Q3 2026 KLA Corp Earnings Call

April 29, 2026

Speaker #1: Good afternoon. My name is Leo, and I will be your conference operator today. At this time, I would like to welcome everyone March quarter 2026 earnings conference call and webcast.

Speaker #1: 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.

Speaker #1: If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, please press star 2.

Speaker #1: Please limit yourself to one question and one follow-up. Lastly, if you should need operator assistance, please press star 0. Thank you. I will now turn the call over to Kevin Kessel, Vice President of Investor Relations and Market Analytics.

Speaker #1: Please go ahead.

Speaker #2: Welcome to the March 2026 quarterly earnings call for KLA. I'm joined by our CEO, Rick Wallace, and CFO, Brent Higgins. We will discuss today's results as well as our outlook, which we released after the market closed and is available on our website along with supplemental materials.

Speaker #2: We are presenting today's discussion and metrics on a non-gap financial basis, unless otherwise specified. We will not reference fiscal years in our discussion. All full-year references we make refer to calendar years.

Speaker #2: The earnings material contained a detailed reconciliation of gap to non-gap results. KLA's IR website also contains future events, presentations, corporate governance information, and links to our SDC filings.

Speaker #2: Our comments today are subject to risks and uncertainties reflected in the disclosure of risk factors in our SDC filing. Any forward-looking statements, including those we make on the call today, are also subject to those risks, and KLA cannot guarantee those forward-looking statements will come true.

Speaker #2: Our actual results may differ significantly from those projected in our forward-looking statements. We will begin the call with Rick providing commentary on the business environment and our quarter, followed by Brent with financial highlights and our outlook.

Speaker #2: Now, over to Rick.

Speaker #3: Thanks, Kevin. KLA delivered strong results across the board for the March quarter, with revenue of $3.415 billion, up 4% sequentially, and 11% year over year, driven by increased investment in leading-edge foundry logic and high-bandwidth memory.

Speaker #3: Non-gap diluted EPS was $9.40, and gap diluted EPS was $9.12. We continue to see AI as a core driver of KLA's performance, and an enabler for our growing momentum.

Speaker #3: Highlights in the quarter include KLA achieving the number one position in process control for advanced wafer-level packaging for 2025, due to continued customer adoption of KLA's packaging portfolio.

Speaker #3: We continue to see improving momentum in advanced packaging revenue growth and market share, and we now expect semiconductor process control product portfolio revenue for advanced packaging will grow from approximately $635 million in 2025 to approximately $1 billion in 2026, well above our prior estimates.

Speaker #3: KLA's service business, with 775 million in the March quarter, up 16% year over year, but down 1% sequentially due to the timing of revenue recognition.

Speaker #3: Consistent long-term growth in service is a key aspect of KLA's business model, and delivers predictable cash flow to anchor our capital return strategy. Quarterly free cash flow was $622 million, over the past 12 months, free cash flow was $4 billion, producing a free cash flow margin of 31%.

Kevin Kessel: There's none filing. Any forward-looking statements, including those we make on the call today, are also subject to those risks, and KLA cannot guarantee those forward-looking statements will come true. Our actual results may differ significantly from those projected in our forward-looking statements. We will begin the call with Rick providing commentary on the business environment and our quarter, followed by Bren with financial highlights and our outlook. Now over to Rick.

Speaker #3: Total capital return in the March quarter was $875 million, comprised of $626 million in share repurchases and $249 million in dividends. Total capital return over the past 12 months was 3.2 billion.

Any forward-looking statements including including those, we make on the call today, are also subject to those risks and Ka cannot guarantee those forward-looking statements will come true.

Our actual results may differ significantly from those projected in our forward-looking statements.

Speaker #3: Additionally, recently published industry research shows KLA increased its global share of both the overall wafer equipment and the process control market in 2025. This growing market leadership was highlighted by significant gains in advanced wafer-level packaging, where KLA increased its market share by 14 percentage points and achieved approximately 70% year-over-year revenue growth.

We will begin the call with Rick providing commentary on the business environment and our quarter, followed by Bren with financial highlights and our outlook.

Richard Wallace: Thanks, Kevin. KLA delivered strong results across the board for the March quarter, with revenue of $3.415 billion, up 4% sequentially and 11% year-over-year, driven by increased investment in leading-edge foundry logic and high-bandwidth memory. Non-GAAP diluted EPS was $9.40, and GAAP diluted EPS was $9.12. We continue to see AI as a core driver of KLA's performance and an enabler for our growing momentum. Highlights in the quarter include KLA achieving the number one position in process control for advanced wafer-level packaging for 2025 due to continued customer adoption of KLA's packaging portfolio.

Rick Wallace: Thanks, Kevin. KLA delivered strong results across the board for the March quarter, with revenue of $3.415 billion, up 4% sequentially and 11% year-over-year, driven by increased investment in leading-edge foundry logic and high-bandwidth memory. Non-GAAP diluted EPS was $9.40, and GAAP diluted EPS was $9.12. We continue to see AI as a core driver of KLA's performance and an enabler for our growing momentum. Highlights in the quarter include KLA achieving the number one position in process control for advanced wafer-level packaging for 2025 due to continued customer adoption of KLA's packaging portfolio.

Now over to Rick.

Thanks. Kevin.

Haley delivered strong results to cross the board to the March quarter with revenue of 3.415 billion up 4% sequentially and 11% year-over-year driven by increased investment in Leading Edge, Foundry, logic and high bandwidth memory.

Speaker #3: KLA's market share also improved across mask inspection, optical pattern wafer inspection, and electron beam inspection. Since 2021, KLA's share of process control has grown by 360 basis points and is approximately seven times greater than the nearest competitor.

Non-gaap deleted. DPS was $9.40 and GAP deleted. DPS was $9.12.

We continue to see AI as a core driver of khaz performance and an enabler for our growing momentum.

Speaker #3: Looking ahead to 2026 and 2027, our expectations for growth in the wafer equipment industry are accelerating. KLA's relevance has increased across all vectors of semiconductor manufacturing, as process control enables a growing volume of design starts at the leading edge and supports the needs for increased performance and reliability in the production of high-bandwidth memory.

Thanks to the quarter include KLA achieving the number 1 position in process control for advanced wafer level packaging for 2025.

Richard Wallace: We continue to see improving momentum in advanced packaging revenue growth and market share. We now expect Semiconductor Process Control product portfolio revenue for advanced packaging will grow from approximately $635 million in 2025 to approximately $1 billion in 2026, well above our prior estimates. KLA's service business was $775 million in Q1, up 16% year-over-year, down 1% sequentially due to the timing of revenue recognition. Consistent long-term growth in service is a key aspect of KLA's business model and delivers predictable cash flow to anchor our capital return strategy. Quarterly free cash flow was $622 million. Over the past 12 months, free cash flow was $4 billion, producing a free cash flow margin of 31%.

Rick Wallace: We continue to see improving momentum in advanced packaging revenue growth and market share. We now expect Semiconductor Process Control product portfolio revenue for advanced packaging will grow from approximately $635 million in 2025 to approximately $1 billion in 2026, well above our prior estimates. KLA's service business was $775 million in Q1, up 16% year-over-year, down 1% sequentially due to the timing of revenue recognition. Consistent long-term growth in service is a key aspect of KLA's business model and delivers predictable cash flow to anchor our capital return strategy. Quarterly free cash flow was $622 million. Over the past 12 months, free cash flow was $4 billion, producing a free cash flow margin of 31%.

Due to continued customer adoption of KHAZ, packaging portfolio.

Speaker #3: It's important to distinguish that design activity and rising memory complexity are not the only catalysts driving benefits for KLA and process control. Faster product cycles, higher value wafers and masks, rising design complexity and variability, and the growing demand and complexity of advanced packaging all require significantly more process control solutions.

We continue to see improving momentum and advanced packaging Revenue growth and market share. And we now expect semiconductor process control product, portfolio. Revenue for advanced packaging will grow from approximately 635 million in 2025 to approximately a billion dollars in 2026? Well, above our prior estimate,

The service business was $775 million in the March quarter, up 16% year-over-year, but down 1% sequentially due to the timing of revenue recognition.

Speaker #3: These solutions shorten time to results, by addressing process integration challenges in R&D and early fab ramp phases. While continuing to manage yields with strong design mix and high-volume manufacturing, turning to services, as KLA Systems become more technologically advanced and have longer service lifetimes in fabs, our service business continues to gain strategic importance.

Consistent long-term growth in service is a key aspect—pause—business model, and delivers predictable cash flow to Anchor. Our capital return strategy.

Richard Wallace: Total capital return in the Q1 was $875 million, comprised of $626 million in share repurchases and $249 million in dividends. Total capital return over the past 12 months was $3.2 billion. Additionally, recently published industry research shows KLA increased its global share of both the overall wafer equipment and the process control market in 2025. This growing market leadership was highlighted by significant gains in advanced wafer-level packaging, where KLA increased its market share by 14 percentage points and achieved approximately 70% year-over-year revenue growth. KLA's market share also improved across mask inspection, optical patterned wafer inspection, and electron beam inspection. Since 2021, KLA's share of process control has grown by 360 basis points and is approximately 7 times greater than the nearest competitor.

Rick Wallace: Total capital return in the Q1 was $875 million, comprised of $626 million in share repurchases and $249 million in dividends. Total capital return over the past 12 months was $3.2 billion. Additionally, recently published industry research shows KLA increased its global share of both the overall wafer equipment and the process control market in 2025. This growing market leadership was highlighted by significant gains in advanced wafer-level packaging, where KLA increased its market share by 14 percentage points and achieved approximately 70% year-over-year revenue growth. KLA's market share also improved across mask inspection, optical patterned wafer inspection, and electron beam inspection. Since 2021, KLA's share of process control has grown by 360 basis points and is approximately 7 times greater than the nearest competitor.

Quarterly free cash flow is 622 million over the past 12 months, free cash flow was billion dollars producing a free cash flow margin of 31%.

Speaker #3: Driven by rising customer expectations for tool performance and availability across all customer segments, creating a strong predictable long-term tailwind for overall KLA revenue growth.

total Capital return in the March quarter was 875 million comprised of 626 million, in share repurchases, and 249 million in dividends

Total Capital Return of the past 12 months was 3.2 billion dollars.

Speaker #2: KLA also recently held an investor day in March. Detailing our position in the semiconductor market and our unique portfolio approach to solving customer process challenges and enhancing yield learning cycles within process control.

Additionally re recently published industry research shows KLA increased. Its Global share of both the overall wafer equipment and the process control market and 2025

Speaker #2: We introduced new long-term revenue growth targets along with a 2030 financial model, and increased our capital allocation to target over 90% of free cash flow.

this growing Market leadership was highlighted by significant gains in advanced wafer level packaging, where KLA increased its market share by 14 percentage points and achieved approximately 70% year-over-year Revenue growth

Speaker #2: We also announced the 17th consecutive increase in our quarterly dividend level, and an incremental $7 billion share repurchase authorization. KLA revised up 13 to 17 percent revenue CAGR objectives through 2030, reflects strong growth across our key business segments and includes increased long-term services revenue CAGR growth model of approximately 13 to 15 percent.

LA's market, share also improved across bask inspection, Optical pattern wafer, inspection and Electron Beam inspection.

Richard Wallace: Looking ahead to 2026 and 2027, our expectations for growth in the wafer equipment industry are accelerating. KLA's relevance has increased across all vectors of semiconductor manufacturing as process control enables a growing volume of design starts at the leading edge and supports the needs for increased performance and reliability in the production of high-bandwidth memory. It's important to distinguish that design activity and rising memory complexity are not the only catalysts driving benefits for KLA and process control. Faster product cycles, higher value wafers and masks, rising design complexity and variability, and the growing demand and complexity of advanced packaging all require significantly more process control solutions. These solutions shorten time to results by addressing process integration challenges in R&D and early fab ramp phases while continuing to manage yields with strong design mix and high-volume manufacturing.

Rick Wallace: Looking ahead to 2026 and 2027, our expectations for growth in the wafer equipment industry are accelerating. KLA's relevance has increased across all vectors of semiconductor manufacturing as process control enables a growing volume of design starts at the leading edge and supports the needs for increased performance and reliability in the production of high-bandwidth memory. It's important to distinguish that design activity and rising memory complexity are not the only catalysts driving benefits for KLA and process control. Faster product cycles, higher value wafers and masks, rising design complexity and variability, and the growing demand and complexity of advanced packaging all require significantly more process control solutions. These solutions shorten time to results by addressing process integration challenges in R&D and early fab ramp phases while continuing to manage yields with strong design mix and high-volume manufacturing.

Since 2021 Ka Sher process control has grown by 360 basis points, and is approximately 7 times greater than the nearest competitor. Looking ahead to 2026 and 2027 our expectations. For growth in the wafer equipment industry are accelerating.

Speaker #2: Our long-term model assumes a baseline semiconductor industry growth CAGR of 11% from 2025 to 2030, and the wafer equipment market growing 1% faster than the semiconductor industry to 215 billion plus or minus 20 billion by 2030.

Koz relevance has the increased across all vectors of semiconductor manufacturing as process control enables a growing volume of design starts at the Leading Edge and supports the needs for increased performance and reliability in the production of high bandwidth memory

Speaker #2: Given the growing relevance of process control across all customer segments, we expect KLA to continue to outperform the wafer equipment market on the top line driving operating leverage and continuing to deliver our best-in-class financial model.

It's important to distinguish that design activity and rising memory complexity are not the only catalysts driving benefits for KLA and process control. Faster product cycles, higher-value wafers and masks, rising design complexity and variability, and the growing demand and complexity of advanced packaging all require significantly more process control solutions.

Speaker #2: I'll close my remarks by saying that KLA's sustainable outperformance reinforces the strength of our leadership in process control. It also underscores the critical role KLA's suite of products and services play in enabling AI-fueled growth in the semiconductor industry.

Richard Wallace: Turning to services, as KLA systems become more technologically advanced and have longer service lifetimes in fabs, our service business continues to gain strategic importance, driven by rising customer expectations for tool performance and availability across all customer segments, creating a strong, predictable, long-term tailwind for overall KLA revenue growth. KLA also recently held an Investor Day in March, detailing our position in the semiconductor market and our unique portfolio approach to solving customer process challenges and enhancing yield learning cycles within process control. We introduced new long-term revenue growth targets along with a 2030 financial model and increased our capital allocation to target over 90% of free cash flow. We also announced the 17th consecutive increase in our quarterly dividend level and an incremental $7 billion share repurchase authorization.

Rick Wallace: Turning to services, as KLA systems become more technologically advanced and have longer service lifetimes in fabs, our service business continues to gain strategic importance, driven by rising customer expectations for tool performance and availability across all customer segments, creating a strong, predictable, long-term tailwind for overall KLA revenue growth. KLA also recently held an Investor Day in March, detailing our position in the semiconductor market and our unique portfolio approach to solving customer process challenges and enhancing yield learning cycles within process control. We introduced new long-term revenue growth targets along with a 2030 financial model and increased our capital allocation to target over 90% of free cash flow. We also announced the 17th consecutive increase in our quarterly dividend level and an incremental $7 billion share repurchase authorization.

These Solutions. Shortened time to results by addressing process. Integration challenges in R&D and early Fab ramp phases while continuing to manage yields with strong design, mix and high volume Manufacturing.

Turning to services.

Speaker #2: Our consistent execution reflects the resilience of the KLA operating model, the talent of our global team, and our disciplined approach to capital allocation focused on long-term investment and maximizing total shareholder value.

FKA systems become more technologically advanced and have longer service lifetimes in facts.

Speaker #2: With that, I'll turn the call over to Brent to discuss the quarter's financial highlights.

Speaker #3: Thanks, Rick. KLA's March quarter results reflect strong year-over-year growth with an industry-leading margin profile, highlighting our market leadership, consistent execution, and the dedication of our global teams in meeting customer commitments.

Our service business continues to gain strategic, importance, driven by Rising customer expectations for Tool performance and availability across all customer segments, creating a strong predictable long-term Tailwind for overall Ka Revenue growth.

Speaker #3: Revenue was $3.415 billion, above the guidance midpoint of $3.35 billion. Non-GAAP diluted EPS was $9.40, and GAAP diluted EPS was $9.12, each above the midpoint of the respective guidance ranges.

Ka also recently held an investor day in March, detailing our position in the semiconductor market and our unique portfolio approach to solving customer process challenges and enhancing yield learning Cycles within process control.

Speaker #3: Gross margin was 62.2%, 45 basis points above the midpoint of guidance, driven by better-than-modeled service business mix, and manufacturing scale due to higher business volume.

Richard Wallace: KLA revised up 13% to 17% revenue CAGR objective through 2030 reflects strong growth across our key business segments and includes an increased long-term services revenue CAGR growth model of approximately 13% to 15%. Our long-term model assumes a baseline semiconductor industry growth CAGR of 11% from 2025 to 2030, and the wafer equipment market growing 1% faster than the semiconductor industry to $215 billion ±$20 billion by 2030. Given the growing relevance of process control across all customer segments, we expect KLA to continue to outperform the wafer equipment market on the top line, driving operating leverage and continuing to deliver our best-in-class financial model. I'll close my remarks by saying that KLA's sustainable outperformance reinforces the strength of our leadership in process control.

Rick Wallace: KLA revised up 13% to 17% revenue CAGR objective through 2030 reflects strong growth across our key business segments and includes an increased long-term services revenue CAGR growth model of approximately 13% to 15%. Our long-term model assumes a baseline semiconductor industry growth CAGR of 11% from 2025 to 2030, and the wafer equipment market growing 1% faster than the semiconductor industry to $215 billion ±$20 billion by 2030. Given the growing relevance of process control across all customer segments, we expect KLA to continue to outperform the wafer equipment market on the top line, driving operating leverage and continuing to deliver our best-in-class financial model. I'll close my remarks by saying that KLA's sustainable outperformance reinforces the strength of our leadership in process control.

Consecutive increase in our quarterly dividend level and an incremental. 7 billion. Share repurchase authorization

Speaker #3: Operating expenses were $670 million, and included $389 million in R&D, and $281 million in SG&A. Operating expenses were higher than expected principally due to prototype materials timing and other reserve adjustments.

Speaker #3: Operating margin was 42.6%. Other income expense net was $9 million in income. The variance relative to guidance was due to a significant mark-to-market gain of a strategic supply investment.

