KLA-Tencor (KLAC) Stock Forecast & Price Target

KLA's strong positioning in the semiconductor wafer fabrication equipment market is underscored by the anticipated growth in both DRAM and NAND segments, with forecasts indicating a $1-2 billion year-over-year increase. The company is expected to derive 75% of its sales from foundry and maintain a significant revenue contribution from China, projected to account for approximately 30% of total revenue in CY25. Furthermore, KLA's advanced packaging revenue is set to exceed $925 million, boosted by a growing market projected to increase by about 20% year-over-year, which emphasizes KLA's advantageous position in a rapidly expanding sector.

KLA's outlook is negatively impacted by anticipated declines in revenue from China, with projections indicating a decrease from approximately 31% of total sales in CY25 to around 25% in CY26, alongside a potential 10-20% decline in revenue from that region next year. Additionally, the company has adjusted its expectations for the wafer fabrication equipment (WFE) market, forecasting a significant drop with estimates suggesting adjusted WFE revenues will fall below $107 billion and KLA's market share in process control could decline to 6-7% by 2026. Coupled with recent regulatory changes that are expected to reduce revenue by $300 million, KLA's gross margins are also projected to decrease, reflecting a troubling trend towards reduced financial performance.