Which metrics exceeded expectations in the September quarter?

  • KLA’s September-quarter revenue was $4.136 billion, about 2.3% above market consensus; non-GAAP earnings per share were $1.22, $0.04 above consensus, or about 3% higher.
  • Gross margin was 62.7%, 0.4 percentage points above consensus; operating expenses were $688 million, also above consensus. Better-than-expected revenue and gross margin helped earnings per share exceed expectations.

What does the December-quarter guidance imply?

  • The midpoint of the company’s December-quarter revenue guidance was $4.7 billion, about 4.4% above market consensus; earnings per share guidance was $1.44, $0.06 above consensus, or about 5% higher.
  • The guidance corresponds to a gross margin of 62.5%, in line with consensus; operating expenses are $710 million, above consensus. The implied operating margin is 47.4%, 0.6 percentage points above consensus.
  • The company raised its 2026 wafer fabrication equipment spending outlook to the mid-$1500 billion-plus range and expects spending to exceed $200 billion in 2027. Evercore ISI plans to update its model after the conference call.

What constraints do the geographic mix and operating data reveal?

  • China accounted for 34% of September-quarter revenue, with revenue up 48% quarter on quarter, making it the largest geographic source; revenue in Korea rose 36% quarter on quarter. Meanwhile, revenue in Taiwan and the United States fell 9% and 6%, respectively, quarter on quarter.
  • Inventory at the end of September was $4.09 billion, up 12% from $3.649 billion at the end of June; days inventory outstanding was 241 days, unchanged from the previous quarter. Accounts receivable rose from $2.889 billion to $3.072 billion, while days sales outstanding fell from 72 days to 68 days.
  • Evercore ISI noted that substantial revenue exposure to China, potential trade restrictions and a globally distributed manufacturing footprint present geopolitical risks. The firm rates KLA Outperform and has a $210 price target.