to.
Great, thank you for that and for my follow-up, you know, it's pretty well. Understood that all these new sort of advanced technology transitions. We do need a lot more inspection and mology capabilities, right? But on top of that, you know, given the industry chip Supply tightness
Have you know high single, maybe low double digit type growth.
As we move into the second half of the year.
I think as an industry you have to remember if we moved independently if we could supply everything everybody wanted right away. It still would be a limit there are other factors that limit their ability to ramp. These fab. So our customers when we talk to them or having the same conversation with our peers that they're having with us is collectively they need all the equip.
Your customers are looking to, even further, squeeze more supply from a given sort of current installed base. I'm wondering, is this— And so they're focused, you know, just as much on technology transition, but on the existing capacity footprint, trying to drive more supply via yield improvements and better manufacturability. I'm wondering if this is also driving incremental demand for your process control solution.
Bren Higgins: Yeah, certainly. I mean, we have seen in some cases back penetration of technologies once the recognition was that two things have happened. In some cases, you know, if you go back in time, they'd move from one technology to the next and not really pay much attention to the prior. Now, there's more demand at the prior, and if they're getting advantages in the capabilities in the latest technology node, we've seen back penetration to squeeze out, to your point, more yield. Right now, because of the constraints, and I think if you-- when we talk to all our customers, we hear a common theme, is they're constrained by the ability to build new fabs and new shells.
Bren Higgins: Yeah, certainly. I mean, we have seen in some cases back penetration of technologies once the recognition was that two things have happened. In some cases, you know, if you go back in time, they'd move from one technology to the next and not really pay much attention to the prior. Now, there's more demand at the prior, and if they're getting advantages in the capabilities in the latest technology node, we've seen back penetration to squeeze out, to your point, more yield.
In order to be able to ramp and so the frustration for a lot of them now as they've got demand and in some cases, they don't even have the ability to build the shelves as fast as they want and then fill it out so to Brian's point collectively we're all being asked to accelerate equip.
Equipment delivery, but it is not really.
Because we don't have Pvp that we're missing out as part of their overall solution. So when we talk to them they really want to prioritize where when they get that equipment to be able to facilitate that but we're not going to lose share because.
Right now, because of the constraints, and I think if you-- when we talk to all our customers, we hear a common theme, is they're constrained by the ability to build new fabs and new shells. But to your point, they're, for the most part, trying to do everything they can to optimize. And then the pricing environment is such for them that, that additional yield is worth more. And so that's the other factor that's, that's driving them.
That's helpful and then as a follow up just trying to understand like the the kind of trajectory of gross margin.
Harlan Sur: Mm-hmm.
Bren Higgins: But to your point, they're, for the most part, trying to do everything they can to optimize. And then the pricing environment is such for them that, that additional yield is worth more. And so that's the other factor that's, that's driving them.
Yeah, certainly I mean, we we have seen in some cases uh, back time of tration of Technologies. Once the recognition was that 2, things have happened in some cases. You know, if you go back in time, they'd move from 1 technology to the next and not really pay much attention to the prior. Now, there's more demand at the prior and if they're getting advantages in the capabilities in the latest technology node, we've seen back penetration uh, to squeeze out to your point more yield right now because of the constraints. And I think if you, when we talked to all our customers, we hear a common theme, is their constrained by the ability to build new Fabs and new shells. So, to your point, they're for the most part trying to do everything they can.
I mean, it seems like maybe based on the guidance March is kind of the bottom and we move higher from here and anything you can share on just the ability to pass through higher component costs or <unk>.
Uh, to optimize. And then the pricing environment is such for them that that additional yield is worth more. And so that's the other factor that's driving them.
Harlan Sur: Thanks, Rick. Thanks, Bren.
Harlan Sur: Thanks, Rick. Thanks, Bren.
Price your backlog.
Thanks Rick. Thanks Brent.
Bren Higgins: Thanks.
Bren Higgins: Thanks.
Yes so.
Operator: Thank you. We'll take our next question from Joe Quattrocki with Wells Fargo.
Operator: Thank you. We'll take our next question from Joe Quattrocki with Wells Fargo.
Thanks.
I think you are right. It looks like March is probably the low point for the year as that goes and as we move across the year, we will see an increment up.
Thank you. We'll take our next question from Joe Quadra with Wells Fargo.
Joe Quatrochi: Yeah, thanks for taking the question. Maybe just kind of understand the supply constraints that you're seeing in the first half. Any way that you can kind of help us understand just, you know, what could growth have potentially kind of been first half or second half if you didn't have those supply constraints? And then, is it mostly just DRAM, or is it also other components like optics and things?
Joseph Quatrochi: Yeah, thanks for taking the question. Maybe just kind of understand the supply constraints that you're seeing in the first half. Any way that you can kind of help us understand just, you know, what could growth have potentially kind of been first half or second half if you didn't have those supply constraints? And then, is it mostly just DRAM, or is it also other components like optics and things?
We're going to be our first priority as it relates to memory supply is securing supply to ensure that we can meet our delivery commitments and support our customers.
That's our primary focus wed also wed expect that that.
Tariff burden as we progress through 2026, given some of the the process things we're doing within the company will will also diminish in terms of its impact I talked about a 50 to 100 basis point impact related to tariffs, we're closer to the top end of that range today, and we will see that come down I think.
Yeah, thanks for taking the question. Maybe just want to kind of understand that the supply constraints that you're seeing in the first half any way that that you can kind of help us understand just, you know, what could growth as the potentially kind of been first half or second half if he didn't have those Supply constraints and then, um, is it mostly just dram or is it also, um, other components, like Optics and things?
Bren Higgins: Well, Joe, Joe, the biggest long lead time aspect of our bill of material is an optical component. So to my earlier point about the lead time for that tends to be pretty long. So that does. You know, we're, like I said, we were making decisions last summer that was affecting what we expect to ship in the first half of the year. So that's probably the biggest factor. We don't really look at what we could have done. Certainly, in the last few months, we've seen a strengthening from customers for more demand in the first half. And so, I mean, the good thing about our differentiation and our market position is that we can balance pretty well across our customers to make sure that we're trying to meet their needs.
Bren Higgins: Well, Joe, Joe, the biggest long lead time aspect of our bill of material is an optical component. So to my earlier point about the lead time for that tends to be pretty long. So that does. You know, we're, like I said, we were making decisions last summer that was affecting what we expect to ship in the first half of the year. So that's probably the biggest factor. We don't really look at what we could have done. Certainly, in the last few months, we've seen a strengthening from customers for more demand in the first half. And so, I mean, the good thing about our differentiation and our market position is that we can balance pretty well across our customers to make sure that we're trying to meet their needs.
Well, Joe—Joe, the biggest.
Over time so is.
As it relates I thought it was important to give you some sense of it in terms of the expectations for the year, 62% plus or minus 50 basis points. We think the memory situation is transitory and really as it relates to how we price our products. It's much more of a of a value oriented pricing model.
Less about cost movement, particularly around commodities so.
Bren Higgins: At the same time, we're not, you know, we're not missing business or losing business. So, our lead times are extending. Our customers know that, and so, we're managing it accordingly. So I don't-- but I don't think, you know, I go, "Oh, I could have done this, or I could have done that." It's, you know, what can you do? And so, you know, I think that that's the nature of our conversations with customers, and then we look to improve as we can. As we move in the second half of 2026, we'll see the business accelerate. Would expect, you know, second half to have high single-digit, maybe low double-digit type growth, as we move into the second half of the year.
Important that we continue to maintain the product cadence that we have in terms of launching new products and variance of new products and that gives us an opportunity to two.
At the same time, we're not, you know, we're not missing business or losing business. So, our lead times are extending. Our customers know that, and so, we're managing it accordingly. So I don't-- but I don't think, you know, I go, "Oh, I could have done this, or I could have done that." It's, you know, what can you do? And so, you know, I think that that's the nature of our conversations with customers, and then we look to improve as we can. As we move in the second half of 2026, we'll see the business accelerate. Would expect, you know, second half to have high single-digit, maybe low double-digit type growth, as we move into the second half of the year.
Our build of materials is an optical component. So to my earlier point about the, the lead time for for that tends, to be pretty long. So that does you know, like I said, we were making decisions last summer, that was affecting what we expect to ship in the first half of the year. So, that's probably the biggest Factor. We don't really look at what we could have done, certainly in the last few months. We've seen a strengthening from customers for for more demand in the first half. And so, I mean, the good thing about our differentiation uh, in our Market position is, is that we can balance pretty well across our customers. To make sure that we're we're trying to meet their needs, uh, at the same time, we're not, you know, we're not missing.
To enhance our cost of ownership offering to our customers add new capability and also take into consideration. Some of these dynamics around cost that we've been dealing with for some time, starting with some of the pretty significant inflation just a few years ago to this issue today. So that's how we're thinking about it right now.
Business or losing business. So, um, our lead times are extending, our customers know that. And so, um, we're managing accordingly.
Helpful. Thank you Joe.
Thank you we'll take our next question from C J Muse with Cantor Fitzgerald.
Bren Higgins: I think as an industry, you have to remember, if we moved independently, if we could supply everything everybody wanted right away, it still would be a limit. There are other factors that limit their ability to ramp these fabs. So our customers, when we talk to them, are having the same conversation with our peers that they're having with us, because collectively, they need all the equipment in order to be able to ramp. And so the frustration for a lot of them now is they've got demand, and in some cases, they don't even have the ability to build the shelves as fast as they want and then fill it out. So to Bren's point, you know, collectively, we're all being asked to accelerate equipment delivery, but it's not really because we don't have BBP that we're missing out.
Richard Wallace: I think as an industry, you have to remember, if we moved independently, if we could supply everything everybody wanted right away, it still would be a limit. There are other factors that limit their ability to ramp these fabs. So our customers, when we talk to them, are having the same conversation with our peers that they're having with us, because collectively, they need all the equipment in order to be able to ramp.
He gave you muted your phone please on mute.
I apologize thank you for taking the question.
First question on gross margins.
How are you thinking about the progression through the year given the overall guide of 62% and then more importantly, I guess what are your thoughts around 2027.
And so the frustration for a lot of them now is they've got demand, and in some cases, they don't even have the ability to build the shelves as fast as they want and then fill it out. So to Bren's point, you know, collectively, we're all being asked to accelerate equipment delivery, but it's not really because we don't have BBP that we're missing out. It's part of their overall solution. So when we talk to them, they really want to prioritize when they get that equipment to be able to facilitate it, but we're not going to lose share because of it.
The ability to kind of pass along the higher DRAM costs, which I don't assume well will go away anytime soon and I guess as you deliver kind of.
Newer products, what impact would should that have on incremental gross margins into next year.
Great. Uh, would expect, you know, second half to to, you know, have you know, High single, maybe low double-digit type growth. Um, as as we move into the second half of the year, I I think as an industry you you have to remember if we moved independently, if we could Supply everything, everybody wanted right away, it still would be a limit. There are other factors that limit their ability to ramp these facts. So our customers, when we talk to them, are having the same conversation with our peers that they're having with us, because collectively they need all the equipment in order to be able to ramp. And so, the frustration for a lot of them now is they've got demand and in some cases they don't even have the ability to build the shelves as fast as they want and then fill it out. So to Brens point, you know, collectively, we're all being asked to to accelerate uh, equipment delivery but it's not really.
Bren Higgins: It's part of their overall solution. So when we talk to them, they really want to prioritize when they get that equipment to be able to facilitate it, but we're not going to lose share because of it.
Because we don't have BVP, that's what we're missing out on; it's part of their overall solution.
