tkal · KLA Q1 FY27: The December Guide Is a Memory Quarter, and the Supply Chain Sets the Ceiling

KLA Q1 FY27: The December Guide Is a Memory Quarter, and the Supply Chain Sets the Ceiling

Our call: KLA's December-quarter revenue lands above its $4.7B guidance midpoint and below the $4.9B top of the range. Memory rises to about 40% of systems revenue, but shipments are set by a supply chain still adding capacity, and KLA has not reached the top of a revenue guide in any of the seven quarters shown here. We are wrong if December prints at or above $4.9B.

Published November 1, 2026 · Post-print analysis · KLA Corporation · KLAC · Nasdaq · fiscal Q1 2027, three months ended September 30, 2026, reported October 28, 2026 · Figures from the earnings release and Letter to Shareholders (US GAAP, unaudited), $ in millions unless noted

The setup

KLA sells the tools that measure and inspect wafers while they are being made: wafer inspection, patterning and metrology, the services that keep an installed base of those tools running, and smaller businesses in PCB and component inspection and specialty process equipment. It is paid when a chipmaker decides a new process is worth the yield it will cost to learn. That makes it a clean read on how fast leading-edge and memory capacity is actually being built, one step behind the buyers' capital budgets and one step ahead of the wafers.

The fiscal first quarter of 2027, the three months to September 30, 2026, was reported on October 28. Revenue was $4,136.0M, up 13.1% on the June quarter and 28.9% on a year earlier, against a guide of $4.0 billion plus or minus $200 million. The December guide is $4.7 billion plus or minus $200 million. Our read is that the December quarter lands above the $4.7B midpoint and below the $4.9B top of that range, because KLA's shipments are being set by its supply chain, not by its orders. We are wrong if December revenue prints at or above $4.9B, which would be the first time in the seven quarters on this page that KLA reached the top of a revenue guide.

The numbers

Revenue

$4,136.0M

+28.9% Y/Y · $136M over the guide midpoint

December guide

$4.7B ± $200M

+13.6% Q/Q at the midpoint

Semiconductor Process Control

$3,754.3M

+29.5% Y/Y · +15.3% Q/Q

Non-GAAP operating margin

46.1%

+240 bps Q/Q · first time over 46%

Memory share of systems

28% → ~40% guided

DRAM ~84% of memory

Free cash flow

$1,336.2M

a record · capex $194.8M

KLA fiscal Q1 2027 · $ millions unless stated

Line	Sep 2026	Jun 2026	Sep 2025	Y/Y
Sales
Total revenues	4,136.0	3,657.6	3,209.7	+28.9%
Product	3,285.5	2,837.2	2,465.0	+33.3%
Service	850.5	820.4	744.7	+14.2%
Semiconductor Process Control	3,754.3	3,256.8	2,899.4	+29.5%
PCB and Component Inspection	242.2	241.1	189.5	+27.8%
Specialty Semiconductor Process	139.5	159.7	119.8	+16.5%
Profit
GAAP gross margin	61.9%	61.4%	61.3%	+0.6 pts
Operating income (gross profit less R&D and SG&A)	1,861.7	1,553.9	1,337.2	+39.2%
Net income	1,548.6	1,363.1	1,121.0	+38.1%
Diluted EPS, GAAP / non-GAAP	$1.18 / $1.22	$1.04 / $1.05	$0.85 / $0.88	+38.8% / +38.6%
Cash
Operating cash flow	1,530.9	906.4	1,161.6	+31.8%
Capital expenditures	194.8	89.3	95.9	+103.1%
Inventories (quarter-end)	4,090.4	3,648.5	3,297.4	+24.1%

Source: KLA Corporation fiscal Q1 2027 earnings release and Letter to Shareholders, October 28, 2026, and the July 2026 and October 2025 releases (unaudited). Per-share figures reflect the ten-for-one split effective June 11, 2026. Notes ↓

The quarter was the strongest in the series on every line that matters. Revenue grew by $478.5M on the June quarter, the largest quarterly step in the seven quarters shown and almost twice the $242.5M step before it. Semiconductor Process Control, the core segment, added $497.5M on its own. KLA's non-GAAP operating margin was 46.1%, which the company says is the first time in its history above 46%, and non-GAAP EPS was $1.22 against a $0.88 a year earlier.

