KLAC 10-Q filed 2026-10-29 | Key takeaways
KLAC filed its 10-Q; the most relevant disclosure change is reduced Customer concentration: In the three months ended September 30, 2026, two customers accounted for approximately 21% and 13% of total revenues each. Customer concentration: Customer A represented 21% of revenue; Customer B represented 13% of revenue.
Key takeaways
Revenue: Q1 FY2027 total revenues of $4.14 billion increased 29% y/y from $3.21 billion in Q1 FY2026, with product revenues up 33% and service revenues up 14%.
Customer concentration: Two customers accounted for approximately 21% and 13% of total revenues in Q1 FY27; three customers accounted for approximately 15%, 11%, and 10% in Q1 FY2026.
Geographic shifts: China revenue decreased to 34.5% of total from 39.5% y/y; North America increased to 14.9% from 9.3%; Korea increased to 12.0% from 9.3%.
Capital returns: The company paid $305.1 million in dividends and repurchased $935.8 million of common stock during Q1 FY27.
ERP implementation: The company implemented an upgraded ERP system during Q1 FY27, resulting in modifications to certain business processes and related internal controls.
Key metrics
Customer concentration
Disclosure changes
- Customer concentration
In the three months ended September 30, 2026, two customers accounted for approximately 21% and 13% of total revenues each.
Customer concentration decreased from three major customers to two, with the largest customer now representing 21% versus 15% previously, suggesting slightly more concentration risk despite fewer named customers. - Geographic revenue composition
China represented 34.5% of total revenues in Q1 FY27, down from 39.5% in Q1 FY26; North America increased to 14.9% from 9.3%; Korea increased to 12.0% from 9.3%; Japan decreased to 3.9% from 9.2%.
Significant geographic mix shift with China declining as a percentage while North America and Korea increased notably, reflecting changing semiconductor manufacturing investment patterns. - Land, property and equipment by geography
Rest of Asia land, property and equipment increased significantly to $192.6 million as of September 30, 2026 from $73.1 million as of June 30, 2026, a 164% increase.
Substantial capital expenditure expansion in Rest of Asia region suggests increased manufacturing or operational capacity investment in that geography. - Interest rate swap arrangements
The company entered into interest rate swaps on $2.00 billion principal amount of senior notes designated as fair value hedges, with interest rate swap liabilities of $162.2 million and $3.4 million in other non-current and current liabilities respectively as of September 30, 2026.
Significant increase in interest rate swap liabilities reflects expanded hedging activity and changes in fair value of those hedges. - Derivative instruments and hedging
Total derivative liabilities increased to $190.8 million as of September 30, 2026 from $22.7 million as of June 30, 2026, primarily due to increases in interest rate swap liabilities and foreign exchange contract liabilities.
Substantial increase in derivative liabilities indicates heightened hedging activity, particularly in interest rate contracts. - Effective tax rate
Effective tax rate was 15.1% for Q1 FY27 compared to 14.4% for Q1 FY26, and 12.0% for Q4 FY26. The increase was primarily due to the tax effects of the Undertaxed Profits Rule (UTPR) provision under OECD Pillar Two GloBE rules.
Effective tax rate increased due to UTPR provision implementation under global minimum tax rules, with $20.2 million tax expense accrued in Q1 FY27 related to UTPR.
Primary source
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