Yes, so over the course of the rest of this year I think the margins.
Product mix is probably the biggest factor in quarter to quarter variability, but I would expect gross margins to trend north part of it being our expectations around mix here, but also expected increases in overall volumes. So I think that there is some scale benefit that we'll see that will flow through over the long run.
So, when we talk to them, they really want to prioritize where, when they get that equipment, to be able to facilitate it. But we're not going to lose share because—
Joe Quatrochi: That's helpful. As a follow-up, just trying to understand, like, the kind of trajectory of gross margin. I mean, it seems like maybe based on the guidance, March is kind of the bottom, and we move higher from here. Anything you can share on just the ability to, like, pass through higher component costs or reprice your backlog?
Joseph Quatrochi: That's helpful. As a follow-up, just trying to understand, like, the kind of trajectory of gross margin. I mean, it seems like maybe based on the guidance, March is kind of the bottom, and we move higher from here. Anything you can share on just the ability to, like, pass through higher component costs or reprice your backlog?
Feel pretty comfortable with as we talked about our model that we presented at our last Investor day of 63% plus type gross margin profile.
That's that's helpful and then as a as a follow-up, just trying to understand like the the kind of trajectory of gross margin, um, I mean it seems like maybe based on the guidance of March is, is kind of the bottom and we move higher from here and anything you can share and just the ability to like pass through higher component costs or repress, your backlog.
Bren Higgins: Yeah. So, I think you're right. It looks like March is probably the low point for the year as that goes, and as we move across the year, we'll see it increment up. You know, our first priority as it relates to memory supply is securing supply to ensure that we can meet our delivery commitments and support our customers. That's our primary focus. We'd also expect that the tariff burden as we progress through 2026, given some of the process things we're doing within the company, will also diminish in terms of its impact. I talked about a 50 to 100 basis point impact related to tariffs. We're closer to the top end of that range today, and we'll see that come down, I think, over time.
Bren Higgins: Yeah. So, I think you're right. It looks like March is probably the low point for the year as that goes, and as we move across the year, we'll see it increment up. You know, our first priority as it relates to memory supply is securing supply to ensure that we can meet our delivery commitments and support our customers. That's our primary focus. We'd also expect that the tariff burden as we progress through 2026, given some of the process things we're doing within the company, will also diminish in terms of its impact.
It's still very good about that.
And given the mix of our business the growth rates of service and so on so I think as we look into 2027 and I would expect to see.
Yeah, so, uh, I think you're right. It looks like March is probably the low point for the year as that goes, and as we move across the year, we'll see it increment up.
Gross margins continue on kind of an incremental cadence from where they are and I feel pretty good about 63% plus.
Um, we're going to be in our first priority as it relates to memory Supply is securing Supply to ensure that we can meet our delivery commitments and and support our customers. Uh, that's our primary focus. Uh, we'd also would expect that
As we go forward and we see some normalization in.
And some of these cost areas.
Very helpful. And then I wanted to focus on DRAM I think your share of wallet historically has been kind of seven to eight 9% depending on the year, but curious now with HBO and particularly as we evolve to a step forward for <unk>.
I talked about a 50 to 100 basis point impact related to tariffs. We're closer to the top end of that range today, and we'll see that come down, I think, over time.As it relates, I thought it was important to give you some sense of it in terms of the expectations for the year, 62% ±50 basis points. We think the memory situation is transitory, and really, as it relates to how we price our products, it's much more of a value-oriented pricing model, and less about cost movement, particularly around commodities.
That the tariff burden, as we progress through 2026, given some of the process things we're doing within the company, will also diminish in terms of its impact.
Bren Higgins: As it relates, I thought it was important to give you some sense of it in terms of the expectations for the year, 62% ±50 basis points. We think the memory situation is transitory, and really, as it relates to how we price our products, it's much more of a value-oriented pricing model, and less about cost movement, particularly around commodities.
Do you see that share kind of progressing in 2006 and two.
Thanks, so much.
Sure I think.
Technologically theres a lot of reasons explain why we're seeing higher adoption of one we've talked about before is less redundancy. The value of these devices is higher so there is less willingness to giveaway real estate to redundancy.
Bren Higgins: So it's important that we continue to maintain the product cadence that we have in terms of launching new products and variants of new products, and that gives us an opportunity to enhance our cost of ownership offering to our customers, add new capability, and also take into consideration some of these dynamics around cost that we've been dealing with for some time, starting with some of the pretty significant inflation just a few years ago to this issue today. So that's how we're thinking about it right now.
So it's important that we continue to maintain the product cadence that we have in terms of launching new products and variants of new products, and that gives us an opportunity to enhance our cost of ownership offering to our customers, add new capability, and also take into consideration some of these dynamics around cost that we've been dealing with for some time, starting with some of the pretty significant inflation just a few years ago to this issue today. So that's how we're thinking about it right now.
Because you've got to move so much data in and out there's more.
<unk> layers, which require more inspection and then there is the increased use of the advanced lithography, which requires it.
More inspection so all those things are driving.
Okay.
Talked about a 50 to 100 basis. Point impact related to tariffs, work were closer to the top end of that range today. And we'll see that, uh, that that come down I think over time. So as it relates, I thought it was important to to give you some sense of it. In terms of the expectations for the year, 62% plus or minus 50 basis points. Uh, we think the memory situation is, is transitory and, and really, as it relates to how we we price our products. It's much more of, a, of a value. Oriented pricing model, uh, unless about cost movement, particularly around Commodities. So, it's important that we continue to maintain the product Cadence that we have in terms of launching new products, and variants of new products. And that gives us an opportunity to, uh, to enhance, uh, our cost of ownership, uh, offering to our customers at new capability and all
DRAM it looks much more.
Similar to what logic did not that long ago. So I think all of those issues are driving that and we feel really good about.
Also, taking into consideration some of these dynamics around costs that we've been dealing with for some time—starting with some of the pretty significant inflation just a few years ago—to this issue today. So that's how we're thinking about it right now.
Joe Quatrochi: Helpful. Thank you.
Joseph Quatrochi: Helpful. Thank you.
That going forward as we are engaging with customers and they're seeing the benefits of for many of them. They haven't.
Bren Higgins: Thanks, Joe.
Bren Higgins: Thanks, Joe.
Helpful. Thank you.
Operator: Thank you. We'll take our next question from C.J. Muse with Cantor Fitzgerald. C.J., you muted your phone. Please unmute.
Operator: Thank you. We'll take our next question from C.J. Muse with Cantor Fitzgerald. C.J., you muted your phone. Please unmute.
A lot of process control like this.
Thank you. We'll take our next question from CJ Muse with Canaccord Genuity. Gerald,
Most of their.
Working lifetime, so we're seeing them getting used to that and coming to us for more capability.
Other thing is the process variability flexibility.
DJ, if you muted your phone, please unmute.
C. J. Muse: Apologies. Thank you for taking the question. I guess first question on gross margins, you know, how are you thinking about the progression, you know, through the year, you know, given the overall guide of 62%? And then, you know, more importantly, you know, I guess, what are your thoughts around 2027 and, you know, the ability to kind of pass along the higher DRAM costs, which I don't assume will go away anytime soon. And I guess as you deliver kind of newer products, you know, what impact would- should that have on incremental gross margins into next year?
C.J. Muse: Apologies. Thank you for taking the question. I guess first question on gross margins, you know, how are you thinking about the progression, you know, through the year, you know, given the overall guide of 62%? And then, you know, more importantly, you know, I guess, what are your thoughts around 2027 and, you know, the ability to kind of pass along the higher DRAM costs, which I don't assume will go away anytime soon. And I guess as you deliver kind of newer products, you know, what impact would- should that have on incremental gross margins into next year?
In the past depending on end market with something that customers could then devices in it with high performance compute they don't have the ability to do that so that's that's driving more rigor around ensuring that each of the devices in the stacks performs pretty tight specs.
The demand environment is also driving opportunities in our service business as customers.
Look to keep these tools up.
To have maximum uptime to ensure good performance where in the past with redundancy you might see less contract penetration. We think it's a growth opportunity here moving forward given the nature of these devices and their requirements.
I apologies. Uh, thank you for taking the question. Um, I guess first question on Gross margins. You know how how are you thinking about the progression, you know, through the year, you know, given the the overall guided 62% and then, you know, more importantly, you know, I guess what, what are your thoughts around 2027? And, you know, the ability to kind of pass along the higher, D ram cost, which I don't assume will we we'll go away anytime soon and and I guess as you deliver kind of newer products you know what impact would should that have on incremental gross margins into next year?
Bren Higgins: Yeah, so over the course of the rest of this year, I think that margins, you know, look, product mix is probably the biggest factor in quarter-to-quarter variability, but I would expect gross margins to trend north. Part of it being our expectations around mix here, but also expected increases in overall volume. So I think that there's some scale benefits that we'll see that will flow through. Over the long run, I feel pretty comfortable with, as we talked about, our model that we presented at our last Investor Day of 63% plus type gross margin profile. I feel still very good about that, and given the mix of our business, the growth rates of service and so on.
Bren Higgins: Yeah, so over the course of the rest of this year, I think that margins, you know, look, product mix is probably the biggest factor in quarter-to-quarter variability, but I would expect gross margins to trend north. Part of it being our expectations around mix here, but also expected increases in overall volume. So I think that there's some scale benefits that we'll see that will flow through. Over the long run, I feel pretty comfortable with, as we talked about, our model that we presented at our last Investor Day of 63% plus type gross margin profile. I feel still very good about that, and given the mix of our business, the growth rates of service and so on.
Okay.
Thank you.
Sure.
Good morning, Dan.
Thank you for letting me ask a question. My first question I just wanted to follow up on <unk> question earlier, but you've previously talked about DRAM process control intensity, increasing 100 basis points with the UV and another 100 basis points of HBM is there a world in which DRAM process control intensity, just really gets close to advanced logic. Thank you.
Yeah, so over the course of the rest of this year, I think that margins—you know, look, product mix is probably the biggest factor in quarter-to-quarter variability—but I would expect gross margins to trend north. Part of it being our expectations around mix here, but also expected increases in overall volume. So I think that there are some scale benefits that we'll see that will—
Well, it's still a ways away from advanced logic, given the high mix of designs and so that's I think the biggest issue that you see in advanced logic.
Bren Higgins: So I think as we look into 2027, I would expect to see, you know, gross margins continue on kind of an incremental cadence from where they are. And, you know, I feel pretty good about, you know, 63%+ as we go forward and we see some normalization in some of these cost areas.
So I think as we look into 2027, I would expect to see, you know, gross margins continue on kind of an incremental cadence from where they are. And, you know, I feel pretty good about, you know, 63%+ as we go forward and we see some normalization in some of these cost areas.
Different than than memory. So we're pretty encouraged by what we're seeing we will see how this plays out with with more <unk> layers and so on in DRAM devices.
At, at, at—uh, as, as we go forward and we see some normalization in, uh, in, in some of these cost areas.
C. J. Muse: Very helpful. And then wanted to focus on DRAM. I think your share of wallet historically has been kind of 7, 8, 9%, depending on the year. But curious now with HBM, particularly as we evolve to HBM4 and HBM4E, you know, how do you see that share kind of progressing in 2026 and 2027? Thanks so much.
C.J. Muse: Very helpful. And then wanted to focus on DRAM. I think your share of wallet historically has been kind of 7, 8, 9%, depending on the year. But curious now with HBM, particularly as we evolve to HBM4 and HBM4E, you know, how do you see that share kind of progressing in 2026 and 2027? Thanks so much.
