KLA (KLAC) Citi’s 2026 Global TMT Conference summary

Market outlook and growth trends

• Wafer Fab Equipment (WFE) expectations for 2024 have increased to over $150 billion, with momentum building into the second half of the year and strong growth anticipated through 2027 and into early 2028.

• Backlog has grown 60% year-over-year to $12.6 billion, with most orders covering 12–18 month delivery windows, reflecting high customer engagement and strong visibility into future shipments.

• Supply chain constraints, especially in optical components, are easing, with new capacity coming online and long-term planning extending to 2029–2030.

• Foundry logic and advanced nodes (2 nm, 3 nm) are driving higher process control intensity, benefiting from increased design complexity and more players investing at the leading edge.

• High-Bandwidth Memory (HBM) and advanced logic are creating new opportunities, with process control intensity in HBM approaching that of advanced logic.

Advanced packaging and technology adoption

• Share in the advanced packaging market has grown from a few percent in 2023 to an expected 7–8% in 2026, driven by adoption of front-end tools for more complex packaging needs.

• High sampling rates and new technologies like hybrid bonding are increasing demand for advanced inspection and metrology tools.

• R&D investments in macro products are being leveraged across the front-end portfolio, with higher-end tool adoption now reaching about 20% of the segment.

• Die stacking and growth in agentic and CPU chips are expected to further expand opportunities in advanced packaging.

Financial performance and operational strategy

• Operating margins have improved by 400 basis points over recent years, with gross margins currently in the low 62% range, targeting 63–64% long-term despite memory cost headwinds.

• Value-based pricing and operational efficiencies are key levers for margin improvement, while growth in lower-margin businesses like packaging and PCB is factored into long-term models.

• Ongoing global investments in facilities and manufacturing are supporting structural growth and operational leverage.