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Is KLA the Biggest Process Control Winner From AI Spending?
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Key Takeaways
KLA's fiscal Q3 revenues rose 11% to a record $3.42B as AI drove stronger process control demand.
Advanced packaging process control revenues are expected to reach about $1B in calendar 2026.
Services revenues rose 16% to $775M, adding recurring cash flows that support shareholder returns.
Artificial intelligence is reshaping semiconductor manufacturing, and KLA Corporation (KLAC - Free Report) appears to be one of the biggest beneficiaries. While AI demand is boosting chipmakers' investments in advanced logic and high-bandwidth memory (HBM), it is also increasing the need for sophisticated process control solutions that improve yield, reliability and manufacturing efficiency.
KLA's third-quarter fiscal 2026 results reflected this trend. Revenues rose 11% year over year to a record $3.42 billion, while non-GAAP earnings per share (EPS) increased to $9.40. Management emphasized that AI is now a core driver of the company's business, supporting stronger demand across foundry, memory and advanced packaging. The company also raised its expectations for advanced packaging process control revenues to roughly $1 billion in calendar year 2026 from about $635 million in 2025, well above its previous outlook. AI-enabled chip architectures and increasingly complex packaging technologies continue to expand KLA's addressable market.
Beyond wafer inspection, KLA is benefiting from rising process control intensity as chip designs become more complex. Larger die sizes, faster product cycles, higher-value wafers and the rapid adoption of HBM require greater inspection and metrology throughout the manufacturing process. These structural changes are helping KLA gain market share while strengthening its competitive position.
The company's services business adds another layer of stability. Services revenues increased 16% year over year to $775 million, providing recurring cash flows that support shareholder returns. Management also expects quarter-to-quarter revenue growth throughout calendar year 2026 and believes the wafer equipment market will strengthen further in 2027.
Although higher DRAM costs and tariff-related pressures remain margin headwinds, KLA's technology leadership, expanding process control portfolio and growing exposure to AI infrastructure spending position it as one of the clearest long-term winners from the semiconductor industry's AI investment cycle.
How Competitors Are Positioned Against KLA Stock
Two of KLA's closest competitors are Onto Innovation (ONTO - Free Report) and Nova Ltd. (NVMI - Free Report) , both of which are benefiting from AI-driven semiconductor investments but remain more specialized than KLA.
Onto has built a strong position in advanced packaging inspection, optical metrology and lithography process control, areas seeing rising demand as AI chips become more complex. Onto continues expanding its advanced packaging portfolio and is gaining from growing adoption of chiplet architectures. However, Onto has a narrower product portfolio and significantly smaller service business, limiting its ability to match KLA's scale and broad process control ecosystem.
Nova focuses on metrology solutions that help semiconductor manufacturers improve yield at advanced process nodes. Nova is benefiting from increasing process complexity in leading-edge logic and high-bandwidth memory production, while Nova continues investing in materials metrology and AI-enabled analytics. Nevertheless, KLA maintains a wider inspection and metrology portfolio, stronger market leadership, greater exposure to advanced packaging and a much larger recurring services business, giving it a competitive advantage as AI infrastructure spending accelerates.
Shares of KLA have surged 113.6% year to date (YTD), outperforming the industry, as shown below.
KLAC YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, KLA trades at a forward price-to-earnings (P/E) multiple of 52.71, significantly above the industry’s average, as shown below.
KLAC’s P/E Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for KLA’s fiscal 2026 and 2027 earnings per share (EPS) implies a year-over-year increase of 11.4% and 34.1%, respectively. The EPS estimates for fiscal 2026 and 2027 have risen in the past 60 days, respectively.
View the Zacks #1 Rank List
Image: Bigstock
Is KLA the Biggest Process Control Winner From AI Spending?
Key Takeaways
Artificial intelligence is reshaping semiconductor manufacturing, and KLA Corporation (KLAC - Free Report) appears to be one of the biggest beneficiaries. While AI demand is boosting chipmakers' investments in advanced logic and high-bandwidth memory (HBM), it is also increasing the need for sophisticated process control solutions that improve yield, reliability and manufacturing efficiency.
KLA's third-quarter fiscal 2026 results reflected this trend. Revenues rose 11% year over year to a record $3.42 billion, while non-GAAP earnings per share (EPS) increased to $9.40. Management emphasized that AI is now a core driver of the company's business, supporting stronger demand across foundry, memory and advanced packaging. The company also raised its expectations for advanced packaging process control revenues to roughly $1 billion in calendar year 2026 from about $635 million in 2025, well above its previous outlook. AI-enabled chip architectures and increasingly complex packaging technologies continue to expand KLA's addressable market.
Beyond wafer inspection, KLA is benefiting from rising process control intensity as chip designs become more complex. Larger die sizes, faster product cycles, higher-value wafers and the rapid adoption of HBM require greater inspection and metrology throughout the manufacturing process. These structural changes are helping KLA gain market share while strengthening its competitive position.
The company's services business adds another layer of stability. Services revenues increased 16% year over year to $775 million, providing recurring cash flows that support shareholder returns. Management also expects quarter-to-quarter revenue growth throughout calendar year 2026 and believes the wafer equipment market will strengthen further in 2027.
Although higher DRAM costs and tariff-related pressures remain margin headwinds, KLA's technology leadership, expanding process control portfolio and growing exposure to AI infrastructure spending position it as one of the clearest long-term winners from the semiconductor industry's AI investment cycle.
How Competitors Are Positioned Against KLA Stock
Two of KLA's closest competitors are Onto Innovation (ONTO - Free Report) and Nova Ltd. (NVMI - Free Report) , both of which are benefiting from AI-driven semiconductor investments but remain more specialized than KLA.
Onto has built a strong position in advanced packaging inspection, optical metrology and lithography process control, areas seeing rising demand as AI chips become more complex. Onto continues expanding its advanced packaging portfolio and is gaining from growing adoption of chiplet architectures. However, Onto has a narrower product portfolio and significantly smaller service business, limiting its ability to match KLA's scale and broad process control ecosystem.
Nova focuses on metrology solutions that help semiconductor manufacturers improve yield at advanced process nodes. Nova is benefiting from increasing process complexity in leading-edge logic and high-bandwidth memory production, while Nova continues investing in materials metrology and AI-enabled analytics. Nevertheless, KLA maintains a wider inspection and metrology portfolio, stronger market leadership, greater exposure to advanced packaging and a much larger recurring services business, giving it a competitive advantage as AI infrastructure spending accelerates.
KLA’s Stock Price Performance, Valuation & Estimates
Shares of KLA have surged 113.6% year to date (YTD), outperforming the industry, as shown below.
KLAC YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, KLA trades at a forward price-to-earnings (P/E) multiple of 52.71, significantly above the industry’s average, as shown below.
KLAC’s P/E Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for KLA’s fiscal 2026 and 2027 earnings per share (EPS) implies a year-over-year increase of 11.4% and 34.1%, respectively. The EPS estimates for fiscal 2026 and 2027 have risen in the past 60 days, respectively.
EPS Trend of KLAC Stock
Image Source: Zacks Investment Research
KLAC stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.