KLA CORP Q3 FY2025 earnings call

• Rick Wallace started by discussing March quarter results, noting revenue of $3.06 billion, which was above the guidance midpoint. He highlighted strong demand in leading-edge logic, high-bandwidth memory, and advanced packaging. - Mentioned KLA has not seen changes in customer demand or investment plans despite macro uncertainty and postponed Investor Day to early to mid-2026. - Bren Higgins discussed financial highlights: revenue of $3.06 billion, non-GAAP diluted EPS of $8.41, gross margin of 63%, operating margin of 44.2%, and cash flow details. - Announced 16th consecutive annual dividend increase and new $5 billion share repurchase authorization.

KLA's March quarter revenue was $3.06 billion. The firm's segments include leading-edge logic, high-bandwidth memory, and advanced packaging. The Services business grew to $669 million in the March quarter, up 13% year-over-year. Advanced packaging revenue grew to over $500 million in 2024 and is expected to exceed $850 million in 2025. KLA's results were fueled by strong demand in leading-edge logic and high-bandwidth memory, with the advanced packaging business also contributing strongly.

• June quarter guidance: total revenue expected to be $3.075 billion ± $150 million. - Foundry/Logic revenue from semiconductor customers forecasted at ~69%, memory at ~31% of Semiconductor Process Control systems revenue. - Gross margin forecasted at 63% ± 1% including global tariffs, with an expected ~100 basis point headwind to gross margin per quarter. - For 2025, gross margins expected to be approximately 62.5% ± 50 basis points. - Effective tax rate assumption for June quarter is 13.5%, with adoption of global taxation Pillar 2 expected to increase rate to ~14% in the second half of 2025.

• Global trade uncertainty and potential second-order effects on macro demand. - Tariff impacts on service business and gross margin, with exposure to parts going in and out of certain geographies like China. - Uncertainty around how global trade and tariff changes will impact KLA's global manufacturing operations and system shipping to different geographies.

Q: Harlan Sur asked about tariff-related risks and KLA's ability to modulate global manufacturing operations under different tariff scenarios.

A: Bren Higgins responded that the decision to postpone Investor Day was due to global trade uncertainty. Tariff impact on KLA is fluid, with some headwind to gross margin related to service business contract streams in China and other geographies. Mitigation steps include evaluating operational processes and pricing strategies.

Q: Atif Malik inquired about services growth outlook and competitive positioning in advanced packaging.

A: Bren Higgins said services growth for 2025 is trending around 10%, slightly below long-term target due to export control impacts. Richard Wallace discussed KLA's competitive positioning in advanced packaging, noting adaptation of front-end solutions to back-end, and strong growth in the sector with market share gains.

Q: Vivek Arya asked about China's impact on 2025 WFE and gauge for 2026 WFE.

A: Bren Higgins said China's business in KLA is around 30% for 2025, with overall company revenue down 15%-20% due to China. Richard Wallace mentioned feedback from customers on AI build-out and continued growth in leading-edge areas, but uncertainty around macro factors.