KLA Navigates Supply Chain Headwinds to Post Record Revenue, Eyes 2027 for Advanced Packaging Surge
This analysis is based on KLA Corporation's Q2 2026 earnings call and financial disclosures.
SAN JOSE, Calif. – Semiconductor equipment giant KLA Corporation (KLAC) unveiled a quarter of record revenue on Thursday, capitalizing on the relentless demand for AI chip manufacturing tools. However, executives tempered the triumph with a cautious outlook for the first half of 2026, citing persistent supply chain bottlenecks and a complex geopolitical landscape.
The company's performance underscores the bifurcated reality of the chip industry: soaring demand for advanced logic and high-bandwidth memory (HBM) for artificial intelligence, set against a backdrop of logistical and component shortages. CEO Rick Wallace noted that while the total wafer fab equipment (WFE) market is poised to grow from approximately $110 billion in 2025 to the low-$120 billion range this year, KLA's own forecast—which includes advanced packaging—pegs the broader opportunity in the mid-$130 billion range.
"The disconnect in industry forecasts often comes down to what you include," explained CFO Bren Higgins. "We see advanced packaging growing to over $12 billion, a critical enabler for AI processors. The real surge, however, is gated by our customers' facility readiness, pointing to a more pronounced growth phase in 2027."
Supply constraints, particularly for specialized optical components, emerged as a recurring theme. Higgins acknowledged these challenges are capping growth potential in the near term, extending lead times. The company expects the March quarter to represent a low point for gross margins, with a steady recovery and business acceleration forecast for the latter half of the calendar year.
On the geopolitical front, KLA projects its revenue from China to remain in the "mid- to high-20% range" for 2026, with the regional WFE market expected to be flat to slightly positive. The company is actively managing tariff impacts, which it expects to diminish over time.
Strategic Bright Spots: Beyond the headwinds, leadership highlighted robust drivers. Wallace pointed to "exceptional" growth prospects for the inspection business, fueled by advanced logic and HBM. Process control intensity—a measure of KLA's value per wafer—continues to rise, especially in DRAM, where architectures are becoming "more logic-like." The foundry and logic segment is also poised for a strong second half, setting the stage for significant growth in 2027.
Industry Voices React
Priya Sharma, Tech Analyst at Horizon Insights: "KLA's results confirm the structural strength in process control. Their ability to maintain outperformance even as the mix shifts toward memory is impressive. The 2027 advanced packaging narrative is the key takeaway for long-term investors."
Michael Ross, Portfolio Manager at Steadfast Capital: "The guidance is prudent. They're acknowledging the supply chain reality without losing sight of the multi-year AI investment cycle. The second-half acceleration story seems credible, provided component availability improves."
David Chen, Semiconductor Supply Chain Consultant: "Frankly, the 'supply constraints' refrain is getting old. This is a company with record revenue and pricing power. They've had years to diversify their optical component sources. This sounds more like controlled metering of shipments to manage expectations than a genuine crisis."
Linda Gibson, Engineering Professor at Stanford: "The technical details are fascinating. The increasing process control intensity in DRAM, driven by reduced redundancy and more layers, validates that the roadmaps for memory and logic are converging. KLA sits precisely at that crossroads."
For the complete details, the full earnings call transcript is available on the KLA investor relations website.