NEW YORK, July 28, 2026, 16:58 EDT – Shares in KLA NASDAQ:KLAC declined as the company’s cash flow came in below expectations despite higher sales supported by artificial intelligence demand.
- KLA shares declined 8.98% in after-hours trading to $173.67, following a 6.18% drop to $190.80 at the close. The after-hours fluctuation is initial.
- Revenue climbed 15.2% in the fourth quarter to $3.66 billion. Adjusted earnings reached $1.05 per share, surpassing the $1.00 consensus forecast.
- First-quarter outlook topped analysts’ expectations, but free cash flow for the quarter declined 23.2% year-over-year.
KLA Corporation NASDAQ:KLAC stock fell almost 9% in after-hours trading on Tuesday. Shares dropped even as the company posted results and an outlook that topped analysts’ expectations. U.S. markets had ended regular trading, but after-hours activity continued.
The response indicates investors were seeking something beyond a slight outperformance. KLA approached the results having climbed more than 57% during the year. Market data showed its trailing price-to-earnings ratio stood in the mid-50s.
The midpoint for first-quarter revenue was around 2% above consensus. Adjusted profit guidance surpassed the mean estimate by about 1.8%. This resulted in only limited support for the valuation.
A less immediate concern involved cash conversion. Free cash flow, which is operating cash net of capital expenditures, declined by 23.2%. Meanwhile, revenue rose by 15.2%, further increasing the gap.
| Measure | Q4 FY2026 | Q4 FY2025 | Year-on-year change |
|---|---|---|---|
| Revenue | $3.658 billion | $3.175 billion | up 15.2% |
| GAAP net income | $1.363 billion | $1.203 billion | up 13.3% |
| Adjusted EPS | $1.05 | $0.94 | up 11.7% |
| Free cash flow | $817 million | $1.065 billion | down 23.2% |
| Free-cash-flow margin | 22.3% | 33.5% | down 11.2 points |
KLA’s per-share data reflect adjustments for the stock split in June. All percentages are based on figures provided by the company.
Operating cash flow was reduced by approximately $1.22 billion due to receivables, inventories and other assets. Deferred system revenue provided a $312 million boost, partially countering that impact. KLA’s statement did not specify the reason for the change in working capital.
Revenue for the quarter came in above the analyst consensus of $3.60 billion. Adjusted earnings topped estimates by five cents. GAAP net income increased 13.3% to $1.36 billion.
Semiconductor process control continued to drive results, with revenue up 13.2% to $3.257 billion. The segment accounted for roughly 79% of KLA’s overall sales growth.
The PCB and component inspection segment posted a 56.5% increase. Revenue totaled $241 million, up $87 million from a year earlier.
Chief Executive Rick Wallace stated that the growth drivers “are strengthening.” Wallace anticipates increased momentum in the second half of 2026, with the trend likely continuing throughout 2027. He pointed to investment in foundry, logic, memory, and advanced packaging as key contributors. KLA Corporation
KLA projected its first-quarter revenue at $4.0 billion, with a margin of plus or minus $200 million. The midpoint suggests sequential growth of 9.4%. Guidance for adjusted EPS stands at $1.16, reflecting a 10.5% increase from the previous quarter.
Revenue for fiscal 2026 increased by 11.7% to $13.58 billion. Free cash flow rose a modest 0.5% to $3.77 billion. The yearly free-cash-flow margin declined to 27.7% from 30.8%.
KLA returned 88.9% of its yearly free cash flow to shareholders. The company allocated $2.29 billion for buybacks and $1.06 billion for dividends. While this benefits investors, it reduces the company’s remaining cash generated internally after payouts.
KLA’s $7 billion buyback authorization was not unveiled on Tuesday. It originates from March 12, adding to a previously approved authorization. The company’s 10-for-1 stock split was finalized on June 11.
The drop in the regular session was also driven by sector performance. Shares of Applied Materials Inc. NASDAQ:AMAT dropped 7.82%, and KLA declined 6.18%. Meanwhile, the S&P 500 rose 0.21%.
Nonetheless, the drop after the market closed was more pronounced and particular to the company. The after-hours price of $173.67 was 14.6% less than the closing level on Monday. This level suggests the primary issue is elevated expectations, not a drop in reported demand.
Risks: Orders may be affected by export regulation, reliance on key customers, and fluctuations in semiconductor investment. Trading after regular hours often sees thinner liquidity and larger bid-ask spreads, so Tuesday’s shift is not definitive.
Cash conversion has become the main focus. Consistent revenue around $4 billion would back KLA’s AI-driven growth story. A further significant working-capital drain would challenge the justification for its premium valuation.