So we think that it's just.
The market requirements are driving more inspection more metrology and we think that will be a positive trend I'm not sure I'm ready to commit to something that looks like advanced logic, just given the nature of those devices.
And the differences in a logic fab versus memory.
Very helpful and then wanted to focus on on dram. I think your, your share of wallet historically has been kind of 789% uh, depending on the year. But curious now with with hbm, particularly as we evolved to hbm, 4 and 4, you know, how do you see that? Share? Kind of progressing in 26, uh, and 27. Thanks so much.
Got it and my follow up is on foundry logic, so you've called out a broadening of foundry customers over the last year and that's clearly materializing with your customers' capex announcements, but could you talk about the process control intensity up these customers and just how good can leading edge logic for U b. This year. Thank you.
Bren Higgins: Sure. I think, technologically, there's a lot of reasons to explain why we're seeing higher adoption. One, we talked about before, is less redundancy. The value of these devices is higher, so there's less willingness to give away real estate to redundancy. Because you've got to move so much data in and out, there's more metallization layers, which require more inspection. And then there is the increased use of the advanced lithography, which requires an EUV, more inspection. So all those things are driving up the intensity of DRAM, and it looks much more similar to what logic did not that long ago.
Bren Higgins: Sure. I think, technologically, there's a lot of reasons to explain why we're seeing higher adoption. One, we talked about before, is less redundancy. The value of these devices is higher, so there's less willingness to give away real estate to redundancy. Because you've got to move so much data in and out, there's more metallization layers, which require more inspection. And then there is the increased use of the advanced lithography, which requires an EUV, more inspection. So all those things are driving up the intensity of DRAM, and it looks much more similar to what logic did not that long ago.
I'll start and then let.
We are seeing the broadening.
Sure. Uh I think a technologically, there's a lot of uh reasons to explain why we're seeing higher adoption. Um 1, we talked about before is less redundancy, the value of these devices is is higher. So there's a less willingness to give away real estate to redundancy, there's because you got to move so much data in and out. There's more
We're definitely seeing.
The intensity I think to <unk> point Theres a couple of factors that you have to look at maybe three really one is the technology node.
Big factors Die size and then another one is the mix.
Metallization layers, which require more inspection, and then there is the increased use of advanced lithography, which requires that, in EUV, more inspection. So, all those things are driving up the intensity of DRAM, and it looks much more—
And so if you have a.
Company, that's doing advanced logic, but theyre not on large die and they're not high mix that intensity is just not going to be as high as if you have somebody that is doing all three but it's higher than it's been in in order to be competitive there increasing it. So we kind of model that going forward and that's and we'll lay this out in a lot more detail when we look at our 2030.
Bren Higgins: So I think all those issues are driving that, and we feel really good about that going forward as we're engaging with customers, and they're seeing the benefits of—for many of them, they haven't been employing a lot of process control like this in most of their working lifetime. So we're seeing them getting used to that and coming to us for more capability. I think the other thing is the process variability, flexibility in the past, depending on end market, was something that customers could bin devices, and it—with high-performance compute, they don't have the ability to do that. So that's driving more rigor around ensuring that each of the devices in the stacks performs to pretty tight specs.
So I think all those issues are driving that, and we feel really good about that going forward as we're engaging with customers, and they're seeing the benefits of—for many of them, they haven't been employing a lot of process control like this in most of their working lifetime. So we're seeing them getting used to that and coming to us for more capability.
similar to what Logic did not that long ago. So I think all those issues are driving that, and we feel really good about the
That going forward, as we're engaging with customers and they're seeing the benefits—for many of them, they haven't. They haven't been employing a lot of process control like this in most of their—
Okay.
What day, but we are seeing it going up for this year and there is when we talk to our customers.
I think the other thing is the process variability, flexibility in the past, depending on end market, was something that customers could bin devices, and it—with high-performance compute, they don't have the ability to do that. So that's driving more rigor around ensuring that each of the devices in the stacks performs to pretty tight specs.
In advanced logic.
working lifetime. So we're seeing them get used to that and coming to us for more capability. I think the other thing is the process, variability, flexibility. Uh, in the past, depending on
Even they are talking about it depends it depends on if they get more customers. It depends on how much more capacity. They need then they are investments will fall out based on that so it's a little hard for us to judge what that's going to end up being.
Bren Higgins: The demand environment is also driving opportunities in our service business as customers, you know, look to keep these tools up, to have maximum uptime, to ensure good performance, where in the past, with redundancy, you might see less contract penetration. We think it's a growth opportunity here moving forward, given the nature of these devices and their requirements.
The demand environment is also driving opportunities in our service business as customers, you know, look to keep these tools up, to have maximum uptime, to ensure good performance, where in the past, with redundancy, you might see less contract penetration. We think it's a growth opportunity here moving forward, given the nature of these devices and their requirements.
Thank you Shannon.
Thank you we'll take our next question from Timothy Arcuri with UBS.
Mid single digits half on half versus the back half of last year, but I think he made a comment answering a question.
About a high single digit so Tim.
Tom do you mind, starting over I think.
Customers could have been, uh, devices and it with high performance compute, uh, they don't have the ability to do that. So that's driving more rigor around ensuring that each of the devices in the stacks performs pretty tight effects. Uh, the demand environment is also driving opportunities in our service business as customers, you know, look to keep these tools up, uh, to have maximum uptime to ensure good performance. Where, in the past with redundancy, uh, you might see, uh, less contract penetration. We—we think it's a growth opportunity here, moving forward, uh, given the nature of these devices and their requirements.
When you began your question you were kind of like right in the middle So we didn't pick up starting the question and I didn't want you to finish and they'll have to do it again.
Kevin Kessel: Thank you, CJ.
Richard Wallace: Thank you, CJ.
Thank you, CJ.
Operator: Thank you. We'll take our next question from Shane Brett with Morgan Stanley.
Operator: Thank you. We'll take our next question from Shane Brett with Morgan Stanley.
Perfect. Okay. Okay perfect. So Brian we know you said the first half of this year is going to be up mid singles versus the back half of last year. So so we know what juniors junes like three six and change I think in answering a question you said.
[Analyst] (Morgan Stanley): Thank you for letting me ask a question. My first question, I just wanted to follow up on CJ's question earlier, but you've previously talked about DRAM process control intensity increasing 100 basis points with EUV and another 100 basis points with HBM. But is there a world in which DRAM process control intensity just really gets close to advanced logic? Thank you.
Shane Brett: Thank you for letting me ask a question. My first question, I just wanted to follow up on CJ's question earlier, but you've previously talked about DRAM process control intensity increasing 100 basis points with EUV and another 100 basis points with HBM. But is there a world in which DRAM process control intensity just really gets close to advanced logic? Thank you.
Thank you. We'll take our next question from Shane, Brett with Morgan Stanley.
High singles to low doubles, and I think you meant the back half of the year is that a half on half comment because that would sort of imply that the calendar back half would be something like $7 5 billion and I ask because thats not up that much versus the three six that youre seeing for Joe.
Thank you for letting me ask a question. My first question—I just wanted to follow up on CJ's question earlier, but you've probably talked about DRAM process control intensity increasing 100 basis points with the EUV, and another 100 basis points with HBM. But is there a world in which DRAM process control intensity just really gets close to advanced logic? Thank you.
Bren Higgins: Well, it's still a ways away from advanced logic, given the high mix of designs. And so that's, I think, the biggest issue that you see in advanced logic that's different than memory. So we're pretty encouraged by what we're seeing. We'll see how this plays out with more EUV layers, and so on, in DRAM devices. So we think that it's just the market requirements are driving more inspection, more metrology, and we think that will be a positive trend. I'm not sure I'm ready to commit to something that looks like advanced logic, just given the nature of those devices and the differences in a logic fab versus memory.
Bren Higgins: Well, it's still a ways away from advanced logic, given the high mix of designs. And so that's, I think, the biggest issue that you see in advanced logic that's different than memory. So we're pretty encouraged by what we're seeing. We'll see how this plays out with more EUV layers, and so on, in DRAM devices. So we think that it's just the market requirements are driving more inspection, more metrology, and we think that will be a positive trend. I'm not sure I'm ready to commit to something that looks like advanced logic, just given the nature of those devices and the differences in a logic fab versus memory.
So there was a half to half statement I said, so we'll see how it plays out right I am not going to guide specifically with more detail I tried to give you a sense of.
Our expectations of growth in the second half of the year.
And I think it's likely in that.
Sort of high single low low double range for now so we'll see how things play out as we move forward.
Okay, and then advanced packaging I think unless I look back at the transcript from last quarter on the October call I thought the expectation was that the advanced packaging market. This year would grow more than 20%.
[Analyst] (Morgan Stanley): Got it. My follow-up is on Foundry Logic. You've called out a broadening of foundry customers over the last year, and it's clearly materializing with your customers' CapEx announcements. Could you talk about the Process Control intensity at these customers, and just how good can leading-edge logic for you be this year? Thank you.
Shane Brett: Got it. My follow-up is on Foundry Logic. You've called out a broadening of foundry customers over the last year, and it's clearly materializing with your customers' CapEx announcements. Could you talk about the Process Control intensity at these customers, and just how good can leading-edge logic for you be this year? Thank you.
Well, it's still a ways away from Advanced logic given the the high mix of designs. And and so that's I think the biggest issue that you see in advanced logic. That's that's different than than memory. Um, so we're pretty encouraged by what we're seeing. We'll see how this plays out with with more euv layers, uh, and so on and dram devices. Um, so we think that it's just the the the market requirements are driving more inspection, more Metrology and we think that will be a positive trend. Not sure. I'm ready to commit to to something that that looks like Advanced logic, just given the nature of those devices and, and, and the, the differences in a logic Fab versus memory.
And now I think youre, saying mid to high teens.
Did the market downtick or did stuff pull in or maybe I'm, just parsing numbers, but I'm just kind of wondering if like something changed.
Got it, and my follow-up is on Foundry Logic. So you've called out a broadening of Foundry customers over the last year, and that's clearly materializing with your customers’ capex announcements. But could you talk about the process control intensity of these customers? And just how good can Leading Edge Logic be for you this year? Thank you.
Bren Higgins: I'll start and then let Bren fill in. We are seeing the broadening. We're definitely seeing the intensity. I think to Bren's point, there's a couple of factors that you have to look at, maybe three, really. One is the technology node, and a big factor is die size, and then another one is the mix. And so if you have a company that's doing advanced logic, but they're not on large die and they're not high mix, that intensity is just not gonna be as high as if you have somebody that's doing all three. But it's higher than it's been, and in order to be competitive, they're increasing it.
Richard Wallace: I'll start and then let Bren fill in. We are seeing the broadening. We're definitely seeing the intensity. I think to Bren's point, there's a couple of factors that you have to look at, maybe three, really. One is the technology node, and a big factor is die size, and then another one is the mix. And so if you have a company that's doing advanced logic, but they're not on large die and they're not high mix, that intensity is just not gonna be as high as if you have somebody that's doing all three. But it's higher than it's been, and in order to be competitive, they're increasing it.
Now, we're pretty encouraged by what we're seeing in the market.
I'll start in the left frontal, and we're seeing the broadening. We're definitely seeing...
No.
It's not a large market so the percentages can move around a fair amount.
We're very encouraged by what we're seeing from a from a.
Share point of view across the market so.
We will see I tried to provide some context I think it's it's.
Likely in that we'll call it 10% to 20% range and so that's why we said what we said what's interesting about our process control position in that market. If you go back to 2021 in process control, we were roughly 10% of that market that overall market was what I called a rounding error in terms of how you thought about wm.
