What Does KLA Do? The Process-Control Model

KLA sells the inspection and metrology tools that check the wafer, the reticle and the package: it gets paid when a system or a service is recognised, while the die still waits on an ASML slot.

SEMICONDUCTORS · Data as at 28 Jul 2026 · Next update: after KLA Q1 FY2027 results (company calendar, 28 Oct 2026)
Affects: Semiconductors · Taiwan · Korea · US

It is the process-control company on the semiconductors layer: the machines that find defects and measure films after EUV has printed the pattern and the chambers have carved it. Foundry/logic is the heavier systems mix this quarter. The foundry that is the only named customer above 10% of sales is TSMC. See who makes wafer fab equipment and foundry and advanced packaging.

In short: KLA sells inspection, metrology and related software, then services the fleet. The June 2026 quarter printed $3.658bn of revenue — $2.837bn product, $820m service. Semiconductor Process Control was 89.0% of the invoice. Wafer inspection was 49% of the quarter. The layer’s stuck step is still the scanner slot.

Education only, not advice to buy or sell any security. Figures are from company filings and company releases dated as shown. Outlook is labelled outlook.

Numbers that matter

Sources: KLA results for the quarter ended 30 Jun 2026, Form 8-K exhibit 99.1, 28 Jul 2026; KLA Letter to Shareholders, June 2026 quarter, 28 Jul 2026. Status chips are Second Order’s read. Foundry/Logic 79% and Memory 21% are systems-only mix to semiconductor customers, not of total revenue. September figures are guidance. The print for that guide is due 28 Oct 2026.

Our arithmetic. Product was 77.6% of the quarter (2,837.151 ÷ 3,657.556 = 0.776). Service 22.4% (820.405 ÷ 3,657.556 = 0.224). Semiconductor Process Control 89.0% (3,256.781 ÷ 3,657.556 = 0.890); Specialty 4.4%; PCB and Component Inspection 6.6%. Total was up 15.2% year over year (3,657.556 ÷ 3,174.741 = 1.152) and 7.1% sequentially against the 8-K’s $3,415 million March quarter (3,657.556 ÷ 3,415 = 1.071). GAAP gross margin 61.4% ((3,657.556 − 1,413.108) ÷ 3,657.556 = 0.614). Net margin 37.3% (1,363.059 ÷ 3,657.556 = 0.373). Taiwan 31% of total is about $1.13bn (0.31 × 3,657.556); China 26% about $951m. Wafer inspection at 49% of the quarter is about $1.79bn; patterning at 20% about $732m. Do not apply the 79/21 foundry/memory split to the $3.257bn Semiconductor Process Control line — the letter’s mix is systems-only to those customers.

What does KLA actually do?

Three steps, in order.

Check. Ship. Service.

1. It checks the work. It does not print the pattern. Lithography prints. Etch and deposition carve and build. KLA’s tools inspect and measure: wafer defect inspection, overlay and film metrology, reticle inspection, packaging process control, and the software that turns those scans into a yield call. The 10-K names 39xx, Surfscan, Teron, Kronos and Klarity among the lines. ASML prints. Applied, Lam and Tokyo Electron build and carve. KLA checks.
2. It ships a counted invoice, not a counted scanner plan. June product was $2,837 million versus $2,472 million a year earlier (2,837.151 ÷ 2,472.182 = +14.8%). The letter puts wafer inspection at 49% of the quarter and patterning — metrology plus reticle inspection — at 20%. Foundry/Logic was 79% of Semiconductor Process Control systems-only mix; Memory 21%, of which DRAM about 83% and NAND 17%. Do not read $2.837 billion as a shipped accelerator.
3. It services the installed fleet. The 8-K printed $820 million of service, 22.4% of the quarter, up 16.8% year over year (820.405 ÷ 702.559 = 1.168). The letter calls this the 17th consecutive calendar year of annual Services growth. That invoice does not wait for a new tool to ship.

KLA also sells into advanced packaging. The letter’s calendar-2026 outlook is Advanced Packaging process-control systems revenue of approximately $1.1 billion, up more than 70% year over year. That is outlook, and a neighbour clock on hybrid bonding and CoWoS. It is not the June $2.837 billion.

How does KLA make money?

