KLA Q2 Earnings Surpass Estimates, Revenues Increase Y/Y, Shares Fall

KLA Corporation KLAC reported second-quarter fiscal 2026 non-GAAP earnings of $8.85 per share, beating the Zacks Consensus Estimate by 0.36%. The figure increased 7.9% year over year.

Revenues increased 7.2% year over year to $3.3 billion, surpassing the Zacks Consensus Estimate by 1.02%.

In the pre-market trading, KLAC shares lost 7.7%.

KLAC’s Q2 Segmental Details

In terms of reportable segments, Semiconductor Process Control revenues (91.1% of total revenues) increased 9% year over year and 4% sequentially to $3 billion.

Foundry & Logic accounted for about 60%, while Memory accounted for about 40% of Semiconductor Process Control revenues.

KLA Corporation Price, Consensus and EPS Surprise

KLA Corporation price-consensus-eps-surprise-chart | KLA Corporation Quote

Specialty Semiconductor Process revenues (4.3% of total revenues) were $140 million, down 12.4% year over year but up 17% sequentially.

PCB and Component Inspection revenues (4.6% of total revenues) decreased 6% year over year to $152 million and declined 20% on a sequential basis.

KLAC Top-Line Details

Product revenues (which accounted for 76.2% of total revenues) rose 4.2% year over year to $2.51 billion. Service revenues (23.8% of total revenues) increased 18% year over year and 6% sequentially to $786 million.

In terms of major products, Wafer Inspection and Patterning Systems (including metrology and reticle inspection) accounted for 48% and 21%, respectively, of KLA’s total revenues in the fiscal second quarter. 

Wafer Inspection revenues increased 1% year over year and 2% sequentially to $1.57 billion. Patterning revenues moved up 31% year over year and 4% sequentially to $696 million. 

In terms of the regional breakdown of revenues, Taiwan and China led revenue contributions with 26% and 30%, respectively. Korea accounted for 14%, Japan 7%, and North America 12%. Europe contributed 5%, whereas the remaining 6% came from the rest of Asia.

KLA’s Operating Details

In the second quarter of fiscal 2026, the non-GAAP gross margin was 62.6%, 60 basis points above the midpoint of the guidance range.

Research and development (R&D) expenses increased 10.9% year over year to $383.9 million. As a percentage of revenues, R&D expenses decreased 40 basis points (bps) on a year-over-year basis to 11.6%.

Selling, general and administrative (SG&A) expenses increased 4.8% year over year to $279.9 million. As a percentage of revenues, SG&A expenses decreased 20 bps year over year to 8.5%.

The fiscal second-quarter non-GAAP operating expenses were $653 million.

The fiscal second-quarter non-GAAP operating margin was 42.8%.

KLAC Balance Sheet & Cash Flow

As of Dec. 31, 2025, cash, cash equivalents, and marketable securities totaled $5.20 billion compared with $4.68 billion as of Sept. 30, 2025.

Long-term debt at the end of the fiscal second quarter was $5.88 billion, unchanged from the figure reported in the previous quarter.

Cash flow from operating activities was $1.36 billion compared with $1.16 billion reported in the previous quarter. The free cash flow was $1.26 billion in the fiscal second quarter.

In the fiscal second quarter, KLAC repurchased $548 million worth of shares and paid $250 million in dividends.

KLAC Provides Positive 3Q26 Guidance

For third-quarter fiscal 2026, revenues are expected to be $3.35 billion, plus/minus $150 million. 

KLA expects non-GAAP earnings of $9.08 per share, plus/minus 78 cents.

The company expects a non-GAAP gross margin of 61.75%, plus/minus 1%. Operating expense is expected to be roughly $645 million in the fiscal third quarter.

KLA’s Zacks Rank & Other Stocks to Consider

Currently, KLA sports a Zacks Rank #1 (Strong Buy). 

Some other top-ranked stocks in the broader Zacks Computer and Technology sector are Arista Networks ANET, Advanced Energy AEIS, and Amkor Technology AMKR. While Amkor Technology sports a Zacks Rank #1, Arista Networks and Advanced Energy carry a Zacks Rank 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Arista Networks have gained 21.2% in the trailing six-month period. Arista Networks is set to report fourth-quarter 2025 results on Feb. 12

Shares of Advanced Energy have gained 86.8% in the trailing six-month period. Advanced Energy is slated to report third-quarter 2025 results on Feb. 10.

Amkor Technology shares have surged 108.9% in the trailing six-month period. Amkor Technology is set to report fourth-quarter 2025 results on Feb. 9. 

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This article originally published on Zacks Investment Research (zacks.com).

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