stockrowWhat it does
KLA Corporation sells equipment, software and services that help semiconductor and electronics manufacturers make and inspect their products. Its tools help customers find defects, measure tiny features and control manufacturing processes so that more of the products coming off a production line meet specifications. Founded in 1997, KLA is headquartered in Milpitas. Richard Wallace is its president and chief executive officer.
A semiconductor is built on a wafer through repeated manufacturing steps. KLA’s inspection systems find and analyze defects on wafers, while its measurement tools check properties such as the dimensions of patterns and the alignment of layers. Its software brings together data from those systems to help customers identify problems and correct processes. KLA also supplies equipment used to check reticles, the patterned masks used in chip manufacturing, and to monitor chemicals and materials.
Beyond process control, KLA sells tools that deposit and remove materials during production of specialty semiconductors, including power and communications chips. It also supplies equipment for inspecting and patterning printed circuit boards and checking packaged chips. Customers include chip, wafer, reticle and electronic-device manufacturers. KLA supports equipment already installed at customer sites with maintenance and other services intended to extend tool life and maintain productivity.
How it makes money
KLA earns revenue primarily from equipment sales and related service contracts, mostly through its direct sales force. Equipment supports customers from research and development through volume production; services maintain the installed base after tools are in use. Services accounted for approximately 23% of total revenue in fiscal 2026. Much of that service revenue comes from recurring, subscription-like contracts for maintenance and other support.
The company reports three segments. Semiconductor Process Control sells inspection and measurement systems, software and related services for chip, wafer, reticle and materials manufacturers. Its inspection tools locate and analyze defects, while measurement systems check features including film thickness and layer alignment. Its software centralizes data from manufacturing equipment to identify defects and help control processes.
Specialty Semiconductor Process sells deposition and etching tools used in making products such as power semiconductors and radio-frequency chips. PCB and Component Inspection sells systems for inspecting, testing, measuring and patterning printed circuit boards, chip substrates and packaged chips.
Product and service arrangements can contain multiple obligations. KLA allocates the contract price to those obligations, and the timing of revenue recognition depends in part on when control transfers to the customer. Existing contracts and backlog can make price increases on agreed business difficult; KLA expects pricing initiatives for new capabilities to help address cost pressures over time.
In the September 2026 quarter, revenue was $4.14 billion. In fiscal 2026, services represented approximately 23% of total revenue.
Customers and how it sells
KLA sells to semiconductor, semiconductor-related and electronic-device manufacturers. Its chipmaking customers generally operate in memory, foundry/logic, or both. Other customers make wafers, reticles, printed circuit boards, chip substrates and packages, while specialty semiconductor customers include manufacturers of power and radio-frequency devices.
The customer base is concentrated. Taiwan Semiconductor Manufacturing Company Limited accounted for more than 10% of KLA’s total revenue in fiscal 2026, primarily in Semiconductor Process Control. The largest customer accounted for 19.0% of fiscal 2026 revenue.
KLA sells mostly through its direct sales force and maintains sales and service operations in major semiconductor manufacturing regions. Its largest customers include manufacturers in Asia, the U.S. and Europe, and KLA regards Asia as one of the largest markets for its equipment. International revenue accounted for approximately 87% of total revenue in the fiscal year ended June 30, 2026. The company expects sales outside the U.S. to continue to represent a significant percentage of revenue.
Customer spending depends on factors including anticipated demand for chips, economic conditions, regulation and manufacturing capacity. KLA also maintains service and applications engineering teams that work with customers using its equipment.
Suppliers and costs
KLA designs, assembles and tests systems in-house but outsources production of components and major subassemblies. Its manufacturing activities occur principally in the U.S., Singapore, Israel, China and locations across Europe. Some parts are made to KLA’s specifications, while others are standard commercial products.
The company uses numerous vendors, but some parts and raw materials come from only one supplier or a limited group. KLA monitors suppliers, seeks potential alternatives and holds inventories of key items to reduce the risk of disruption. It has also increased purchase commitments, partly to secure components, which can affect costs and working capital.
KLA invests in research and development to improve existing products and create new ones. In the September 2026 quarter, operating expenses were $688 million, including $395 million in R&D. The company said high memory costs for image processing in its systems were offsetting operating leverage, and it was working to use memory more efficiently and reduce other product costs.
KLA also said it was investing with key suppliers in long-lead-time items, particularly optics. It reported that more supply-chain capacity was coming online after constraints earlier in calendar 2026.