It gets paid when a system is recognised, and again when the installed fleet is serviced. Three things decide which cash prints, and when:

• Recognition — a tool in deferred system revenue is not the quarter’s sales until KLA’s accounting says it is. Deferred system revenue was $933 million at 30 June 2026, up from $817 million at 30 June 2025. Deferred service revenue was $604 million current plus $238 million non-current ($842 million together, ours).
• Mix — foundry/logic versus DRAM versus NAND; wafer inspection versus patterning versus packaging; new systems versus service.
• Process-control intensity — more EUV layers, tighter overlay, HBM stacks and hybrid-bonded packages mean more inspection steps per wafer. That is how KLA’s invoice can rise even when wafer starts do not.

On 28 July 2026 the 8-K printed $3,658 million of revenue: $2,837 million product, $820 million service. GAAP gross margin 61.4% (ours), net income $1,363 million, diluted EPS $1.04 after the 10-for-1 split effected 11 June 2026. Cash plus marketable securities $4.902 billion (1,649.842 + 3,252.566). Operating cash flow $906 million minus capex $89 million = $817 million free cash flow. Full-year FY2026 revenue was $13.579 billion (13,579.476 ÷ 12,156.162 = +11.7%). The 10-K puts services at approximately 23% of FY2026 sales.

Who gets paid. KLA, on the recognised tool and on the service contract. Who pays. TSMC is the only customer the 10-K names at more than 10% of total revenues for FY2026, FY2025 and FY2024, primarily in Semiconductor Process Control. Samsung, Intel Foundry, SK hynix and Micron sit on the same wafer-buyer list; they are not a second 10% name in this 10-K. Money sticks at the recognised inspection tool and the service contract, not at a foundry capex headline. See the Taiwan capex-split Pulse. International revenues were approximately 87% of FY2026 sales (10-K).

Guidance for the quarter ended September 2026 was $4.0 billion ± $200 million, GAAP gross margin 61.6% ± 1.0%, GAAP diluted EPS $1.14 ± $0.10. Midpoint versus June is +9.4% (4,000 ÷ 3,657.556 = 1.094). That is outlook. The print is the 28 October call.

What limits it?

Scanner slots first. Intensity conversion second. China mix third. Neighbour clocks fourth.

1. A shipped inspection tool does not print a leading-edge die by itself. Every advanced logic wafer and most new DRAM still need an ASML scanner. On 14 October 2026 ASML said planned supply for 2027 and 2028 will not fully meet demand. See the Wire. KLA can raise a product invoice while the wafer still waits on a Low-NA slot. High-NA adds overlay and stitching checks; it does not replace the scanner bind. Do not read $2.837 billion as a shipped accelerator.
2. The check still has to convert. Process-control intensity is KLA’s own clock: more EUV layers, tighter specs, HBM stacks. A 79% foundry/logic systems mix can look leading-edge while TSMC CoWoS still queues the package. See the Taiwan CoWoS Pulse. Memory at 21% of systems-only mix, DRAM-heavy, can stay “strong” while cubes wait on SK hynix allocation and Micron cleanroom timing. A 39xx in a bay is not a tested stack.
3. China is a mix, not an EUV escape. The letter puts China at 26% of total revenue, Taiwan 31%, North America 18%, Korea 10%. That print is process-control tools and service. It is not a scanner substitute, and it moves with Bureau of Industry and Security licences — a 10-K risk named in so many words.
4. A checked wafer still needs a stack and a slot. HBM and CoWoS sit after the inspection step. The letter’s $1.1 billion calendar-2026 Advanced Packaging outlook is KLA’s seat on that neighbour. It does not move the scanner bind. Calendar-2026 wafer equipment in the low $150 billion range is outlook, not this 8-K. The Besi Wire is the same neighbour from the bonder’s side: HBM still uses bumps.

The honest uncertainty is conversion: a $4.0 billion September guide can still miss if installs slip, licences stall, or inspection intensity does not show as dollars on 28 October.

Who else does this?

Roles, not a league table.

What separates them is who can ship a qualified EUV box — that is ASML — versus who gets paid on the hundreds of other steps. KLA sits on the check seat. They overlap at the margin (eBeam, some metrology). They do not overlap on production EUV.

What would change this view?

The read on the model weakens if:

• The 28 Oct 2026 print comes in well below the $4.0 billion ± $200 million guide
• Foundry/Logic systems-only mix rolling over, or wafer inspection falling well below ~49% of the quarter without a matching service offset
• China geo jumping as a share of the invoice, or export licensing cutting the 26%
• Deferred system revenue climbing while product recognition stalls
• ASML 2027–2028 supply remaining short while KLA’s product invoice is sold as if wafers were unconstrained
• CoWoS or HBM remaining so tight that inspected wafers queue anyway — the neighbour clock stealing the bind

It stays intact while product stays ~78% of the invoice, service keeps a good fifth of the quarter, foundry/logic holds the systems-only majority, China stays a process-control mix rather than an EUV story, and the scanner slot remains the layer’s stuck step.