Speaker #3: The quarterly affected tax rate was 15.4%. At the guided tax rate of 14.5%, non-GAAP earnings per share would have been $0.10 higher or $9.50.

KLA revised up 13 to 17% Revenue. Kaker objective through 2030 reflects strong growth across our key, B business, segments and includes increased long-term Services Revenue kager, growth model of approximately 13 to 15%. Our long-term model assumes, the Baseline semiconductor industry growth taker of 11% from 2025 to 2030 and the wafer equipment market for a 1% faster than the semiconductor industry to 215 billion dollars, plus or minus 20 billion by 2030.

Speaker #3: Breakdown of revenue by reportable segments 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 billion in total cash, cash equivalents, and marketable securities, and debt of $5.95 billion.

Given the growing relevance of process control across all customer segments. We expect KLA to continue to outperform the wafer equipment Market on the top line, driving operating leverage and continuing to deliver our best-in-class financial model.

Richard Wallace: It also underscores the critical role KLA's suite of products and services play in enabling AI-fueled growth in the semiconductor industry. Our consistent execution reflects the resilience of the KLA operating model, the talent of our global team, and our disciplined approach to capital allocation focused on long-term investment and maximizing total shareholder value. With that, I'll turn the call over to Bren to discuss the quarter's financial highlights.

Rick Wallace: It also underscores the critical role KLA's suite of products and services play in enabling AI-fueled growth in the semiconductor industry. Our consistent execution reflects the resilience of the KLA operating model, the talent of our global team, and our disciplined approach to capital allocation focused on long-term investment and maximizing total shareholder value. With that, I'll turn the call over to Bren to discuss the quarter's financial highlights.

Our close my remarks by saying that Kayla sustainable. Outperformance reinforces the strength of our leadership and process control.

It also underscores, the critical role Kayla's Suite of products and services. Play and enabling AI field growth in the semiconductor industry.

Speaker #3: 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.

Speaker #3: Over the past five calendar years, free cash flow has grown at approximately 20% CAGR, above the revenue CAGR of 16% over the same period.

Bren Higgins: Thanks, Rick. KLA's March quarter results reflect strong year-over-year growth with an industry-leading margin profile, highlighting our market leadership, consistent execution, and the dedication of our global teams in meeting customer commitments. Revenue was $3.415 billion, above the guidance midpoint of $3.35 billion. Non-GAAP diluted EPS was $9.40, and GAAP diluted EPS was $9.12, each above the midpoint of the respective guidance ranges. Gross margin was 62.2%, 45 basis points above the midpoint of guidance, driven by better-than-modeled service business mix and manufacturing scale due to higher business volume. Operating expenses were $670 million and included $389 million in R&D and $281 million in SG&A. Operating expenses were higher than expected, principally due to prototype materials timing and other reserve adjustments.

A consistent execution, reflects the resilience of the KA operating model, the talent of our Global team and our discipline approach to Capital allocation focused on long-term investment and maximizing total shareholder value with that. I'll turn the call over to Brian to discuss the quarters financial highlights.

Speaker #3: This growth, coupled with resilience across business cycles, enables a comprehensive capital return strategy featuring double-digit dividend growth and share repurchases to support long-term shareholder value creation.

Speaker #3: This strategy prioritizes predictable assertive capital deployment and remains an important differentiator of the KLA investment thesis. Now, turning to the industry outlook for 2026, which continues to strengthen across all segments.

Revenue was 3.415 billion above the guidance midpoint of 3.35 billion.

Non-gaap diluted EPS was $9.40 and GAP deleted. DPS was $9.12 each above the midpoint of the respective guidance ranges.

Speaker #3: We expect the wafer equipment market, which includes advanced packaging, to exceed $140 billion. In 2026, the strength of demand and customer engagement in ensuring KLA has the capacity to support numerous new fab projects currently under construction has led to unprecedented demand visibility from our customers.

Gross margin was 62.2% 45 basis. Points above the midpoint of guidance driven by better than modeled service business. Mix and Manufacturing scale due to higher business volume.

Operating expenses were $670 million and included $389 million in R&D and $281 million in SG&A.

Speaker #3: While normally we would not comment on 2027 growth rates at April of 2026, this demand environment gives us confidence in 2027 visibility for the wafer equipment market.

Bren Higgins: Operating margin was 42.6%. Other income expense net was $9 million in income. The variance relative to guidance was due to a significant mark-to-market gain of a strategic supply investment. The quarterly effective tax rate was 15.4%. At the guided tax rate of 14.5%, Non-GAAP earnings per share would have been $0.10 higher or $9.50. Breakdown of revenue by reportable segments and end markets, major products and regions can be found within the shareholder letter and slides. Moving to the balance sheet, KLA ended the quarter with $5 billion in total cash equivalents, and marketable securities, and debt of $5.95 billion. The company has a flexible and attractive bond maturity profile, supported by investment-grade ratings from all three major rating agencies.

operating expenses were higher than expected principally due to protect materials timing and other Reserve adjustments.

Operating margin was 42.6%. Other income (expense), net, was $9 million in income.

Speaker #3: Today, we expect the 2027 year-over-year growth rate to be higher than our growth rate expectations for 2026. KLA has strong business momentum, expanding market share, and higher process control intensity that's a leading edge across all segments.

The variance relative to guidance was due to a significant mark-to-market gain of a strategic supply investment.

The quarterly effective tax rate was 15.4%.

But the guided tax rate of 14.5%.

Speaker #3: Given all this, we are well positioned to continue to increase our share of the overall market in 2026 and 2027. The strong customer momentum that we are experiencing is reflected in our growing systems backlog and sales funnel.

Non-gaap earnings per share would have been 10 cents higher or 9.50.

Breakdown of Revenue by reportable segments and markets major products. And regions can be found within the shareholder letter and slides

Speaker #3: We continue to expect quarter-to-quarter revenue growth throughout 2026 and strong business momentum leading into 2027. For 2026, we expect sequential revenue growth for the company to accelerate leading to high team revenue growth year-over-year and the semiconductor process control systems business to grow over 20%.

moving to the balance sheet Ka into the quarter with 5 billion dollars in total Cash, Cash, equivalents and marketable, securities and debt of 5.95 billion.

Bren Higgins: KLA generates consistent strong free cash flow driven by our high-performing operating model. Over the past five calendar years, free cash flow has grown at approximately 20% CAGR, above the revenue CAGR of 16% over the same period. This growth, coupled with resilience across business cycles, enables a comprehensive capital return strategy featuring double-digit dividend growth and share repurchases to support long-term shareholder value creation. This strategy prioritizes predictable, assertive capital deployment and remains an important differentiator of the KLA investment thesis. Turning to the industry outlook for 2026, which continues to strengthen across all segments. We expect the wafer equipment market, which includes advanced packaging, to exceed $140 billion in 2026.

The company has a flexible and attractive Bond maturity profile supported by investment grade ratings from all 3 major rating agencies.

Speaker #3: KLA's June quarter guidance is for revenue of $3.575 billion plus or minus $200 million. Foundry Logic revenue from semiconductor customers is forecasted to increase to approximately 82%, and memory is expected to be approximately 18% of semi-process control systems revenue to semiconductor customers.

KLA generates consistent, strong free cash flow driven by our high-performing operating model.

For the past 5, calendar years. Free cash flow has grown at approximately 20% kegger above the revenue, kaker of 16% over the same period.

Speaker #3: In memory, DRAM is expected to account for roughly 84%, with NAND accounting for the remaining 16%. As always, these business mix approximations pertain solely to our semiconductor customers and do not fully reflect our total semiconductor process control systems revenue.

this growth coupled with resilience across business Cycles, enables a comprehensive Capital return strategy, featuring double-digit dividend growth and share repurchases to support long-term, shareholder value creation,

The strategy, prioritizes predictable, assertive, Capital deployment, and remains an important differentiator of the KA investment thesis.

Speaker #3: Gross margin for the quarter is forecasted to be 61.75% plus or minus 1 percentage point. Although volume levels are up quarter to quarter, product mix is modestly weaker than in the March quarter.

Bren Higgins: The strength of demand and customer engagement in ensuring KLA has the capacity to support numerous new fab projects currently under construction has led to unprecedented demand visibility from our customers. While normally we would not comment on 2027 growth rates in April 2026, this demand environment gives us confidence in 2027 visibility for the wafer equipment market. Today, we expect the 2027 year-over-year growth rate to be higher than our growth rate expectations for 2026. KLA has strong business momentum, expanding market share, and higher process control intensity at the leading edge across all segments. Given all this, we are well-positioned to continue to increase our share of the overall market in 2026 and 2027. The strong customer momentum that we are experiencing is reflected in our growing systems backlog and sales funnel.

Now turning to the industry outlook for 2026, which continues to strengthen across all segments, we expect the wafer equipment Market which includes Advanced packaging to exceed 140 billion dollars in 2026.

Speaker #3: As discussed last quarter, the guidance also includes the persistent impact of elevated DRAM chip costs for the company's image processing computers that ship with our systems.

The strength of demand and customer engagement and ensuring Ka has the capacity to support numerous new bad projects currently under construction.

Has led to unprecedented demand visibility from our customers.

Speaker #3: Creating a headwind to the company's gross margins. While the memory pricing environment remains challenging in the near term, we have secured the required supply to meet our build plan requirements.

While normally we would not comment on 2027 growth rates at April of 2026. This demand environment, gives us confidence in 2027, visibility for the wafer equipment Market.

Speaker #3: Our view of elevated memory pricing persisting through at least calendar 2026 is unchanged, and we continue to see a roughly 100 basis point negative impact on our gross margin over the next several quarters.

Today, we expect the 2027 year-over-year growth rate to be higher than our growth rate, expectations for 2026.

Dla has strong business momentum, expanding market, share and higher process control intensity at the Leading Edge across all segments.

Speaker #3: Considering this impact, the tariff environment, along with product mix and volume expectations, our view of gross margins remains unchanged at approximately 62% plus or minus 50 basis points in calendar 2026.

Position to continue to increase our share of the overall Market.

In 2026 and 2027.

Bren Higgins: We continue to expect quarter-to-quarter revenue growth throughout 2026 and strong business momentum leading into 2027. For 2026, we expect sequential revenue growth for the company to accelerate, leading to high teen revenue growth year over year, and the semiconductor process control systems business to grow over 20%. KLA's Q2 guidance is for revenue of $3.575 billion ±$200 million. Foundry logic revenue from semiconductor customers is forecasted to increase to approximately 82%, and memory is expected to be approximately 18% of semiconductor process control systems revenue to semiconductor customers. In memory, DRAM is expected to account for roughly 84%, with NAND accounting for the remaining 16%. As always, these business mix approximations pertain solely to our semiconductor customers and do not fully reflect our total semiconductor process control systems revenue.

The strong customer momentum that we are experiencing is reflected in our growing systems, backlog and sales funnel.

Speaker #3: Operating expenses are forecasted to be approximately $665 million in the June quarter. For 2026, we will continue to prioritize next-generation product development and company infrastructure investments to support expected revenue growth over the next several years, and we anticipate these expenses to grow by roughly $15 million sequentially throughout the calendar year.

We continue to expect quarter to quarter Revenue growth, throughout 2026 and strong business momentum leading into 2027.

For 2026. We expect sequential Revenue growth for the company to accelerate leading to High teen Revenue growth year-over-year, and the semiconductor process control systems business to grow over 20%,

Speaker #3: Our business model is designed to deliver 40 to 50 percent incremental operating margin leverage on revenue growth over the long run. Other model assumptions include other income and expense net of an approximately $25 million expense for the June quarter, and we expect it to remain at approximately this quarterly level for the calendar year.

Daily is June quarter. Guidance is for revenue of 3.575 billion plus or minus 200 million.

Foundry logic revenue from semiconductor customers is forecasted to increase to approximately 82%.

And memory is expected to be approximately 18% of semi-processed control systems revenue to semiconductor customers.

Speaker #3: The planning tax rate is 14.5%. As always, we expect some quarter-to-quarter tax rate variance due to discrete items as we move throughout the year.

And memory dramas expected to account for a roughly 84% with nand accounting for the remaining 16%.

Speaker #3: For the June quarter, non-GAAP diluted EPS is expected to be $9.87 plus or minus $1, and GAAP diluted EPS is expected to be $9.66 plus or minus $1.

As always these businessmen pertain solely to our semiconductor customers.

Bren Higgins: Gross margin for the quarter is forecasted to be 61.75% ±1 percentage point. Although volume levels are up quarter to quarter, product mix is modestly weaker than in the March quarter. As discussed last quarter, the guidance also includes the persistent impact of elevated DRAM chip costs for the company's image processing computers that ship with our systems, creating a headwind to the company's gross margins. While the memory pricing environment remains challenging in the near term, we have secured the required supply to meet our build plan requirements. Our view of elevated memory pricing persisting through at least calendar 2026 is unchanged, and we continue to see a roughly 100 basis point negative impact on our gross margin over the next several quarters.

and do not fully reflect our total semiconductor process control systems Revenue,

Chris margin for the quarters forecasted to be 61.75% plus or minus 1 percentage point.

Speaker #3: EPS guidance is based on a fully diluted share count of approximately 131.4 million shares. In conclusion, our near-term revenue guidance reflects consistent growth and strong profitability.

Although, although volume levels are up quarter to quarter, product mix is modestly weaker than in the March quarter.

Speaker #3: We expect our semiconductor process control systems business to outperform the wafer equipment market in 2026, driven by rising process control intensity and growth in advanced packaging.

As discussed last quarter, the guidance also includes the persistent impact of elevated. Dram chip costs for the company's image processing computers that ship with our systems.

Creating a headwind to the company's gross margins.

While the memory pricing environment remains challenging in the near term, we have secured,

Speaker #3: KLA continues to focus on delivering a differentiated product portfolio that supports customer technology roadmaps and production efficiency driving our long-term relevance and growth expectations.

The required Supply to meet our bill plan requirements.

Speaker #3: KLA operating model drives our best-in-class execution. Our focus on customer success, innovative solutions, and operational excellence enables industry-leading financial performance and consistent predictable capital returns.

Bren Higgins: Considering this impact, the tariff environment, along with product mix and volume expectations, our view of gross margins remains unchanged at approximately 62% ±50 basis points in calendar 2026. Operating expenses are forecasted to be approximately $665 million in the Q2. For 2026, we will continue to prioritize next-generation product development and company infrastructure investments to support expected revenue growth over the next several years, and we anticipate these expenses to grow by roughly $15 million sequentially throughout the calendar year. Our business model is designed to deliver 40% to 50% incremental operating margin leverage on revenue growth over the long run. Other model assumptions include other income and expense net of an approximately $25 million expense for the Q2, and we expect it to remain at approximately this quarterly level for the calendar year.

Our view of elevated. Memory pricing for sisting through at least calendar. 2026 is unchanged and we continue to see a roughly 100 basis. Point negative impact, on our gross margin over the next several quarters.

Considering this impact the Tariff environment along with product mix and volume expectations.

Speaker #3: As we detailed at our March investor day, KLA's business is uniquely positioned to capitalize on today's technology inflection points and growth drivers. We are encouraged by strengthening customer confidence and engagement, which informs our business forecast.

Our view of gross margins remains unchanged at approximately, 62% plus or minus 50 basis points in calendar 26.

Operating expenses are forecasted to be approximately 665 million in the June quarter.

Speaker #3: The long-term secular trends driving semiconductor industry demand and investments in wafer equipment are compelling and represent a relative performance opportunity for KLA over the next several years.

For 2026, we will continue to prioritize Next, Generation product development and Company infrastructure, Investments to support expected Revenue growth of the next several years. And we anticipate these expenses to grow by roughly 15 million sequentially throughout the calendar year.

Speaker #3: KLA's business has gone from being primarily indexed to leading-edge R&D investment and fab capacity ramps to now addressing all growth phases in wafer equipment, enabling leading-edge process development kind of results in fab capacity ramps and optimizing yield in a high-volume manufacturing environment.

Our business model is designed to deliver 40 to 50% incremental operating margin, leverage on Revenue growth over the long run.

Bren Higgins: The planning tax rate is 14.5%. As always, we expect some quarter-to-quarter tax rate variance due to discrete items as we move throughout the year. For the June quarter, Non-GAAP diluted EPS is expected to be $9.87 ±$1, and GAAP diluted EPS is expected to be $9.66 ±$1. EPS guidance is based on a fully diluted share count of approximately 131.4 million shares. In conclusion, our near-term revenue guidance reflects consistent growth and strong profitability. We expect our Semiconductor Process Control systems business to outperform the wafer equipment market in 2026, driven by rising process control intensity and growth in advanced packaging.

Other model, assumptions include other income and expense net of an approximately 25 million expense for the J quarter. And we expected to remain at approximately this quarterly level for the calendar year.

Speaker #3: 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.

The planning tax rate is 14.5%.

As always, we expect some quarter to quarter tax rate, variance, due to discrete items as we move throughout the year.

The June quarter. Non-gaap alluded to DPS is expected to be $9.87.

Speaker #3: The design mix and complexity grows; so does the need for 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.

Plus plus, or minus $1 and GAP, diluted EPS is expected to be $9.66.

Plus, or minus a dollar.

EPS guidance is based on a fully diluted Share account of approximately 131.4 million shares.

Speaker #3: 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.

In conclusion, our near-term, Revenue guidance, reflects consistent growth and strong profitability.

Bren Higgins: KLA continues to focus on delivering a differentiated product portfolio that supports customers' technology roadmaps and production efficiency, driving our long-term relevance and growth expectations. KLA operating model drives our best-in-class execution. Our focus on customer success, innovative solutions, and operational excellence enables industry-leading financial performance and consistent, predictable capital returns. As we detailed at our March Investor Day, KLA's business is uniquely positioned to capitalize on today's technology inflection points and growth drivers. We are encouraged by strengthening customer confidence and engagement, which informs our business forecast. The long-term secular trends driving semiconductor industry demand and investments in wafer equipment are compelling and represent a relative performance opportunity for KLA over the next several years.

Speaker #3: Kevin, please begin the Q&A.

We expect our semiconductor process control systems business to outperform the wafer equipment market in 2026, driven by rising process control intensity and growth in advanced packaging.

Speaker #2: Thank you, Brian. Operator, can you please provide instructions and then begin the Q&A session?

Speaker #3: Certainly. At this time, if you would 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.

KLA continues to focus on delivering a differentiated product portfolio. That supports customer technology road maps, and production efficiency Drive in our long-term relevance and growth expectations.

