By Adam Clark
KLA Corp. stock is falling even though the supplier of chip-manufacturing equipment reported higher earnings than expected. While the shares have been on a great run, management's financial forecasts were unimpressive compared with recent guidance from peer Lam Research.
KLA reported its results after the market closed on Thursday. Early Friday, the stock was down 9.3% at $1,528 in early trading. The shares have more than doubled in the past 12 months in response to a surge in spending on wafer fabrication equipment, or WFE, the tools used to produce semiconductors.
Wall Street analysts noted that management forecast spending on wafter fab equipment will grow at a percentage in the high single to low double digits this year. Lam said it expects WFE capital expenditures to grow 23% in its own earnings report earlier this week.
"Lower WFE outlook will likely spark debate whether KLA is going to underperform this year. In our view, it is too early to call a race when it is barely getting started," wrote Needham analyst Charles Shi in a research note.
Shi kept a Buy rating and $1,800 target price on KLA shares, arguing it is likely to match or exceed its 2025 revenue growth of 17% this year.
Another factor potentially dragging on the stock was KLA's expectation that its growth this year will be weighted toward the second half of the year. It said the early part of the year will be affected by supply shortages, especially in optical components, and the readiness of customers to install equipment.
"This highlights a key difference of the KLA model -- longer lead times and a generally more complex supply chain (for example, KLAC buys a good bit of memory) means that during good times it can't ramp as fast, but during bad times, it is more insulated," wrote UBS analyst Timothy Arcuri.
Arcuri lowered his target price on KLA to $1,575 from $1,635, keeping a Neutral rating on the stock.
KLA reported fourth-quarter adjusted earnings of $8.85 per share, compared with the call for $8.79 among analysts surveyed by FactSet. Revenue rose 7.1% to $3.3 billion, beating the $3.25 billion forecast.
KLA expects third-quarter revenue in the range of $3.2 billion to $3.5 billion and adjusted earnings in the range of $8.30 to $9.86 per share.
Wall Street commentators were generally upbeat on the prospects for growth to continue into 2027. "We increase our estimates on continued gradual share gains and overall strong advanced foundry/logic/memory/advanced packaging spending," wrote J.P. Morgan analyst Harlan Sur in a research note.
Sur kept an Overweight rating on the stock and raised his target price to $1,950 from $1,485. He noted that was based on the stock trading at 35 to 40 times his forecast for annualized earnings per share of around $48 at the end of 2026.
Write to Adam Clark at adam.clark@barrons.com
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(END) Dow Jones Newswires
January 30, 2026 10:51 ET (15:51 GMT)
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