KLA Shares Tumble 11.5% as Supply Chain and Tariff Concerns Overshadow Strong Earnings
Shares of semiconductor equipment giant KLA Corporation (NASDAQ: KLAC) plummeted more than 11% in morning trading Friday, a sharp reversal following what appeared on the surface to be a robust earnings report. The sell-off highlights the market's current hypersensitivity to any signs of operational friction, even within a sector riding a long-term growth wave.
The company reported fiscal second-quarter revenue of $3.30 billion, a 7.1% year-over-year increase that edged past the consensus estimate of $3.25 billion. Adjusted earnings per share surged 41% to $8.85, also exceeding the projected $8.80. Management's guidance for the current quarter was similarly firm, with midpoints slightly above Wall Street's existing forecasts.
However, the post-earnings conference call painted a more nuanced picture. Chief Financial Officer Bren Higgins flagged several near-term headwinds spooking investors. Component shortages are extending equipment delivery lead times, tariff expenses are pressuring margins, and the company is struggling to fully meet soaring demand for its tools used in memory chip fabrication.
The reaction underscores the precarious nature of high-flying stocks. Prior to this report, KLA's shares had skyrocketed approximately 140% over the past 52 weeks, buoyed by the global chip shortage and massive capital expenditure plans from foundries. In such a context, even a solid report peppered with cautionary notes can trigger a significant profit-taking event.
Analysts point out that KLA's long-term thesis remains intact. Alongside peers like ASML Holding (NASDAQ: ASML) and Lam Research (NASDAQ: LRCX), KLA occupies a critical and arguably irreplaceable niche in the semiconductor manufacturing ecosystem, particularly for advanced process control. The structural demand for more and better chips suggests these supply chain hiccups are likely temporary delays rather than permanent threats to revenue.
Market Voices:
"This is classic 'buy the rumor, sell the news' behavior amplified by a skittish macro environment," said David Chen, a portfolio manager at Horizon Capital. "The fundamentals for the entire equipment sector are still incredibly strong. Today's dip might represent a compelling entry point for patient investors."
"It's a reality check," countered Maya Rodriguez, an independent market analyst known for her bearish tech takes. "The market is finally waking up to the fact that these companies aren't immune to logistics nightmares and cost inflation. KLA's guidance was 'slightly above' estimates—that's not the blowout you need to justify a 140% run-up. The bubble in chip stocks is starting to leak."
"The headline numbers were good, but the call revealed the cracks in the operational model," noted Arjun Patel, a senior research associate at The Lowell Institute. "Investors are asking if peak growth is behind us, at least for this cycle. It shifts the narrative from unbridled optimism to cautious execution."
Friday's volatility serves as a reminder that in today's market, stellar financial performance alone may not be enough to sustain momentum if accompanied by warnings of tangible business challenges ahead.