Daily, operating model drives, our best-in-class execution.

Speaker #3: 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 that you please limit yourself to one question and one follow-up.

Our focus on customer success innovative solutions and operational excellence, enables industry-leading, financial performance and consistent predictable Capital returns.

Speaker #3: We'll now take our first question. From CJ Mews, the Cantor Fitzgerald, your line is open.

As we detailed at our March investor day. Kaylee's business is uniquely positioned to capitalize on today's technology inflection points and growth drivers.

Speaker #4: Yeah, good afternoon. Thank you for taking the question. I guess first question, we'd love to dig a little bit deeper in terms of your extended lead times and visibility into 2027.

We are encouraged by strengthening customer confidence and engagement which informs our business forecast.

Speaker #4: Can you kind of speak to where in the portfolio kind of what in the end markets and how you kind of see that progressing into perhaps soon having visibility into 2028?

Bren Higgins: KLA's business has gone from being primarily indexed to leading-edge R&D investment and fab capacity ramps to now addressing all growth phases in wafer equipment, enabling leading-edge process development, tying the results in fab capacity ramps, and optimizing yield in a high-volume manufacturing environment. In addition, the growing investment in custom silicon, particularly among hyperscalers developing their own custom chips, have led to a proliferation of new higher-value design starts and increased demand on our customers to deliver performance, volume, and time to market. As design mix and complexity grows, so does the need for process control. As a result, KLA 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.

The long-term secular trends driving semiconductor industry demand and investments, in WFE for equipment, are compelling and represent a relative performance opportunity for KLA over the next several years.

Speaker #2: Yeah, CJ, thanks for the question. It's really broad-based. Certainly, we're seeing backlogs build, and so order flow is very high. Customer engagement, as we talk about slot planning into next year, is also very strong.

Koz business has gone from being primarily indexed to Leading Edge R&D investment and Fab capacity ramps to now addressing all growth phases in wafer equipment. Enabling Leading Edge process development, find the results in Fab capacity ramps.

And a high volume manufacturing environment.

In addition, the growing investment in custom silicon, particularly among hyperscalers developing their own custom, custom chips.

Speaker #2: So I think when you take that, couple it with now we're working really hard here to make sure that we can enable the capacity to meet our customer timelines.

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.

Speaker #2: But most of our focus and discussion is on how do we address the opportunities in 2027. Lots of new greenfield opportunities. So I think customers want to make sure that they're in the queue to align with their construction schedules.

Design, mix, and complexity grows. So does the need for process control?

As a result Ela is seen consistent growth in process control intensity as each new chip, design requires rigorous inspection Metrology and yield optimization Solutions.

Speaker #2: And I think it's pretty broad-based across our product portfolio. Certainly, most of it is more leading-edge-centric. So it's the most advanced products in the product families.

Allah is uniquely positioned to benefit from these Trends as we expand our Market leadership and deliver differentiated value to our customers.

Bren Higgins: Kevin, please begin the Q&A.

That concludes our prepared remarks.

Speaker #4: Yeah, just to build on that, CJ, the conversations I've had with customers in the last few months, there's a higher level of urgency around securing capacity for our customers that I can remember seeing.

Kevin, please begin the Q&A.

Richard Wallace: Thank you, Brian. Operator, can you please provide instructions and then begin the Q&A session?

Kevin Kessel: Thank you, Bren. Operator, can you please provide instructions and then begin the Q&A session?

Operator: Certainly. At this time, if you would 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 that you please limit yourself to one question and one follow-up. We will now take our first question from CJ Muse with Cantor Fitzgerald. Your line is open.

Thank you, Brian operator. Can you please provide instructions and then begin uh the Q&A session?

Speaker #4: And I think it's indicative and speaks to the demand that they're feeling from their customers. And so there's a huge amount of interest and push to make sure that they can get slots assigned.

Shortly at this time. If you would 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,

Speaker #4: And I think the other realization they all have is that they're not alone in doing this. So the whole industry is trying to support that growth as we go forward.

we remind you to, please unmute your line when introduced and if possible pick up your handset or optimal sound quality,

In the interest of time, we ask that you please limit yourself to 1 question and 1 follow-up.

Speaker #4: So there's no question in 2027 is going to be a massive build-out.

CJ Muse: Yeah, good afternoon. Thank you for taking the question. I guess first question, would love to dig a little bit deeper in terms of your extended lead times and visibility into 2027. Can you kind of speak to, you know, where in the portfolio, kind of what in the end markets, and you know, how you kind of see that progressing into perhaps, you know, soon having visibility into 2028?

We'll now take our first question from CJ Muse with cancer. Fitzgerald, your line is open.

Speaker #1: Perfect. And maybe as a quick follow-up, I guess, as you think about the sequential going to the high teens in the second half, should we be thinking about kind of 14, 9, 15 billion as the right framework for calendar 26 revenues?

Speaker #2: Yeah, I think so. If you just take the commentary again in the high teens, it gets you into the 15-ish range. And I think when you look at the second half and we'll call it 15 to 20 percent type second half sequential growth or growth over the first half, it puts you up into that ballpark.

Hey, good afternoon, thank you for taking the question. I just first question, would love to dig a little bit deeper in terms of your extended lead times and visibility into 27. Can you kind of speak to, um, you know, we're we're in the portfolio, kind of, what are we in markets? Uh, and you know, how, um, how how you kind of see that progressing, uh, into perhaps, you know, soon, having visibility into 2028.

Bren Higgins: Yeah, CJ, thanks for the question. It's really broad-based. Certainly we're seeing backlogs build, order flow is very high. Customer engagement, as we talk about slot planning into next year, is also very strong. I think when you take that, couple it with now we're working really hard here to make sure that we can enable the capacity to meet our customer timelines, but most of our focus and discussion is on how do we address the opportunities in 2027. Lots of new greenfield opportunities. I think customers want to make sure that they're in the queue to align with their construction schedules. I think it's pretty broad-based across our product portfolio. Certainly, most of it is more leading edge centric, so it's the most advanced products in the product families.

Yeah, DJ thanks for the question. It's really broad-based. Uh certainly we're seeing backlogs build.

Speaker #2: So I think you're thinking about it the right way.

Speaker #1: Perfect. Thank you.

Speaker #3: Thank you. We'll move on now to Stacey y Rasgun with Bernstein Research. The line is open. Please go ahead.

Uh and so order flow is very high uh customer engagement. As we talk about slot planning into next year is also very strong, so I think when you take that couple, it would now work working really hard here to make sure that we can

Speaker #5: Hi, guys. Thanks for taking my questions. The analyst day, you talked about 2030 model, which had, was it 215 billion WP and like 1.4 billion in semis and I mean, it's looking increasingly likely that we might get to those kinds of levels like this year or next year.

Speaker #5: So I guess maybe could you talk a little bit more about the underlying assumptions for that long-term model? And maybe it's a little craft after.

Richard Wallace: Yeah, just to build on that, CJ, the conversations I've had with customers in the last few months, there's a higher level of urgency around securing capacity for our customers that I can remember seeing. I think it's indicative and speaks to the demand that they're feeling from their customers. There's a huge amount of interest and push to make sure that they can get slots assigned. I think the other realization they all have is that they're not alone in doing this. The whole industry is trying to support that growth as we go forward. There's no question 2027 is going to be a massive buildup.

Rick Wallace: Yeah, just to build on that, CJ, the conversations I've had with customers in the last few months, there's a higher level of urgency around securing capacity for our customers that I can remember seeing. I think it's indicative and speaks to the demand that they're feeling from their customers. There's a huge amount of interest and push to make sure that they can get slots assigned. I think the other realization they all have is that they're not alone in doing this. The whole industry is trying to support that growth as we go forward. There's no question 2027 is going to be a massive buildup.

And able to capacity to meet our customer timelines. But most of our focus and discussion is on how do we address the opportunities in '27? Lots of new greenfield opportunities. So, um, I think customers want to make sure that they're in the queue to align with their construction schedules. And I think it's pretty broad-based across our, uh, our product portfolio. Certainly, most of it is more leading-edge centric. So it's the most advanced products in the, uh, in the product families.

Speaker #5: Why isn't it higher given where we're sitting right now and what you guys are seeing?

Speaker #4: I'd say, see, great question. I think a couple of things are driving the increased revenue. And I think that the number you're referring to that might be closer to what we talked about for 2030 is the semi-revenue number, not the equipment number.

Yeah, just to build on that CJ, the conversation I've had with customers in the last few months. There's uh that there's a higher level of urgency around securing capacity for our customers that I can remember seeing and and I think it's it's an indicative and speaks to the demand that they're feeling from their customers. And so, there's a huge amount of

Speaker #4: And the reason the semi-revenue is going higher faster is pricing. And so there's been more elasticity, especially around memory in that pricing. That's driven that number up.

Speaker #4: So when we talk about 2030, we talk about a normalized level of capital intensity associated with a revenue that we said would be in the range of 1, 3 to 1, 5.

Interest and push to make sure that they can get slots assigned. And I think the other realization they all have is that they're not alone in doing this. So the whole industry is, is trying to support that growth as we go forward. So there's no question. 27 is going to be a massive build up.

CJ Muse: Perfect. Maybe as a quick follow-up, I guess, as you think about the sequential going to the high teens in H2, should we be thinking about kind of $14.9 billion, $15 billion as the right framework for calendar 2026 revenues?

Speaker #4: If we had to redo that today, there are a lot of reasons why you would push that up from that, as you know, that was six weeks ago.

Speaker #4: So things have changed. But I think the numbers around equipment haven't moved nearly as fast as the numbers around semi-revenue associated with pricing. Does that help?

Perfect. And maybe as a quick follow-up, I guess as you think about, um, the sequential going to the high teens in the second half, should we be thinking about kind of $14.9 to $15 billion as the right framework for calendar '26 revenues?

Bren Higgins: Yeah, I think so. If you just take the commentary, you know, you get into high teens, it gets you into the 15-ish range. I think when you look at the H2 and, you know, we'll call it, you know, 15% to 20% type H2 sequential growth over or growth over the H1, it puts you up into that ballpark. I think you're thinking about it the right way.

Speaker #5: Yeah, that actually does help. And I guess just for a quick follow-up, there's been some news flow. Apologies if you maybe mentioned this on the call or not, but there's a news flow about bans for Huahong.

yeah, I think so, if you just take the commentary, you know, you get into the High Teens, you know, it gets you into the the 15-inch range um and and I think when you look at the second half and and you know, we'll call it, you know, 15 to 20% type second half,

Speaker #5: And I guess, is there any implication of that on you? And just, I guess, how are you thinking overall about the China trajectory as we go forward from here?

CJ Muse: Perfect. Thank you.

Uh, sequential growth over or or growth over the first half, it puts you up into that ballpark. I I think you're thinking about it the right way.

Perfect, thank you.

Speaker #5: As you're thinking, they're changed at all?

Operator: Thank you. We'll move on now to Stacy Rasgon with Bernstein Research. Your line is open. Please go ahead.

Thank you.

Speaker #4: So we got the letter. I'm not going to say too much about it other than we're still looking at it. The impact on the company in terms of our Q2 guidance and the commentary around 2026, I would say, is fairly immaterial.

Stacy Rasgon: Hi, guys. Thanks for taking my questions. You know, at the analyst day, you talked about a 2030 model, which had, what was it? $215 billion WFE and, like, $1.4 billion in semis. I mean, it's looking increasingly likely that we might get to those kinds of levels, like, this year or next year. I guess, maybe could you talk a little bit more about the underlying assumptions for that long-term model? You know, maybe it's a little craft to ask, but like, why isn't it higher, given where we're sitting right now and what you guys are seeing?

We'll move on now to Stacy Rasgon with Bernstein Research. The line is open, please go ahead.

Hi guys, thanks for taking my questions. Um you know the analyst day you you talked about

Speaker #4: It's focused on not all affiliated fabs. So the impact, I would say, is fairly immaterial and contemplated in the guidance we provided.

Um, a 2030 model, which had—I was 215 million WP and like $1.4 billion in semis. And, I mean, it's looking increasingly likely that we might get to those kinds of levels, like, this year.

Speaker #5: Broader thoughts on China?

for next year's I I just maybe you could talk

Speaker #4: I'm sorry, but what's the?

Speaker #5: I'm sorry, broader thoughts on China? Broader thoughts on China?

Speaker #2: Broader thoughts.

Like why, why isn't it higher? Um, given where we're sitting right now and what you guys are seeing

Speaker #4: Oh, broader thoughts. Yeah, I think when you look at China overall, it's playing out more or less consistent with the way we've talked about it.

Bren Higgins: Hi, Stacy. Great question. I think a couple things are driving the increased revenue, and I think that the number you're referring to that might be closer to what we talked about for 2030 is the semi revenue number, not the equipment number. The reason the semi revenue is going higher faster is pricing. There's been more elasticity, especially around memory in that pricing that's driven that number up. When we talk about 2030, we talk about a normalized level of capital intensity associated with the revenue that we said would be in the range 1.3 to 1.5. If we had to redo that today, there are a lot of reasons why you would push that up from that. As you know, that was 6 weeks ago, things have changed.

I see uh, great question. I think a couple things are.

Speaker #4: I think if you look at overall spending in China, it's more or less flat, maybe a little bit up. It's been fairly flat in terms of spending levels over the last few years.

Speaker #4: And so what's driving our business is what's happening at the leading edge. I would expect that the China growth rate is probably lower than where the overall WFE growth rate is projected to be here moving forward.

Are driving the increased revenue, and I think that the the number you're referring to, that might be closer to what we talked about for 2030 is the semi Revenue. Number not the equipment number and and the reason the semi revenue is going higher, faster is pricing. And so there's been more elasticity, especially around memory in that price and

Speaker #5: Got it. Thank you, guys.

Speaker #3: Thank you. We'll move next to Harlan Soor with JPMorgan. Your line is open.

That’s driven that number up. So when we talk about 2030, we talk about a normalized level of capital intensity associated with the revenue that we said would be in the range of $13 to $15 billion. If we had to redo that today, there are a lot of reasons why you would push that up from that.

Speaker #6: Good afternoon. Thanks for taking my question. On your 2026 WFE better outlook, now 140 billion plus. So kind of high teens percentage type of growth outlook.

Bren Higgins: I think the numbers around equipment haven't moved nearly as fast as the numbers around semi revenue associated with pricing. Does that help?

Speaker #6: On the incremental upside this year, is it being driven by new brick-and-mortar sort of greenfield programs being pulled forward, or are customers just accelerating technology migrations on existing capacity, or maybe focusing on improving yields on existing capacity?

Stacy Rasgon: Yeah, that actually does help. I guess just for a quick follow-up, you know, there's been some news flow. Apologize if you maybe mentioned this on the call or not, but there's a news flow about bans for Huawei. I guess, is there any implication of that on you? Just I guess, how are you thinking overall about the China trajectory as you go forward from here? Has your thinking there changed at all?

You know, that was six weeks ago, so things have changed. But I think the numbers around equipment haven't moved nearly as fast as the numbers around semi revenue associated with pricing. Does that help?

Yeah that that that that actually does help and I guess just for a quick follow up, you know there's been some news flow apologies. If you've made maybe mentioned this on the call or not. But there's a new school about um bands for a long time.

Speaker #6: Any color there? And then for calendar 27, now you're saying WFE will go faster than 26 versus your prior view of inline to better.

And I guess is there any implication of that on you and just I guess how how are you thinking overall about the China trajectory as we go forward from here? Because you're thinking they're changed at all.

Bren Higgins: We got the letter. I'm not gonna say too much about it other than we're still looking at it. The impact on the company in terms of our Q2 guidance and the commentary around 2026, I would say is fairly immaterial. It's focused on not all affiliated fabs. The impact I would say is fairly immaterial and contemplated in the guidance we provided.

Speaker #6: Looking at your order book, does that continuation of the broad-based spending growth across segments, foundry logic, memory advanced packaging, or is there a particular segment that is driving the strong growth?

Speaker #6: Any color there would be helpful as well.

Speaker #4: Yeah, so I think around the 206 view, just the urgency from customers to take slots or take deliveries as we have moved here into better visibility into the second half, we're seeing nothing more than just general urgency across different segments with our customer base.

Uh, so, so we got the letter. I'm not going to say too much about it other than we're still looking at it. Um, the impact on the company, in terms of our Q2 guidance and the commentary around '26, I would say is fairly immaterial. Uh, it's focused on not all Affiliated Fabs. Uh, so the impact, I would say, is fairly immaterial and contemplated in the guidance. We

Stacy Rasgon: Broader thoughts on China?

from China.

Bren Higgins: I'm sorry, what's the-

Stacy Rasgon: I'm sorry, broader thoughts on China? Broader thoughts on China?

I'm sorry, but

I'm sorry. Broad broad. Broad in China.

Speaker #4: And that's caused us to increment the views of industry growth upward. As you look at 2027, obviously, you've got a lot of new fab projects, a lot of greenfield activity.

Broader thoughts on China?

Bren Higgins: Broader thoughts. Yeah, I think when you look at China overall, it's playing out more or less consistent with the way we've talked about it. I think if you look at overall spending in China, it's, you know, more or less flat, maybe a little bit up. It's been fairly flat in terms of spending levels over the last few years. What's driving our business is what's happening at the leading edge. I would expect that the China growth rate is probably lower than where the overall WFE growth rate is projected to be here moving forward.

Broader thoughts? Oh, oh, broader thoughts. Um, sorry. Yeah, I think with, when you look at China overall, it's it's playing out more or less.

Speaker #4: Both on the logic side, and memory, I think you'll also see some greenfield activity in flash. So and packaging will grow also. So I think it's really pretty broad-based across the all our different customer segments.

Consistent with the way we talked about it. I think if you look at overall spending in China, it's you know, more or less flat, maybe a little bit up,

in a fairly flat in terms of of, of spending levels over the last

Speaker #6: I appreciate that. And then your services business group, 15% last year, with an exit run rate of about 18%. That strong growth carried into the March quarter with 16% year-over-year growth.

A few years. Uh, and so what's driving our business is what's happening at the leading edge. I would expect that the China growth rate is probably lower than where the overall WFE growth rate is projected to be here moving forward.

Stacy Rasgon: Got it. Thank you, guys.

Got it. Thank you guys.

