KLA Corporation (NASDAQ: KLAC) topped estimates in its fiscal fourth quarter, and management says the AI infrastructure buildout is lifting demand for its process control equipment through the second half of calendar 2026 and into 2027.
Revenue of $3.66 billion beat the consensus estimate of $3.60 billion by 1.6%, climbing 15.2% year over year. Non-GAAP diluted EPS of $1.05 also beat the $1.00 estimate, landing at the upper end of the company's guidance range. This was no fluke. Guidance for the September quarter projects revenue of $3.8 billion to $4.2 billion and non-GAAP diluted EPS of $1.06 to $1.26. That implies sequential growth of 4% to 15% and year-over-year expansion at the midpoint.
The Semiconductor Process Control segment, which makes up 89% of total revenue, rose 13.2% YoY to $3.26 billion. That is the core story. CEO Rick Wallace pointed to "the increasing number and sophistication of leading-edge designs across foundry/logic and the rising complexity and performance specifications in memory." Put simply: as chipmakers cram more transistors onto each wafer and push memory architectures for higher performance, they need more inspection and metrology steps. KLA captures that intensity.
More striking was the PCB and Component Inspection segment. It surged 56.5% YoY to $241 million. This business has been a drag before—KLA took a $239 million goodwill impairment in fiscal 2025 tied to its PCB operations. The recovery now looks real, propelled by advanced packaging demand for AI chip assembly. The segment is still small compared to the core, but its swing from impairment to 56% growth is a structural turnaround that matters for margin mix.
Gross margin was 61.4% on a GAAP basis, within guidance. Non-GAAP gross margin was 62.3%. The company's Q1 guidance for non-GAAP gross margin is 61.5%–63.5%, suggesting steady operating leverage even as revenue scales. That is a positive signal. KLA is not having to discount to win the incremental AI-related business.
Capital allocation was aggressive. KLA returned $876 million to shareholders in the quarter, $571 million in buybacks and $305 million in dividends. For the full fiscal year, capital returns hit $3.35 billion against free cash flow of $3.77 billion. The payout ratio was 89%. That is high. It implies management is confident in the cash flow trajectory, but it leaves little buffer if the cycle turns. The buyback pace, specifically, accelerated in Q4 relative to the $426 million quarterly average for the first three quarters. With the stock at roughly 28x trailing free cash flow, the repurchases are not cheap. They do signal conviction from a team that sees multi-year demand visibility.
The June 2026 ten-for-one stock split, effective after the market close on June 11, retroactively adjusted all per-share figures. The split is cosmetic, lowering the nominal share price and potentially broadening the shareholder base. The more material event is the $3.35 billion return program, which the company executed in full.
Looking ahead, the Q1 guidance midpoint of $4.0 billion in revenue implies 12% sequential growth and about 20% year-over-year growth at the high end. That is a strong setup. Can KLA sustain this through the second half of calendar 2026 without a build-and-ship pull-forward from customers securing capacity ahead of potential trade restrictions? The company's exposure to China—a recurring overhang—was not detailed in the release, but the broad-based strength across foundry/logic and memory suggests demand is diversified enough to absorb regional volatility.
The analytical takeaway here is that KLA's growth is becoming less cyclical and more structural. The AI infrastructure buildout is not a single investment wave; it is a multi-year increase in process control intensity per wafer. That shifts the company's revenue trajectory upward permanently, not just for a cyclical upswing. The guidance and the capital return program both reflect that view. Investors should watch whether gross margins can push past the 63% level as revenue scales and if the PCB segment's recovery holds. If both occur, the current valuation may prove conservative.