KLA Upgraded to Zacks Rank #2 Buy on Rising Earnings Estimates

ASML Holding N.V. raised its 2026 revenue outlook to EUR 43 billion to EUR 45 billion as customers increase capacity for advanced logic and memory. The company generated EUR 9.3 billion of revenue in the second quarter, up 21.3% year-over-year, while net income reached EUR 2.9 billion. Management expects EUV system sales to grow more than 45% this year, while memory-related system sales are expected to increase more than 75%. Installed-base revenue reached EUR 2.8 billion in the second quarter, nearly EUR 300 million above guidance, and the company expects that business to grow more than 30% this year. ASML said customers are already planning capacity for 1.4-nanometer chips, while advanced logic and DRAM are both seeing increasing lithography intensity, and Intel is already using a High-NA EUV system on its 18A process to produce some Core Ultra Series 3 processors. Management expects China to account for around 20% of 2026 sales, while restrictions on advanced semiconductor equipment can limit what ASML is allowed to sell into the country, and the stock trades at about 28.9x forward earnings.

Applied Materials announced expanded collaborations at its new US$5.00 billion EPIC Center, bringing in KIOXIA to advance next-generation memory and extending its longstanding partnership with BE Semiconductor Industries to co-develop advanced packaging and interconnect technologies for AI-focused chips. The twin push into cutting-edge memory and packaging research and development highlights Applied Materials' ambition to sit at the center of AI-era chip design and manufacturing innovation. The company said the new EPIC Center collaborations with KIOXIA and Besi look more like medium-term positioning than near-term revenue drivers, but they subtly shift the catalyst mix toward advanced packaging and 3D memory integration as critical proof points. The stock's valuation, a BIS settlement reminder on export controls, and concentration in a cyclical industry remain the key risks that could pressure sentiment if conditions change. Ten Simply Wall St Community fair value views span roughly US$279 to US$845 per share, showing how far apart individual estimates can be.

Jefferies named its top stock picks in Japan's semiconductor production equipment sector and raised price targets and earnings forecasts across its coverage, citing record orders and earnings growth driven by artificial intelligence and high-performance computing demand in logic semiconductors and advanced packaging. Tokyo Seimitsu saw its price target lifted to ¥24,000 from ¥23,000 on 25 times fiscal 2028 estimated earnings; the company posted first-quarter sales of ¥36.7 billion, up 19% year-over-year, operating profit of ¥5.9 billion, up 29%, and record first-quarter orders of ¥53.2 billion, up 102% year-over-year, while raising its first-half orders outlook to a 50% increase from 20% and lifting fiscal 2027 sales guidance to ¥189.0 billion, above its ¥185.0 billion medium-term goal. Rorze Corp kept its ¥6,000 price target on 25 times fiscal 2028 estimated earnings, with Jefferies raising its fiscal 2027 operating profit estimate to ¥44.0 billion from ¥42.0 billion and its fiscal 2028 estimate to ¥52.0 billion from ¥47.3 billion; Rorze reported first-quarter sales of ¥37.2 billion, up 12%, operating profit of ¥10.2 billion, up 21%, and semiconductor orders of ¥42.0 billion, 1.9 times the prior-year level and above the previous record of ¥34.0 billion, with a semiconductor-related equipment order backlog of ¥62.2 billion. Advantest had its price target raised to ¥41,000 from ¥38,500 on 35 times fiscal 2028 estimated earnings, reflecting a premium for high profitability; it delivered record first-quarter sales of ¥367.5 billion, up 39%, and operating profit of ¥190.0 billion, up 53%, and raised its 2026 SoC tester market outlook to $10.5-11.5 billion from $8.7-9.5 billion, with full-year fiscal 2027 guidance lifted to sales of ¥1.714 trillion, up 51%, and operating profit of ¥846.0 billion, up 69%.

Zacks Investment Research named Lam Research, Taiwan Semiconductor Manufacturing and Marathon Petroleum as stocks to buy before third-quarter earnings, citing Technology and Energy as the two strongest sectors. S&P 500 earnings are set to rise 24.6% year over year on 11.6% higher revenues, the eighth straight quarter of double-digit growth, with Technology earnings expected up 43.3% and Energy up 114.3%. Semiconductor earnings are projected to jump 85.5% on 62.8% higher revenues, and Energy has drawn the largest upward revision since the quarter began on elevated oil prices tied to Persian Gulf disruptions, with Brent crude above $100 per barrel as of Oct. 5. Lam Research posted $6.72 billion in fiscal 2026 fourth-quarter revenues, up 30%, and guided September-quarter revenues to $8.1 billion plus or minus $400 million with adjusted EPS of $2.15 plus or minus 15 cents, ahead of its Oct. 21 report. TSMC guided third-quarter revenues of $44.6-$45.8 billion and gross margin of 65%-67%, with its report due Oct. 15, while Marathon Petroleum expects third-quarter crude throughput of 2.82 million barrels per day and 94% utilization ahead of its Nov. 3 report.

Onto Innovation has emerged as a key beneficiary of the AI semiconductor investment cycle, with its stock jumping 125.6% in a year, roughly matching the Zacks Nanotechnology industry's 125.7% gain and outpacing the Zacks Computer and Technology sector and the S&P 500 composite, which rose 26% and 15.5%, respectively. The company reported record second-quarter revenue of $343.1 million, up 35.3% year over year and nearly 18% sequentially, with non-GAAP earnings per share of $1.93 versus $1.25 a year earlier, while backlog exceeded $1 billion for the first time. Management raised its second-half 2026 revenue, margin and EPS outlook, guiding third-quarter revenue of $380 to $400 million and expecting gross margin to expand by another 50 basis points in each of the third and fourth quarters, with operating margin improving 200 basis points to 31.5-32.5% in the third quarter and exceeding 33% by year-end. The company also raised its 2026 advanced-packaging growth outlook to at least 80% from more than 50% previously and now expects advanced-nodes revenue to grow more than 35% in 2026, up from about 25%, helped by its Dragonfly G5 platform and more than $200 million in Dragonfly orders from a single OSAT, mostly for 2027 delivery. In April 2026, Onto Innovation agreed to acquire a 27% stake in Rigaku Holdings for about $710 million, and it ended the second quarter with $1.88 billion in cash and short-term investments, though risks include customer concentration, with four customers accounting for 57.3% of first-half 2026 revenue, and a forward price/earnings multiple of 30.23X versus the industry's 5.83X.