Speaker #6: You guys just outlined the 4K growth analyst day of 13 to 15% growth, right? Just in the current environment, just given the very high customer utilizations, more advanced services offerings, obviously, lots of focus on driving as much output and yield per fab as possible.

Operator: Thank you. We'll move next to Harlan Sur with JPMorgan. Your line is open.

Operator: Thank you. We'll move next to Harlan Sur with J.P. Morgan. Your line is open.

Thank you. We'll move next to Harlan sewer with JP Morgan. Your line is open.

Harlan Sur: Good afternoon, thanks for taking my question. On your 2026 WFE better outlook, now $140 billion plus, kind of high teens% type of growth outlook. On the incremental upside this year, is it being driven by new brick-and-mortar sort of greenfield programs being pulled forward, or our customers just accelerating technology migrations on existing capacity, or maybe focusing on improving yields on existing capacity? Any color there? For 2027, now you're saying WFE will go faster than 2026 versus your prior view of in line to better. Looking at your order book, is that a continuation of the broad-based spending growth across segments, foundry, logic, memory, advanced packaging, or is there a particular segment that is driving the strong growth? Any color there would be helpful as well.

Speaker #6: How should we think about the services growth profile this year?

Speaker #4: So I think the service will be in the range. As we move across this year, obviously, a lot of the shipments that we're shipping this year will start to flow into services as you move into next year and beyond.

Speaker #4: So I think that's an accelerant we'll call higher end of the range, growth opportunities as we move over the next couple of years. But more or less, we're trending in service in line with the target range.

Speaker #4: We would expect to be within it.

Speaker #6: Perfect. Thank you.

Speaker #3: Thank you. We'll move on to Chris Senker, with TD Cowan. Your line is open. Please go ahead.

Good afternoon. Thanks for taking my question, on your 2026 WFC better Outlook. Now 140 billion plus so kind of high teams percentage type of growth outlook on the income level upside this year. Is it being driven by new brick and mortar sort of Greenfield programs being pulled forward or our customers just accelerating technology migrations on existing capacity or maybe focusing on improving meals on existing capacity any color there and then for 2027 now you're saying WFC will go faster than 26 versus your prior view of inline to better. Looking at your order book is that a continuation of the broad day spending growth across segments. Andre logic memory Advanced packaging or is there a particular segment that is driving the strong growth? Uh, any color? That would be helpful as well.

Bren Higgins: Yeah. I think around the 20 view, just the urgency from customers to take slots or take deliveries, as we have moved here into better visibility into the H2, we're seeing nothing more than just general urgency across different segments with our customer base. That's caused us to increment the views of industry growth upward. If you look at 2027, obviously you've got a lot of new fab projects, a lot of greenfield activity, both on the logic side and memory. I think you'll also see some greenfield activity in flash. Packaging will grow also. I think it's really pretty broad-based across all our different customer segments.

Speaker #5: Question. The first one, I think Rico Brown, I think the visibility angle is pretty interesting. How much of that is really driven by true demand, like the customers giving visibility in 27, and even maybe into 28?

Speaker #5: Versus trying to ensure that you have enough capacity or even personnel who needs to be trained and service the tools? So how much of you think, or how much of that do you think is actually true demand versus prepping you up for what could be potential demand?

yeah, so I think around the, the 20 views just the urgency from customers to take slots or take deliveries, as we have moved here into better, visibility into the second half, uh, we're seeing nothing, uh, more than just general urgency across different segments with our customer base and that's

Caused us to to increment the the the views of Industry growth upwards.

Speaker #5: May I have a follow-up?

Speaker #4: I'm sorry. It's a little hard to hear. So the question is, is the demand real? Is that the question? Or do you think we're getting orders in anticipation of shortages?

Harlan Sur: I appreciate that. Your services business grew 15% last year with an exit run rate of about 18%. That strong growth carried into the March quarter was 16% year-over-year growth. You guys just outlined the forward figure at analyst day of 13% to 15% growth, right? Just in the current environment, just given the very high customer utilizations, more advanced services offerings, obviously lots of focus on driving as much output and yield per fab as possible, how should we think about the services growth profile this year?

If you look at 2027, obviously you've got a lot of new bad projects, a lot of Greenfield activity, both on the logic side and memory. I think you'll also see some green field activity in Flash. So, um, and packaging will grow also. So, I think it's really pretty broad-based across, uh, across the all our different customer segments,

Speaker #4: Is that your question?

Speaker #5: No, no, no. I was just wondering how much of it is actually true demand versus customers making sure that there's enough capacity and service personnel, etc., people who can run the tools, etc.?

Speaker #4: Well, look, I think our customers, given they're going to these are significant investments they're going to open these fabs. I mean, part of the discussions are not only around tools and tool delivery timing, but also in our support resources, our installation resources, applications.

See. Lots of focus on driving as much output and yield profile as possible. Uh, how should we uh think about the services growth profile this year?

Speaker #4: Which are people that are out there working with our customers to drive value out of the tools. The service teams are there to support.

Bren Higgins: I think the service will be in the range as we move across this year. Obviously, a lot of the shipments that we're shipping this year will start to flow into service as you move into next year and beyond. I think that's an accelerant to higher end of the range growth opportunities as we move over the next couple of years. More or less we're trending in service in line with in line with the target range. We'd expect to be within it.

Speaker #4: So it's really across the company that we're in position to support what they expect to be a pretty significant ramp in terms of business activities as those fabs come up to higher levels of productivity.

So I think the service will be in the range as we move across this year. Obviously, a lot of the shipments that that we're shipping this year will start to flow into Service as you move into next year and Beyond. So I think that's an accelerant we'll call higher end of the range growth opportunities as we move over the next couple of years.

Speaker #5: Got it. Thank you for that. And then a quick follow-up. It seems like some of the incremental WFE demand this year is coming from the CPU tightness.

That's where we're trying to in service in line with uh, in line with the target range. We would expect to to be be within it.

Harlan Sur: Perfect. Thank you.

Speaker #5: But Intel last week spoke about incremental CPU capacity coming from Intel 3 and Intel 7. Which are prior nodes, where I believe the EM issues are already being solved.

Perfect, thank you.

Operator: Thank you. We'll move on to Krish Sankar with TD Cowen. Your line is open. Please go ahead.

Speaker #5: So would the incremental CPU demand actually benefit KLA? Or not as much?

Thank you. We'll move on to Chris. Sanker with TD. Cowen, your line is open, please go ahead.

Krish Sankar: Question. The first one, I think, little bit, I think the visibility angle is pretty interesting. How much of that is really driven by true demand, like the customers getting this in 2027, and even maybe into 2028, versus trying to ensure that you have enough capacity or even personnel who needs to be trained and service the tools? How much of that do you think is actually true demand versus prepping you up for what could be potential demand? I have a follow-up.

Speaker #4: Certainly, it's something we've talked about over the last year is that we're encouraged by is the broadening of investment at the leading edge and near leading edge.

Speaker #4: And so that has been, I think, good for KLA. Our collaboration levels are very high with our customers. And so if you look at what we're the easiest way to drive efficiency out of existing install bases is to drive yield.

Question. Uh the first 1 I think little but I think the visibility uh angle was pretty interesting. Uh, I was just really driven by 2 demand like the customers getting this to the 27th and then maybe into 28, uh, versus trying to ensure that you have enough capacity or even uh personal who needs to be trained and served as the tools. So how much do we think? How much of that you think is actually true Demand versus tripping, you up for what, could be potential demand not to follow up.

Bren Higgins: I'm sorry. It's a little hard to hear. The question is the demand real? Is that the question, or do we think we're getting orders in anticipation of shortages? Is that your question?

Speaker #4: And so that plays to KLA's ability to help drive learning cycles and drive yield in a high-volume manufacturing environment. So I think we're well positioned.

I'm sorry, it's a little hard to hear. Um,

Krish Sankar: Oh, no. I was just wondering how much of it is actually true demand versus customers making sure that there's enough capacity and service personnel, et cetera, the people who can like, you know, run the tools, et cetera.

So the question is, is the demand real is that the, the question, or do you think we're getting orders in anticipation of shortages? Is that your question?

Speaker #4: We're encouraged by the engagement levels, really, across the install base. And the broader participation, I think, lends itself to a pretty robust leading-edge environment as we go forward.

No, no no. I was just wondering how much of it is actually Demand versus customers, making sure that there's enough capacity and uh, service personal Etc, these people who can like, you know, run the tools, Etc.

Speaker #5: Thanks, Brent.

Bren Higgins: Well, well, look, I think our customers, given these are significant investments are gonna open these fabs, I mean, part of the discussions are not only around tools and tool delivery timing, but also in our support resources, our installation resources, applications, which are people that are out there working with our customers to drive value out of the tools, that the service teams are there to support. It's really across the company that we're in position to support what they expect to be, you know, pretty significant ramp in terms of business activities as those fabs come up to higher levels of productivity.

Speaker #3: Thank you. We'll move on now to Joe Kwachwache with Wells Fargo, your line is open.

Speaker #7: Yeah, thanks for taking the question. Maybe just to follow up on that, I guess when we think about your customers trying to obviously drive higher yield to drive higher output, is that a bigger driver for potential incremental process control system sales for you?

Speaker #7: Or is it largely flowing through the service line?

Speaker #4: Well, it absolutely drives process control sales it drives both, but the process control especially if they're dealing with fabs that are already up but don't have a particularly high yield.

Well well look I I think our customers given they're going to these are significant Investments right now. Open these Fabs, they made part of the discussions are not only around tools and tools delivery timing but also in our support resources are installation, resources applications, which are people that are out there working with our customers to drive value out of the tools that the service teams are there to support. So it's really across the company that that we're in position to support what they expect to be. You know, pretty significant ramp in terms of of business activities as those Fabs come up uh to to higher levels of productivity.

Krish Sankar: Got it. Thank you for that. Then a quick follow-up. It seems like some of the incremental WFE demand this year is coming from the CPU tightness. Like Intel last week spoke about incremental CPU capacity coming from Intel 3 and Intel 7, which are prior nodes where I believe the yield issues have already been solved. Will the incremental CPU demand actually benefit KLA or not as much?

Speaker #4: And if they've changed die size. So that's the challenge, I think, that they're dealing with when they're trying to put out more capability to support AI.

Got it. Thank you for that. I got a quick follow up.

Um, it seems like some of the incremental WP demand this year is coming from the CPU titles.

Speaker #4: And I think that's a different fact that's driving a lot of the activity around process control. And you even heard, I mean, Intel was public about increasing their metrology usage as you heard on their call.

Uh but like until last week spoke about incremental CPU capacity coming from Intel 3 and Intel 7 which are prior nodes where I believe the issues are already being solved.

so, with the incremental CPU, demand actually benefit Ka or not as much,

Speaker #4: So we're definitely seeing in general, because there's a shortage in the industry, the easiest lever anyone can use is to get more yield. Out of the existing capacity that they have.

Bren Higgins: Certainly, it's something we've talked about over the last year is that we're encouraged by the broadening of investment at the leading edge and near lead edge. That has been, I think, good for KLA. Our collaboration levels are very high with our customers. If you look at, you know, the easiest way to drive efficiency out of existing install base is to drive yield. That plays to KLA's ability to help drive learning cycles and drive yield in a high volume manufacturing environment. I think we're well-positioned. We're encouraged by the engagement levels really across the install base. The broader participation, I think lends itself to a pretty robust leading edge environment as we go forward.

Speaker #4: Even the leaders have gone back to prior nodes and added process control because they recognize that's a faster way to get more yield. That's far less true in historical cycles when they're meeting on leading edge, the only lever you have left, you can build new fabs, but the thing you can do before that is try to squeeze out more yield.

So certainly is something we've talked about over the last, uh, year is, is that we're encouraged by is the the broadening of investment at the Leading Edge in near lease Edge. And so, uh, that is been I think good for KLA our collaboration levels are very high with our customers.

Speaker #4: I think one of the other benefits we see is the product types change that our customers are shipping. Serving different parts of the market.

Speaker #4: That the need for different capability arises and might be different than how they originally set up the fab to run a different type of parts or different mix of parts.

And so, if you look at, you know what, we're the easiest way to drive efficiency out of existing install bases to drive yield. And so that plays to, to Koz ability to help Drive learning cycles, and and drive yield, and and a high volume manufacturing environment. So, I think we're we're well, positioned, we're we're encouraged by the engagement levels really across the install base and the broader participation, I think lends itself to a pretty robust Leading Edge environment as we go forward.

Krish Sankar: Thanks, Brent.

Thank you.

Operator: Thank you. We'll move on now to Joe Quatrochi with Wells Fargo. Your line is open.

Thank you.

Speaker #4: So that tends to create opportunities for us because new and different capabilities required to support different higher-performance compute markets, for example.

We'll move on now to Joe quati with Wells, Fargo. Your line is open.

Joe Quatrochi: Yeah, thanks for taking the question. Maybe just to follow up on that, you know, I guess, like when we think about your customers trying to obviously drive higher yield to drive higher output, is that a bigger driver for potential incremental like process control system sales for you or is it largely flowing through the service line?

Speaker #5: Yeah, that's really helpful. Maybe as a follow-up, I was wondering if you could maybe talk about your own lead times and just kind of thinking about your own supply chain and kind of, yeah, I think last quarter you talked about maybe things being tight from a component standpoint in the first half of this year and then really opening up in the second half.

Yeah, thanks for taking the question. Maybe just to follow up on that, you know, I guess like when we think about your customers trying to obviously Drive higher you have to drive higher output. Is that a bigger driver for for potential incremental like process control system sales for you or or is it largely flowing through the service line?

Bren Higgins: Well, it absolutely drives process control sales. It drives both. The process control, especially if they're dealing with fabs that are already up but don't have a particularly high yield, and if they've changed die size. That's the challenge I think that they're dealing with when they're trying to put out more capability to support AI. I think that's a different fact that's driving a lot of the activity around process control. You even heard, I mean, Intel was public about increasing their metrology usage, as you heard on their call. We're definitely seeing in general, because there's a shortage in the industry, the easiest lever anyone can use is to get more yield out of the existing capacity that they have.

Drives.

Speaker #5: And obviously, yeah, I think you've increased your WFE guidance now a couple of times just how do we think about KLA's capacity to support this ramp as we continue to increase into the 2027?

Speaker #4: Yeah, so thanks, Joe. So look, I think the thing that surprised us was the slope and duration of how quickly the business started to ramp into the first half.

It drives both, but the process control, especially if they're dealing with Fabs that are already up, but don't have a particularly high yield and if they've changed dice size. Um, so that's the challenge. I think that they're dealing with when they're trying to

Speaker #4: And so that did put some constraints on our ability to scale from an overall supply chain capacity point of view in the first half of '26.

Speaker #4: As we move into '27 and some of the context we provided and some of my comments earlier around growth rate in the second half, I think we're much better positioned to support this ramp and support customer requirements.

Then that was public about increasing their metrology usage, as you heard on their call.

So we're definitely, we're definitely seeing in general.

because there's a shortage in the industry, the easiest lever, anyone can use is to get more yield

Speaker #4: And as we look at '27, as I said earlier, our focus has been really to ensure that we have the capacity to support the different forecasts that are out there.

Bren Higgins: Even the leaders have gone back to prior nodes and added process control because they recognize that's a faster way to get more yield. That's far less true in historical cycles when they're meeting demand. Once you see utilizations go way up on leading edge, the only lever you have left, you can build new fabs, but the thing you can do before that is try to squeeze out more yield. I think one of the other benefits we see is as the product types change that our customers are shipping, serving different parts of the market. That the need for different capability arises and might be different than how they originally set up the fab to run a different type of parts or different mix of parts.

Speaker #4: So we feel pretty comfortable about the guidance we gave today and our ability to support that and then some. We always try to think about all the conceivable opportunities as we plan along our supply chain.

Speaker #4: And so there's a tremendous amount of focus across the company to ensure that we have that capacity to support what looks to be a very strong environment next year.

Out of the existing capacity that they have, even the leaders have gone back to Prior nodes and added process control because they recognize that the faster way to get more, you know, that's far less true in historical Cycles when they're meeting demand. So once you see utilizations go way up on Leading Edge, the the only leverage you have left, you can build new Fabs. But the thing you can do before that is try to squeeze out more yield. I think 1 of the other benefits we see, is this the

Process that our customers are shipping.

Serving different parts of the market.

Speaker #4: And then as we said earlier, we've got to do we're hiring a lot too. We need to make sure we've got our install resources, our service resources, to be able to support the tools after we ship them.

Bren Higgins: That tends to create opportunities for us because new and different capabilities required to support, different, like, higher performance compute markets, for example.

Speaker #5: Yeah, and Joe, the folks in our operations service know that we're matching the urgency in providing capability to our sharing with us. So this is a time, like I said, I've not seen this before.

That the need for different capability arises and might be different than how they originally set up the Fab to run a different type of parts or different mix of parts. So that tends to create opportunities for us because new in different capabilities. Required to support different, like higher performance, compute markets, for example,

Joe Quatrochi: That's really helpful. Maybe as a follow-up, I was wondering if you could maybe talk about, you know, your own lead times and just kinda thinking about your own supply chain and kind of, yeah, I think last quarter you talked about things being tight from a component standpoint in H1 this year, and then really opening up in H2. Obviously, yeah, you've increased your WFE guidance now a couple times. Just how do we think about KLA's capacity to support this ramp as we continue to increase into 2027?

Speaker #5: Where there's such broad demand for such capacity at breakneck speed. So we're working very hard to support that. And historically, we've always done it, but it's going to take a lot of work.

Speaker #5: Thank you.

Speaker #3: Thank you. We'll move on now to Timothy, our query, with UBS. Please go ahead.

So that's really helpful. Maybe as a follow-up, I was wondering if you could maybe talk about, uh, you know, your own lead times and just kind of thinking about your own supply chain and, and kind of—yeah, I think last quarter, you talked about maybe things being tight from a component standpoint in the first half of this year and then really opening up in the second half. And obviously, yeah, you've increased your WIC guidance now a couple times. Just, how do we think about Koz capacity to support this ramp as we continue to increase into 2027?

Bren Higgins: Thanks, Joe. Look, I think the thing that surprised us was the slope and duration of how quickly the business started to ramp into H1. That did put some constraints on our ability to scale from an overall supply chain capacity point of view in H1 2026. As we move into 2027 and some of the context we provided and some of my comments earlier around growth rate in H2, I think we're much better positioned to support this ramp and support, you know, customer requirements. As we look at 2027, as I said earlier, our focus has been really to ensure that we have the capacity to support the different forecasts that are out there.