Bren Higgins: So we kind of model that going forward, and that's, and we'll lay this out in a lot more detail when we look at our 2030 conversation at the Analyst Day. But we are seeing it going up for this year. And, and there's. When we talk to our customers in advanced logic, even they are talking about it depends. It depends on if they get more customers, it depends on how much more capacity they need, then their investments will follow based on that. So it's a little hard for us to judge what that's gonna end up being.
So we kind of model that going forward, and that's, and we'll lay this out in a lot more detail when we look at our 2030 conversation at the Analyst Day. But we are seeing it going up for this year. And, and there's. When we talk to our customers in advanced logic, even they are talking about it depends. It depends on if they get more customers, it depends on how much more capacity they need, then their investments will follow based on that. So it's a little hard for us to judge what that's gonna end up being.
The intensity, I I think to Brent's Point, there's a couple of factors that you have to look at maybe 3 really, 1 is the technology node, um, and a big factor is Dice size and then another 1 is the mix and and so if you have a a company that's doing Advanced logic but they're not on large die and they're not high mix. That intensity is just not going to be as high as if you have somebody that's doing all 3 but it's higher than it's been and in order to be competitive that they're increasing it. So we kind of model that going forward and that's and we'll lay this out in a lot more detail when we look at our 2030,
conversation at the
But now as you look at the size of the market and the opportunity. That's there. It is now becoming part of what's causing what I think is this for.
Day. But we are seeing it going up for this year, and, and there's—when we talk to our customers,
Uh, in advanced logic.
Overall equipment market, our share was down in the 10% range I think when you look at 2025, where close to half the market and share and I think in 2020 fish, we feel pretty good about our prospects moving forward. So.
Judge what that's going to end up being.
[Analyst] (Morgan Stanley): Thank you.
Shane Brett: Thank you.
Kevin Kessel: Thank you, Shane.
Richard Wallace: Thank you, Shane.
Great opportunity, there's a lot of advancement that's happening there sampling rates are high so and we have a broader portfolio that we think customers will start to leverage more as we move forward. So it's a pretty I think exciting market and we.
Thank you. Thank you, Shane.
Operator: Thank you. We'll take our next question from Timothy Arcuri with UBS.
Operator: Thank you. We'll take our next question from Timothy Arcuri with UBS.
Thank you. We'll take our next question from Timothy Auri with UBS.
Timothy Arcuri: Mid-single digits, half on half versus the back half of last year. But I think you made a comment answering a question, about, high single digits-
Timothy Arcuri: Mid-single digits, half on half versus the back half of last year. But I think you made a comment answering a question, about, high single digits-
We have great drivers within what I call traditional Wi Fi and we have this evolving Sam that we think will augment our growth here moving forward.
Kevin Kessel: Tim, Tim, Tim. Tim, do you mind starting over? I think, when you began your question, you were kind of, like, right in the middle, so we didn't pick up the start of the question, and I didn't want you to finish and then have to do it again, if you don't mind.
Kevin Kessel: Tim, Tim, Tim. Tim, do you mind starting over? I think, when you began your question, you were kind of, like, right in the middle, so we didn't pick up the start of the question, and I didn't want you to finish and then have to do it again, if you don't mind.
A good single digits half-on-half versus the back half of last year, but I think you made a comment answering a question about high single digits.
Okay excellent.
Thank you we'll take our next question from Chris Caso with Wolfe Research.
Timothy Arcuri: Perfect. Okay. Okay, perfect. So Bren, we know you said the first half of this year is gonna be at mid-singles versus the back half of last year. So we know what June is. June's, like, 3.6 and change. I think in answering a question, you said high singles to low doubles, and I think you meant the back half of the year. Is that a half-on-half comment? Because that would sort of imply that the calendar back half would be something like $7.5 billion. And, like, I ask because that's not up that much versus the $3.6 that you're saying for June.
Timothy Arcuri: Perfect. Okay. Okay, perfect. So Bren, we know you said the first half of this year is gonna be at mid-singles versus the back half of last year. So we know what June is. June's, like, 3.6 and change. I think in answering a question, you said high singles to low doubles, and I think you meant the back half of the year. Is that a half-on-half comment? Because that would sort of imply that the calendar back half would be something like $7.5 billion. And, like, I ask because that's not up that much versus the $3.6 that you're saying for June.
Do you mind starting over? I think, uh, when you began your question, you were kind of, like, right in the middle. So we didn't pick up the start of the question, and I didn't want you to finish and then have to do it again.
Yes. Thank you.
Perfect. Okay.
First question would be characterizing the relative growth.
Memory versus.
Geologic for this year and I recognize that.
A lot of that has probably has to do with clean room space constraints as you said, but.
How do you think it shapes up for this year and then particularly in the second half of the year as some of the revenue starts to improve.
Well, we think that that is certainly the DRAM part of the market will grow faster than <unk>.
Foundry logic will grow.
Okay, perfect. So Brandon, um, we know you said the first half of this year is going to be a mid singles versus the back half of last year. So so we know what June is June is like 3, 6 and change? Um, I think in answering a question you said, uh, hi singles to load doubles and I think you meant the back half of the year, is that a half on half comment because that would sort of imply that the calendar back, half would be something like 7.5 billion and, like I asked, because that's not up that much versus the 3.6 that you're saying for June.
You've driven mostly by the demands for HBM, but also as we've talked about the challenges conventional memory as well.
Bren Higgins: Tim, yeah, so that was a half-to-half statement I said. So we'll see how it plays out, right? I'm not gonna guide specifically with more detail. I tried to give you a sense of, you know, this, our expectations of growth in the second half of the year. And, you know, I think it's, you know, likely in that, you know, that sort of high single, low double range for now. So, we'll see how things play out as we move forward.
Bren Higgins: Tim, yeah, so that was a half-to-half statement I said. So we'll see how it plays out, right? I'm not gonna guide specifically with more detail. I tried to give you a sense of, you know, this, our expectations of growth in the second half of the year. And, you know, I think it's, you know, likely in that, you know, that sort of high single, low double range for now. So, we'll see how things play out as we move forward.
The way we are modeling as we think overall foundry logic is up 10% to 15% for the year from a <unk> point of view and the DRAM part of the market is probably 15% to 20%.
Versus last year.
Flash little little harder to pin I think slower than DRAM, it's off a lower the lower base. So you know a lower number.
Uh Tammy yes. So there was a half to half statement. I said is so so we we'll see how it plays out, right? I'm not going to going to guide specifically with more detail. I tried to give you a sense of you know, this our expectations of growth in the second half of the year. Uh and you know I I think it's, you know, likely in that you know, that sort of high single low low, double range for now. So uh, we'll see how things play out. As we move forward.
Timothy Arcuri: Okay. And then advanced packaging. I think, unless I look back through the transcripts, I thought last quarter on the October call, I thought the expectation was that the advanced packaging market this year would grow more than 20%. And now I think you're saying mid- to high teens. Did the market downtick, or did stuff pull in? Or, you know, maybe I'm just parsing numbers, but I'm just kind of wondering if, like, something changed. Thanks.
Timothy Arcuri: Okay. And then advanced packaging. I think, unless I look back through the transcripts, I thought last quarter on the October call, I thought the expectation was that the advanced packaging market this year would grow more than 20%. And now I think you're saying mid- to high teens. Did the market downtick, or did stuff pull in? Or, you know, maybe I'm just parsing numbers, but I'm just kind of wondering if, like, something changed. Thanks.
Okay, uh, and then I think—
But I think the biggest at least from our point of view I mean, certainly the biggest drivers for the.
For further for Adobe a few this year and from a growth point of view overall is what's happened in advanced logic.
And what we're seeing in the DRAM market.
Thank you.
As a follow up.
I think you've talked about 12% to 14% kind of normalized service growth given the rising utilization rates. The fact that the folks are a bit tight now.
Bren Higgins: No, we're pretty encouraged by what we're seeing in the market. You know, it's not a large market, so the percentages can move around a fair amount. We're very encouraged by what we're seeing from a share point of view across the market. So, you know, we'll see. You know, I tried to provide some context. I think it's, you know, it's likely in that, you know, we'll call it 10 to 20 percent range, and so that's why, you know, we said what we said. What's interesting about our process control position in that market, if you go back to, you know, 2021 in process control, we were roughly 10% of that market. That overall market was what I called a rounding error in terms of how you thought about WFE.
Bren Higgins: No, we're pretty encouraged by what we're seeing in the market. You know, it's not a large market, so the percentages can move around a fair amount. We're very encouraged by what we're seeing from a share point of view across the market. So, you know, we'll see. You know, I tried to provide some context. I think it's, you know, it's likely in that, you know, we'll call it 10 to 20 percent range, and so that's why, you know, we said what we said.
Packaging. I I think unless I I looked back to the transcripts I saw last quarter on the October call. I thought the expectation was that the advanced packaging Market this year, would grow more than 20%. Uh, and now I think you're saying mid to high teens. Um, did the market downtick or did stuff pull in or, you know, maybe I'm just parsing numbers but I'm just kind of wondering if like something changed things.
How does that affect the service growth for both the 26 and as you kind of starting to 27.
Well Theres a number of factors that are driving growth certainly to your point I mean higher utilization I mean, our tools tend to tend to stay very well utilized.
No matter, where customer overall utilizations are because it's the best way to manage capital even in downturns is to drive yield so our customers in terms of how they buy our systems is.
What's interesting about our process control position in that market, if you go back to, you know, 2021 in process control, we were roughly 10% of that market. That overall market was what I called a rounding error in terms of how you thought about WFE.
Now we're pretty encouraged by what we're seeing in the market. It it you know, it it's not a large market. So the percentages can can move around a fair amount. Uh, we're very encouraged by what we're seeing from a, from a SharePoint of view across the market. So, uh, you know, we'll, we'll see, I, you know, I tried to provide some context. I, I think it's, you know, it's likely in that, you know, we'll call it 10 to 20% range. And so that's why, you know, we said what we said. What's interesting about our process control position in that market. If you go back to, you know, 2021 and process control, we were roughly 10% of that market. That that
They buy them they run them at very high uptime and the value is in the performance of the systems and matching performance in terms of information on deep activity and metrology and so on so the growth expectations of the growing installed base. This install base living longer opportunities for where things are.
Bren Higgins: But now, as you look at the size of the market and the opportunity that's there, it is now becoming part of what's called—what I think is, you know, this core, overall equipment market. Our share was, you know, down in the 10% range. I think when you look at 2025, we're close to 50% of the market in share, and I think in 2026, we feel pretty good about our prospects moving forward. So, it's a great opportunity. There's a lot of advancement that's happening there. Sampling rates are high, so—and we have a broader portfolio that we think customers will start to leverage, more as we move forward.
But now, as you look at the size of the market and the opportunity that's there, it is now becoming part of what's called—what I think is, you know, this core, overall equipment market. Our share was, you know, down in the 10% range. I think when you look at 2025, we're close to 50% of the market in share, and I think in 2026, we feel pretty good about our prospects moving forward. So, it's a great opportunity. There's a lot of advancement that's happening there. Sampling rates are high, so—and we have a broader portfolio that we think customers will start to leverage, more as we move forward.
Later in the market opportunities around memory as I talked about earlier opportunities in packaging and then growing streams in our acquired businesses, where we think we can leverage the infrastructure of KLA to drive.
