KLA Corp (KLAC) Q3 2025 Earnings Call Highlights: Surpassing Revenue Expectations and Strategic ...

GuruFocus News

Thu, May 1, 2025, 12:18 AM 4 min read

Revenue: $3.06 billion, above the guidance midpoint of $3 billion.
Non-GAAP Diluted EPS: $8.41, at the upper end of the guidance range.
GAAP Diluted EPS: $8.16, at the upper end of the guidance range.
Gross Margin: 63%, about 50 basis points higher than the midpoint of guidance.
Operating Expenses: $575 million, comprised of $338 million in R&D and $237 million in SG&A.
Operating Margin: 44.2%.
Net Income: $1.12 billion (GAAP net income: $1.09 billion).
Free Cash Flow: $990 million for the quarter; $3.5 billion over the past 12 months.
Free Cash Flow Margin: 30% over the past 12 months.
Capital Returns: $733 million in the quarter, including $507 million in share repurchases and $226 million in dividends.
Advanced Packaging Revenue: Expected to exceed $850 million in calendar 2025.
KLA Services Revenue: $669 million in the March quarter, up 13% year over year.
Cash Flow from Operations: $1.1 billion.
Dividend Increase: 12% increase to $1.90 per share per quarter.
Share Repurchase Authorization: New $5 billion authorization, raising total to $5.46 billion.
June-Quarter Revenue Guidance: $3.75 billion, plus or minus $150 million.
June-Quarter Gross Margin Guidance: 63%, plus or minus 1 percentage point.
June-Quarter GAAP Diluted EPS Guidance: $8.28, plus or minus $0.78.
June-Quarter Non-GAAP Diluted EPS Guidance: $8.53, plus or minus $0.78.

Warning! GuruFocus has detected 3 Warning Signs with BHC.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

KLA Corp (NASDAQ:KLAC) reported March-quarter revenue of $3.06 billion, exceeding the midpoint of their guidance range.
The company achieved a 30% year-over-year increase in revenue, driven by strong demand in leading-edge logic and high-bandwidth memory.
KLA's Advanced Packaging business showed significant growth, with revenue expected to exceed $850 million in calendar 2025.
The KLA Services business marked its 52nd consecutive quarter of year-over-year growth, demonstrating resilience despite export control impacts.
KLA announced a 12% increase in its quarterly dividend, reflecting confidence in long-term value accretion and commitment to capital returns.

Negative Points

Global trade uncertainties and potential tariff impacts pose risks to KLA's future business environment.
The company postponed its Investor Day to early to mid-calendar 2026 due to macroeconomic uncertainties.
Newly announced US government export controls impacted service revenue growth in the March quarter.
KLA faces a 100 basis points headwind to gross margin per quarter due to global tariffs, affecting profitability.
The company anticipates a slight decline in foundry/logic revenue in the second half of the year, indicating potential market challenges.

Q & A Highlights

Q: Can you explain the impact of tariffs on KLA's gross margins and how the company plans to mitigate these effects? A: Bren Higgins, CFO, explained that the tariff impact is primarily on the service business, particularly in China, where reciprocal tariffs affect parts imports. KLA is exploring mitigation strategies, including operational adjustments and pricing strategies, to manage these impacts. The decision to postpone the Investor Day was due to the current global trade uncertainties.

Q: What is driving the growth in KLA's e-beam inspection business, and how is it differentiated? A: CEO Richard Wallace highlighted that KLA's e-beam inspection growth is due to long-term investments in platform development. The synergy between e-beam and optical inspection tools is crucial, especially for challenging layers and nodes. Customers are increasingly adopting both technologies, which validates KLA's strategy and investments in e-beam.

Q: How is KLA's Services business expected to perform this year, given the challenges in China? A: Bren Higgins noted that despite losing access to certain fabs in China, the Services business achieved its 52nd consecutive quarter of year-over-year growth. The semi-PC part of the business is expected to grow in low double digits this year, slightly below the long-term target due to export controls, but long-term growth prospects remain strong.

Q: Can you elaborate on KLA's competitive positioning in Advanced Packaging and the potential for hybrid bonding adoption? A: Richard Wallace stated that KLA's strength in Advanced Packaging is driven by adapting front-end solutions for back-end applications, particularly for AI and high-value packages. The market's demand for inspection and measurement capabilities supports KLA's growth, with expectations to reach $850 million in revenue. Hybrid bonding presents additional opportunities as the market evolves.

Q: What are the expectations for KLA's business in China, and how does it impact the overall revenue outlook? A: Bren Higgins mentioned that KLA expects China to account for about 30% of its business in 2025, with revenue from China projected to be down 15% to 20% for the year. The impact of export controls is estimated at $500 million, with 65% to 70% affecting Systems. The overall outlook remains stable, with KLA focusing on aligning with customer requirements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Terms and Privacy Policy

Your Privacy Choices

Utah Privacy Notice

More Info