- Revenue$13.6B
- Cost of revenue−$5.3B
- Research and development−$1.5B
- Selling, general and administrative−$1.1B
- Operating income$5.7B
Competitive position
KLA competes in process control, process-enabling and yield-management equipment for semiconductor and electronics manufacturers. It names Applied Materials, ASML, Hitachi High-Tech, Lasertec and Onto Innovation among its competitors across its product markets. Customers consider equipment performance, reliability, ease of use, service and overall cost of ownership. KLA says customers also require systems that integrate automated capabilities into their existing development and manufacturing processes.
KLA invests in product research, maintains service and support centers, and seeks long-term customer relationships. Its inspection and measurement tools are accompanied by software and services, and it had over 9,100 active patents as of June 30, 2026. KLA says no single patent, copyright or trade secret is essential to the company as a whole or to any segment.
Our reading: KLA’s technology and continuing R&D are a meaningful competitive asset because its customers must detect and measure defects as manufacturing becomes more complex. Our reading: Its installed base and service relationships provide support for its position, though customers and competitors continue to develop new technologies. Our reading: The patent portfolio provides protection, but its strength is limited by the possibility that patents are challenged, circumvented or insufficiently broad.
| Competitor | Where they compete | Threat (our reading) |
|---|---|---|
| Applied Materials, Inc. | Semiconductor and electronics process control and related equipment | Medium |
| ASML Holding N.V. | Semiconductor and electronics process control and related equipment | Medium |
| Hitachi High-Tech Corporation | Semiconductor and electronics process control and related equipment | Medium |
| Lasertec, Inc. | Semiconductor and electronics process control and related equipment | Medium |
| Onto Innovation, Inc. | Semiconductor and electronics process control and related equipment | Medium |
Growth opportunities
KLA’s growth opportunities include investment in leading-edge chip manufacturing, memory and advanced packaging. The company says AI infrastructure and data-center demand are contributing to industry investment. More complex chip designs and manufacturing steps increase requirements for inspection and measurement, while advanced packaging creates demand for tools that check packaged devices and related materials.
In fiscal 2026, Semiconductor Process Control revenue increased 12% from fiscal 2025, helped by foundry/logic and memory investment, adoption of advanced packaging products and service revenue from a larger installed base. PCB and Component Inspection revenue increased 21%, supported in part by advanced packaging investment. Specialty Semiconductor Process revenue decreased 1%, including lower customer investment and product sales in China.
KLA’s backlog increased from $7.86 billion as of June 30, 2025 to $12.57 billion as of June 30, 2026. The company cautions that backlog does not provide meaningful information about when future revenue will be recognized: orders can be modified, delayed or canceled, and delivery depends on factors including customer readiness and supply constraints.
KLA expects the wafer equipment market, including advanced packaging, to exceed $200 billion in calendar 2027. It also expects continued growth in its business as long-lead-time supply capacity comes online. The company said supply remained behind demand even as its capacity trajectory improved.
- $9.2BFY2022
- $10.5BFY2023
- $9.8BFY2024
- $12.2BFY2025
- $13.6BFY2026
Structural risks
- Customer spending cycles: KLA depends on capital spending by semiconductor and electronics manufacturers. Industry downturns, changes in customer investment plans and delivery schedules can affect demand and operating results.
- Customer concentration: A limited number of customers account for a substantial portion of revenue. Taiwan Semiconductor Manufacturing Company Limited represented more than 10% of total revenue in fiscal 2026.
- Trade restrictions: Export controls, sanctions, tariffs and other trade measures can limit KLA’s ability to sell equipment or services, particularly to customers in China. Trade regulations have already adversely affected its results.
- Supply and input costs: Some components come from sole or limited sources, and supplier disruptions can delay deliveries. High memory costs have also pressured the cost of systems requiring image processing.
- Technology and competition: KLA must keep pace with technological change and protect its intellectual property. Competitors may improve products or introduce alternatives, and a loss of competitive position could affect prices, orders, revenue and margins.
- Backlog uncertainty: Customer orders can be modified, postponed or canceled. Fab readiness, regulation and supply-chain constraints can also change delivery timing and revenue recognition.
Bottom line
Our reading
KLA combines equipment sales with recurring support for tools installed in customers’ factories, and its position rests on inspection technology, software and customer service. Its opportunity is tied to more complex chips and packaging, but the business remains exposed to concentrated customer spending, trade restrictions and the availability and cost of specialized components.