KLA raises guidance on AI demand, but margin pressure and valuation risks loom
Shares near 52-week highs ahead of 10-for-1 split, yet implied volatility signals caution amidst rising input costs.
KLA Corporation has lifted its quarterly revenue forecast by 6.7 per cent and its earnings per share outlook by 9.2 per cent, citing unprecedented demand visibility from customers. The semiconductor equipment manufacturer reported that its shares are trading near a 52-week high of $2,145.52, having climbed 170 per cent over the past year. This performance significantly outpaces the S&P 500’s return of 28.7 per cent during the same period.
Management provided a rare forward-looking signal for the cyclical industry, stating that it expects year-over-year growth in 2027 to exceed growth rate expectations for 2026. This outlook is driven by artificial intelligence and advanced packaging, with revenue in the advanced packaging segment projected to grow from approximately $635 million in 2025 to $1 billion in 2026. The stock has risen an additional 17.2 per cent since the guidance announcement on April 29.
Despite the optimistic outlook, the company flagged a roughly 100 basis point negative impact on gross margins due to soaring memory component costs. KLA is absorbing these increased costs rather than passing them on to customers. The semiconductor industry is currently operating at full capacity, with executives noting physical limits to the speed at which new fabrication plants can be constructed.
Market participants are closely monitoring structural changes to the stock, which is approaching a 10-for-1 forward split scheduled for execution at the close of next week. Implied volatility for KLA options is currently at the 100th percentile of its one-year range, indicating significant market expectation of price movement ahead of the split and earnings results.
The company’s guidance revision highlights a potential inflection point in its business model, yet the stock’s valuation riddle remains unresolved. Investors are weighing the strong multi-year demand narrative against the reality of a historic run and rising input costs, with the options market pricing in unusually large potential moves.