Speaker #8: Thanks a lot, Brent. I just wanted to come back to this idea that you're outgrowing WFE this year. You're guiding up sort of high teams.

Yeah, so thanks, Joe. So, look, I think the thing that—that

Speaker #8: I think the general consensus among all the other companies is that WFE is growing like mid-20s. So is it that you just think that that WFE growth is too high?

The, the the slope and and duration of of how quickly that the business started to ramp into the first half.

Speaker #8: Maybe your baseline for WFE last year is more like 120 or something. So actually you don't think WFE is up even high teams. Is that how you get to the concept that you're going to outgrow this year?

And so they did put some constraints on our ability to, to scale from a an overall supply chain capacity point of view in the first half of 26 as we move into 27 and some of the contexts we provide is and some of my comments earlier around.

Speaker #4: Well, yeah, I think that you're right. I think the baseline is about 120, and that aligns with where the various third parties and if you do a kind of a consensus view of all the different forecasts that are out there, you end up somewhere more or less in that ballpark in terms of where 2025 growth rates were.

Growth rate in the in the second half. I think we're, we're much better positioned to support, uh, this ramp and support. You know, customer requirements. And as we look at 27,

as I said, earlier, our Focus has been really to ensure that we we have the capacity.

Bren Higgins: We feel pretty comfortable about the guidance we gave today and our ability to support that and then some. We always try to think about all the conceivable opportunities as we plan along our supply chain. There's a tremendous amount of focus across the company to ensure that we have that capacity to support what looks to be a very strong environment next year. As we said earlier, we're hiring a lot too. We need to make sure we've got our install resources, our service resources to be able to support the tools after we ship them.

Speaker #4: And if you look at the different relative performance of the different players, it does imply that '25 was pretty good year greater than 10% growth.

Speaker #4: So look, from a baseline point of view, we see it at about 120 growing to about 140 plus as we said, which translates into this we'll call it mid to high team growth rate.

Speaker #4: If you look at the semi-PC business, as I said, the prepared remarks, we expected it to grow our systems business to grow in excess of 20%.

To support the, the different forecasts that are out there. So we feel pretty comfortable about the, the guidance we gave today, our ability to support that and then some we always try to to, to think about all the conceivable opportunities, as as we plan along our supply chain. And so, there's a tremendous amount of focus across the company to ensure that we have that capacity to support. Uh, what, what looks to be a very strong environment, next year. And then, as we said earlier, we've got to do, we're hiring a lot too, we need to make sure we've got our

Richard Wallace: Yeah, Joe, the folks in our operations service know that we're matching the urgency in providing capability to our customers that our customers are sharing with us. This is a time, like I said, I've not seen this before, where there's such broad demand, such, you know, capacity at breakneck speed. We're working very hard to support that. Historically, we've always done it, but it's gonna take a lot of work.

Rick Wallace: Yeah, Joe, the folks in our operations service know that we're matching the urgency in providing capability to our customers that our customers are sharing with us. This is a time, like I said, I've not seen this before, where there's such broad demand, such, you know, capacity at breakneck speed. We're working very hard to support that. Historically, we've always done it, but it's gonna take a lot of work.

Speaker #4: So that's aligns with our view of growth. As we talked about in Investor Day, we've spent a lot of time trying to explain how we're defining the market.

Speaker #4: Everybody, of course, defines it in different ways. But we believe that the approach that we've taken, as I said, it lines up with third parties.

Resources, our service resources uh, to be able to support the tools, after we ship them. Yeah. The folks, in our operation service know that we're matching the urgency and providing capability to our customers that are customers are sharing with us. So, uh,

This is a—this is a time, like I said, I've not seen this before where there's such broad demand for such—

Speaker #4: I think there's a lot of opportunity out there that starts to span not just traditional WFE, but also in the advanced packaging parts of the market.

You know, capacity at Breakneck speed. So we're working very hard to support that. And historically, we've always done it, but it's going to take a lot of work.

Speaker #4: And as we've seen our revenue inflect in that part of the market, we think it's appropriate if you're going to measure yourself on share of market that you've got the numerator, but you also get the denominator right.

Joe Quatrochi: Thank you.

Thank you.

Operator: Thank you. We will move on now to Timothy Arcuri with UBS. Please go ahead.

Thank you.

Speaker #4: So that's how we see it. And that's that kind of informs the forecast that we have here.

We'll move on now to Timothy Aruri with UBS. Please go ahead.

Timothy Arcuri: Thanks a lot. Bren, I just wanted to come back to this idea that you're outgrowing WFE this year. You're guiding up sort of high teens. I think the general consensus among all the other companies is that WFE is growing like mid-twenties. Is it that you just think that that WFE growth is too high, maybe your baseline for WFE last year is more like 120 or something, actually you don't think WFE is up even high teens? Is that how you get to the concept that you're gonna outgrow this year?

Speaker #5: Okay, got it. And then I guess just, Rick, I wanted to ask you about the push out of high in A. And just what the puts and takes are for you.

Speaker #5: I mean, I can see on one hand you've got like 25, 30 percent direct attached to Lithos. So maybe that's a bad thing that is pushing up.

Speaker #5: But on the other hand, there's going to be some other offset things that get more complex and things like that, which obviously would actually help you.

Speaker #5: So how do you weigh those puts and takes, thanks?

Speaker #4: Yeah, thanks, Tim. There's no change in the high in A forecast from everything that we've modeled. It's exactly what we've modeled and started talking about a couple of years ago.

I just wanted to come back to this idea that you're outgoing wfd this year. Um, you're guiding up sort of High Teens. I think the general consensus among all the other companies is that Debbie? If he's growing like mid 20s, so is it that you just think that that W if growth is too high, maybe your Baseline for WV last, year's more like 120 or something. So actually, you don't think WS is up. Even even High Teens, is that, is that how you get to the concept that you're going to outgrow this year?

Bren Higgins: Well, yeah, I think that you're right. I think the baseline is about 120, and that aligns with where the various third parties. If you do a kind of a consensus view of all the different forecasts that are out there, you end up somewhere more or less in that ballpark in terms of where 2025 growth rates were. If you look at the different relative performance of the different players, it does imply that, you know, that 2025 was pretty good year, greater than 10% growth. Look, from a baseline point of view, we see it at about 120 growing to about 140 plus, as we said, which translates into this, you know, we'll call it, you know, mid to high teen growth rate.

Speaker #4: So in that sense, this is what we were talking about when we put out the 2030 plan. However, high in A has puts and takes, as you say.

Speaker #4: So ultimately, it's going to be better if people are printing smaller geometries and the defectivity challenges are going to be greater. But it's also the case that that's not going to happen until the economics support it.

Speaker #4: So I'd say for us, it's a push. It's going to happen. It's going to extend the timeline for which people can keep getting benefit out of process.

Bren Higgins: If you look at the semi PC business, as I said in the prepared remarks, we expected it to grow, our systems business to grow in excess of 20%. That aligns with our view of growth. As we talked about in Investor Day, we spent a lot of time trying to explain how we're defining them. Everybody, of course, defines it in different ways, but we believe that the approach that we've taken, as I said, it lines up with third parties. I think there's a lot of opportunity out there that starts to span not just traditional WFE, but also in the advanced packaging parts of the market.

Speaker #4: That's good for the industry. But it is in our what's happening is in our model. So there was no change from our expectations.

Speaker #5: Yeah, Tim, and I think this attach rate to Litho historically when scaling was driving the innovation and the process roadmap, that was more true than it is today.

Speaker #5: Today, you have architecture changes. You have the nature of a high mixed design environment. We talk a lot about larger die and what that means in terms of defect density.

Speaker #5: The value of that die and how that translates to how much you're willing to invest to ensure that those die are good and are performing at spec.

Bren Higgins: As we've seen our revenue inflect in that part of the market, we think it's appropriate if you're gonna measure yourself on share of market, that you got the numerator, but you also get the denominator right. That's how we see it, and that's that kind of informs the forecast that we have here.

Speaker #5: Process and performance requirements are much more significant. So there's a lot of drivers there for process control that's beyond just traditional Lithos scaling. If you look, we need a Lithos scaling roadmap, as Rick said, it's important.

If you look at the semi PC business, as I said, the prepared remarks, we expected it to grow our systems business, to grow in excess of 20%. So that's aligns with our, our view of of growth. Uh, as we talked about an investor day, we we spent a lot of time trying to, to explain how we're defining the market, everybody, of course, defines it in different ways, but we believe that, that, that the approach that we've taken, as I said, it lines up with third parties that I think there's a lot of opportunity out there that starts to span. Not just traditional WF, but also in the advanced packaging parts of the market. Uh, and as we've seen our Revenue in flecked, in that part of the market, we we think it's appropriate. If you're going to measure yourself on share of markets that you got the numerator, but you also get the denominator, right? So that's how we see it. And, uh,

Speaker #5: It's good for the industry. But it's not the only factor that drives process control intensity. The two nanometer node has higher intensity than three nanometer node.

and that's, uh, that point of forms the forecast that we have.

Timothy Arcuri: Okay. Got it. I guess just, Rick, I wanted to ask you about the push out of High NA and just, like, what the puts and takes are for you. I mean, I can see on one hand you've got, like, 25%, 30% direct attach to litho, so maybe that's a bad thing that is pushing up. On the other hand, there's gonna be some other, you know, offset things that get more complex and things like that, which, you know, obviously would actually help you. How do you weigh those puts and takes? Thanks.

Speaker #5: And the amount of EUV layers hasn't changed all that much from node to node. So I think that gives you an indication that it's not the only factor that influences how customers invest in our products.

Speaker #5: Okay. Thank you both.

Okay, I got it. And then I guess just, Rick, I wanted to ask you about the push-out of Ina, and just what the puts and takes are for you. I mean, I can see, on one hand, you've got like 25% to 30% direct attached to lithos, so maybe that's a bad thing that's pushing out, but on the other hand, there's going to be some other, you know, offset things that get more complex and things like that, which obviously would actually help you. So how do you weigh those puts and takes? Thanks.

Richard Wallace: Yeah. Thanks, Tim. There's no change in the High NA forecast from everything that we've modeled. It's exactly what we've modeled and started talking about a couple of years ago. In that sense, this is what we were talking about when we put out the 2030 plan. However, High NA has puts and takes, as you say. Ultimately, it's going to be better if people are printing smaller geometries and the defectivity challenges are going to be greater. It's also the case that, you know, that's not going to happen until the economics support it. I'd say for us, it's a push. It's going to happen. It's going to extend the.

Rick Wallace: Yeah. Thanks, Tim. There's no change in the High NA forecast from everything that we've modeled. It's exactly what we've modeled and started talking about a couple of years ago. In that sense, this is what we were talking about when we put out the 2030 plan. However, High NA has puts and takes, as you say. Ultimately, it's going to be better if people are printing smaller geometries and the defectivity challenges are going to be greater. It's also the case that, you know, that's not going to happen until the economics support it. I'd say for us, it's a push. It's going to happen. It's going to extend the.

Speaker #3: Thank you. We'll move on now to Jim Schneider with Goldman Sachs. Your line is open.

Speaker #6: Good afternoon. Thanks for taking my question. I was wondering if you could maybe address your expectations for the advanced packaging market and your revenue growth there in calendar '26.

Speaker #6: And maybe just kind of talk about how that's likely to kind of filter in as we go throughout the year.

Speaker #4: Yeah, and so it's a pretty exciting part of our story. Of course, we spent a lot of time talking about how it's how that market has moved to the need for more front-end requirements and how well the KLA portfolio is positioned here.

Bren Higgins: You know, the timeline for which people can keep getting benefit out of process, that's good for the industry. What's happening is in our model, there was no change from our expectations. Yeah, Tim, I think this attach rate to litho, historically, when scaling was driving the innovation and the process roadmap, that was more true than it is today. Today, you have architecture changes. You have the nature of a high mixed design environment. We talk a lot about larger die and what that means in terms of defect density, the value of that die, and how that translates to how much you're willing to invest to ensure that those die are good and are performing at spec, process and performance requirements are much more significant.

Rick Wallace: You know, the timeline for which people can keep getting benefit out of process, that's good for the industry. What's happening is in our model, there was no change from our expectations.

Speaker #4: We talked about exceeding being somewhere in the range of a billion dollars in business in advanced packaging for our process control business this year, growing from about 635 million in 2025.

Bren Higgins: Yeah, Tim, I think this attach rate to litho, historically, when scaling was driving the innovation and the process roadmap, that was more true than it is today. Today, you have architecture changes. You have the nature of a high mixed design environment. We talk a lot about larger die and what that means in terms of defect density, the value of that die, and how that translates to how much you're willing to invest to ensure that those die are good and are performing at spec, process and performance requirements are much more significant.

Speaker #4: One of the great things that we're starting to see also is as the packaging market has evolved and more nanometer level inspection is required, that the need for more precision and more capability from the tool sets.

Yeah, thanks Tim. Um, there's no change in the Ina forecast from everything that we modeled, it's exactly what we had modeled and started talking about a couple years ago. Uh, so in that sense, this is what we were talking about when we put out the 2030 plan. However, uh, Ina has puts and takes as you say. So ultimately, it's going to be better. If people are printing smaller geometries and the defectiveness is going to be greater but it's also the case that, you know, that's not going to happen until the economic supported. So I'd say for us, it's a push it's going to happen. It's going to instead extend the you know, the the timeline for which people could keep getting benefit out of process, that's good for the industry. Um but it is in our what's happening is in our models so that there was no change from our expectations. Yeah, and I think this attach rate to Litho historically, when scaling was driving the Innovation and the process roadmap that was more true than it is today.

Today, you have architecture changes. You have the nature of a High mixed design environment.

We can talk a lot about larger die and what—

Speaker #4: So as we look at 2026, we're actually seeing meaningful revenue increases across some of our more advanced systems as we talked about that that was going to come.

Speaker #4: And we're starting to see that both in terms of co-op packaging, but also emerging SOIC packaging as die stack is happening, driving hybrid bonding requirements and so on.

die and how that translates to how much you're willing to invest to ensure that those those die are good and are performing at spec.

Bren Higgins: There's a lot of drivers there for process control that's beyond just traditional litho scaling. Look, we need a litho scaling roadmap. As Rick said, it's important, it's good for the industry, but it's not the only factor that drives a process control intensity. The 2nm node has higher intensity than 3nm node and the amount of the EUV layers hasn't changed all that much from node to node. I think that gives you an indication that it's not the only factor that influences how customers invest in our products.

Speaker #4: So we're pretty excited about the growth in that part of the market for us. It's likely one of the top growing markets, certainly in overall packaging.

Uh process and performance requirements are are much more significant so there's a lot of drivers there for for process control. That's beyond just traditional lithos scaling if if you look we need a list of scaling road map, as Rick said it's important. It's good for the industry but it's not the only factor that that drives uh process control intensity.

Speaker #4: And we're expected to continue to grow into next year.

Speaker #6: Thanks. And I was wondering if you could maybe provide a little bit of color, kind of given your extended sort of order book and higher visibility, can you see your way clear to a point in time in the future where you would expect the process control intensity to really step up and start to really materially outgrow the overall WFE envelope you're forecasting?

The tune animator node has higher intensity than 3, nanometer node and, and, and the amount of the euv layers hasn't changed all that much from node to node. So, I think that gives you an indication that that, uh, that it's not the only factor that that influences how customers invest in our products.

Timothy Arcuri: Okay. Thank you both.

Okay, thank you very much.

Operator: Thank you. We'll move on now to Jim Schneider with Goldman Sachs. Your line is open.

Thank you. We'll move on now, to Jim Schneider, with Goldman Sachs. Your line is open.

Jim Schneider: Good afternoon. Thanks for taking my question. I was wondering if you could maybe address your expectation for the advanced packaging market and your revenue growth there in calendar 2026. Maybe just kind of talk about how that's likely to kind of filter in as we go throughout the year.

Speaker #6: Thank

Speaker #4: Well, in the last five years, we gained 160-ish basis points of share. And that translated into about a six and a half percent growth rate for KLA above the market baseline.

Speaker #4: If you go back to what we talked about at Investor Day, we thought that we could gain another 150 basis points plus share of the overall wafer equipment market.

Good afternoon. Thanks for taking my question. I was wondering if you could maybe address your expectations for the advanced packaging market, uh, in your revenue growth there in, uh, calendar '26. Um, and maybe just kind of talk about how that's likely to kind of filter in as we go, uh, throughout the year.

Bren Higgins: Yeah. It's a pretty exciting part of our story. Of course, we spent a lot of time talking about how that market has moved to the need for more front-end like requirements and how well the KLA portfolio is positioned here. We talked about exceeding and being somewhere in the range of $1 billion in business in advanced packaging for our Process Control business this year, growing from about $635 million in 2025. One of the great things that we're starting to see also is as the packaging market has evolved and more nanometer-level inspection is required, that the need for more precision and more capability from the tool sets.

Speaker #4: And that translated into a four and a half percent growth for the company over the market baseline of WFE growth of 12%. So it's these are small increases, but on a pretty big base.

Speaker #4: And it translates into meaningful CAGR upside relative to the overall market. And that's our plan that then feeds into our $26 billion target for 2030.

How that market has moved to the need for more front-end-like requirements and how well the KLA portfolio is positioned here. Uh, we talked about exceeding, it being somewhere in the range of a billion dollars in business and

Speaker #6: Thank you.

Speaker #3: Thank you. We'll move on next to Charles Xi with Needham. Your line is open.

Bren Higgins: As we look at 2026, we're actually seeing meaningful revenue increases across some of our more advanced systems, as we talked about that that was gonna come, and we're starting to see that both in terms of CoWoS packaging, but also emerging SOIC packaging as die stack is happening, driving hybrid bonding requirements and so on. We're pretty excited about the growth in that part of the market for us. It's likely, you know, one of the top growing markets, certainly in overall packaging, and we expect it to continue to grow into next year.

Speaker #7: Thanks about taking my question. I have a question around some technology in metrology. There's a lot of discussion around X-ray versus optical for CD measurement in the front end, let's say in void detection, those kind of other stuff in hybrid bonding types of advanced packaging.

Speaker #7: And Rick, I'm sure you're familiar with all of these discussions around the debate around optical versus E-beam. DUV versus actinic. I think you've said that when you can use optical, customers will stay with the optical.

Likely, you know, one of the top growing markets—certainly in overall packaging.

