Shares of KLA (KLAC) fell about 9% on Friday after investor concerns over the company’s wafer fab equipment, or WFE, outlook despite analysts remaining largely bullish and raising price targets.
KeyBanc Capital kept its Sector Weight rating on the chip equipment maker’s stock.
“KLA shares were down AH following F1Q results and guide slightly ahead of Street. We think investors likely have consternation with KLA’s WFE guide of +HSD-LDD [high single digit-low double digit] vs. LRCX’s +23%, but both landed at a total CY26 figure of ~$135B. Similarly, however, KLA indicated a 2H weighting with 2H26 growth accelerating from +MSD h/h in 1H26. It’s also seeing some margin drag from higher cost DRAM components and tariffs,” said analysts led by Steve Barger.
The analysts noted that they ultimately view KLA as positioned to succeed in what should be a robust market, but understand investor anxiety with high expectations for expensively valued shares.
J.P. Morgan maintained its Overweight rating and increased the price target on the stock to $1950 from $1485.
“KLA delivered strong Dec-Q results (revenues/margins/EPS) on solid Q/Q trends in its core process control and its services business, as demand for advanced-node technologies from its foundry/logic and memory customers (DRAM/HBM) continues to strengthen, combined with strong growth in advanced packaging. For the March quarter outlook, the team guided revenues/EPS above consensus expectations, as the advanced node ramp remains strong—supported by significant leverage to TSMC’s N3/N2 and advanced node DRAM suppliers— along with continued momentum in advanced packaging,” said analysts led by Harlan Sur.
However, the analysts added that revenue upside is currently limited by supply constraints (1H of calendar year) as KLA is sold out through the first half of the year, though the company expects to unlock more supply as the year progresses.
Demand is constrained by both KLA tool availability and customer fab readiness, which should extend growth into 2027, according to the analysts.
The analysts noted that KLA expects 2026 WFE spending to grow low double-digit percentages, reaching mid-$130B (including $12B from advanced packaging view), building off an around $121B WFE base ($110B core WFE and $11B advanced packaging).
“The 2026 WFE outlook is similar to peers at mid-$130B, but the Y/Y rate is slightly lower, which could be due to different base assumptions and the characterization of core WFE versus advanced packaging. China revenue should be more resilient in CY26 than previously anticipated, at mid- to high-20% range, with a flattish to slightly positive China WFE spending environment. Given supply constraints, customer fab readiness, and visibility into new greenfield projects, the team anticipates WFE growth to extend into 2027,” said Sur and his team.
The analysts noted that KLA remains confident it will continue to outgrow WFE, given a spending environment expected to favor advanced node foundry/logic (with ongoing 3 nm capacity builds and the 2 nm ramp), expanding advanced DRAM spending, and rising process control intensitydue to higher manufacturing complexity.
Wells Fargo kept its Overweight rating on KLA and raised the price target on the stock to $1,900 from $1,600.
“KLAC is down AMC due to confusion on its 2026 WFE growth est [estimates] relative to Lam. While elevated val required a clean qtr/guide, we think the neg [negative] share reaction is misplaced as ests increase again. Buy on weakness,” said analyst Joe Quatrochi and his team.
BofA reiterated its Buy rating and increased the price target on the shares to $1,850 from $1,650.
“KLAC’s core WFE CY26 guide of low-$120bn (+11% YoY) excluding $12bn in advanced packaging is lower than LRCX’s $130bn (+18% YoY) core WFE (excl. ~$5bn packaging) which along with slower revenue growth (LRCX signaled >23% YoY), is likely weighing on shares post print. We suspect there is fear KLAC is losing share given WFE mix shift towards memory (KLAC’s F/L sales growing +15% YoY vs. memory at +43%) which led to stock underperformance during CY12-28,” said analysts led by Vivek Arya.
Shares of other chip equipment makers on Thursday. ASML (ASML) and Lam Research (LRCX) were largely flat but in the green, while Applied Materials (AMAT) dipped nearly 1%.