KLAC: AI And DRAM Investment Cycles Will Balance Market Uncertainties Ahead

Analysts have raised their price targets for KLA, citing strong quarterly results, an improved outlook for artificial intelligence demand, and the company's dominant market position. Recent targets have moved from $1,093 to as high as $1,300.

Analyst Commentary

Recent analyst updates on KLA reflect a mix of optimism about the company's market position and growth outlook, alongside some cautions regarding industry conditions and future expectations.

• Bullish analysts have cited KLA's robust quarterly performance, with results and near-term guidance generally meeting or exceeding consensus expectations. This supports higher valuation multiples.
• There is growing confidence that KLA will benefit from increased investments in artificial intelligence compute infrastructure. This trend is expected to drive long-term demand for process control solutions.
• KLA has effectively addressed concerns surrounding its Remaining Performance Obligations (RPO) and DRAM exposure. Visibility has improved into the 2026 and 2027 demand cycles.
• The company's dominant position in process control is viewed as a key differentiator, especially as technology transitions intensify and capital spending on advanced manufacturing rises.

• Bearish analysts remain cautious about the pace of wafer fab equipment spending. Some expectations for 2026 growth may be viewed as overly optimistic.
• Exposure to geopolitical risks, especially related to China and potential trade or tariff headwinds, could create volatility in KLA's end markets.
• Even as some analysts have upgraded their price targets, a few have signaled valuation concerns. They suggest that the stock's risk/reward is more balanced at current levels.
• The company's near-term guidance, while solid, is considered in-line rather than exceptional. This reinforces some hesitation regarding further upside in the immediate quarters.

What's in the News

• On November 6, 2025, KLA's Board of Directors approved amendments to the company's By-laws, updating shareholder nomination procedures, modernizing governance sections, and clarifying corporate policies (Key Developments).
• Between July 1 and September 30, 2025, KLA repurchased 622,500 shares for $559.62 million. The company has completed buybacks totaling 18,399,343 shares or 13.05% of outstanding shares under a program started in June 2022 (Key Developments).
• KLA issued earnings guidance for the second quarter ending December 31, 2025, projecting total revenues between $3.225 billion plus or minus $150 million and GAAP diluted EPS of $8.46 plus or minus $0.78 (Key Developments).

Valuation Changes

• The Fair Value Estimate has remained stable at $1,287.27, reflecting little change in expected intrinsic value.
• The Discount Rate has declined modestly, moving from 10.68% to 10.55%. This indicates a slightly lower implied risk in valuing future cash flows.
• The Revenue Growth Projection edged down fractionally, from 8.57% to 8.55%. This suggests expectations for future sales expansion are largely unchanged.
• The Net Profit Margin is up marginally, increasing from 36.10% to 36.12%. This implies a minor improvement in projected profitability.
• The Future P/E Ratio has dipped slightly, going from 38.31x to 38.17x. This suggests a small reduction in anticipated future valuation multiples.