Overall, market was what I called a rounding error in terms of how you thought about WFE. But now, as you look at the size of the market and the opportunity that's there, it is now becoming part of what's called—what I think is, you know, this core overall equipment market. Our share was, you know, down in the 10% range. I think when you look at 2025, we're close to half the market in share, and I think in 2026, we feel pretty good about our prospects moving forward. So, uh,
Great opportunity. There's a lot of advancements that are happening there.
Drive revenue revenue growth and service out of acquired businesses. Those are all our our vectors for growth here moving forward. So we feel very confident about the 12% to 14% Gulf.
Bren Higgins: So, it's a pretty, I think, exciting market, and, you know, we have great drivers within what I call traditional WFE, and we have this evolving SAM that we think will augment our growth here moving forward.
So, it's a pretty, I think, exciting market, and, you know, we have great drivers within what I call traditional WFE, and we have this evolving SAM that we think will augment our growth here moving forward.
Go forward target model for service revenue and I think there are a lot of drivers that suggest we can operate at the higher end of the range versus the lower over time.
Sampling rates are high, so—and we have a broader portfolio that we think customers will start to leverage more as we move forward. So, it's a pretty, I think, exciting market, and, you know, we have great drivers within what I call traditional WFE, and we have this evolving SAM that we think will augment our growth here moving forward.
Richard Wallace: Okay. Thanks, Ben.
Timothy Arcuri: Okay. Thanks, Ben.
Okay. Thanks man.
Operator: Thank you. We'll take our next question from Chris Casso with Wolfe Research.
Operator: Thank you. We'll take our next question from Chris Casso with Wolfe Research.
Thank you thank you Chris.
Thank you. We'll take our next question from Chris Casso with Wolfe Research.
[Analyst] (Wolfe Research): Yes, thank you. I guess first question would be characterizing the relative growth of memory versus foundry logic for this year. And I recognize that, you know, a lot of that probably has to do with clean room space constraints, as you said. But, you know, how do you think it shapes up for this year, and then particularly in the second half of the year, as some of the revenue starts to improve?
Chris Caso: Yes, thank you. I guess first question would be characterizing the relative growth of memory versus foundry logic for this year. And I recognize that, you know, a lot of that probably has to do with clean room space constraints, as you said. But, you know, how do you think it shapes up for this year, and then particularly in the second half of the year, as some of the revenue starts to improve?
Thank you we'll take our next question from Jim Schneider with Goldman Sachs.
Thanks, Good afternoon, and thanks for taking my question I was wondering if you could maybe provide a little bit more precision following on the last question.
Do you expect that I mean, clearly you expect DRAM to be stronger in the short term, but do you expect the growth in foundry logic to actually.
Expand substantially into the back half of the year, such that growth those growth rates would be closer to matched or or not I'm. Just trying to think about how that plays out in terms of process control intensity for you over the course of this year. Thank you.
Yeah, thank you. Um, I guess first question, would be, uh, characterizing the relative growth, uh, of memory versus, uh, Calgary Logic for for this year. And I recognize that, uh, you know, a lot of that has to that probably has to do with clean room. Space constraints as you said, but you know what, what what do you, how do you think it shapes up for this year? And then, particularly in the second half of the year, as some of the revenue starts to improve?
Bren Higgins: Well, we think that you know, certainly the DRAM part of the market will grow faster than Foundry Logic will grow. Be driven mostly by the demands for HBM, but also, as we talked about, the challenges in conventional memory as well. So the way we're modeling is, you know, we think overall Foundry Logic is up, you know, 10% to 15% for the year from a WFE point of view, and that, you know, the DRAM part of the market is probably, you know, 15% to 20% versus last year. Flash, a little harder to pin. I think it, it's slower than DRAM. It's off a lower base, so, you know, a lower number.
Richard Wallace: Well, we think that you know, certainly the DRAM part of the market will grow faster than Foundry Logic will grow. Be driven mostly by the demands for HBM, but also, as we talked about, the challenges in conventional memory as well. So the way we're modeling is, you know, we think overall Foundry Logic is up, you know, 10% to 15% for the year from a WFE point of view, and that, you know, the DRAM part of the market is probably, you know, 15% to 20% versus last year. Flash, a little harder to pin. I think it, it's slower than DRAM. It's off a lower base, so, you know, a lower number.
What do you think—that you certainly think the DRAM part of the market will grow faster than?
Yes so.
I can't comment exactly on where the overall.
Industry levels will be I mean, certainly as it relates to Kla's business I would expect the foundry logic part of our business to be stronger in the second half.
Boundary logic will grow—uh, be driven mostly by the demands for HBM, but also, as we talked about, the challenges in conventional memory as well. So, the way we're modeling is, you know, we think overall foundry logic is a, you know, 10% to 15% for the year from a wafer point of view. And that, you know, the DRAM part of the market is probably, you know, 15% to 20%, uh, versus last year.
In the first half right now.
But it is.
I think it's pretty fluid and there is I think kind of consistent growth expectations, you have to have across both segments, well and we know from <unk>.
Bren Higgins: But I think the biggest, at least from our point of view, I mean, certainly the biggest drivers for the WFE this year and from a growth point of view overall, is what's happening in advanced logic and what we're seeing in the DRAM market.
But I think the biggest, at least from our point of view, I mean, certainly the biggest drivers for the WFE this year and from a growth point of view overall, is what's happening in advanced logic and what we're seeing in the DRAM market.
Public comment some of our customers have made that they are definitely facility.
For WFE this year and from a growth point of view overall, is what's happening in advanced logic and...
Alright, so their ability to ramp.
And what we're seeing in the demand market.
[Analyst] (Wolfe Research): Thank you. As a follow-up, I think you've talked about 12 to 14 percent kind of normalized service growth. Given the rising utilization rates, the fact that the folks are a bit tight now, how does that affect the service growth for both 2026 and as you kind of start into 2027?
Chris Caso: Thank you. As a follow-up, I think you've talked about 12 to 14 percent kind of normalized service growth. Given the rising utilization rates, the fact that the folks are a bit tight now, how does that affect the service growth for both 2026 and as you kind of start into 2027?
I'm sure, they're going to do everything they can to pull that in but I think we're going to see in the foundry logic space.
Setup for 27% is pretty remarkable and you'll see more I think late in 2006 as they have the opportunity, but there there's a lot of a lot of.
The discussion already about preparing us the equipment supply companies for.
Thank you. Um, as a follow-up, uh, I think you've talked about 12 to 14% kind of normalized service growth, uh, given the rising utilization rates. The fact that the folks are a bit tight now, uh, how how does that affect the service growth for for both, uh, 26, and as you kind of start in the 27th?
Bren Higgins: Well, there's a number of factors that are driving growth, certainly to your point, I mean, higher utilizations. I mean, our tools tend to stay very well utilized, no matter where customer overall utilizations are, because it's the best way to manage capital, even in downturns, is to drive yield. So our customers, in terms of how they buy our systems, is they buy them, they run them at very high uptime, and the value is in the performance of the systems and matching performance in terms of information on defectivity, and metrology, and so on. So the growth expectations of the growing install base, this install base living longer.
Richard Wallace: Well, there's a number of factors that are driving growth, certainly to your point, I mean, higher utilizations. I mean, our tools tend to stay very well utilized, no matter where customer overall utilizations are, because it's the best way to manage capital, even in downturns, is to drive yield.
27.
That's helpful and then maybe as a follow up relative to the China market you outlined your expectations for AWP growth there, but I'm wondering in terms of your the competitive landscape you have a very very strong portfolio sort of across the board in your and your product space have you heard any kind of incremental interest.
Well, there's a number of factors that are driving growth. Certainly, to your point—I mean, higher utilization. I mean, our tools tend to stay very well utilized.
So our customers, in terms of how they buy our systems, is they buy them, they run them at very high uptime, and the value is in the performance of the systems and matching performance in terms of information on defectivity, and metrology, and so on. So the growth expectations of the growing install base, this install base living longer.
Your customers in China or from the government in terms of promoting more onshore solutions there. Thank you.
Well I think that to the degree where we can compete we continue to offer capabilities that our customers want I think the.
Bren Higgins: Opportunities for where things are tighter in the market, opportunities around memory, as I talked about earlier, opportunities in packaging, and then growing streams in our acquired businesses, where we think we can leverage the infrastructure of KLA to drive revenue growth and service out of acquired businesses. Those are all our vectors for growth here moving forward. So we feel very confident about the 12 to 14% go forward target model for service revenue. And I think there are a lot of drivers that suggest we can operate at the higher end of the range versus the lower over time.
Opportunities for where things are tighter in the market, opportunities around memory, as I talked about earlier, opportunities in packaging, and then growing streams in our acquired businesses, where we think we can leverage the infrastructure of KLA to drive revenue growth and service out of acquired businesses. Those are all our vectors for growth here moving forward. So we feel very confident about the 12 to 14% go forward target model for service revenue. And I think there are a lot of drivers that suggest we can operate at the higher end of the range versus the lower over time.
The biggest constraint we have and the biggest challenge we have sometimes in China is when we're not permitted to sell but alternative non U S companies are permitted to sell the same customers and those are conversations we've had.
With the government.
We're not going to opine on those decisions overall of which companies are on that list in terms of.
No matter where customer overall utilizations are because it's the best way to manage Capital. Even in downturns is to drive yield. So our customers in terms of how they buy our systems, is they they buy them they run them at very high up time. And the the value is is is in the performance of the systems and matching performance in terms of information on deep activity and and and Metrology. And so on. So the growth expectations of of the growing install base, this install base living longer opportunities for where where things are tighter in the market opportunities around memory, as I talked about earlier opportunities and packaging and then growing streams in our acquired businesses where we think we can leverage the infrastructure of KLA to drive, uh, Drive Revenue.
Competition from China, I think there's been more progress made quite a bit more in the process tools than there has been an either orthography or in process control, partly largely because of the technology research.
We feel pretty good about competing anywhere in the world, including China.
Revenue growth and service out of acquired businesses. Those are all our. Our vectors for growth here are moving forward. So we feel very confident about the 12 to 14%. Uh, go forward Target model for for service revenue and I think there are a lot of drivers that that suggests we can operate at the higher end of the range versus the lower overtime.
[Analyst] (Wolfe Research): Thank you.
Chris Caso: Thank you.
Richard Wallace: Thank you, Chris.
Richard Wallace: Thank you, Chris.
Thank you.
What we push forward in the cases, where we've had.
Thank you, Chris.
Operator: Thank you. We'll take our next question from Jim Schneider with Goldman Sachs.
Operator: Thank you. We'll take our next question from Jim Schneider with Goldman Sachs.
Some unfair disadvantages, we just want a level playing field as it pertains to actions taken by the government.
Thank you. We'll take our next question from Jim Schneider with Goldman Sachs.
[Analyst 1] (Goldman Sachs): Thanks. Good afternoon, and thanks for taking my question. I was wondering if you could maybe provide a little bit more precision, following on the last question. Do you expect that, I mean, clearly, you expect DRAM to be stronger in the short term, but do you expect the growth in Foundry Logic to actually expand substantially into the back half of the year, such that growth—those growth rates would be closer to matched or, or not? I'm just trying to think about how that plays out in terms of Process Control intensity for you over the course of this year. Thank you.
Jim Schneider: Thanks. Good afternoon, and thanks for taking my question. I was wondering if you could maybe provide a little bit more precision, following on the last question. Do you expect that, I mean, clearly, you expect DRAM to be stronger in the short term, but do you expect the growth in Foundry Logic to actually expand substantially into the back half of the year, such that growth—those growth rates would be closer to matched or, or not? I'm just trying to think about how that plays out in terms of Process Control intensity for you over the course of this year. Thank you.
