After A Punishing July, KLA Stock Is Now A Buy (Rating Upgrade)

KLA Corporation is upgraded to a buy as robust semiconductor demand and strong Q1 guidance outweigh recent margin contraction. Q4 revenue grew 15% YoY, but gross margin declined as a signal of potential cost pressures. Q1 FY2027 guidance projects 25% revenue growth and stable gross margin, signaling accelerating business momentum and improved profitability. TSMC's increased CapEx and long-term semiconductor super-cycle support KLA's outlook, but China exposure remains a key risk.

Earlier this year, I downgraded KLA Corporation (KLAC) to a sell rating, citing growth deceleration, expected margin contraction, and China risks. Furthermore, the valuation was deemed to be rich. Clearly, this has not been one of my finest calls so far this year.