KLA Q1 FY2027 slides: record revenue, historic 46% operating margin

KLA Corporation reported its first quarter earnings for the fiscal year 2027, revealing a financial performance that surpassed market expectations and highlighted the growing demand for semiconductor process control equipment. The company disclosed revenue of $4.14 billion and non-GAAP diluted earnings per share of $1.22, both exceeding projections of $4.04 billion in revenue and $1.18 per share.

KLA's stock saw a positive response, rising 3.9% in after-hours trading to $164.96, achieving a 7.3% increase from the previous close of $153.66 at the end of extended trading. This quarter marked KLA's highest revenue performance in its history, with a 13% increase sequentially and a 29% growth year-over-year. Operating margin achieved a historic 46.1%, marking a 240-basis-point improvement sequentially.

Gross margin reached 62.7% on a non-GAAP basis, slightly above guidance, while net income amounted to $1.60 billion. Revenue was driven by strong demand across semiconductor process control systems and services, particularly in AI infrastructure, advanced packaging, leading-edge logic, and DRAM. The company's Semiconductor Process Control segment generated $3,754 million, accounting for 91% of total revenue and growing 29% year-over-year and 15% sequentially.

72% of system revenue came from Foundry & Logic customers, while Memory accounted for 28%. The Specialty Semiconductor Process segment contributed $140 million, and PCB and Component Inspection added $242 million. Wafer Inspection emerged as the top revenue performer, generating $2,111 million, representing 51% of total revenue and growing 37% year-over-year and 19% sequentially.

Geographically, revenue was distributed with Taiwan leading at 34%, followed by China at 25%, North America at 15%, and Japan at 12%. Services revenue reached $850 million, up 14% year-over-year and 4% sequentially. KLA's balance sheet was robust, maintaining investment-grade credit ratings and generating $1.34 billion in free cash flow during the quarter, a 32% FCF margin.

The company has a strong track record of free cash flow growth, with a 20% CAGR from 2020 to the last twelve months, totaling $4.0 billion. KLA continues its capital return program, repurchasing $936 million in shares and paying $305 million in dividends during the quarter, with a total of $3.79 billion in capital returns over the past year.