Thank you.
Thank you we'll take our next question from Krish Shankar with TD Cowen.
Hi, This is Robert Burns on the line for Chris. Thank you for taking my questions.
I know you've talked a good amount.
The previous questions, but just in terms of these capacity constraints are there any areas of the market that are larger pinpoints and your ability to ship tools too.
Thanks, good afternoon and thanks for taking my question. I was wondering if you could maybe provide a little bit more uh, Precision. Uh, following on the last question, do you expect that? Uh, I mean, clearly, you expect DM to be stronger in the short term, but do you expect the growth and Foundry logic to actually, uh, expand substantially into the back half of the Year. Such that growth, those growth rates would be closer to matched or, or not. I'm just trying to think about how that plays out in terms of uh price control intensity for you. Over the course of this year. Thank you.
Bren Higgins: Yeah, so I can't comment exactly on where the overall industry levels will be. I mean, certainly as it relates to KLA's business, I would expect the Foundry Logic part of our business to be, you know, kind of stronger in the second half than in the first half right now. But it is, you know, I think it's pretty fluid and there's, I think, kind of consistent growth expectations, you know, half to half across both segments.
Richard Wallace: Yeah, so I can't comment exactly on where the overall industry levels will be. I mean, certainly as it relates to KLA's business, I would expect the Foundry Logic part of our business to be, you know, kind of stronger in the second half than in the first half right now. But it is, you know, I think it's pretty fluid and there's, I think, kind of consistent growth expectations, you know, half to half across both segments.
And.
Any areas, where potentially you could be constrained it would be more capacity.
yeah, so so I
Foundry logic takes off more.
Calendar year 'twenty seven.
I mean, if you think about it this is Rick if you think about our portfolio.
Uh, I can't comment exactly on where the overall, uh, industry levels will be. I mean, certainly as it relates to KLA's business, I would expect the Foundry/Logic part of our business to be, you know, kind of stronger in the second half.
We by and large shift the same products.
Same kind of products for advanced technologies, whether it's memory or foundry logic. So it's not like we're constrained on to support the memory guys or the larger guys. It's it's more.
It's in the first half right now, um, but it is, uh,
You know, I think it's pretty fluid and and there's, there's I think kind of consistent growth expectations. You know, have to have across
Richard Wallace: Well, and we know from public comments some of our customers have made, that they are definitely facility constrained, right? So their ability to ramp, I'm sure they're gonna do everything they can to pull that in, but I think we're gonna see in the foundry logic space, you know, set up for 2027 is pretty remarkable. We'll see more, I think, late in 2026 as they have the opportunity. But there, there's a lot of discussions already about preparing us, the equipment supply companies for 2027.
Well, and we know from public comments some of our customers have made, that they are definitely facility constrained, right? So their ability to ramp, I'm sure they're gonna do everything they can to pull that in, but I think we're gonna see in the foundry logic space, you know, set up for 2027 is pretty remarkable. We'll see more, I think, late in 2026 as they have the opportunity. But there, there's a lot of discussions already about preparing us, the equipment supply companies for 2027.
Brent talked about where optics is an example, where.
Both segments well, and we know from, uh, public comments some of our customers have made that there are definitely facility constraints.
If you only have so much capacity over time and you can we can add it but you can add it quickly because it takes a lot of work to increase the number of the output of very complex optics. So it's more product specific to our products then that as customers.
And I guess, the only other thing I would add to that is what's driving the market today is really leading edge demand and so.
Right. So their ability to ramp, uh, I'm sure they're going to do everything they can to pull that in, but I think we're going to see, in the foundry/logic space, you know, the setup for '27 is pretty remarkable. We'll see more, I think, late in '26 as they have the opportunity, but there's a lot of, uh, a lot of discussions already about preparing as the equipment supply companies for—
27.
[Analyst 1] (Goldman Sachs): That's helpful. Then maybe as a follow-up, relative to the China market, you outlined your expectations for WP growth there. But I'm wondering, in terms of your, the competitive landscape, you have a very, very strong portfolio, sort of across the board in your, in your product space. Have you heard any kind of incremental interest from your customers in China or from the government in terms of promoting more onshore solutions there? Thank you.
Jim Schneider: That's helpful. Then maybe as a follow-up, relative to the China market, you outlined your expectations for WP growth there. But I'm wondering, in terms of your, the competitive landscape, you have a very, very strong portfolio, sort of across the board in your, in your product space. Have you heard any kind of incremental interest from your customers in China or from the government in terms of promoting more onshore solutions there? Thank you.
Is it.
Like we were when we went through 'twenty three 'twenty four with more legacy products, where you have a broader mix of products what customers.
Today, our leading edge solutions and so that's.
That's where most of the focus is.
Okay.
Got it thank you and then.
DRAM shipments were particularly strong this quarter I think you.
You had mentioned in the last call you expected them to be up but were there any shifts in your view over the quarter and it was sort of demand and visibility do you have into that market for this year.
That's helpful. And then maybe as a follow-up, a relative to the China Market you outlined your expectations for uh WP growth there. But I'm wondering in terms of your the competitive landscape, you have a very, very strong portfolio of sort of the board in your your product space. Have you heard any kind of incremental, uh, interest from your customers in China or from the government in terms of promoting more onshore solutions there? Thank you.
Richard Wallace: Well, I think that, you know, to the degree where we can compete, we continue to offer capabilities that our customers want. I think the biggest constraint we have, and the biggest challenge we have sometimes in China, is when we're not permitted to sell, but alternative non-US companies are permitted to sell to the same customers, and those are conversations we've had with the government. We're not gonna opine on those decisions overall, which companies are on that list. In terms of competition from China, I think there's been more progress made, quite a bit more in the process tools than there has been in either lithography or in process control, partly, largely because of the technology required for that.
Richard Wallace: Well, I think that, you know, to the degree where we can compete, we continue to offer capabilities that our customers want. I think the biggest constraint we have, and the biggest challenge we have sometimes in China, is when we're not permitted to sell, but alternative non-US companies are permitted to sell to the same customers, and those are conversations we've had with the government.
Yes, as we said earlier I mean, certainly over the last few months, we've seen fundamentals.
The overall equipment spending strengthen and certainly and desire by our customers to get who will sooner rather than later, so we've tried to manage our way around that and the demand is broad based so I would say that that overall demand has strengthened in the last few months in that part of the market correct.
We're not gonna opine on those decisions overall, which companies are on that list. In terms of competition from China, I think there's been more progress made, quite a bit more in the process tools than there has been in either lithography or in process control, partly, largely because of the technology required for that.
Well, I, I, I think that, you know, to the degree where we can compete, we continue to offer capabilities that customers want. I think the, the biggest constraint we have—and the biggest challenge we have sometimes in China—is when we're not permitted to sell, but alternative non-U.S. companies are permitted to sell to the same customers. And those are conversations we've had with the government. We're not going to opine on those decisions overall, or which companies are on that list.
and in terms of, uh,
All markets frankly.
Got it. Thank you. Thank you Robert.
Thank you we'll take our next question from Stacy <unk> with Bernstein research.
Richard Wallace: So, we feel pretty good about competing anywhere in the world, including China, and what we push for in the cases where we've had some unfair disadvantages, we just want a level playing field as it pertains to actions taken by the government.
Richard Wallace: So, we feel pretty good about competing anywhere in the world, including China, and what we push for in the cases where we've had some unfair disadvantages, we just want a level playing field as it pertains to actions taken by the government.
Hi, guys. Thanks for taking my questions.
So, we feel pretty good about competing anywhere in the world, including China.
My first one I wanted to ask Tim's question, a slightly different way.
Hope we push for, in the cases where we've had,
So you gave the guidance for the first half, which kind of gives me June and again, if I'm modeling you said high single to low double the second half will be up call. It 10% that would put US my math suggests that kind of total revenues up I don't know 12, 13% which is about.
[Analyst 1] (Goldman Sachs): Thank you.
Jim Schneider: Thank you.
Some unfair disadvantages. We just want to level the playing field as it pertains to actions taken by the government.
Thank you.
Operator: Thank you. We'll take our next question from Krish Sankar with TD Cowen.
Operator: Thank you. We'll take our next question from Krish Sankar with TD Cowen.
Thank you. We'll take our next question from Chris Sankar with TD Cowen.
What you're suggesting the whole WP market is growing so like you said you are gaining share so why wouldn't that number be higher like where is the share gains.
[Analyst] (TD Cowen): Hi, this is Robert Burns on the line for Krish. Thank you for taking my questions. I know you've talked a good amount on some of the previous questions, but just in terms of these capacity constraints, are there any areas of the market that are larger pain points in your ability to ship tools to? And any areas where potentially you could be constrained and would need more capacity, you know, once Foundry Logic takes off more in calendar year 2027?
Krish Sankar: Hi, this is Robert Burns on the line for Krish. Thank you for taking my questions. I know you've talked a good amount on some of the previous questions, but just in terms of these capacity constraints, are there any areas of the market that are larger pain points in your ability to ship tools to? And any areas where potentially you could be constrained and would need more capacity, you know, once Foundry Logic takes off more in calendar year 2027?
Hi, this is Robert Burns on the line for Chris. Thank you for taking my questions.
Given that half over half in the second half that youre talking about.
Well, so Stacy I mean part of this is the blended numbers right. So youre getting at when we talk about share gain overall, we're looking at our our semiconductor process control business in terms of its relative performance against the total equipment market. So.
Um, I know you've talked a good amount, um, on some of the previous questions. But, um, just in terms of these capacity constraints, are there any areas of the market that are larger pain points in your ability to ship tools to? And, um, any areas where potentially you could be constrained? Um, would need more capacity, you know, once, uh, Foundry logic takes off more in, in the calendar year '27.
So there is that again.
Richard Wallace: I mean, if you think about, this is Rick, if you think about our portfolio, we by and large ship the same products, same kind of products for advanced technologies, whether it's memory or Foundry Logic. So it's not like we're constrained to support the memory guys or the logic guys. It's more the thing Bren talked about, where optics is an example, where you only have so much capacity over time, and you can add it, but you can't add it quickly because it takes a lot of work to increase the number of the output of very complex optics. So it's more product specific to our products than it is customer specific.
Richard Wallace: I mean, if you think about, this is Rick, if you think about our portfolio, we by and large ship the same products, same kind of products for advanced technologies, whether it's memory or Foundry Logic. So it's not like we're constrained to support the memory guys or the logic guys.
A lot of that allow you to do the work I am not going to I'm not going to guide the full year or two to that level of precision I will say that we feel very good about our ability to grow grow faster than the market.
And you've got service element, you've got our non semi elements that are are also factors in our broad growth rate.
It's more the thing Bren talked about, where optics is an example, where you only have so much capacity over time, and you can add it, but you can't add it quickly because it takes a lot of work to increase the number of the output of very complex optics. So it's more product specific to our products than it is customer specific.
Okay, because I mean services is growing about that much is why are you said, 12% to 14%.
I just feel like that that have over half of them, maybe theres just conservatism built into it but it feels like like I said call it 10% or whatever.
Oh, this is Rick. If you think about our portfolio, um, we by and large ship the same products, uh, same kind of products for Advanced Technologies, whether it's memory or recovery logic. So it's not like we're constrained on A to support the memory guys or the logic guys. It's, it's, it's more the thing Brent talked about, where optics is an example—where you only have so much capacity over time, and you can add it, but you can't add it quickly.
Because it takes a lot of work to increase the number of the output of very complex optics.
Those light anyways.