The Sankey is the GAAP quarter in one picture. Cost of revenues took 38.1% of revenue, R&D and SG&A together took 16.8 points, and operating income was 45.0% of revenue on our gross-profit-less-operating-expense basis. KLA's statement of operations does not print an operating income line, which is why our 45.0% sits below the company's 46.1% non-GAAP figure.

Where KLA's September-quarter revenue went: 61.9% survived cost of revenues, R&D and SG&A took 16.8 points, and operating income was 45.0% of revenue. PCB + specialty combines the PCB and Component Inspection segment (242.2) and the Specialty Semiconductor Process segment (139.5). Segment revenue includes associated services. Operating income is gross profit less R&D and SG&A as reported; KLA's statement of operations does not print an operating income line.

Paid subscribers

The rest of this dive is for paid subscribers.

The headline numbers are above. The 15 sections below carry the mechanism, the peer read, the valuation work, and the dated tests that decide it.

The record a $4.9B quarter would break
Memory comes back: from 21% to about 40% of systems
Four raises to the market number in four letters
The supply gate: lead times, capacity and capex
Segment by segment
Margins, and the memory bill on KLA's own cost line
Cash and capital return
Connecting the dots
The next-quarter bar
How peers read it
Valuation
The strongest case against this read
What we'd watch
The trade (analysis, not advice)
Bottom line

Unlock the full dive →

Not ready to pay? Get the free Monday issue and one full dive a week by email.

Already a subscriber? Sign in.

