Process control intensity

Search documents
KLA(KLAC) - 2025 Q4 - Earnings Call Transcript
2025-07-31 22:02
Financial Data and Key Metrics Changes - KLA reported revenue of $3,175,000,000 for the quarter, representing a 24% year-over-year growth [6][10] - Non-GAAP diluted EPS was $9.38, while GAAP diluted EPS was $9.06, both at or above the high end of guidance [6][12] - Free cash flow reached a record of over $1,000,000,000 for the quarter, totaling $1,065,000,000 [11] - Gross margin was 63.2%, slightly above the midpoint of guidance [13] - Operating margin stood at 44.2% [13] Business Line Data and Key Metrics Changes - Advanced Packaging Systems revenue is expected to exceed $925,000,000 in calendar 2025, up from a previous estimate of $850,000,000 [10] - Services revenue grew to $703,000,000 in the quarter, up 5% sequentially and 14% year-over-year [10] - The process control systems business, particularly inspection, saw a 50% year-to-date increase, while patterning remained flattish [36][38] Market Data and Key Metrics Changes - KLA's assessment for wafer fabrication equipment (WFE) in 2025 remains consistent with previous expectations, with mid-single-digit growth anticipated [16] - Foundry logic revenue is forecasted to be approximately 75% of semiconductor process control systems revenue, with memory expected to be about 25% [18] - DRAM is expected to account for about 79% of memory revenue, with NAND making up the remaining 21% [18] Company Strategy and Development Direction - KLA is focusing on increasing investment in leading-edge logic, high bandwidth memory, and advanced packaging to drive growth [16][22] - The company aims to capitalize on strong growth and expanded market share in critical markets for customers [9] - KLA's operating model emphasizes prioritizing and productizing new innovations in product roadmaps [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform the overall WFE market in 2025, driven by strong business momentum and expanding market share opportunities [16][22] - Customer discussions indicate constructive expectations for growth in 2026, particularly in advanced logic and packaging [22] - The long-term trends driving semiconductor industry demand are compelling, presenting a relative performance opportunity for KLA [23] Other Important Information - KLA's total capital return in the quarter was $680,000,000, including $426,000,000 in share repurchases and $254,000,000 in dividends [11] - The company announced a new $5,000,000,000 share repurchase authorization [15] Q&A Session Summary Question: Insights on growth expectations for 2026 - Management is encouraged by early customer discussions indicating potential growth in 2026, driven by high-performance compute and advanced logic investments [27][28] Question: Impact of competition in China - Management stated it is too early to determine the extent of investment declines in China, but they expect some headwinds [32][33] Question: Drivers of strength in inspection business - The inspection business has seen strong growth due to supply constraints being alleviated and increased demand for advanced packaging [36][38] Question: Process control intensity in memory - Management noted that process control intensity is increasing due to the complexity of high bandwidth memory and larger die sizes [52][56] Question: Gross margin outlook - Gross margins are expected to remain around 62.5%, with ongoing assessments of tariff impacts [19][61] Question: Memory revenue expectations - Management anticipates DRAM revenue to strengthen in the December quarter compared to September [68][70] Question: Market share gains and revenue targets for 2026 - KLA is confident in its market share gains and does not require the previously assumed WFE levels to achieve its 2026 revenue targets [72][75] Question: Process control intensity correlation with lithography - Management explained that the correlation has changed due to increased design variability and the need for higher process control intensity [82][86]