EPS of $8.47 increased by 36.8% from previous year
Gross margin of 61.3%
Net income of 1.12B
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KLA Corporation (KLA.DE) QQ1 2026 Results Analysis: Resilient Demand, Robust Margins, and Strong Free Cash Flow in a Cyclic Semiconductor Equipment Cycle
Executive Summary
KLA Corporation reported a strong QQ1 2026 performance, underscored by top-line growth, expanding margins, and robust cash generation. Revenue of $3.2097 billion, up 25.07% year over year and 4.79% quarter over quarter, was accompanied by a gross profit of $1.9666 billion and a gross margin of 61.27%, illustrating meaningful operating leverage as volumes improved and mix benefited high-margin services and software. Operating income reached $1.3372 billion with an operating margin of 41.66%, while net income totaled $1.1210 billion and diluted EPS was $8.47 (GAAP $8.51), supported by strong operating efficiency and expense discipline.
Key Performance Indicators
Revenue
3.21B
QoQ: 4.79% | YoY:25.07%
Gross Profit
1.97B
61.27% margin
QoQ: 4.20% | YoY:23.52%
Operating Income
1.34B
QoQ: 2.83% | YoY:27.04%
Net Income
1.12B
QoQ: 3.00% | YoY:34.02%
EPS
8.51
QoQ: 3.65% | YoY:36.82%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $3.209696 billion; YoY +25.07%; QoQ +4.79%. Indicates sustained demand for process control and yield management in advancing nodes and packaging applications.
Operating Income: $1.337178 billion; Operating margin 41.66%; YoY +27.04%; QoQ +2.83%. Shows continued operating leverage as volumes grow.
Net Income: $1.12104 billion; Net margin 34.93%; YoY +34.02%; QoQ +3.00%. Demonstrates strong profitability generation from core operations.
EPS (diluted): $8.47; YoY +36.82%; QoQ +3.65%. Indicates accretive earnings growth with share count stable to modestly higher.
Financial Highlights
Key QQ1 2026 metrics and what they indicate:
- Revenue: $3.209696 billion; YoY +25.07%; QoQ +4.79%. Indicates sustained demand for process control and yield management in advancing nodes and packaging applications.
- Gross Profit: $1.966626 billion; Gross margin 61.27%; YoY +23.52%; QoQ +4.20%. Reflects favorable mix, pricing discipline, and efficiency in product/service mix.
- Operating Income: $1.337178 billion; Operating margin 41.66%; YoY +27.04%; QoQ +2.83%. Shows continued operating leverage as volumes grow.
- Net Income: $1.12104 billion; Net margin 34.93%; YoY +34.02%; QoQ +3.00%. Demonstrates strong profitability generation from core operations.
- EPS (diluted): $8.47; YoY +36.82%; QoQ +3.65%. Indicates accretive earnings growth with share count stable to modestly higher.
- EBITDA: $1.337178 billion; EBITDA margin ~41.66%. Reflects cash-generative earnings before financing/IFRS items.
- Cash flow: Net cash provided by operating activities $1.161591 billion; Free cash flow $1.065697 billion. Indicates substantial cash generation even after capex and shareholder returns.
- Balance sheet highlights: Total assets $16.3179 billion; Total liabilities $11.3329 billion; Stockholders’ equity $4.9851 billion. Long-term debt $5.8852 billion; Net debt approximately $3.9389 billion.
- Liquidity and capital allocation: Cash and short-term investments $4.6836 billion; Dividends paid $254.0 million; Shares repurchased $545.1 million. End cash balance $1.9462 billion; Net cash usage in financing activity $(0.882) billion; net change in cash $(0.133) billion. These figures illustrate a disciplined balance sheet with meaningful capital returns to shareholders while sustaining investment in growth and capability.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.21B
25.07%
4.79%
Gross Profit
1.97B
23.52%
4.20%
Operating Income
1.34B
27.04%
2.83%
Net Income
1.12B
34.02%
3.00%
EPS
8.51
36.82%
3.65%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript not provided in the input. If available, key management themes would likely cover: (1) strategy and product roadmap for process control/yield management, (2) market conditions across leading-edge nodes and packaging/MEMS, (3) service and software contribution to revenue growth, (4) capital allocation philosophy including share repurchases and dividends, and (5) potential supply-demand dynamics for semiconductor equipment. Without the actual transcript, these themes are inferred from the QQ1 2026 results and industry context.