Sure.
For my second question just around China, you know the last time you reported it was after the affiliate rule been put in place and before it was taken off.
It's more product-specific to our products than it is to customers.
Bren Higgins: I guess the only other thing I'd add to that is what's driving the market today is really, you know, leading-edge demand. So, you know, it isn't like we -- you know, when we went through 2023 and 2024 with more legacy products, where you had a broader mix of products. What customers want today are leading-edge solutions, and so that's where most of the focus is.
Bren Higgins: I guess the only other thing I'd add to that is what's driving the market today is really, you know, leading-edge demand. So, you know, it isn't like we -- you know, when we went through 2023 and 2024 with more legacy products, where you had a broader mix of products. What customers want today are leading-edge solutions, and so that's where most of the focus is.
What are your thoughts on I guess recovery of that revenue and like how does that bake in.
And I guess the only other thing I'd add to that is what's driving the market today is really, you know, leading edge demand. And so, you know, it isn't—
So your thoughts on China revenue next year because.
In my mind like you're I don't know if your China guidance for next year now is higher than it was last quarter or not but presumably some of that affiliate revenue should be coming back.
Like we, you know, when we went through '23 and '24 with more legacy products, where you had a broader mix of products, what customers want today are leading-edge solutions, and so that's, uh,
That's where most of the focus is.
Yes, I would.
I think that.
[Analyst] (TD Cowen): Thank you. And then, your DRAM shipments were particularly strong this quarter. I think you had mentioned in the last call you expected them to be up, but were there any shifts in your view over the quarter, and, and what sort of demand visibility do you have into that market for this year?
Krish Sankar: Thank you. And then, your DRAM shipments were particularly strong this quarter. I think you had mentioned in the last call you expected them to be up, but were there any shifts in your view over the quarter, and, and what sort of demand visibility do you have into that market for this year?
Three months ago, we thought China would be modestly down and now I think it's going to be up for us this year.
Got it. Thank you. And then, um, your DRAM shipments were particularly strong in this quarter, I think.
So that business has come back in and feather through is in our forecast and some of the commentary provided here.
And how much was that again was I can't remember three or 300 million 350, I can't remember.
You had mentioned in the last call you expected them to be up, but were there any shifts in your view over the quarter, and what sort of demand visibility do you have for that market for this year?
Bren Higgins: Yeah, as, as we said earlier, I mean, certainly over the last few months, we've seen, you know, fundamentals of overall equipment spending strengthen and certainly a desire by our customers to get tools sooner rather than later. So we've tried to manage our way around that, and the demand is broad-based. So I would say that overall demand has strengthened in the last few months in that part of the market.
Richard Wallace: Yeah, as, as we said earlier, I mean, certainly over the last few months, we've seen, you know, fundamentals of overall equipment spending strengthen and certainly a desire by our customers to get tools sooner rather than later. So we've tried to manage our way around that, and the demand is broad-based. So I would say that overall demand has strengthened in the last few months in that part of the market.
In that ballpark of of some service elements, but yeah in that bulk.
Berke.
Got it okay. That's helpful. Thank you guys.
Thank you we do have time for one additional question, we will take our final question from Tom O'malley with Barclays.
Hey, guys. Thanks for taking my question.
As I look out you can talk about more share gains where should I be paying attention is that more on the leading edge foundry logic side is that more in the advanced packaging side, just because just to answer your question right. Like you were talking about a quarter of your view that you'll grow their mind was maybe youre being a little conservative to start the year and end up being that as we go along but I would imagine if you included the packaging as well that's an area where you had a lot of.
Richard Wallace: Correct. The whole part of all markets, frankly.
Bren Higgins: Correct. The whole part of all markets, frankly.
Yeah, as, as we said earlier, I mean, certainly over the last few months we've seen, you know, fundamentals, uh, of overall equipment spending strength and certainly a desire by our customers to get tools sooner rather than later. So we've tried to manage our way, uh, around that. And and the demand is is broad-based. So I would say that that overall demand has has strengthened the last few months in that part of the market.
Frank, the whole part of all markets, frankly?
[Analyst] (TD Cowen): Got it. Thank you.
Krish Sankar: Got it. Thank you.
Richard Wallace: Thank you, Robert.
Richard Wallace: Thank you, Robert.
Got it. Thank you. Thank you, Robert.
Operator: Thank you. We'll take our next question from Stacy Rasgon with Bernstein Research.
Operator: Thank you. We'll take our next question from Stacy Rasgon with Bernstein Research.
[Analyst 1] (Goldman Sachs): Hi, guys, thanks for taking my questions. My first one, I wanna ask Tim's question a slightly different way. So you gave the guidance for the first half, which kind of gives me June, and again, if I'm modeling, you said high single to low double, the second half would be up, you know, call it 10 percent. That would put it might now suggest that kind of total revenues up, I don't know, 12, 13 percent, which is about what you're suggesting the whole WP market is growing. So like, you said you're gaining share, so why wouldn't that number be higher? Like, where is the share gains, given that, half over half in the second half that you're talking about?
Stacy Rasgon: Hi, guys, thanks for taking my questions. My first one, I wanna ask Tim's question a slightly different way. So you gave the guidance for the first half, which kind of gives me June, and again, if I'm modeling, you said high single to low double, the second half would be up, you know, call it 10 percent. That would put it might now suggest that kind of total revenues up, I don't know, 12, 13 percent, which is about what you're suggesting the whole WP market is growing. So like, you said you're gaining share, so why wouldn't that number be higher? Like, where is the share gains, given that, half over half in the second half that you're talking about?
Thank you. We'll take our next question from Stacy Rasgon with Bernstein Research.
Strength so.
I would imagine that would accelerate the growth rate, maybe explain where you're seeing those share gains is it more so on the AP side or on the leading guys from Georgia side.
Hi guys, thanks for taking my questions. Um, for my first one, I want to ask Tim's question a slightly different way.
Well, we're certainly seeing share gains in NAV as I talked about earlier I think there's a lot of positive momentum there I think we've done extremely well in logic and I think theres a lot of momentum on the memory side as it relates the overall business I wouldn't say in our share is pretty consistent across the different segments. So it really comes down to our products.
So you gave the guidance for the first half, which kind of gives me June. And again, if I'm modeling, you said to the low double, the second half would be up, you know call it 10%, that would put, as my message, that kind of total revenue is up, I don't know, 12-13%, which is about—
Reticle inspection has had a really strong year, we think that that's part of the market's inflicting we're doing pretty well there we see some positive momentum in our electron beam businesses and we so we think that thats a positive here moving forward as well so I think between what's happening in packaging and what's happening in <unk>, what's happening in radical and our.
What you're suggesting is the whole WC market is growing. So, like, you said you're gaining share, so why wouldn't that number be higher? Like, where is the share gain, given that over half, in the second half, that you're talking about?
Bren Higgins: Well, so Stacy, I mean, part of this is the blended numbers, right? So you're getting that, you know, when we talk about share gain overall, we're looking at our semiconductor process control business in terms of its relative performance against the-
Richard Wallace: Well, so Stacy, I mean, part of this is the blended numbers, right? So you're getting that, you know, when we talk about share gain overall, we're looking at our semiconductor process control business in terms of its relative performance against the-
Well, so Stacy, I mean, part of this is the blended numbers, right? So you're getting that they, you know, when we talk about share gain overall.
Are our largest.
[Analyst 1] (Goldman Sachs): Uh-huh
Stacy Rasgon: Uh-huh
Bren Higgins: ... the total equipment market. So, so there is that. You know, again, I'll allow you to do the work. I'm not gonna, I'm not gonna guide the full year to that level of precision. I will say that we feel very good about our ability to grow faster than the market. And, you know, you've got service element, you've got our non-semi elements that are, you know, are also-
Richard Wallace: ... the total equipment market. So, so there is that. You know, again, I'll allow you to do the work. I'm not gonna, I'm not gonna guide the full year to that level of precision. I will say that we feel very good about our ability to grow faster than the market. And, you know, you've got service element, you've got our non-semi elements that are, you know, are also-
Businesses like our broadband plasma business or our high end pattern inspection, it's a market that's growing faster and we have a strong share. So will influence the overall share numbers, just because of the relative growth rate of that segment versus other parts of the market. So those are the areas, we feel pretty good about our share position here in 2025.
We're looking at our semiconductor process control business in terms of its relative performance against the total equipment market. So, there is that. You know, again, I—
In terms of gaining share and we think that we'll continue to increment.
It was a really strong share position, we'll continue to increment here moving forward given the nature of the portfolio and our ability to compete meeting customers' technical requirements and their cost requirements being able to leverage the.
Stacy Rasgon: ... Okay, 'cause I mean, services is growing about that much as well. You said 12% to 14%, and I just, I just feel like that, that half over half, and maybe there's just conservatism built into it, but it feels like, like I said, call it 10% or whatever, feels light. Anyways, so my second question, just around China, you know, the last time you reported it was after the affiliate rule had been put in place and before it was taken off. What are your thoughts on, I guess, recovery of that revenue, and, like, how does that bake in to your thoughts on China revenue next year?
Stacy Rasgon: ... Okay, 'cause I mean, services is growing about that much as well. You said 12% to 14%, and I just, I just feel like that, that half over half, and maybe there's just conservatism built into it, but it feels like, like I said, call it 10% or whatever, feels light. Anyways, so my second question, just around China, you know, the last time you reported it was after the affiliate rule had been put in place and before it was taken off. What are your thoughts on, I guess, recovery of that revenue, and, like, how does that bake in to your thoughts on China revenue next year?
You do the work. I'm not gonna, I'm not gonna guide the full year to to that level of precision. I will say that we feel very about our ability to grow uh, bastards and in the market and you know, you've got certain element. You've got our non semi elements that are, you know, are also factors in our world growth rate.
The network effect across the systems. So we think that that is enhances.
Enhances our competitive offerings and positions us well here moving forward from a share point of view.
Okay, because, I mean, this is wrong about that as well. You said 12 to 14%, and I just—I just feel like that's half, or over half. Maybe there's just conservatism into it. Feels like, like I said, call it 10% or whatever. Um, feels like—anyways. Um,
But my second question is just around China. You know, the last time you reported—
Super helpful. If I may just a really quick follow up your competitor talked about.
The different vectors of market growth into their guidance for WP in 2026, instead foundry logic, good growth and good growth, but in the end a bit below that I was curious if you agree with that assessment. When you look at the broader market and then obviously youre hearing some NAND guys report Tonight, maybe talking a bit more aggressively spend do you think that as this year goes along maybe that you can change.
On, I guess, recovery of that revenue and like, how is that baked in?
Stacy Rasgon: Because I, to my mind, like your—I don't know if your China guidance for next year now is higher than it was last quarter or not, but, presumably some of that affiliate revenue should be coming back.
Because I, to my mind, like your—I don't know if your China guidance for next year now is higher than it was last quarter or not, but, presumably some of that affiliate revenue should be coming back.
To your thoughts on trying to revenue next year because I, to my mind, like you're—I don't know if your China guidance connection now is higher than it was last quarter or not. But, um, presumably some of that affiliate revenue should be coming back.
Bren Higgins: Yeah, I would've, I think back three months ago, we thought China'd be, you know, modestly down, and now I think it's, it's gonna be up for us this year. So that business has, you know, come back in and feathered through, is in our forecast and some of the commentary we've provided here.
Bren Higgins: Yeah, I would've, I think back three months ago, we thought China'd be, you know, modestly down, and now I think it's, it's gonna be up for us this year. So that business has, you know, come back in and feathered through, is in our forecast and some of the commentary we've provided here.