Practical takeaways

• KLA’s model is Check → Ship → Service: inspection around the scanner, a recognised product invoice, then the installed-base contract
• June 2026 quarter: $3.658bn sales, $2.837bn product (77.6%), $820m service (22.4%), 61.4% GAAP gross margin, $1.363bn net income
• Mix: Semiconductor Process Control 89.0% of sales. Letter: wafer inspection 49% / patterning 20%; foundry/logic 79% of Semi PC systems-only
• Taiwan 31% of total (~$1.13bn); China 26% (~$951m); TSMC the only >10% customer in the FY2026 10-K
• Layer stuck step: ASML scanner slots for 2027–2028. KLA’s clock: process-control intensity and the $4.0bn ± $200m September guide, due 28 Oct 2026
• A checked wafer still waits on HBM and CoWoS

FAQ

What does KLA do?
KLA designs, builds and services process-control tools — wafer and reticle inspection, metrology, related software, and packaging inspection — then charges again to keep those tools running. It does not sell production EUV scanners. Product revenue in the June 2026 quarter was $2.837 billion.

What does KLA do in simple terms?
It makes the machines a chip factory uses to find defects and measure films after the pattern is printed, then charges again to service those machines.

Is KLA profitable?
Yes on the dated print. The June 2026 quarter’s net income was $1.363 billion on $3.658 billion of revenue, a 37.3% net margin, with a 61.4% GAAP gross margin (Form 8-K exhibit 99.1, 28 Jul 2026, margin ours). That is not a forecast.

How is KLA different from ASML and Applied Materials?
ASML sells the production EUV scanner. Applied sells the widest process-chamber catalogue. KLA sells the inspection and metrology that check that work. Service was 22.4% of KLA’s June quarter. See What Does ASML Do? and What Does Applied Materials Do?.

What share of KLA’s sales is inspection versus service?
On the 28 July 2026 letter, wafer inspection was 49% of the June quarter and patterning 20%. Service was $820 million, 22.4% of the 8-K total. Those product-line percentages are the letter’s, not a second income statement.

Should I buy KLA shares?
We do not make buy or sell calls, and nothing here is a recommendation. What we can tell you is what the company does, how it gets paid, and which figures would change the picture. The decision is yours.

Keep reading on the map

• The layer: Semiconductors
• The mechanism: Who makes wafer fab equipment · Foundry and advanced packaging
• The scanner: EUV, explained · High-NA EUV · What Does ASML Do?
• The foundry: What Does TSMC Do?
• The neighbours: CoWoS · HBM · Hybrid bonding · Applied Materials · Lam Research
• The Wire: ASML 2027–2028 supply short · Besi: HBM still uses bumps
• Where it happens: Taiwan · TSMC CoWoS · TSMC capex split · Korea HBM · Micron Idaho

The members cut on the long clock is already live: Where does the stuck step move?. This page stays the free Stack read of the KLA model.

How we check this

Figures come from company filings and company releases, each dated below. Product-line mix (wafer inspection 49%, patterning 20%, foundry/logic 79% systems-only) is the 28 July letter; dollar splits from those percentages applied to the 8-K total are our arithmetic. China 26% and Taiwan 31% are the letter’s geo table. September $4.0 billion ± $200 million, CY26 WFE in the low $150 billion range, and Advanced Packaging process-control systems ~$1.1 billion are outlook. TSMC as the only >10% customer is the FY2026 10-K. Where we work something out ourselves, the arithmetic is shown in full.

Last reviewed: 23 Oct 2026 · Next review: after KLA Q1 FY2027 results (company calendar, 28 Oct 2026) print revenue against the $4.0 billion ± $200 million guide

Spot an error? Tell us; we will correct it here. Editorial standards →

Sources

1. KLA, results for the quarter ended 30 Jun 2026 (Form 8-K exhibit 99.1), 28 Jul 2026
2. KLA, Form 8-K, 28 Jul 2026
3. KLA, IR copy of the same release, 28 Jul 2026
4. KLA, Letter to Shareholders, June 2026 quarter, 28 Jul 2026
5. KLA, Form 10-K for the fiscal year ended 30 Jun 2026, filed 6 Aug 2026
6. KLA, Q1 FY2027 earnings date, 1 Oct 2026 — 28 Oct 2026, 2:00pm PT
7. ASML, via Wire: 2027–2028 supply short, 14 Oct 2026

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