Transcript not provided; unable to extract quotes at this time.
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Forward Guidance
The supplied materials do not include formal forward-looking guidance. Based on the quarterly results and industry dynamics, the near-term outlook hinges on continued capex strength from foundries and logic suppliers, ongoing transitions to advanced nodes, and rising demand for packaging and MEMS inspection/metrology. Investors should monitor: (a) order momentum and backlog progression for tool shipments to leading-edge fabs, (b) service revenue growth as installed bases expand and software/KT Pro offerings scale, (c) macro demand for AI/data-center infrastructure driving incremental capital expenditure, and (d) potential cyclical headwinds in 2025–2026 semiconductor capex cycles. Management commentary (when available) would be expected to emphasize disciplined capital allocation, steady maintenance of high gross margins, and a continued focus on high-margin software/services alongside core hardware offerings.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
KLA.DE Focus
61.27%
N/A
N/A
N/A
ADB.DE
89.10%
37.90%
13.80%
26.40%
AP2.DE
48.80%
30.40%
6.36%
31.75%
KLAC
59.60%
39.40%
26.60%
27.46%
MTE.DE
38.40%
25.00%
4.00%
14.54%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, KLA QQ1 2026 results reinforce a positive investment thesis. The company delivers solid top-line growth with meaningful operating leverage, leading margins, and substantial free cash flow generation. The balance sheet remains robust, enabling continued R&D investment and meaningful capital returns to shareholders while maintaining liquidity for strategic opportunities. The primary risks relate to cyclicality in semiconductor capex and competitive dynamics; however, KLA’s differentiated software-enabled hardware, strong installed base, and high-margin services position it well to monetize ongoing transitions in AI compute, advanced node manufacturing, and packaging. Near term, the stock benefits from visibility into tool shipments and service growth, with the key risks being timing of capex cycles and macroeconomic volatility.
Key Investment Factors
Growth Potential
Sustained growth potential driven by AI compute, advanced node transitions, and expanding use cases in packaging, MEMS, and compound semiconductors. A large installed base of inspection/metrology tools supports recurring revenue through KT Pro and service offerings, with potential upside from software-driven efficiency gains and expanded post-install services.
Profitability Risk
Cyclicality of semiconductor capex cycles and timing risk of tool orders; competitive pressure from peer equipment providers; geopolitical and supply-chain disruptions; FX exposure on international revenue; reliance on a relatively concentrated capex cycle for large OEM customers; potential pricing/tariff pressures.
Financial Position
Strong liquidity and cash flow generation with CFO of about $1.16B and FCF of about $1.07B in QQ1 2026, plus a solid balance sheet (total assets ~$16.32B, stockholders’ equity ~$4.99B). Long-term debt (~$5.89B) creates leverage but is supported by ample cash and investments (~$4.68B) and ongoing shareholder returns (dividends and buybacks). The company appears capable of funding ongoing R&D, capex, and capital returns while maintaining a healthy financial position.
SWOT Analysis
Strengths
Industry-leading position in process-control and yield-management solutions for semiconductors.
High gross margin (61.27%) and strong EBITDA margin (~41.66%) reflecting favorable mix and software/services contribution.
Robust free cash flow generation and shareholder-friendly capital allocation (dividends + substantial share repurchases).
Large installed base and global customer footprint supporting recurring revenue streams (KT Pro and services).
Weaknesses
Exposed to cyclical capex swings in the semiconductor equipment market.
High dependency on capital expenditure cycles of leading-edge fabs; slower demand recovery could weigh on results.
Long development and lead times for new tools may reduce near-term revenue visibility.
Opportunities
Expansion into adjacent end-markets (packaging, MEMS, compound semiconductors) and broader adoption of KT Pro/service models.
Continued growth from AI compute, data-center buildouts, and advanced node transitions driving demand for yield-management and inspection tooling.
Potential product and software enhancements that further improve yield and process control efficiency.
Threats
Macro/geo-political risk affecting global semiconductor capex and supply chains.
Competitive intensity from AMAT and LRCX, potentially affecting pricing and market share.
Volatility in end-demand for consumer electronics and enterprise IT could impact order velocity.
KLA Corporation (KLAC) QQ1 2026 Results Analysis: Record Cash Flow, AI-Driven Growth in Process Control and Advanced Packaging, China headwinds and No...