Core Insights - KLA reported a revenue of $3.08 billion for the quarter ended December 2024, marking a year-over-year increase of 23.7% and exceeding the Zacks Consensus Estimate of $2.93 billion by 4.88% [1] - The company's EPS for the same period was $8.20, up from $6.16 a year ago, representing a surprise of 6.08% compared to the consensus estimate of $7.73 [1] Revenue Breakdown - Semiconductor Process Control revenues reached $2.76 billion, surpassing the estimated $2.62 billion, with a year-over-year increase of 25.6% [4] - Specialty Semiconductor Process revenues were reported at $160.41 million, exceeding the average estimate of $141.12 million, reflecting a 6.9% year-over-year change [4] - Service revenues totaled $667.39 million, slightly below the estimated $671.85 million, but still showing an 18.1% increase compared to the previous year [4] - Product revenues amounted to $2.41 billion, exceeding the average estimate of $2.24 billion, with a year-over-year growth of 25.4% [4] - PCB, Display and Component Inspection revenues were reported at $161.08 million, above the estimated $147.47 million, representing a 12.6% year-over-year increase [4] Stock Performance - KLA shares have returned +13.2% over the past month, significantly outperforming the Zacks S&P 500 composite's +1.2% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Group 1 - KLA reported quarterly earnings of $8.20 per share, exceeding the Zacks Consensus Estimate of $7.73 per share, and up from $6.16 per share a year ago, representing an earnings surprise of 6.08% [1] - The company achieved revenues of $3.08 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 4.88%, compared to $2.49 billion in the same quarter last year [2] - KLA has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Group 2 - KLA shares have increased approximately 13.2% since the beginning of the year, significantly outperforming the S&P 500's gain of 2.7% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $7.63 on revenues of $2.9 billion, and for the current fiscal year, it is $30.35 on revenues of $11.6 billion [7] Group 3 - The Zacks Industry Rank places Electronics - Miscellaneous Products in the top 36% of over 250 Zacks industries, indicating a favorable outlook for the sector [8] - Bel Fuse, another company in the same industry, is expected to report a quarterly earnings decline of 43.8% year-over-year, with revenues projected to decrease by 4.8% [9]

Financial Performance - KLA Corporation reported GAAP net income of $824.5 million and revenues of $3.08 billion for Q2 FY 2025, representing a 23.6% increase in revenue compared to $2.49 billion in Q2 FY 2024[2][3]. - Non-GAAP net income for Q2 FY 2025 was $1.10 billion, with non-GAAP net income per diluted share at $8.20, up from $6.16 in Q2 FY 2024[3][10]. - KLA Corporation reported a net income of $824,527,000 for the three months ended December 31, 2024, compared to $582,534,000 for the same period in 2023, representing an increase of 41.6%[11]. - Total revenues for reportable segments reached $3,077,230,000 for the three months ended December 31, 2024, up from $2,487,176,000 in 2023, reflecting a growth of 23.7%[12]. - KLA Corporation's non-GAAP net income for the three months ended December 31, 2024, was $1,098,444,000, compared to $839,202,000 in 2023, an increase of 30.9%[13]. - KLA Corporation's GAAP net income per diluted share for the three months ended December 31, 2024, was $6.16, up from $4.28 in 2023, reflecting a growth of 44.0%[13]. Revenue and Segment Performance - The Semiconductor Process Control segment generated revenues of $2,755,743,000, a 25.6% increase from $2,194,079,000 in the prior year[12]. - The company expects total revenues for Q3 FY 2025 to be in the range of $3.0 billion +/- $150 million, with GAAP diluted EPS projected between $7.77 and $8.37[4][5]. Cash Flow and Capital Expenditures - Cash flow from operating activities for the last twelve months was $3.65 billion, with free cash flow at $3.36 billion[4]. - KLA Corporation's free cash flow for the three months ended December 31, 2024, was $757,192,000, compared to $545,441,000 in 2023, marking an increase of 38.7%[15]. - The company reported capital expenditures of $92,323,000 for the three months ended December 31, 2024, compared to $76,801,000 in 2023, representing an increase of 20.2%[15]. Asset and Liability Management - Total current assets decreased to $9.77 billion as of December 31, 2024, down from $10.03 billion as of June 30, 2024[9]. - KLA's total liabilities were reported at $11.42 billion, a decrease from $12.07 billion as of June 30, 2024[9]. - KLA's total stockholders' equity increased to $3.58 billion as of December 31, 2024, compared to $3.37 billion as of June 30, 2024[9]. - KLA Corporation's total cash and cash equivalents at the end of the period were $1,838,278,000, compared to $1,665,054,000 at the end of the same period in 2023, an increase of 10.4%[11]. Impairment and Charges - The company experienced a $239.1 million impairment charge for goodwill and purchased intangible assets, impacting GAAP EPS by $1.76 per diluted share[4][10]. - Impairment charges for goodwill and purchased intangible assets were recognized due to downward revisions in financial outlook for PCB and Display reporting units[21]. - The impairment charge in fiscal 2024 was due to a downward revision in the PCB business forecast, while fiscal 2025 saw continued deterioration in long-term forecasts[21]. Stock Repurchase - The company repurchased $650,121,000 worth of common stock during the three months ended December 31, 2024, compared to $437,817,000 in the same period of 2023, indicating a rise of 48.3%[16]. Non-GAAP Financial Information - The company provides non-GAAP financial information to enhance understanding of operating performance and future prospects[20]. - Non-GAAP metrics include non-GAAP net income, non-GAAP net income per diluted share, non-GAAP gross margin, and free cash flow, which help compare performance across periods and with other companies[20]. - The income tax effect of non-GAAP adjustments includes tax impacts from excluded items and discrete tax items related to foreign currency gains/losses[22]. - Discrete tax items in fiscal 2024 included recognition of a deferred tax asset, while fiscal 2023 had a one-time tax benefit from restructuring international ownership of intellectual property[22].

