⚠ Memory Prices Land in KLA's CostsModerate threat

KLA (KLAC) — threat to the moat

Memory prices and tariffs are costing KLA about a point of margin, and rising volume is what is hiding it.

The AI boom that fills KLA's order book also raises what its tools cost to build. On the third-quarter fiscal 2026 call management put the gross margin headwind from DRAM prices at "roughly 100 basis point"1, and the 10-K lists DRAM chip shortages beside rare earth elements and limited-source suppliers among its supply risks2.

KLA gross margin bridge, FY2025 to FY2026 (percentage points)FY2025 gross margin60.9%Revenue volume+0.5Mix-0.2Labor, overhead and efficiencies+0.2Other service and manufacturing costs-0.1FY2026 gross margin61.3%KLA Form 10-K FY2026, gross margin discussion
Volume added half a point; mix and costs took most of it back.

Tariffs add to it. The fiscal 2026 gross margin bridge names "increased costs due to tariffs" among the other costs that took 0.1 points3.

Neither has broken the margin yet. The company gross margin rose from 60.9% to 61.3% in fiscal 20264, because higher volume added 0.5 points5. That is the catch: volume is covering rising costs, and volume is what a downturn removes.

The 10-K is candid about the supply side. It names "limited-source suppliers", the availability of rare earth elements and DRAM chip shortages among its risks6. A tool KLA cannot build on time is revenue deferred, and a supply delay at the end of June can move revenue from one fiscal year to the next.

Inventory is where rising component prices sit first. KLA's inventories rose to $3,648.5 million at June 2026 from $3,212.1 million a year earlier7. Memory bought at this year's prices reaches cost of revenues only as the tools that contain it ship.

The guide for the September 2026 quarter is a GAAP gross margin of 61.6% plus or minus 1.0 point8. A result at the bottom of that range with revenue at the top would say costs are outrunning price.

References
  1. ReportedOn the third-quarter fiscal 2026 call management put the gross margin headwind from DRAM prices at "roughly 100 basis point", and the 10-K lists DRAM chip shortages beside rare earth elements and limited-source suppliers among its supply risks.
    The Motley Fool, KLA Q3 fiscal 2026 earnings call transcript - process control share, advanced packaging, the 2030 financial model, capital allocation, China and memory; per-share figures before the split - process control share, advanced packaging, China, memory and margins. — Q3 FY2026 · publ. 29 April 2026 · source ↗
  2. ReportedOn the third-quarter fiscal 2026 call management put the gross margin headwind from DRAM prices at "roughly 100 basis point", and the 10-K lists DRAM chip shortages beside rare earth elements and limited-source suppliers among its supply risks.
    KLA Corporation Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1A risk factors: export controls, tariffs, suppliers, leverage and cyclicality. — FY2026 · publ. 6 August 2026 · source ↗
  3. ReportedThe fiscal 2026 gross margin bridge names "increased costs due to tariffs" among the other costs that took 0.1 points.
    KLA Corporation Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1A risk factors: export controls, tariffs, suppliers, leverage and cyclicality. — FY2026 · publ. 6 August 2026 · source ↗
  4. ReportedThe company gross margin rose from 60.9% to 61.3% in fiscal 2026, because higher volume added 0.5 points.
    KLA Corporation Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 7 MD&A and revenue notes: revenue by product category and region, gross margin and research spending. — FY2026 · publ. 6 August 2026 · source ↗
  5. ReportedThe company gross margin rose from 60.9% to 61.3% in fiscal 2026, because higher volume added 0.5 points.
    KLA Corporation Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 7 MD&A and revenue notes: revenue by product category and region, gross margin and research spending. — FY2026 · publ. 6 August 2026 · source ↗
  6. ReportedIt names "limited-source suppliers", the availability of rare earth elements and DRAM chip shortages among its risks.
    KLA Corporation Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1A risk factors: export controls, tariffs, suppliers, leverage and cyclicality. — FY2026 · publ. 6 August 2026 · source ↗
  7. ReportedKLA's inventories rose to $3,648.5 million at June 2026 from $3,212.1 million a year earlier.
    KLA Corporation Form 10-K for fiscal 2026 (year ended 30 June 2026) - financial statements and notes: backlog, contract liabilities, receivables, cash flow, capital returns and debt. — FY2026 · publ. 6 August 2026 · source ↗
  8. ReportedThe guide for the September 2026 quarter is a GAAP gross margin of 61.6% plus or minus 1.0 point.
    KLA fourth-quarter fiscal 2026 results release, Form 8-K exhibit 99.1 - revenue, product and service revenue, segment revenue, net income, cash flow, capital returns and September 2026 quarter guidance. — Q4 FY2026 · publ. 28 July 2026 · source ↗
Sources
Generated September 28, 2026