And we expect it to continue to grow into next year.

Jim Schneider: Thanks. I was wondering if you could maybe provide a little bit of color, kind of given your extended sort of order book and higher visibility, can you see a way clear to a point in time in the future where you would expect the process control intensity to really step up and start to really materially outgrow the overall WFE envelope you're forecasting? Thank you.

Speaker #7: But is this new debate around metrology, X-ray versus optical, you would have the same view? Maybe optical will eventually win or you have some other thoughts?

Speaker #7: I understand you do have an XCD tool, but I want to get your thoughts. Thanks.

Speaker #4: Yeah, I think that the history of inspection and measurement and really the industry is you move to the highest capability tool that can do the job.

Thanks. And I just wonder if you could maybe provide a little bit of color, kind of giving your extended sort of order book and higher visibility. Can you see your way clear to a point in time in the future where you would expect the process control intensity to really step up and start to materially outgrow the overall WFE envelope you're forecasting?

Thank you.

Bren Higgins: Well, in the last 5 years, we gained 160-ish basis points of share, and that translated into about a 6.5% growth rate for KLA above the market baseline. If you go back to what we talked about at Investor Day, we thought we could gain another 150 basis points plus share of the overall wafer equipment market, and that translate into a 4.5% growth for the company over the market baseline if WFE grows at 12%. It's these are small increases, but on a pretty big base, and it translates into meaningful CAGR upside relative to the overall market. That's our plan that feeds into our $26 billion target for 2030.

Speaker #4: Initially, to debug it, and then you go to the cost of ownership play. So whatever can do the job most efficiently. And we talked about the roll-off, for example, in our wafer inspection portfolio where you might debug a process at a very high level of, say, E-beam during characterization along with high-end optical.

Speaker #4: But then if you can possibly go to higher throughput, lower cost, you do. The case of X-ray is interesting because in some ways, when we introduced Axion a few years ago, that was a product that was really solving a problem that could only be solved in failure analysis.

Speaker #4: And the challenge with that was getting the tech to work, getting adoption, and getting proof of concept with enough players that they would make the change.

Well the last 5 years, we gained 16 uh basis points of share and that translated into about a 6 and a half percent uh growth rate for KLA above the market Baseline. If you go back to what we talked about at investor day because we could gain another 150 basis points, plus, uh, share of the overall weight for equipment market and that translate into a 4 and a half percent growth for the company, over the market Baseline of then, if he grows the 12%. So it's it's, it's these are small increases. But on on a pretty big bass and it translates into meaningful. Kegger upside relative to the overall market and that's our plan that then feeds into our 26 billion dollar Target for 2030.

Jim Schneider: Thank you.

Thank you.

Operator: Thank you. We'll move on next to Charles Shi with Needham. Your line is open.

Speaker #4: And we've done that, but it took quite a while because the industry is remarkably aggressive in new technology, development, but slow in making changes in manufacturing.

Thank you.

We'll move on next to Charles she need him. The line is open.

Charles Shi: Thanks for taking my question. I have a question around some technology in metrology. There's a lot of discussion around X-ray versus optical for CD measurement in the front-end, let's say in void detection, those kind of other stuff in hybrid bonding type of advanced packaging. You know, Rick, I'm sure you're familiar with the all of these discussion around the debate around optical versus E-beam, DUV versus actinic. I think you've said that when you can use optical, customers will stay with the optical. Is this new debate around metrology, X-ray versus optical, you would have the same view, maybe optical will eventually win or you have some other thoughts? I understand you do have an SpectraCD-XT tool, but I wanna get your thoughts.

Speaker #4: Except for when it has to. So I think the question is, is there capability that you can use and you can drive more with X-ray?

Speaker #4: And can you do it? And the answer is you might be able to do it, but the question is, is it something you can do in production?

Speaker #4: You can do it to debug the process, but if even in E-beam, what we're seeing now with our portfolio, is we might use our E-beam system coupled with our inspection system to tune that inspection system but to offload as much as we can to higher throughput.

Speaker #4: So I think there's a scenario in which you see that that's what happens with X-ray, as well. You'll want to have the capability. But the problem is always eventually is the cost.

Speaker #4: And if it's something that is so out of control that the only way you can do it is with massive amounts of very inspection metrology and very expensive you're just not going to do it.

Charles Shi: Thanks.

Thanks for taking my question. I have a question uh, around, uh, some technology in in Metrology. Uh, there. There's a a lot of discussion around um, actually versus Optical for CD measurement in the front end. Uh, let's say in boy detection, those kind of this stuff in hybrid bonding type of advanced packaging and uh you know uh uh Rick, I'm sure you're you're familiar with all of these discussion around the debate around Optical versus reading do versus actinic. Um, I I think that you said that, that when you can use Optical, uh, customers will stay with the optical. But is this new debate around Metrology x-ray versus Optical? You, you would have the same view, maybe, uh, Optical or eventually, when, or, or you have some other thoughts? I, I understand you do have an XP tool, but I want to get your topic. Thanks.

Bren Higgins: Yeah, I think that the, you know, the history of inspection and measurement and really the industry is you move to the highest capability tool that can do the job initially to debug it, and then you go to the cost of ownership play. Whatever can do the job most efficient. We talked about the roll-off, for example, in our wafer inspection portfolio, where you might debug a process at a very high level of, you know, say, E-beam during characterization along with high-end optical. If you can possibly go to higher throughput, lower cost, you do.

Rick Wallace: Yeah, I think that the, you know, the history of inspection and measurement and really the industry is you move to the highest capability tool that can do the job initially to debug it, and then you go to the cost of ownership play. Whatever can do the job most efficient. We talked about the roll-off, for example, in our wafer inspection portfolio, where you might debug a process at a very high level of, you know, say, E-beam during characterization along with high-end optical. If you can possibly go to higher throughput, lower cost, you do.

yeah, I I think that the

Speaker #4: And you're going to figure out another process. So I think the answer is, yeah, there's a lot of work going on. And there's people that are really focused on getting something to work, but that's different than what they'll use in volume production.

Speaker #4: There's a company we've always focused on the difference between the characterization, development phase, and what you can fan out. So when we laid out our 2030 plan, we obviously worked very closely with our customers on their packaging roadmaps.

Speaker #4: And what we anticipated was having capability across our portfolio to solve all the tools, the needs they have, including in their development phase. So I don't think you're going to see a quick adoption of X-ray anytime soon.

Richard Wallace: The case of X-ray is interesting because in some ways, when we introduced Axion a few years ago, that was a product that was really solving a problem that could only be solved in failure analysis. The challenge with that was getting the tech to work, getting adoption, and getting proof of concept with enough players that they would make the change. We've done that, but it took quite a while because the, you know, the industry is remarkably aggressive in new technology development, but slow in making changes in manufacturing except for when it has to. I think the question is there a capability that you can use and you can drive more with X-ray, and can you do it?

Rick Wallace: The case of X-ray is interesting because in some ways, when we introduced Axion a few years ago, that was a product that was really solving a problem that could only be solved in failure analysis. The challenge with that was getting the tech to work, getting adoption, and getting proof of concept with enough players that they would make the change. We've done that, but it took quite a while because the, you know, the industry is remarkably aggressive in new technology development, but slow in making changes in manufacturing except for when it has to. I think the question is there a capability that you can use and you can drive more with X-ray, and can you do it?

Speaker #4: And those of us that have been around a while, there was an X-ray lithography company 30 years ago. So it's not like it's a new idea to leverage X-ray.

Speaker #4: It's just the cost of throughput is really challenging. I hope that helps. And just to build on that, the market size, most of the adoption has been in memory.

You know the history of inspection and measurement and really the industry is you move to the highest capability tool that can do the job initially to debug it and then you go to the cost of ownership play. So whatever can do the job and most efficient we talked about the roll off. For example, in our wafer inspection portfolio, where you might debug a process at a very high level of, you know, say he being during characterization along with high in Optical. But then, if you can possibly go to higher throughput lower cost, you do the case of X-ray is interesting, because, in some ways, when we introduced Axion a few years ago, that was a product that was really solving, a problem that could only be solved in failure analysis and and the, the challenge with that was getting the tech to work getting adoption and getting proof of concept with enough players that they would make the change. And we've done that. But it, it took quite a while because the, you know, the industry

Speaker #4: And so the market size has been roughly I'll call it today is about 75 to 100 million dollars. And I'd say we have probably about call it a 60-ish percent share of the overall market.

Speaker #4: I think as adoption starts to increase, as maybe more production opportunities become available, you could see that moving up into the 150 million dollar range over the next few years.

Richard Wallace: The answer is, you might be able to do it, but the question is it something you can do in production? You know, you can do it to debug the process, but if even in E-beam, you know, what we're seeing now with our portfolio is we might use our E-beam system coupled with our inspection system to tune that inspection system, but to offload as much as we can to higher throughput. I think there's a scenario in which you see that that's what happens with X-ray as well. You'll want to have the capability, but the problem is always eventually is the cost.

Rick Wallace: The answer is, you might be able to do it, but the question is it something you can do in production? You know, you can do it to debug the process, but if even in E-beam, you know, what we're seeing now with our portfolio is we might use our E-beam system coupled with our inspection system to tune that inspection system, but to offload as much as we can to higher throughput. I think there's a scenario in which you see that that's what happens with X-ray as well. You'll want to have the capability, but the problem is always eventually is the cost.

Is remarkably aggressive in new technology development, but slow in making changes in manufacturing except for when it has to. So I think the question is, is there capability that you can use and you can drive more with X-ray, and can you do it? And the answer is you might be able to do it, but the question is, is it something you can do in production?

Speaker #4: But the challenge is of the productivity of the tool and how that then translates into volume production has Rick said has been the biggest challenge.

Speaker #4: And I think has affected how the pace of adoption for that technology.

Speaker #7: Thanks. Maybe a quicker one as a second question. You gave that advanced packaging 635 to a billion. But if I recall correctly, one quarter ago, you were basically calling advanced packaging I mean, probably is like much lower growth.

Richard Wallace: If it's something that is so out of control that the only way you can do it is with massive amounts of very inspection metrology and it's very expensive, you're just not gonna do it and you're gonna figure out another process. I think the answer is, yeah, there's a lot of work going on, and there's people that are really focused on getting something to work, but that's different than what they'll use in volume production. As a company, we've always focused on the difference between the characterization, development phase, and what you can fan out.

Rick Wallace: If it's something that is so out of control that the only way you can do it is with massive amounts of very inspection metrology and it's very expensive, you're just not gonna do it and you're gonna figure out another process. I think the answer is, yeah, there's a lot of work going on, and there's people that are really focused on getting something to work, but that's different than what they'll use in volume production. As a company, we've always focused on the difference between the characterization, development phase, and what you can fan out.

You know, you can do it to debug the process, but if even an even, you know what we're seeing now, with our portfolio is we might use our evening system coupled with our inspection system to tune that inspection system but offload as much as we can to higher throughput. So I think there's a scenario in which you see that that that's what happens with x-ray as well. You'll want to have the capability but the problem is always eventually is the cost and if it's something that

Speaker #7: Feels like that was an upward revision to your advanced packaging revenue outlook. So may I ask what was the big upward revision about? I mean, it happened like just over 90 days.

It's so out of control that the only way you can do it is with massive amounts of very inspection metrology, and it's very expensive. You're not going to do it, and you're going to figure out another process.

Speaker #7: And what's changed from maybe a quarter ago?

Speaker #4: Yeah. So we thought in a quarter ago, we thought that the overall growth rate in process control advanced packaging was somewhere in excess of 30%.

Richard Wallace: When we laid out our 2030 plan, we obviously worked very closely with our customers on their packaging roadmaps, and what we anticipated was having capability across our portfolio to solve all the tool, you know, the needs they have, including in their development phase. I don't think you're gonna see a quick adoption of X-ray anytime soon. You know, those of us who have been around a while, you know, there was an X-ray lithography company 30 years ago. It's not like it's a new idea to leverage X-ray, it's just the cost and throughput is really challenging. I hope that helps.

Rick Wallace: When we laid out our 2030 plan, we obviously worked very closely with our customers on their packaging roadmaps, and what we anticipated was having capability across our portfolio to solve all the tool, you know, the needs they have, including in their development phase. I don't think you're gonna see a quick adoption of X-ray anytime soon. You know, those of us who have been around a while, you know, there was an X-ray lithography company 30 years ago. It's not like it's a new idea to leverage X-ray, it's just the cost and throughput is really challenging. I hope that helps.

Speaker #4: Obviously, if you do the math on the numbers we've talked about, we're now in the upper 50% range. In terms of growth, there's clearly been and one thing about packaging is it's a shorter lead time business generally.

When we laid out our 2030 plan, we obviously worked very closely with our customers on their packaging roadmaps. And what we anticipated was having capability across our portfolio to solve all the tools, you know, the needs they have, including in their development phase.

So I don't think you're going to see a quick adoption of X-ray anytime soon. And, you know, those of us who've been around a while.

Speaker #4: And there's clearly been momentum from a number of customers for additional capacity this year. We didn't have the visibility to it going into this calendar year.

Bren Higgins: Just to build on that, the market size, most of the adoption has been in memory, so the market size has been roughly, I'll call it, you know, today it's about $75 to $100 million. Say we have probably about, you know, call it a 60-ish% share of the overall market. I think as adoption starts to increase as, you know, maybe more production opportunities become available, you could see that moving up into the, you know, $150 million range over the next few years. The challenges of the productivity of the tool and how that then translates into volume production has, as Rick said, has been the biggest challenge and I think has affected how the pace of adoption for that, for that technology.

You know, there was an x-ray lithography company, 30 years ago. So it's not like it's a new idea to to leverage x-rays. Just the cost of throughput is is really challenging. I hope that helps and just to build on that. It it

Speaker #4: And we see it growing more. And it's, I think, going to be a little bit more of a second-half dynamic in terms of half to half of that growth.

Speaker #4: But it has absolutely picked up over the last 90 days or so. And I think the competitive positioning and need for more capability that talked about earlier are big drivers in it.

Has been in memory, and so the market size has been roughly, I'll call it, you know, today, about $75 to $100 million, and

Speaker #4: So semiconductor process control, growing in the range of a billion up from about 635 million which translates, as I said, into the high 50% range.

Speaker #7: Thanks, Brent. Thanks, Rick.

Speaker #8: Thank you. We'll move on now to Srini Pajuri, with RBC Capital Markets. Your line is open.

Say we have probably about, you know, call with the 60% share of the overall Market. I think as adoption starts to increase, as you know, maybe more production opportunities become available. You could see that moving up into the, you know, 150 million dollar range over the next few years. But the the challenges of of the the productivity of the tool and how that then translates into volume production has, as Rick said has been the biggest uh Challenge and and I think has affected how the pace of adoption for that for that technology.

Charles Shi: Thanks. Maybe a quicker one, as a second question. You gave that advanced packaging revenue outlook from $635 to $1 billion. If I recall correctly, Q1 ago, you were basically calling advanced packaging, I mean, probably it's like, much lower growth. Feels like that was a upward revision to advanced packaging revenue outlook. May I ask, what was the big upward revision about? I mean, it happened like just over, 6 to 90 days, and what's changed from maybe a quarter ago?

Speaker #9: Thank you. I have a clarification. Sorry, I've been jumping between calls here. It looks like you're raising the WFC number to about 140 versus 135 to 140 at the analyst day.

Speaker #9: But at the same time, your annual guidance, revenue guidance is still for high teams. I understand high teams can mean a lot of things.

Speaker #9: So just trying to see if I'm reading that correctly, if you can kind of give me some additional color on that, that would be great.

Speaker #4: Yeah. I think that we're talking about a pretty small adjustment from where we were about six weeks ago. But we think it's 140 plus.

Bren Higgins: Yeah, yeah. We thought in a quarter ago, you know, we thought that the overall growth rate in process control advanced packaging was somewhere in excess of 30%. Obviously, if you do the math on the numbers we've talked about, we're now in the upper 50% range in terms of growth. One thing about packaging is it's a shorter lead time business generally, there's clearly been, you know, momentum from a number of customers for additional capacity this year. We didn't have the visibility to it, you know, going into this calendar year, we see it growing more, and I think it's going to be a little bit more of a H2 dynamic in terms of half to half of that growth.

Speaker #4: And I think that, as I said, a pretty comfortable with the guidance that we provided I would say probably translates into consistent with the stronger view of the industry that translates into probably a little bit stronger view of 2026 for KLA than we thought six weeks ago.

Um thanks. Um the um let me get a quicker 1 as a second question. Uh, uh you you gave that advanced packaging Revenue Outlook from 635 to a billion, uh, but uh, if I recall correctly, 1 quarter ago, you were basically calling Advanced packaging. Uh, I mean, probably is like, uh, much lower growth. Uh, feels like that was an upward revision to your Advanced packaging Revenue Outlook. Uh, so may I ask, uh, what was the Big Apple revision about? Uh, I mean, it happened like, just over uh, 6 90 days and what's changed from maybe a quarter though. Yeah, yeah, yeah. So so we so we thought and, and a quarter ago, uh, you know, we thought that the overall growth rate in process control. Advanced packaging was somewhere in excess of 30%. Obviously, if you if you do the math on the numbers, we've talked about we're now in the upper 50% range. In terms of growth there's clearly been and and 1 thing about packaging is

Speaker #4: But look, we've got nine months to go here. And we have a number of opportunities to provide an update to that forecast. So we're pretty excited.

Speaker #4: And we'll see how the second-half plays out in terms of opportunities to reduce the risk and increase the our views of performance here for the year.

Is it's a shorter lead time business generally and there's clearly been, you know, momentum from a number of customers for additional capacity. This year we didn't have the visibility to it. You going into this calendar year. Um,

And we see it growing more, and I think it's going to be a little bit more of a second half dynamic, in terms of 'have to have.'

Bren Higgins: It has absolutely picked up over the last 90 days or so. I think, you know, the competitive positioning, the need for more capability that I talked about earlier, are big drivers in it. Semiconductor Process Control growing in the range of $1 billion, up from about $635 million, which, you know, translates, as I said, into the high 50% range.

Speaker #4: But I think that's as good as we can do for now.

Speaker #7: Yeah. That's fair enough. Thank you. And then on the 2027, just a few clarifications, Brent. So you're obviously guiding for high teams or better seems like.