Financial Performance - KLA Corporation reported GAAP net income of $824.5 million for Q2 FY 2025, with a diluted EPS of $6.16 on revenues of $3.08 billion, marking a significant increase from $2.49 billion in Q2 FY 2024 [1][3][8] - Non-GAAP net income for the same period was $1.10 billion, with a non-GAAP diluted EPS of $8.20, reflecting strong profitability despite challenges from new U.S. government export controls [4][8] Revenue Growth - Total revenues for Q2 FY 2025 reached $3.08 billion, exceeding the guidance range of $2.95 billion +/- $150 million, indicating robust demand in the semiconductor sector [2][8] - The revenue growth was driven by investments in AI and high-performance computing, aligning with increasing technology complexity and larger semiconductor devices [2][8] Segment Performance - The Semiconductor Process Control segment generated $2.76 billion in revenue, up from $2.19 billion in the same quarter last year, showcasing strong performance in this key area [14] - Specialty Semiconductor Process and PCB and Component Inspection segments also reported revenue increases, contributing to the overall growth [14] Cash Flow and Capital Returns - Cash flow from operating activities for the quarter was $849.5 million, with free cash flow of $757.2 million, demonstrating strong cash generation capabilities [8][15] - Capital returns for the quarter totaled $876.9 million, including $226.8 million in dividends and $650.1 million in stock repurchases, reflecting the company's commitment to returning value to shareholders [8][15] Guidance for Future Performance - For Q3 FY 2025, KLA expects total revenues to be in the range of $3.0 billion +/- $150 million, with GAAP diluted EPS projected between $7.77 and $8.37 [9][16] - The company anticipates a GAAP gross margin of approximately 60.6% +/- 1.0% and a non-GAAP gross margin of around 62.0% +/- 1.0% for the upcoming quarter [9][16]

Group 1 - The analysis focuses on identifying companies with a wide economic moat and long-lasting competitive advantage through key metrics [1] - The emphasis is on high-quality companies that can outperform the market over the long run due to their competitive advantages and high levels of defensibility [1] - The analysis is primarily focused on European and North American companies, without constraints regarding market capitalization, covering both large cap and small cap companies [1] Group 2 - The analyst has a beneficial long position in the shares of Intel (INTC) through stock ownership, options, or other derivatives [2] - The article expresses the analyst's own opinions and is not receiving compensation from any company mentioned [2]

Core Viewpoint - BofA Securities analyst Vivek Arya anticipates fourth-quarter earnings for semiconductor capital equipment, with key reports from ASML Holding, Lam Research Corp, and KLA Corp scheduled for late January [1] Subsector Sentiment - Year-to-date sentiment in the semiconductor capital equipment sector has improved, but complexities arise from potential impacts of DeepSeek's advancements [2] - Risks include reduced AI-related spending if DeepSeek's R1 leads to lower demand for large language models, capital expenditure cuts in memory sectors, and high consensus estimates compared to industry growth expectations [2] Positive Catalysts - If DeepSeek's technology makes inference more cost-effective at the edge, it could trigger a device upgrade cycle in PCs and smartphones, benefiting leading-edge Wafer Fab Equipment [3] - Recent developments include less severe China export restrictions, a positive capex outlook for Taiwan Semiconductor Manufacturing Co, and Intel's capital expenditure plans remaining intact [3] Market Forecasts - Arya maintains a $105 billion Wafer Fab Equipment outlook for calendar 2025, expecting alignment on key issues with upcoming earnings reports [4] - Price targets for KLA Corp, Nova Ltd, and Camtek Ltd have been raised due to favorable data points for leading-edge foundry/logic and HBM spending [4] China Market Insights - The forecast for China’s Wafer Fab Equipment market has been increased to $31.5 billion, reflecting a 15% year-over-year decline, as local semiconductor companies gain market share [5] Growth Estimates - Consensus estimates for the top five semiconductor capital equipment companies project a 10% year-over-year growth for calendar 2025, which is above Arya's forecast of 5% [6] - Excluding ASML, the top semiconductor capital equipment growth is estimated at 8% [6] Stock Performance - Despite the DeepSeek sell-off, semiconductor capital equipment stocks have outperformed the sector year-to-date, with notable gains from Nova Ltd, KLA Corp, Applied Materials, Camtek Ltd, and Lam Research [7] Valuation Insights - Valuations for semiconductor capital equipment companies have been adjusted to reflect anticipated WFE growth, with long-term CAGR projected at 7.5% through 2030-2032 [8] - The sector exhibits superior free cash flow margins compared to the median for S&P 500 industrial companies [8]