Sources

KLA Corporation earnings release, fiscal Q1 2027 (quarter ended September 30, 2026), October 28, 2026: $ thousands: total revenues 4,136,015; product 3,285,469; service 850,546; costs of revenues 1,577,791; research and development 395,096; selling, general and administrative 301,458; income before income taxes 1,824,082; net income 1,548,588; Semiconductor Process Control 3,754,254; Specialty Semiconductor Process 139,487; PCB and Component Inspection 242,151; inventories 4,090,426; accounts receivable, net 3,072,087; deferred system revenue 843,008; deferred service revenue 634,232; net cash provided by operating activities 1,530,939; capital expenditures (194,756); depreciation and amortization 97,424; common stock repurchases (935,776); dividends paid (305,145); revenue guidance for the quarter (from the prior release) $4.0 billion +/- $200 million. December 2026 quarter guidance: total revenues $4.7 billion +/- $200 million; non-GAAP gross margin 62.5% +/- 1.0%; GAAP diluted EPS $1.41 +/- $0.11; non-GAAP diluted EPS $1.44 +/- $0.11. Diluted EPS $1.18 GAAP and $1.22 non-GAAP (Sep 2025: $0.85 and $0.88; Jun 2026: $1.04 and $1.05); per-share amounts adjusted for the ten-for-one split effective June 11, 2026; interest expense 67,927; other expense (income), net (30,339).
KLA Letters to Shareholders (PDFs linked from KLA's financial results page): Q1 FY27 (October 28, 2026): revenue $4.14 billion, +13% sequentially and +29% year over year; non-GAAP gross margin 62.7%; non-GAAP operating expenses $688 million; non-GAAP operating margin 46.1%, +240 bps; non-GAAP net income $1.60 billion; free cash flow a record $1.34 billion; returned $1.24 billion ($936 million repurchases, $305 million dividends); trailing twelve months capital returns $3.8 billion and free cash flow $4.0 billion; cash and marketable securities $4.7 billion, debt $5.95 billion; Semi Process Control systems mix about 72% foundry/logic and 28% memory; December quarter foundry/logic about 60% and memory about 40%, DRAM about 84%, NAND 16%; wafer inspection 51% of revenue (+19% Q/Q, +37% Y/Y); patterning 21% (+18%, +29%); services $850 million, +14% Y/Y, 20% of revenue; PCB and Component Inspection systems +43% Y/Y; regions China 34%, Taiwan 25%, North America 15%, Korea 12%, Rest of Asia 5%, Europe 5%, Japan 4%; advanced packaging process control systems about $1.1 billion in calendar 2026, more than 70% growth; wafer equipment market about the mid-$150 billion range in 2026 and more than $200 billion in 2027; second-half 2026 revenue about 25% above the first half; December non-GAAP operating expenses about $710 million; tax rate 14.5%; about 1.306 billion diluted shares. Q4 FY26 (July 2026): memory 21%, DRAM about 83%; September guide memory about 27%; regions Taiwan 31%, China 26%, North America 18%, Korea 10%; services $820 million, 22% of revenue; wafer equipment market about the low $150 billion range. Q3 FY26 (April 2026): memory 38%, DRAM 86%; June guide memory about 18%; regions Taiwan 26%, China 24%, Korea 20%; market to exceed $140 billion. Q2 FY26 (January 2026): memory 40%, DRAM 75%; March guide memory about 40%; regions China 30%, Taiwan 26%, Korea 14%; services $786 million, 24% of revenue; total market in the mid $130 billion range; lead times increasing due to supply constraints.
KLA Corporation earnings release, fiscal Q4 2026 (quarter ended June 30, 2026), July 2026: $ thousands: total revenues 3,657,556; product 2,837,151; service 820,405; costs of revenues 1,413,108; research and development 399,023; selling, general and administrative 291,477; income before income taxes 1,549,385; net income 1,363,059; Semiconductor Process Control 3,256,781; Specialty Semiconductor Process 159,704; PCB and Component Inspection 241,110; inventories 3,648,538; accounts receivable, net 2,889,208; deferred system revenue 932,901; deferred service revenue 604,127; net cash provided by operating activities 906,430; capital expenditures (89,288); depreciation and amortization 98,606; common stock repurchases (570,997); dividends paid (305,334); revenue guidance for the quarter (from the prior release) $3.575 billion +/- $200 million.
KLA Corporation earnings release, fiscal Q3 2026 (quarter ended March 31, 2026), April 2026: $ thousands: total revenues 3,415,078; product 2,640,287; service 774,791; costs of revenues 1,327,672; research and development 388,763; selling, general and administrative 291,134; income before income taxes 1,416,761; net income 1,200,990; Semiconductor Process Control 3,083,912; Specialty Semiconductor Process 164,028; PCB and Component Inspection 167,642; inventories 3,437,046; accounts receivable, net 2,304,454; deferred system revenue 620,839; deferred service revenue 576,503; net cash provided by operating activities 707,451; capital expenditures (85,187); depreciation and amortization 99,088; common stock repurchases (625,955); dividends paid (248,836); revenue guidance for the quarter (from the prior release) $3.35 billion +/- $150 million.