Of that growth. But it has absolutely picked up over the last—

Speaker #7: So I'm assuming WFE is at least growing in line or maybe you continue to outperform WFE. As you've been doing over the past few years, just trying to understand the moving pieces there.

Uh, 90 days or so. And I think the competitive positioning and the need for more capability that I talked about earlier are big drivers in it. So, semiconductor process control are only in the range of $1 billion, up from about $635 million, which, you know, translates—as I said—into the high 50% range.

Charles Shi: Thanks, Bren. Thanks, Richard.

Charles Shi: Thanks, Bren. Thanks, Rick.

Thanks Brent. Thanks Rick.

Speaker #7: I know you said it's fairly broad-based. But can you maybe parse it out by end market, memory versus logic, what you're seeing? And also, what's your base case assumption for China WFE for next year?

Operator: Thank you. We'll move on now to Srini Pajjuri with RBC Capital Markets. Your line is open.

Thank you.

We'll move on now to Streamy Poduri with RBC Capital Markets. Your line is open.

Srini Pajjuri: Thank you. I have a clarification. Sorry, I've been jumping between calls here. It looks like you're raising the WFE number to about 140, versus 135 to 140 at the Analyst Day. At the same time, your annual guidance, revenue guidance is still for high teens. I understand high teens can mean a lot of things, so just trying to see if I'm reading that correctly. If you can kind of give me some additional color on that'd be great.

Speaker #7: Thank you.

Speaker #4: Yeah. So I think that if you look at the greenfield opportunities which I think for DRAM, but also in the flash market is that memory is probably a few percent higher than this year.

Speaker #4: So if this year memory is about we'll call it 60 so logic foundry is about 62% of the overall spend. I think it's probably closer to 60% more memory focused versus logic into next year.

Thank you. Um, I have a clarification, sorry. I've been uh, jumping between calls here. Um, it looks like you you're raising the WFC number to about 140 versus 135 to 140 at the analyst day. Uh, but at the same time, your annual guidance Revenue guidance is for still for high teams. I, I understand High teams can mean a lot of things to just trying to. Um, see if I'm reading that correctly, if you can, uh, kind of give me some additional code on that, that would be great.

Bren Higgins: Yeah. I think that, you know, we're talking about a pretty small adjustment from where we were about six weeks ago. We think it's 140 plus, and I think that, as I said, I'm pretty comfortable with the guidance that we provided. I would say it probably translates into, consistent with the stronger view of the industry, that it translates into probably a little bit stronger view of 2026 for KLA than we thought six weeks ago. Look, we've got, you know, nine months to go here, and we have a number of opportunities to provide an update to that forecast.

Speaker #4: I don't think it's hard to say about China. We're a little ways away. But at least in terms of how we're modeling it, our general view on China is that it grows at a slower rate than overall WFE.

Speaker #4: And we haven't seen it change much, at least in terms of KLA's business levels over the last couple of years. So I would say that you'll see it more along those lines.

Speaker #4: Now, it's more greenfield, less around technology upgrades. And so that drives a different dynamic in with the rising process control intensity that we're seeing in memory.

Bren Higgins: We're pretty excited, and we'll see how H2 plays out in terms of opportunities to reduce the risk and increase our views of performance here for the year.

Speaker #4: We feel very good about how well we're positioned for that activity into next year.

Speaker #7: Got it. Thanks, John.

Speaker #4: I'd say logic foundry continues to be very broad-based. And legacy is pretty weak this year. So I would think that legacy probably has some upside into next year.

Srini Pajjuri: Okay

Bren Higgins: The best we can do for now.

Yeah, I I I think that, you know, we're talking about a pretty small adjustment from where we were about 6 weeks ago, but we think it's 1:40 plus. And, uh, I think that, as I said, a pretty comfortable with the, uh, the guidance that we provided. I, I would say probably translates into consistent with the, the stronger view of the industry that translates into probably a little bit stronger view of of, of 2026 for KLA than than we thought, uh, 6 weeks ago. But look, we've got, you know, 9 months to go here and we have a number of opportunities to provide an update to that forecasts. So we we're pretty, uh, excited and we'll see how the second half plays out in terms of of opportunities to uh, uh, to to reduce the risk and and and increase the uh, our views of performance here for the year. But I think that's, that's okay as soon as we can do for now.

Srini Pajjuri: Yeah. That's fair enough. Thank you. On the 2027, just a few clarifications, Bren. You're obviously guiding for high teens or better, it seems like. I'm assuming WFE is at least growing in line, or maybe, you know, you continue to outperform WFE as you've been doing over the past few years. Just trying to understand, you know, the moving pieces there. I know you said it's fairly broad based, can you maybe parse it out by, you know, end market, memory versus logic, you know, what you're seeing? Also, what's your base case assumption for China WFE for next year? Thank you.

Speaker #4: I don't want to quantify that yet, though.

Speaker #7: Got it. Thank you.

Speaker #8: Thank you. We'll move next to Shane Brett. With Morgan Stanley, your line is open. Please go ahead.

Just a few clarifications Brian. Um,

Speaker #10: Thank you for letting me ask a question. So my first question is on margin. I want to assume that your customers are likely fighting for a KLA shipment slots at the moment.

Speaker #10: Just how should we think about your ability to take advantage of this demand via margin? I'm especially curious in the context of your memory customers, given you have seen a gross margin headwind due to higher DRAM pricing, but shouldn't we be able to pass this cost on earlier than the historical one-year pricing pass-through cycle?

So you're obviously guiding for high teams or better. Uh seems like so I'm assuming WF is at least growing in line or maybe you know, you you continue to outperform WFC as you've been doing over the past few years. Um, just trying to understand, you know, the moving pieces there. Um, I know you said it's fairly broad-based but can you maybe talk about by, you know, End Market memory versus logic, you know, where you're seeing. And also, what's your base case, assumption for China, uh, WFC for next year. Thank you.

Speaker #10: Thank you.

Bren Higgins: I think that if you look at the greenfield opportunities, which I think is for DRAM, but also in the flash market, memory is probably a few percent higher than this year. If this year memory is, about, you know, we'll call it, you know, 60. Logic foundry is about 62% of the overall spend. I think it's probably closer to 60% more memory focused versus logic into next year. I don't think, you know, it's hard to say about, you know, China.

yeah, so I think

that if you look,

Speaker #4: Yeah, Shane. We don't price based on scarcity. At KLA, our pricing is based on cost of ownership improvements from one generation to the next.

Greenfield.

Speaker #4: We're pretty disciplined about that. And that translates into terms of meeting our customers' view of incremental performance and incremental cost of ownership improvement. If you start to price based on different price changes in components, I would expect that your customers would want symmetry with that.

Opportunities, which I think are for DRAM, but also in the flash market, is that memory is probably a few percent higher than this year. So, if this year memory is

Bren Higgins: We're a little ways away, but at least in terms of how we're modeling it, you know, our general view on China is that it grows at a slower rate than overall WFE, and we haven't seen it change much, at least in terms of KLA's business levels over the last couple of years. I would say that you'll see it more along those lines. Now, it's more greenfield, less around technology upgrades, and so that drives a different dynamic. With the rising process control intensity that we're seeing in memory, we feel very good about how well we're positioned for that activity into next year.

Speaker #4: And so that's not how we think about it at KLA. It's much more about the value that we offer to value-based pricing and how we're able, from product type to product type, to deliver new capability at better cost of ownership to our customers.

Speaker #4: So I think we do a pretty good job around that at KLA. And this is a headwind around memory that we think ultimately will normalize out in the future.

Um, about, you know, we'll call it, you know, 60—it's a logic boundary is about 62% of the overall spend. I think it's probably closer to 60% more memory, uh, focused versus logic into next year. I don't think, you know, it's—it's hard to say about, you know, China, we're a little ways away. But at least in terms of how we're modeling it, you know, our general view on China is that it grows at a slower rate than overall WFB, uh, and we haven't seen it change much, at least in terms of Haley's business levels over the last couple of years. So I would say that you'll see it more along those lines. Now it's more greenfield, less around.

Speaker #4: I don't think it's going to I think it's going to be with us for a little while. But we feel pretty good about the supply that we have, to be able to support the growth outlook we've talked about.

Technology upgrades, and so that drives a different dynamic. And with the rising process control intensity that we're seeing in memory, we feel very good about it.

How well we're positioned for for that activity into next year.

Srini Pajjuri: Got it. Thanks, Bren.

Bren Higgins: As I say, logic foundry continues to be very broad-based, and legacy is pretty weak this year, so I would think that legacy probably has some upside into next year. I don't wanna quantify that just yet, though.

Speaker #4: And as I talked about at Investor Day, I think it's highlights why our new product introduction cadence is so important for KLA because it allows us to introduce new products, rethink how we're pricing that incremental value.

Got it. Thanks, John. As in, LA County continues to be very broad-based.

And Legacy is pretty weak this year. So, uh, I would think that Legacy probably has some upside into next year. I don't want to quantify that yet, though.

Srini Pajjuri: Got it. Thank you.

Thank you.

Operator: Thank you. We'll move next to Joseph Moore with Morgan Stanley. Your line is open. Please go ahead.

Operator: Thank you. We'll move next to Shane Brett with Morgan Stanley. Your line is open. Please go ahead.

Speaker #4: How do we share it with customers? As we move forward. So I think we feel pretty good about how we're positioned in the last thing you're going to do is go to a customer in the middle of a transaction or middle of a buy and change pricing.

Thank you.

Joseph Moore: Thank you for letting me ask a question. My first question is on margin. I want to assume that your customers are likely fighting for KLA shipment slots at the moment. Just how should we think about your ability to take advantage of this demand via margin? I'm especially curious in the context of your memory customers, given you have seen a gross margin headwind due to higher DRAM pricing, but shouldn't we be able to pass this cost on earlier than the historical one-year pricing pass-through cycle? Thank you.

Shane Brett: Thank you for letting me ask a question. My first question is on margin. I want to assume that your customers are likely fighting for KLA shipment slots at the moment. Just how should we think about your ability to take advantage of this demand via margin? I'm especially curious in the context of your memory customers, given you have seen a gross margin headwind due to higher DRAM pricing, but shouldn't we be able to pass this cost on earlier than the historical one-year pricing pass-through cycle? Thank you.

We'll move next to Shane. Brett with Morgan Stanley, your line is open. Please go ahead.

Speaker #4: So that doesn't work that way. So I think we're pretty good and feel pretty good about what we do.

Speaker #8: Got it. Thank you. That's very clear. And for my follow-up, this is more of a clarification. And it's on advanced packaging. So I understand you see your business growing 30% in packaging, but your process peers are now also talking about 50% plus growth.

Thank you for letting me ask a question. Um, so my first question is on margin. I want to assume that your customers are likely fighting for KLA shipments, thoughts at the moment. Just, how should we think about your ability to take advantage of this demand via margin on the specialty? Curious in the context of your memory customers, given you have seen a gross margin headwind due to higher DRAM pricing. But shouldn't we be able to pass this cost on earlier than the historical one-year pricing pass-through cycle? Thank you.

Bren Higgins: Joseph Moore. We don't price based on scarcity at KLA. Our pricing is based on cost of ownership improvements from one generation to the next. We're pretty disciplined about that, and that translates into terms of meeting our customers' view of incremental performance and incremental cost of ownership improvement. If you start to price based on different price changes in components, I would expect that your customers would want symmetry with that. That's not how we think about it at KLA. It's much more about the value that we offer, it's a value-based pricing, and how we're able, from product type to product type, to deliver new capability at better cost of ownership to our customers.

Speaker #8: Correct me if I'm wrong, but does that mean that relative to your initial packaging guide of approximately $12 billion that you disclosed in late January, we should be looking at closer to 13 or 14 billion for this year?

Speaker #8: Thank you.

Yeah. Jane we we don't price based on on scarcity uh at KLA our pricing is is based on on cost of ownership uh improvements from 1 generation to the next. We're pretty disciplined about.

Speaker #4: Yeah, Shane. So we're growing greater than in the high 50%, as we said in the prepared remarks, the shareholder letter, and the question I answered earlier.

About that and that translates into terms of meeting our customers uh our customers view of of incremental performance and incremental cost of ownership Improvement.

Speaker #4: The overall market is somewhere growing up in the range of about 13 billion. We think. And so that's approximately 30% growth in the overall market from 2025.

If you, if you start to to price based on different price changes and components, I would expect that your customers would want symmetry with that.

And so that's not how we think about it at KLA. It's much more about

Speaker #8: Okay. Thank you very much. Thank you. We'll move on now to Edward Yang with Oppenheimer. Your line is open.

The value that we offered, the value-based pricing, and how we're able from product type to product type to deliver.

Bren Higgins: I think we do a pretty good job around that at KLA, and this is a headwind around memory that we think ultimately will normalize out in the future. I don't think it's gonna be with us for a little while, but we feel pretty good about the supply that we have to be able to support the growth outlook we've talked about. As I talked about at Investor Day, I think it highlights why our new product introduction cadence is so important for KLA because it allows us to introduce new products, rethink how we're pricing that incremental value, how do we share it with customers as we move forward. I think we feel pretty good about how we're positioned.

Speaker #11: Oh, hey, Rick. Hey, Bren. Thanks for the time. Just following up on DRAM and the gross margin headwind. You mentioned having procured enough chips now.

Speaker #11: Is that through calendar year 26 or possibly longer?

Speaker #4: Longer. I feel very good about our supply situation. Going into to support our build plans through next year.

New capability at at better cost of ownership to our customers. So I think we do a pretty good job around that at KLA and uh this is a headwind around memory that that we think ultimately will will will normalize out in the future. I don't think it's going to I think it's going to be with us for a little while but we feel pretty good about the supply that we have to be able to support this. The growth Outlook, we talked about and it it as I talked about an investor day. I think it's

Speaker #8: Great. And second question is on AI, CapEx assumptions. A couple of hyperscalers reported tonight as well. Not a couple, a few. A couple have appeared to have come in a little light on CapEx tonight.

Highlights why our our new product introduction Cadence is so important for KLA because it allows us to, to introduce new products re re rethink how we're pricing that incremental value. How do we share it with customers, uh, as we move forward. So, um,

Speaker #8: Microsoft and Google for the quarter, Meta and Amazon were a bit higher. But we all appreciate those numbers can be lumpy quarter to quarter.

Bren Higgins: You know, the last thing you're going to do is go to a customer in the middle of a transaction or middle of a, you know, a buy and change that pricing. It doesn't work that way. I think we're pretty good and feel pretty good about what we do.

Speaker #8: But given sporadic market concerns around data center CapEx durability, can you bridge your updated 26 WFU view of greater than 140 billion and your expectation of growth in 2027?

I think we feel pretty good about how we're positioned and and you know the last thing you're going to do is go to a customer in the middle of a transaction and or middle of a, you know, a buy and and change at pricing so that just, it doesn't work that way. So I, I I think we're, we're pretty good at and feel pretty good about what we do.

Joseph Moore: Got it. Thank you. That's very clear. For my follow-up, this is more of a clarification, and it is on advanced packaging. I understand you see your business growing 30% in packaging. Your process peers are now also talking about 50% plus growth. Correct me if I am wrong, does that mean that relative to your initial packaging guide of approximately $12 billion, that you disclosed in late January, we should be looking at closer to $13 billion or $14 billion for this year? Thank you.

Shane Brett: Got it. Thank you. That's very clear. For my follow-up, this is more of a clarification, and it is on advanced packaging. I understand you see your business growing 30% in packaging. Your process peers are now also talking about 50% plus growth. Correct me if I am wrong, does that mean that relative to your initial packaging guide of approximately $12 billion, that you disclosed in late January, we should be looking at closer to $13 billion or $14 billion for this year? Thank you.

Speaker #8: To the underlying AI infrastructure assumptions, put differently, what level of hyperscaler end customer AI CapEx do those WFE forecasts effectively require?

Got it. Thank you. That's very clear and from a follow-up, um, this is more of a clarification and it's on Advanced packaging. So I understand you see your business growing 30% in packaging but your process peers are also talking about 50% plus growth, correct me if I'm wrong. But does that mean that relative to your initial packaging guide of approximately 12 billion that you disclosed in early in late January? We should be looking at closer to 13 or 14 billion for this year. Thank you.

Speaker #4: Yeah. So when we talk and like I said, we've had all these conversations with customers recently about what is their expected demand and what kind of capacity are they bringing online.

Bren Higgins: Yeah, Shane. We're growing greater than in the high 50%, as we said in the prepared remarks, the shareholder letter and the question I answered earlier. The overall market is somewhere growing up in the range of about $13 billion, we think. That's approximately 30% growth in the overall market from 2025.

Speaker #4: Recently, within the last two weeks, I've had those conversations both on the foundry logic side and on the memory side. There's still, with all these very aggressive plans through 26 and 27, they're not going to close the gap.

And as we said in the prepared remarks, the Cheryl letter—and I have the question I answered earlier. Um, the

The overall market is somewhere growing up in the range of about $13 billion, we think. And so that's approximately 30% growth in the overall market from '20.

Speaker #4: And in some cases, the gap is even expanded from where it was a few months ago because of the demand. So this equilibrium between what the CapEx the hyperscaler guys say and the notion that you can draw a straight line to WFE, you just can't because we're way underserving those demands.

Joseph Moore: All right. Thank you very much.

Shane Brett: All right. Thank you very much.

From 2025.

Okay, thank you very much.

Operator: Thank you. We'll move on now to Edward Yang with Oppenheimer. Your line is open.

Edward Yang: Hey, Rick. Hey, Brent. Thanks for the time. Just following up on DRAM and the gross margin headwind. You mentioned having procured enough tips now. Is that through calendar year 2026 or possibly longer?

Thank you. We'll move on now to Edward Yang with Oppenheimer. The line is open.

Speaker #4: So our contention has been for quite a while that there's not enough silicon to be able to support the plans that people have and so the WFE is literally just as fast as we can go as an industry.

Oh, hey Rick. Hey Bren, thanks for the time. Um, just following up on DRAM and the gross margin headwind. Uh, you mentioned having procured enough FITs—now, is that through calendar year '26, or possibly longer?

Richard Wallace: Longer. I feel very good about our supply situation going into, to support our build plans through next year.

Rick Wallace: Longer. I feel very good about our supply situation going into, to support our build plans through next year.

Longer. I feel very good about our supply situation going into uh to supply to support our bill plans through next year.

