KLA Corporation Common Stock Goldman Sachs Communacopia + Technology Conference 2026

Okay. We'll get started. Okay, great. Good morning, everybody. Welcome to the Goldman Sachs Communacopia + Technology Conference. I'm Jim Schneider, the semiconductor analyst at Goldman Sachs. It's my pleasure to welcome KLA Corporation to the stage today. With us from the company, we have CFO Bren Higgins, and President of Semiconductor Products and Customers, Ahmad Khan. Welcome, guys. Thanks for being here.

Thanks for having us. Brent, I think to kick off, you might want to give the audience a brief recap of the quarter and sort of the current business outlook as you maybe currently see it.

Yeah, sure. That's great. Just to frame things up a bit, 2026 is setting up to be a very good year for the company. If you just look back over the last three years, we've had a really impressive period of growth. In 2024, the company grew at about 12%, in 2025, we're 19%, 2026, based on some of the guidance we gave, would be somewhere in the low 20% growth range for the total business. Over that timeframe, our incremental operating margins have been at the top end of our 40%-50% target. Perhaps maybe even a little bit better than that, and so that translates into over 400 basis points of improvement operating margin over that timeframe. So the business is performing very well. We've seen share of market grow over that timeframe.

We're excited about that, and the operating leverage in the model continues to drive what is one of the best business models in the industry. We're pretty proud of the accomplishments to date, but we're pretty excited about what's to come. 2026 is a period of time here where the momentum continues to build in the industry. If you just go back to our Investor Day in March, we thought the industry would be somewhere between $135 billion and $140 billion. Today, and in earnings, we talked about a low $150 billion range. That translates into a mid-20% growth rate over 2025 for the industry. Over that timeframe, we've seen not only strengthening in our views of 2026, but also that momentum continuing into 2027.

One of the things we said at Investor Day is that we thought that 2027 would have a growth rate at the same level or faster than 2026. 2026 has gone up, but 2027 has gone up. I still think the statement is accurate. I still think that as we look at next year, given the backlog that we have, and we disclosed our backlog in our 10-K that we filed back in August of over $12 billion, and my expectation that in the funnel, we'll continue to see backlog build moving forward. That's leading to very strong visibility, and it's driving us within the company to really focus on three things. The first being to continue to execute on the opportunities that are out there. We have to drive and keep our focus on next-generation development.

We've got a lot of programs in the company to deliver new capability to support, which is, I think, a compelling market and a compelling roadmap moving forward. That allows us to also deliver new capability to customers, better cost of ownership, and allows us to share in the value of that moving forward. I think that's very important. Then finally, supporting our customers with service resources that we can keep their tools running at high utilizations. Process control is really critical. Yield translates into printing money in a lot of respects, and certainly with some of the pricing dynamics in the industry today.

Application support, how we get work with our customers to drive and deliver value out of our systems, and doing the things that we need to do just in terms of overall supply chain engagement, installation, all the things we do to continue to deliver our systems and execute to help them deal with what is a very strong demand environment where supply is being outpaced by the demand levels that are out there. Maybe I'll stop there. We'll get into your questions. Very happy to have Ahmad here. Ahmad runs the systems and customer channel of the company, so systems across process control, but also in our non-process control businesses and also the primary interface with our customer channel. You'll bring some, I think, some perspective that a little bit more insight and context into what's kind of happening out there today.

Fantastic. Welcome, Ahmad. Maybe just to kind of follow up on what you just said, Brent, there, in terms of the Investor Day, you talked about same or faster growth in 2027. Given backlogs being up as much as they are, how would you sort of handicap the chances of 2027 being sort of decisively faster growth? Then maybe as we look further, I mean, I think backlogs are quite high, so how would you handicap the chances of that strong growth sustaining itself into 2028 as well?

Well, to be talking about 2027 at this stage here in September, talking about the next year with the specificity I have is a little unique. 2028, the only thing I'll say about that, and I'll get to the 2027 part in a minute, is that there are multi-year investment cycles for our customers with new fabs and new fabs that are in process. We feel and see in terms of how we're sizing our factories and planning is that, I don't want to comment on the level of growth, but I see a sustainability in investment continuing as we move beyond next year. Certainly, the order profile would suggest that. The backlog is providing a good level of visibility, and it helps. I mean, look, we stay very close to our major customers in terms of their needs.

But getting the orders solidified, both from a plan and a slotting point of view, where what our customers want from us in terms of expectations for deliveries. It does help provide some additional clarity that will then go and drive the decisions we need to make to make sure we're in a position to support that. I think in general, we feel it's pretty constructive. Now we'll see what happens in terms of the clean rooms coming online, the ability of peer companies to be able to support different growth levels. We'll see how that translates. I think I've probably been a little more specific than some of my peers in terms of talking about next year. I think that's just predicated by the lead times on our business and the strength of some of our products in the market.

We'll see how that plays out, at least in terms of how we're managing the company, is we're managing it in a way that we've got to be able to deliver to some of the more bullish scenarios. I talked at earnings, I said, well, it's 190-ish billion kind of growth rates into next year, that would be a mid-20s kind of growth rate from this year. But there are scenarios and views of strength beyond that, and so the way we are running the company is that we've got to be able to deliver that. We don't want to be the bottleneck, and so we're taking actions to ensure that we're not. We'll see how it goes, but certainly the strength of the environment's pretty clear and there's a lot of pressure to deliver.

Great. Now, a couple of high-level questions for you for a second. I think we're in a situation where your customers are incredibly profitable right now, as profitable as I've ever seen them in my career, for sure, and that's probably a long time. But some of your customers' customers who are driving the ultimate spending on chips are spending well over $1 trillion per year, and that seems to be moving a lot higher. Those companies are actually tapping capital markets to sustain even their current levels of CapEx. How do you think about the ultimate returns for AI for the supply chain? Do you see any kind of systemic risk that could be building up that gives you any kind of pause?

Look, I will comment at our level, and certainly our customers and our customers' customers, is their profitability levels are unprecedented. There's a ton of profitability in the system. It contributes to the outlook I just talked about. I think given the need for everyone's short compute and the need for more compute, and the supply being deployed to meet the demand that's out there, and how that's translating back into our customers' profitability, is that they can afford and will sustain this investment. That certainly, as we look at it over the next couple of years, how we're thinking about it. Over the long run, we'll see how it plays out in terms of ultimate returns on AI. We certainly see a number of compelling opportunities within the company, some of the things that we're doing to take advantage of it.

But at least as it relates to our outlook and the profitability to fund that outlook, never seen anything like it, and I think we're pretty compelled about our ability to deliver to it.