KLA Corporation earnings release, fiscal Q2 2026 (quarter ended December 31, 2025), January 2026: $ thousands: total revenues 3,297,146; product 2,511,093; service 786,053; costs of revenues 1,271,210; research and development 383,871; selling, general and administrative 279,919; income before income taxes 1,330,303; net income 1,145,682; Semiconductor Process Control 3,004,648; Specialty Semiconductor Process 140,577; PCB and Component Inspection 152,175; inventories 3,282,605; accounts receivable, net 2,073,581; deferred system revenue 858,088; deferred service revenue 599,254; net cash provided by operating activities 1,367,607; capital expenditures (105,576); depreciation and amortization 99,268; common stock repurchases (547,750); dividends paid (249,654); revenue guidance for the quarter (from the prior release) $3.225 billion +/- $150 million.
KLA Corporation earnings release, fiscal Q1 2026 (quarter ended September 30, 2025), October 2025: $ thousands: total revenues 3,209,696; product 2,465,006; service 744,690; costs of revenues 1,243,070; research and development 360,461; selling, general and administrative 268,988; income before income taxes 1,309,476; net income 1,121,040; Semiconductor Process Control 2,899,392; Specialty Semiconductor Process 119,755; PCB and Component Inspection 189,488; inventories 3,297,368; accounts receivable, net 2,277,755; deferred system revenue 818,807; deferred service revenue 604,752; net cash provided by operating activities 1,161,591; capital expenditures (95,894); depreciation and amortization 97,016; common stock repurchases (545,067); dividends paid (254,008); revenue guidance for the quarter (from the prior release) $3.15 billion +/- $150 million.
KLA Corporation earnings release, fiscal Q4 2025 (quarter ended June 30, 2025), July 2025: $ thousands: total revenues 3,174,741; product 2,472,182; service 702,559; costs of revenues 1,207,286; research and development 352,989; selling, general and administrative 262,706; income before income taxes 1,328,799; net income 1,202,849; Semiconductor Process Control 2,877,647; Specialty Semiconductor Process 141,866; PCB and Component Inspection 154,106; inventories 3,212,149; accounts receivable, net 2,263,915; deferred system revenue 816,834; deferred service revenue 548,011; net cash provided by operating activities 1,164,991; capital expenditures (100,408); depreciation and amortization 96,252; common stock repurchases (425,697); dividends paid (253,965); revenue guidance for the quarter (from the prior release) $3.075 billion +/- $150 million.
KLA Corporation earnings release, fiscal Q3 2025 (quarter ended March 31, 2025), April 2025: $ thousands: total revenues 3,063,029; product 2,393,821; service 669,208; costs of revenues 1,175,689; research and development 338,043; selling, general and administrative 248,905; income before income taxes 1,264,433; net income 1,088,416; Semiconductor Process Control 2,738,817; Specialty Semiconductor Process 156,500; PCB and Component Inspection 168,552; inventories 3,155,777; accounts receivable, net 2,159,897; deferred system revenue 868,345; deferred service revenue 509,075; net cash provided by operating activities 1,072,159; capital expenditures (82,135); depreciation and amortization 98,091; common stock repurchases (506,745); dividends paid (225,774); revenue guidance for the quarter (from the prior release) $3.0 billion +/- $150 million.
Peer figures are taken from tkal's published pages, each linked in the text: Applied Materials Q3 FY26, ASML Q3 2026, TSMC 3Q26, SK hynix 3Q26, Samsung 3Q26, Intel Q3 2026. Figures used: Applied Materials Q3 FY26 record revenue $9.12B and Q4 guide $10.25B; ASML non-current contract liabilities €3.57B to €9.30B; TSMC 4Q26 guide US$52.3–54.3B; SK hynix LTAs with 14 customers covering more than half of 2027-28 capacity; Samsung capex ₩29T in 3Q26; Intel Q4 2026 guide $15.0B to $16.0B. Share price: October 30, 2026 close $157.95, market data, unverified.
Notes: operating income is gross profit less R&D and SG&A, because KLA's statement of operations does not print an operating income line; free cash flow is operating cash flow less capital expenditures. Implied December revenue from KLA's "approximately 25%" second-half growth: (March 2026 quarter + June 2026 quarter) × 1.25 − September 2026 quarter. Quarters are KLA fiscal quarters ending in March, June, September and December.

KLA Q1 FY27: The December Guide Is a Memory Quarter, and the Supply Chain Sets the Ceiling

The setup

The numbers

The rest of this dive is for paid subscribers.

This is one print. The pipeline runs every week.