Edward Yang: Great. Second question's on AI CapEx assumptions. You know, a couple of hyperscalers reported tonight as well. Not a couple, a few. A couple have appeared to have come in a little light on CapEx tonight, Microsoft and Google, for the quarter. Meta and Amazon were a bit higher. We all appreciate those numbers can be lumpy quarter to quarter. You know, given sporadic market concerns around data center CapEx durability, can you bridge your updated 2026 WFE view of greater than $140 billion and your expectation of, you know, growth in 2027, to the underlying AI infrastructure assumptions? You know, put differently, what level of hyperscaler end customer AI CapEx do those WFE forecasts effectively require?

Speaker #4: That's kind of what we're seeing when we talk to our customers. And we talk to their plans for build-out in 27. And the reason 26 isn't bigger is because they can't build enough fabs fast enough.

Speaker #4: And take the extreme of this because he said it on his call. If you say what Elon Musk was saying about SpaceX and the demands and why he talked about building TerraFab was because it was going to be a massive shortage of semiconductor capacity through 2030.

Speaker #4: So nothing about these short-term and I think that's a that confuses a lot of people what is talked about short-term in terms of the hyperscaler CapEx and the buffer between that and what's happening in terms of the ability of the industry to bring on all that capacity.

Great. And uh second question is on AI capex assumptions. Um, you know a couple of hyperscalers uh reported tonight as well about a couple of few. Uh, a couple have appeared to have come in, a little light on capex tonight. Um, Microsoft and Google, uh, for the quarter meta, and Amazon were a bit higher, but we all appreciate those numbers can be lumpy quarter to quarter, uh, but, you know, given, uh, sporadic Market concerns around data center, capex durability. Um, can you Bridge

Speaker #4: So I understand people are trying to correlate it, but there's a massive assumption in there that this thing is even close to filling that capacity.

Speaker #4: And it's not.

You're updated to $26 WFU. Uh, WFV view of greater than $140 billion, and your expectation of, you know, growth in 2027—um, to the underlying AI infrastructure assumptions, you know, put differently—what level of hyperscaler and customer AI capex do those WFV forecasts effectively require?

Richard Wallace: Yeah. When, like I said, we've had all these conversations with customers recently about what is their expected demand and what kind of capacity are they bringing online. Recently, within the last 2 weeks, I've had those conversations both on the foundry logic side and on the memory side. They're still, with all these very aggressive plans through 2026 and 2027, they're not gonna close the gap. In some cases, the gap is even expanded from where it was a few months ago because of the demand. This equilibrium between what the CapEx, the hyperscaler guys say, and the notion that you can draw a straight line to WFE, you just can't, because we're way underserving those demands.

Rick Wallace: Yeah. When, like I said, we've had all these conversations with customers recently about what is their expected demand and what kind of capacity are they bringing online. Recently, within the last 2 weeks, I've had those conversations both on the foundry logic side and on the memory side. They're still, with all these very aggressive plans through 2026 and 2027, they're not gonna close the gap. In some cases, the gap is even expanded from where it was a few months ago because of the demand. This equilibrium between what the CapEx, the hyperscaler guys say, and the notion that you can draw a straight line to WFE, you just can't, because we're way underserving those demands.

Speaker #11: I agree with you. Thank you.

Speaker #4: Okay.

Speaker #8: Thank you. We'll take our last question from Chris Caso with Wolf Research. Your line is open.

Speaker #5: Yeah. Thank you. Good evening. Just as a follow-on to the prior question, and it does certainly sound like demand is well ahead of the industry's ability to supply, does that cap the amount that KLA can ship to customers and that the customers have clean room space to be able to put tools right now?

Yeah, so when, um, when we talked and, like I said, we've had all these conversations with customers recently about what is their expected demand, and what kind of capacity are they bringing online. Recently, within the last two weeks, I've had those conversations both on the Foundry logic side and on the memory side. There are still all these very aggressive plans through '26 and '27. They're not going to close the gap and, in some cases, the gap has even expanded from where it was a few months ago because of the demand. So this, this, this—

Speaker #5: I mean, you talked about perhaps the opportunity to increase the view as the year goes on. But are we sort of toward the upper limits of what can be supplied in 26?

Speaker #5: And we're just going to have to supply it in 27, 28?

Richard Wallace: Our contention has been for quite a while that there's not enough silicon to be able to support the plans that people have. The WFE is literally just as fast as we can go as an industry. That's kind of what we're seeing when we talk to our customers and we talk to their plans for build-out in 2027. The reason 2026 isn't bigger is 'cause they can't build enough fabs fast enough. Take the extreme of this, 'cause he said it on his call. If you say, you know, what Elon Musk was saying about SpaceX and the demands and why he talked about building Terafab was because it was gonna be a massive shortage of semiconductor capacity through 2030.

Rick Wallace: Our contention has been for quite a while that there's not enough silicon to be able to support the plans that people have. The WFE is literally just as fast as we can go as an industry. That's kind of what we're seeing when we talk to our customers and we talk to their plans for build-out in 2027. The reason 2026 isn't bigger is 'cause they can't build enough fabs fast enough. Take the extreme of this, 'cause he said it on his call. If you say, you know, what Elon Musk was saying about SpaceX and the demands and why he talked about building Terafab was because it was gonna be a massive shortage of semiconductor capacity through 2030.

Speaker #4: Well, yeah. I think so. And the way to think about this, and I think this is we are an ecosystem. So it kind of takes all the parts of the ecosystem to make it happen.

Speaker #4: And so when you look at what are what are the constraints or what are the limits? I know when we talk in the AI world about you have power constraints or other constraints, but in the semiconductor industry, the first constraint is how many fabs do you have?

Equilibrium between what the capex? The hyperscaler guys say. And the, the notion that you can draw a straight line to wfe you scan, because they're we're way under serving those demands. So our content has been for quite a while that there's not enough silicon to be able to support the plans that people have. And so the wfp is literally just as fast as we can go as an industry, that that's kind of what we're seeing when we talk to

Our customers and we talked to their plans for buildout in '27. And the reason '26 is bigger is because they can't build enough fabs fast enough.

Speaker #4: How many shells can you fill? And then you got to have enough equipment from all the different suppliers to be able to make a functioning line.

Speaker #4: So in many ways, this is why we talk about the overall investment in the industry. You kind of have to think about it in aggregate because let's say we could infinitely ship.

Richard Wallace: Nothing about the short term, and I think that confuses a lot of people, what is talked about short term in terms of the hyperscaler CapEx and the buffer between that and what's happening in terms of the ability of the industry to bring on all that capacity. I understand, you know, people are trying to correlate it, but there's a massive assumption in there that this thing is even close to filling that capacity, and it's not.

Rick Wallace: Nothing about the short term, and I think that confuses a lot of people, what is talked about short term in terms of the hyperscaler CapEx and the buffer between that and what's happening in terms of the ability of the industry to bring on all that capacity. I understand, you know, people are trying to correlate it, but there's a massive assumption in there that this thing is even close to filling that capacity, and it's not.

Speaker #4: There'd be nowhere to send it because you'd be sending it into fabs that haven't been built yet. So that's why we look very closely at what the overall industry is doing, what our customers are doing.

Speaker #4: And that's why when we say you can get a marginal increase in 2026 to the numbers we're talking about, you can't go from 140 to 200 in 2026.

Speaker #4: And there's only so much you can add in 2027. And those fabs have to be built now. So when our customers say it's just not easy, it's because it takes a long time to get through even in places where they build fabs very quickly.

And and take the extreme of this because he said it on his call. If you say, you know what the what Elon Musk was saying about SpaceX and the demands and why he talked about building paripath was because it was going to be a massive shortage of semiconductor capacity through 2030. So nothing about these short-term and and I think that's a that confuses a lot of people what is talking about short-term in terms of the hyperscale or capex and the buffer between that and what's happening in terms of the ability of the industry to bring on all that capacity. So I understand you know people are trying to correlate it but there's a massive assumption in there that this thing is even close to filling that capacity and it's not

Edward Yang: I agree with you. Thank you.

I agree with you. Thank you.

Richard Wallace: Okay.

Rick Wallace: Okay.

Operator: Thank you. We'll take our last question from Chris Caso with Wolfe Research. Your line is open.

Okay, thank you.

Speaker #4: It takes a long time to build them and then to get the equipment and the fastest in the world places to build fabs. Have big plans for expansion next year.

We'll take our last question from Chris Queso with Wolfe Research. Your line is open.

Chris Caso: Yeah. Thank you. Good evening. Just as a follow-on to the prior question, it does certainly sound like demand is well ahead of the industry's ability to supply. Does that cap the amount that KLA can ship to customers and that, you know, the customers have clean room space to be able to put tools right now? I mean, you talked about, you know, perhaps the opportunity to increase the view as the year goes on, are we sort of towards the upper limits of what can be supplied in 2026, we're just gonna have to supply it in 2027, 2028?

Speaker #4: And they're still going to be short by the end of next year. And so that's how the whole system is working. So when we give our guidance for the year, it's yes, it's what we can do, but it's also collectively what we as an industry can do.

Yeah, thank you. Good evening. Um, just as a follow on to to uh the prior question. Um and it it it does certainly sound like demand as well, ahead of the industry's ability to supply.

Speaker #4: Does that make sense?

Speaker #11: Yeah. It does. That's clear. Thank you. For the last question, I have something more mundane on gross margins for the year. And I think you indicated you kind of sticking with a view of 62% for the year.

Speaker #11: Can you talk about the pluses and minuses in that? I know you had some mixed headwinds earlier and there's some cost increases. So what should we be watching for on the gross margins this year?

Does that cap the amount that that K like can ship to customers and and that you know the customers have clean room space to be able to to put tools right now. I mean, you talked about you know perhaps the opportunity to increase the view as the year goes on but we sort of toward the upper limits of of what can be supplied in 26 and we're just going to have to supply it in 2728.

Richard Wallace: Well, yeah, I think so. The way to think about this, and I think this is, you know, we are an ecosystem, so it kind of takes all the parts of the ecosystem to make it happen. When you look at what are, you know, what are the constraints or what are the limits? I know when we talk in the AI world about, you know, you have power constraints or other constraints. In the semiconductor industry, the first constraint is how many fabs do you have? Like, how many shelves can you fill? You gotta have enough equipment from all the different suppliers to be able to make a functioning line. In many ways, this is why we talk about the overall investment in the industry.

Rick Wallace: Well, yeah, I think so. The way to think about this, and I think this is, you know, we are an ecosystem, so it kind of takes all the parts of the ecosystem to make it happen. When you look at what are, you know, what are the constraints or what are the limits? I know when we talk in the AI world about, you know, you have power constraints or other constraints. In the semiconductor industry, the first constraint is how many fabs do you have? Like, how many shelves can you fill? You gotta have enough equipment from all the different suppliers to be able to make a functioning line. In many ways, this is why we talk about the overall investment in the industry.

Speaker #4: It's pretty consistent guidance with what we had last quarter. I would say the memory pricing environment is on the margin worse. I thought that the headwind was 75 to 100 basis points.

Speaker #4: I think it's 100 basis points now. And part of that has been the relative pricing on DDR4 versus DDR5 where they're generally and it depends on what type of memory level.

Richard Wallace: You kinda have to think about it in aggregate because let's say we could infinitely ship, there'd be nowhere to send it because you'd be sending it at a fab that haven't been built yet. That's why we look very closely at what the overall industry is doing, what our customers are doing. That's why when we say you can get a marginal increase in 2026 to the numbers we're talking about, you can't go from 140 to 200 in 2026, and there's only so much you can add in 2027, and those fabs have to be built now. When, you know, when our customers say it's just not easy, it's because it takes a long time to get through.

Rick Wallace: You kinda have to think about it in aggregate because let's say we could infinitely ship, there'd be nowhere to send it because you'd be sending it at a fab that haven't been built yet. That's why we look very closely at what the overall industry is doing, what our customers are doing. That's why when we say you can get a marginal increase in 2026 to the numbers we're talking about, you can't go from 140 to 200 in 2026, and there's only so much you can add in 2027, and those fabs have to be built now. When, you know, when our customers say it's just not easy, it's because it takes a long time to get through.

Speaker #4: But more or less the same prices. You still have tariff dynamics. I would expect as we move through the year, the tariff headwind that we have at KLA will become less, but it's still a meaningful, I'll call it I talked about 50 to 100 basis points of overall impact.

Speaker #4: I'd say we're operating at the middle of the higher end of that range. Today, but would expect that to come down to the lower end of the range as we go through the year with some of the things we're doing here operationally.

Speaker #4: Overall mix generally is pretty consistent with how we thought about it. So like anything else, there's always puts and takes. But in general, we said 62% plus or minus 50 basis points.

Them to make it happen. And so, when you look at what are, you know, what are the constraints, or, or what is the limits? I know when we talk in the AI World about, you know, you know, power constraints, or other constraints. But in the semiconductor industry, the first constraint, is how many Fabs do you have? Like, how many sales can you fill? And then you got to have enough equipment from all the different suppliers to be able to make a functioning line? So, in many ways, this is why we talk about the overall investment in the industry. You kind of have to think about it in aggregate because let's say we could infinitely ship, there'd be nowhere to send it because you'd be sending in a Fabs that haven't been built yet. So that's why we look very closely at what the overall industry is doing what our customers are doing. And that's why. When we say, you can get a marginal increase in 2026. To the numbers. We're talking about, you can't go from 140 to 200 in 2026 and and there's only so much you can add in 2027 and those Fabs have to be built.

Richard Wallace: Even in places where they build fabs very quickly, it takes a long time to build them and then to get the, you know, the equipment. The fastest in the world places to build fabs have big plans for expansion next year, and they're still gonna be short by the end of next year. You know, that's how the whole system is working. When we give our guidance for the year, it's, yes, it's what we can do, but it's also collectively what we as an industry can do. Does that make sense?

Rick Wallace: Even in places where they build fabs very quickly, it takes a long time to build them and then to get the, you know, the equipment. The fastest in the world places to build fabs have big plans for expansion next year, and they're still gonna be short by the end of next year. You know, that's how the whole system is working. When we give our guidance for the year, it's, yes, it's what we can do, but it's also collectively what we as an industry can do. Does that make sense?

Speaker #4: And we still feel that that's an appropriate way to think about the company at the revenue guidance that we provided for the year.

Speaker #11: Got it. Thank you.

Speaker #5: Thank you, Chris. And thank you, everybody, for tuning in. We appreciate your support. Apologies for those that weren't able to get a question on this call.

Now, so when you know, when our customers say it's just not easy. It's because it takes a long time to get through even in places where they build Fabs very quickly take a long time to build them. And then to get the, you know, the equipment and the fastest in the world places to build tabs, have big plans for expansion next year and they're still going to be short by the end of next year. And so, you know, that's how the whole system is working. So when we give our guidance for the year, it's it's yes, it's what we can do, but it's also,

Speaker #5: We will catch up with you in the follow-up call. And with that, I'll turn the call back to the operator to provide any closing remarks.

Chris Caso: Yeah. It does. That's clear. Thank you. For the last question, I have something more mundane on gross margins for the year. I think you indicated, you're kind of sticking with a view of 62% for the year. Can you talk about the pluses and minuses in that? I know you had some mix headwinds earlier, and there's some cost increases. You know, what should we be watching for on the gross margins this year?

Collectively. What we as an industry can do, does that make sense?

Yeah, it is, it does. Uh, that's clear. Thank you.

Um, so the last question I I have something more mundane on on Gross margins for the year. And and I think you indicated, uh, you kind of sticking with a view of 62%, for the year. Uh, can you talk about the pluses and minus in that? I know you had some mixed headwinds earlier and, and there's some cost increases so, you know, what, what, what, uh, what should we be watching for on the gross margins this year?

Bren Higgins: It's pretty consistent guidance with what we had last quarter. I would say the memory pricing environment is on the margin worse. I thought that the headwind was 75 to 100 basis points. I think it's 100 basis points now. You know, part of that has been the relative pricing on DDR4 versus DDR5, where they're generally, and it depends on what type of memory level, but more or less the same prices. You still have tariff dynamics. I would expect as we move through the year, the tariff headwind that we have at KLA will become less, but it's still, you know, a meaningful, I'll call it. I talked about 50 to 100 basis points of overall impact.

It's pretty consistent guidance with what we had last quarter. Um, I would say the memory pricing environment is, on the margin, worse. I thought that the headwind was 75 to 100 basis points; I think it's 100 basis points now. Uh, and, you know, part of that has been the relative pricing on DDR4 versus DDR5, where they're—

Bren Higgins: I'd say we're operating at the, you know, the middle of the higher end of that range today, but would expect that to come down to the lower end of the range as we go through the year with some of the things we're doing here operationally. Overall mix generally is pretty consistent with how we thought about it. Like anything else, there's always puts and takes, but in general, we said 62% ±50 basis points, we still feel that that's an appropriate way to think about the company at the revenue guidance that we provided for the year.

Generally and it depends on on what type of of, of memory level, but but more or less the same price as you still have tariff Dynamics. I would expect as we move through the year that tariff headwind that we have at KLA will become less, but it's still, uh, you know, a meaningful, I'll call it. I talked about 50 to 100 basis points of overall impact. I'd say we're operating at the, you know, the middle of the the higher end of that range today but would expect that to come down to the lower end of the range as we go through the year with some of the things we're doing here. Operationally overall mix generally is

Is pretty consistent with how how we thought about it. So like anything else, there's always puts and takes but in general we said 62% plus or minus

50 basis points. And we still feel that that's an appropriate way to think about the company, at the revenue guidance that we provided for the year.

Chris Caso: Got it. Thank you.

Thank you.

Bren Higgins: Thank you. Thank you, Chris, thank you everybody for tuning in. We appreciate your support. Apologies for those that weren't able to get a question on this call. We will catch up with you in a follow-up call. With that, I'll turn the call back to the operator to provide any closing remarks.

Operator: Thank you. This concludes the KLA Corporation Q1 2026 earnings call and webcast. Please disconnect your line at this time, and have a wonderful day.

Thank you. Thank you, Chris. And thank you, everybody, for, uh, for tuning in. We appreciate your support. Um, apologies for those that weren’t able to get a question on this call; we will catch up with you in a follow-up call. And, um, with that, I'll turn the call back to the operator to provide any closing remarks.

Thank you. This concludes the KLA Corporation March quarter 2026 earnings call and webcast. Please disconnect your line at this time, and have a wonderful day.

Stacy Rasgon: Goodbye.

Operator: [Break]

Goodbye.

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