KLA builds inventory and doubles capital spending ahead of the second-half growth it guided to

KLA (Nasdaq: KLAC), which makes inspection and measurement equipment for chip factories, reported first-quarter fiscal 2027 revenue of $4.14 billion and guided to $4.7 billion for the next quarter, according to its earnings release. Its inventory and capital spending grew in the same quarter, the financial statements in the release show.

What happened

Revenue for the quarter ended September 30 was $4,136 million, against $3,210 million a year earlier and $3,658 million in the quarter ended June 30, the company said. That is 28.9% more than a year earlier and 13.1% more than the previous quarter (computed). KLA said revenue was above the midpoint of its guidance range of $4.0 billion plus or minus $200 million.

GAAP net income was $1.55 billion, or $1.18 per diluted share; non-GAAP earnings were $1.22 per diluted share. Per-share figures were adjusted for a ten-for-one stock split that took effect on June 11, 2026, the company said.

Product revenue was $3,285 million, 33.3% more than a year earlier, and service revenue was $851 million, 14.2% more (both computed from the statement of operations). The Semiconductor Process Control segment, KLA's largest, had revenue of $3,754 million, 90.8% of the total (computed). The PCB and Component Inspection segment had $242 million, up 27.8% from a year earlier (computed).

What the company said

Rick Wallace, KLA's president and chief executive, said the September quarter beat the midpoint of guidance "across all key metrics, demonstrating the accelerated growth we expected for the second half of calendar 2026." He said that "process control, and KLA in particular, continues to be critical to the AI ecosystem buildout."

Wallace listed several drivers in the release, among them "increases in leading-edge designs across foundry and logic," "memory complexity and performance requirements, and the importance of advanced packaging."

Inventory and spending

The balance sheet shows the other side of that outlook. Inventories were $4,090 million at September 30, against $3,649 million at June 30, an increase of 12.1% in three months (computed). The cash flow statement shows inventories absorbing $434 million in the quarter, compared with $96 million in the same quarter a year earlier.

Capital expenditures were $195 million, more than double the $96 million of a year earlier (computed, 103.1% more). Deferred system revenue fell to $843 million from $933 million at June 30.

Operating cash flow was $1.53 billion and free cash flow was $1.34 billion in the quarter, the company said. Capital returns were $1.24 billion; the cash flow statement shows $936 million of common stock repurchases and $305 million of dividends.

Guidance

For the quarter ending in December, KLA guided to revenue of $4.7 billion plus or minus $200 million. The midpoint is 13.6% above the quarter just reported (computed). Non-GAAP gross margin is expected at 62.5% plus or minus 1.0 percentage point, and non-GAAP diluted earnings per share at $1.44 plus or minus $0.11.

KLA's gross margin in the September quarter, computed from revenue and cost of revenues in the statement of operations, was 61.9%, against 61.3% a year earlier.

What to watch

The December-quarter guidance range is $4.5 billion to $4.9 billion, which is 8.8% to 18.5% above the September-quarter revenue (computed). The release lists several risks that could affect results, among them export rules for sales to customers in China, tariffs, and what it calls "DRAM chip shortages" among component supply risks. Inventory, capital spending and deferred system revenue are reported again with the next quarterly results.