Investors pushed KLA up 2.5% to about US$198 in the session after earnings, even though the stock had slipped around 10% over the past month. The move reflects a simple reality. The market had been uneasy about a premium P/E and a stock trading well above a recent discounted cash flow estimate. The new quarter just put hard numbers under the long term thesis.

The headline is straightforward. KLA reported record quarterly revenue of US$3.66b and delivered strong non GAAP earnings per share around US$1.05 with gross margins in the low 60s. For a semiconductor equipment company, that margin profile is the story investors are reacting to.

Love KLA's high margin profile but concerned about paying up for a premium P/E and rich valuation multiples? Take a look at the 49 high quality undervalued stocks.

FY 2026 Earnings Summary

• Revenue, Q4 FY 2026: US$3,657.6m vs. Q4 FY 2025 US$3,174.7m (up 15.2%)
• Net Income, Q4 FY 2026: US$1,363.1m vs. Q4 FY 2025 US$1,202.8m (up 13.3%)
• Basic EPS, Q4 FY 2026: US$1.04 vs. Q4 FY 2025 US$0.91 (up 14.5%)
• Trailing 12 Month Net Profit Margin, FY 2026: 35.6% vs. prior year 33.4% (expanded 2.2 percentage points)

Prefer clean visuals instead of another dense wall of earnings tables and margin figures? See KLA's full financial picture, including a clear breakdown of its valuation and profitability trends, in the interactive company report for KLA.

KLA Bullish Story Meets Hard AI and Services Milestones

The bullish view on KLA is that AI chip complexity, advanced packaging and richer software content drive structurally higher process control demand and margins. The latest quarter gives concrete evidence this is happening. Record US$3.66b revenue with gross margin in the low 60s aligns with the idea that KLA’s mix is skewing to higher value tools and services rather than low margin hardware.

Advanced packaging is a key proof point. Management now expects more than US$1.1b of advanced packaging process control revenue in 2026, with growth well ahead of the wider market. Services also fit the thesis. Quarterly services revenue of US$820m and a stated long term 13 to 15 percent growth ambition support the claim that recurring, software heavy contracts are becoming a larger part of the model. Together with a roughly US$12.5b backlog, these milestones give the bullish narrative tangible operational footing.

Compare KLA's record revenue, higher margin mix, and growing backlog with how institutions are actually pricing the stock. See the consensus price target analysis for KLA

KLA Bear Worries on Cyclicality and China Get Fresh Fuel

The bearish view is that KLA sits in a crowded AI trade, tied to cyclical wafer fab equipment spending and vulnerable to export and customer shocks. The latest quarter does not refute that. Revenue of US$3.66b, a roughly US$12.5b backlog and raised 2026 WFE market expectations confirm heavy dependence on a single, very strong investment cycle rather than broad based insulation.

Bears also focus on fragility in margins and regional exposure. Management flagged memory component cost inflation that has already taken about 100 bps off gross margin and could linger through 2027. They also highlighted ongoing constraints on serving certain Chinese customers, which directly supports fears around geopolitical risk to revenue and profitability. Strong services growth helps. However, the print leaves key bearish milestones, including sensitivity to export rules, long lead supply bottlenecks and rich expectations for AI capex, largely unresolved.

After margin pressure from memory costs, export limits and a volatile share price, it is worth reviewing whether these issues hint at deeper structural fragility. Scan the independent risk analysis for KLA which shows 2 important warning signs

Stay Ahead Of Your Next Move

If KLA's record revenue, margin profile and valuation debate have your attention, register for free with Simply Wall St and add it to a Watchlist to track the share price against fair value and wait for a setup that fits your plan. Once you are invested, keep your focus on what matters by using the Portfolio Command Center to cut through noise and surface only the most important developments across your holdings. For a longer term view, tap into crowd insights and sentiment through the Community so you can see how other investors are thinking about KLA alongside your own work. In this way, you can uncover potential catalysts and risks early and give yourself a better chance of staying a step ahead of the market.

Seeking Alternatives Beyond KLA?

Fresh ideas move first. Some stocks build breakout momentum quietly while others are dropping out of favor. Use these curated lists before the crowd catches on and act now.

• Spot resilient compounders with healthy balance sheets and steady cash generation using a curated list of solid balance sheet and fundamentals stocks (49 results) that keeps weaker stories out of your shortlist.
• Chase early upside in companies involved in the next leg of power grid upgrades by scanning the focused 36 power grid technology and infrastructure stocks while many investors are still ignoring the sector.
• Look for potential breakout momentum in miners geared to precious metals trends through a hand picked set of producers found in the targeted 30 elite gold producer stocks before interest spikes.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.