If you see an acceleration a bit more quickly on the NAND side from a technology transition perspective, or some greenfield capacity I know, it's a smaller business for you but interested in your thoughts.
Yeah. I would have, uh, I think back, uh, three months ago with China to be, you know, modestly down. And now I think it's, uh, it's going to be up for us this year.
I think the challenge given the constraints in the industry around.
So that business is, you know, come back in and feather through, and then our forecasts and some of the commentary we've provided.
Stacy Rasgon: How much was that again? It was, I can't remember, $300 million, $350 million? I can't remember.
Stacy Rasgon: How much was that again? It was, I can't remember, $300 million, $350 million? I can't remember.
How much was that again? Was I...
How much can actually be supplied any any new demand that's showing up today as I said earlier in terms of our conversations with customers is more about 'twenty seven deliveries.
300 million.
Or 350.
Bren Higgins: Yeah, in that ballpark. I mean, some service elements, but yeah-
Bren Higgins: Yeah, in that ballpark. I mean, some service elements, but yeah-
Stacy Rasgon: Okay.
Stacy Rasgon: Okay.
Bren Higgins: in that ballpark.
Bren Higgins: in that ballpark.
Remember, yeah. And that ballpark of business service elements, but yeah, okay. And that ballpark.
Stacy Rasgon: Got it. Okay, that's helpful. Thank you, guys.
Stacy Rasgon: Got it. Okay, that's helpful. Thank you, guys.
Got it. Okay, that's helpful. Thank you, guys.
Operator: Thank you. We do have time for one additional questioner. We'll take our final question from Tom O'Malley with Barclays.
Operator: Thank you. We do have time for one additional questioner. We'll take our final question from Tom O'Malley with Barclays.
Although theyre not a competitor there appear we have enough competitors.
Thank you. We do have time for one additional question. Or, we'll take our final question from Tom Ali with Barclays.
[laughter].
Tom O'Malley: Hey, guys. Thanks for taking my question. As I look out, you talk about more share gains. Where should I be paying attention? Is that more on the leading-edge foundry logic side? Is that more in the advanced packaging side? Just because to Stacy's question, right, like, you're talking about a core WFE that you're growing in line with. Maybe you're being a little conservative to start the year and end up beating that as we go along. But I would imagine if you include advanced packaging as well, that's an area where you've had a lot of strength. So, I would imagine that would accelerate the growth rate. Maybe explain where you're seeing those share gains. Is it more so on the AP side or on the leading-edge foundry logic side?
Thomas O'Malley: Hey, guys. Thanks for taking my question. As I look out, you talk about more share gains. Where should I be paying attention? Is that more on the leading-edge foundry logic side? Is that more in the advanced packaging side? Just because to Stacy's question, right, like, you're talking about a core WFE that you're growing in line with. Maybe you're being a little conservative to start the year and end up beating that as we go along.
Hey guys, thanks for taking my question. Uh,
Yeah.
Thanks, Tom.
Thank you Tom.
Alright, I wanted to just to thank everyone for their time I know, it's a very busy earnings season, and a very busy earnings day.
We look forward to seeing hopefully many of you at our Investor Day in New York on March 12, and with that I'll turn it back to the operator for any final instructions.
But I would imagine if you include advanced packaging as well, that's an area where you've had a lot of strength. So, I would imagine that would accelerate the growth rate. Maybe explain where you're seeing those share gains. Is it more so on the AP side or on the leading-edge foundry logic side?
Thank you. This concludes the KLM KLA Corporation December quarter, 2025 earnings call and webcast. Please disconnect. Your line at this time.
Talk about more share gains. Where should I be paying attention? Is that more on the leading edge around your logic side? Is that more in the advanced packaging side, just because—to stay in question, right? Like you’re talking about a quarter WFE that you’re growing in line with; maybe you’re being a little conservative to start the year and end up beating that as we go along. But I would imagine if you include advanced packaging as well, that’s an area where you’ve had a lot of strength. So, I would imagine that would accelerate the growth rate. Maybe explain where you’re seeing those share gains—is it more so on the AP side or on the leading edge of your left side?
Bren Higgins: Well, we're certainly seeing share gains in AP, as I talked about earlier. I think there's a lot of positive momentum there. I think we've done extremely well in logic, and I think there's a lot of momentum on the memory side. As it relates to the overall business, I wouldn't say, you know, our share's pretty consistent across the different segments. I mean, so it really comes down to our products. Our reticle inspections had a really strong year. We think that that's part of the market's inflecting. We're doing pretty well there. We see some positive momentum in our electron beam businesses, and so we think that that's a positive here moving forward as well.
Bren Higgins: Well, we're certainly seeing share gains in AP, as I talked about earlier. I think there's a lot of positive momentum there. I think we've done extremely well in logic, and I think there's a lot of momentum on the memory side. As it relates to the overall business, I wouldn't say, you know, our share's pretty consistent across the different segments. I mean, so it really comes down to our products. Our reticle inspections had a really strong year. We think that that's part of the market's inflecting. We're doing pretty well there. We see some positive momentum in our electron beam businesses, and so we think that that's a positive here moving forward as well.
Well, we're certainly seeing share gains in AP. As I talked about earlier, I think there's a lot of positive momentum there. I think we've done extremely well with logic, and I think there's a lot of momentum on the memory side as it relates to the overall business. I wouldn't say, you know, our share is pretty consistent across the different segments. I mean, so it really comes down to our products, and reticle inspections had a really strong year. We think that that's where the market's influenced. We see some positive momentum in our Electron Beam business.
So, we think that that's a
Bren Higgins: So I think between what's happening in packaging, what's happening in E-beam, what's happening in reticle, and our largest, you know, businesses, like our broadband plasma business or our high-end patterns inspection, it's a market that's growing faster, and we have a strong share. So we'll influence the overall share numbers just because of the relative growth rate of that segment versus other parts of the market. So those are the areas we feel pretty good about our share position here in 2025, in terms of gaining share, and we think that, you know, we'll continue to increment what is. It was a really strong share position.
So I think between what's happening in packaging, what's happening in E-beam, what's happening in reticle, and our largest, you know, businesses, like our broadband plasma business or our high-end patterns inspection, it's a market that's growing faster, and we have a strong share. So we'll influence the overall share numbers just because of the relative growth rate of that segment versus other parts of the market. So those are the areas we feel pretty good about our share position here in 2025, in terms of gaining share, and we think that, you know, we'll continue to increment what is. It was a really strong share position.
positive here moving forward as well. So, I think between
And what's happening in reticle and our, our, our largest, uh, you know, businesses like our broadband plasma business or, or high-end.
It's growing faster, and we have a strong share, so it will influence the overall share numbers of that segment versus other parts of the market. So those are the areas. We feel pretty good about our share position here in 2025.
Bren Higgins: We'll continue to increment here moving forward, given the nature of the portfolio, and our ability to compete, meeting customers' technical requirements and their cost requirements, being able to leverage the network effect across the systems. So we think that that is, you know, enhances our competitive offerings and positions us well here moving forward from a share point of view.
We'll continue to increment here moving forward, given the nature of the portfolio, and our ability to compete, meeting customers' technical requirements and their cost requirements, being able to leverage the network effect across the systems. So we think that that is, you know, enhances our competitive offerings and positions us well here moving forward from a share point of view.
Uh, in terms of gaining share, and we think that, you know, we'll continue to increment. Uh, what is—it was a really strong share position. We'll continue to increment here moving forward, given the nature of the portfolio, uh, and our ability to compete meeting customers.
Technical requirements and their cost requirements—being able to leverage the network effect across the systems. So, we think that that, you know, enhances our competitive offerings and positions us well here, moving forward from a share point of view.
Tom O'Malley: Super helpful. And just if I may, just a really quick follow-up. Your competitor talked about the different vectors of market growth into their guidance for WFE in 2026 and said, "Foundry Logic, good growth, DRAM, good growth, but NAND a bit below that." I was curious if you agree with that assessment when you look at the broader market. And then, obviously, you're hearing some NAND guys report tonight, maybe talking a bit more aggressively about spend. Do you think that as this year goes along, maybe that view can change if you see an acceleration a bit more quickly on the NAND side from a technology transition perspective or some greenfield capacity? I know it's a smaller business for you, but interested in your thoughts.
Thomas O'Malley: Super helpful. And just if I may, just a really quick follow-up. Your competitor talked about the different vectors of market growth into their guidance for WFE in 2026 and said, "Foundry Logic, good growth, DRAM, good growth, but NAND a bit below that." I was curious if you agree with that assessment when you look at the broader market.
And then, obviously, you're hearing some NAND guys report tonight, maybe talking a bit more aggressively about spend. Do you think that as this year goes along, maybe that view can change if you see an acceleration a bit more quickly on the NAND side from a technology transition perspective or some greenfield capacity? I know it's a smaller business for you, but interested in your thoughts.
Super helpful. And if I may just a really quick follow-up, um, your competitor talked about, uh, the different vectors of market growth into their guidance for WV in 2026 and said, boundary logic, good growth, theorem good growth, but nand a bit below that. I was curious if you agree with that assessment, when you look at the broader market and then obviously, you're hearing some uh Nan guys report tonight. Maybe talking a bit more aggressively about then, do you think that as this year goes along maybe that you can change if you see an acceleration a bit more quickly on the N side from the technology, transition perspective, or some green Field capacity. I know it's a smaller business for you, but interested in your thoughts.
Bren Higgins: I think the challenge, given the constraints in the industry around how much can actually be supplied, you know, any new demand that's showing up today, as I said earlier, in terms of our conversations with customers, is more about 2027 deliveries. Also, they're not a competitor. They're a peer. We have enough competitors, thank you. Thanks, Tom.
Bren Higgins: I think the challenge, given the constraints in the industry around how much can actually be supplied, you know, any new demand that's showing up today, as I said earlier, in terms of our conversations with customers, is more about 2027 deliveries.
I think the challenge given the constraints in in the industry around, uh, how much can actually be supplied, you know, any any new demand that's showing up today, as I said earlier, in terms of our conversation,
Customers is more about 27 deliveries.
Richard Wallace: Also, they're not a competitor. They're a peer. We have enough competitors, thank you.
Also, they're not a competitor. They're a peer. We have enough competitors. Thank you.
Bren Higgins: Thanks, Tom.
Kevin Kessel: Thank you, Tom. All right, I wanted just to thank everyone for their time. I know it's a very busy earnings season and a very busy earnings day. We look forward to seeing, hopefully, many of you at our Investor Day in New York on 12 March. And with that, I'll turn it back to the operator for any final instructions.
Richard Wallace: Thank you, Tom.
Thanks Tom.
Kevin Kessel: All right, I wanted just to thank everyone for their time. I know it's a very busy earnings season and a very busy earnings day. We look forward to seeing, hopefully, many of you at our Investor Day in New York on 12 March. And with that, I'll turn it back to the operator for any final instructions.
Thank you, Tom.
All right, I wanted to just thank everyone for their time. I know it's a very busy earnings season and a very busy earnings day. We look forward to seeing, hopefully, many of you at our Investor Day in New York on March 12th. And with that, I'll turn it back to the operator for any final instructions.
Operator: Thank you. This concludes the KLA Corporation December quarter 2025 earnings call and webcast. Please disconnect your lines.
Operator: Thank you. This concludes the KLA Corporation December quarter 2025 earnings call and webcast. Please disconnect your lines.
Thank you, this concludes the Klo KLA Corporation, December quarter, 2025 earnings, call and webcast.