Core Viewpoint - The announcement of DeepSeek's new open-source large language model (LLM) has raised concerns about the future demand for advanced semiconductor chips, impacting semiconductor manufacturing equipment stocks significantly [1][2][3]. Semiconductor Manufacturing Equipment Stocks - Shares of semiconductor manufacturing equipment companies such as Lam Research, KLA, and ASML have seen declines, with Lam Research down 5.6%, KLA down 6.3%, and ASML down 6.5% as of 11:55 a.m. ET [3]. - The sales of these companies have slumped in 2024 due to prior equipment purchases by China and ongoing sanctions limiting further sales [5]. - There are concerns that if China can produce LLMs with fewer and cheaper chips, it may not need to expand production capacity, leading to slower global sales of semiconductor manufacturing equipment [6]. Valuation and Growth Projections - Lam Research is currently valued at just over 25 times trailing earnings, KLA at 34 times, and ASML at 40 times, indicating varying levels of valuation among these stocks [8]. - Long-term earnings growth estimates suggest that Lam and KLA are expected to grow earnings at about 15% annually over the next five years, while ASML is projected to grow at 17% [9]. - The current growth projections may be overly optimistic given the implications of DeepSeek's announcement, potentially leading to higher PEG ratios and lower actual growth rates than previously anticipated [10]. Investment Considerations - The current sell-off in semiconductor manufacturing equipment stocks may not yet present a clear buying opportunity, and a margin of safety is advised before making investment decisions [11].

Core Viewpoint - KLA Corporation is set to report its second-quarter fiscal 2025 results, with expectations of strong revenue growth driven by demand in its wafer inspection business and advanced packaging portfolio, despite challenges in its China operations and PCB segment [1][5][6]. Revenue Expectations - KLA anticipates revenues of $2.95 billion, with a variance of $150 million, compared to the Zacks Consensus Estimate of $2.93 billion, reflecting a year-over-year increase of 17.98% [2]. - The company expects to achieve over $500 million in revenues from its advanced packaging portfolio in calendar year 2024, indicating strong customer adoption [5]. Earnings Projections - KLA forecasts non-GAAP earnings of $7.75 per share, with a variance of 60 cents, while the consensus estimate stands at $7.73 per share, representing a year-over-year growth of 25.49% [3]. - The company has consistently surpassed the Zacks Consensus Estimate in the past four quarters, with an average surprise of 6.02% [3]. Market Dynamics - The performance in the second quarter is expected to benefit from robust demand for wafer inspection due to the increasing complexity of semiconductor devices and the adoption of advanced technologies [3]. - The services business is likely to see growth from a larger installed base and increased customer demand for maintenance and performance optimization [4]. Challenges - KLA faces challenges from export controls and geopolitical tensions, particularly affecting its operations in China, where revenue contribution is projected to decline from 42% to 30% in fiscal 2025 [5]. - The PCB and Component Inspection segment has struggled with consistent growth, which is expected to negatively impact the second-quarter performance [6].

Group 1: Stock Performance and Market Dynamics - Shares of semiconductor equipment companies such as Applied Materials, Lam Research, and KLA Corporation saw significant gains, with increases of 4.5%, 4%, and 4.3% respectively [1] - Despite these gains, these stocks are down between 20% and 32% from their summer highs, indicating a volatile market environment [1][4] Group 2: TSMC's Impact on the Semiconductor Industry - Taiwan Semiconductor Manufacturing Company (TSMC) reported higher-than-expected capital expenditures for the upcoming year, forecasting a substantial growth cycle [2][5] - TSMC predicts a near-20% compound annual growth rate (CAGR) for revenue from 2025 to 2029, driven by a mid-40% annual CAGR for AI accelerators [5][6] Group 3: Capital Expenditures and Equipment Demand - TSMC plans to increase its capital expenditures to between $38 billion and $42 billion, a 33% increase from the previous year, which is expected to benefit semiconductor equipment manufacturers [6][7] - The transition to new transistor technologies will expand the addressable market for companies like Lam and Applied, as these innovations require more advanced manufacturing processes [7] Group 4: Long-term Investment Outlook - Semiconductor capital equipment stocks are considered strong long-term holds due to their correlation with the growing semiconductor industry and their profitability [9] - Despite the volatility and potential for significant drawdowns, these stocks are recommended for investors who can withstand market fluctuations [10][11]

KLA Corporation KLAC shares are ripping higher on Thursday. They are trading in sympathy with Taiwan Semiconductor Manufacturing Company Limited TSM, which reported earnings ahead of estimates.But KLA Corporation may be about to reverse and head lower. This is why our team of technical analysts has made it our Stock of the Day.Momentum is a measurement of how far a stock has moved up or down in a given period of time. Most of the time, a stock will stay in its typical or usual trading range.If sellers are a ...