Financial Data and Key Metrics Changes - KLA reported revenue of $3,060,000,000 for the March quarter, exceeding the guidance midpoint of $3,000,000,000, with a non-GAAP diluted EPS of $8.41 and GAAP diluted EPS of $8.16 [7][15] - The gross margin was 63%, about 50 basis points higher than the guidance midpoint, driven by a stronger product mix within the Process Control segment [15][21] - Free cash flow for the quarter was $990,000,000, with a total of $3,500,000,000 over the past twelve months, resulting in a free cash flow margin of 30% [13][18] Business Line Data and Key Metrics Changes - KLA's advanced packaging revenue grew to over $500,000,000 in calendar 2024 and is expected to exceed $850,000,000 in calendar 2025, reflecting strong customer adoption [12] - The services business grew to $669,000,000 in March, marking a 13% year-over-year increase, despite challenges from U.S. Government export controls [12][47] - The Process Control segment maintained a strong global share, with a notable increase in advanced wafer level packaging market share, moving from third position in 2019 to a leading position in 2025 [10][11] Market Data and Key Metrics Changes - KLA's market share in the WFE and process control markets remained strong, with a 30% year-over-year revenue increase attributed to investments in leading-edge logic and high bandwidth memory [11][19] - The company expects WFE to grow by mid-single digits percentage in 2025, driven by investments in leading-edge foundry and logic, partially offset by lower demand from China [19][24] - KLA's exposure to the Chinese market was approximately 26% in March, with expectations of it being around 30% for the year, despite potential declines due to export controls [56][57] Company Strategy and Development Direction - KLA's strategy focuses on capital return, with a commitment to increasing dividends and share repurchases, announcing a 12% increase in quarterly dividends and a new $5,000,000,000 share repurchase authorization [14][18] - The company aims to leverage its unique product portfolio to support technology transitions and ensure high-volume production, particularly in advanced packaging and AI infrastructure [20][24] - KLA plans to postpone its Investor Day to early to mid-2026, hoping for a more stable macro environment to discuss growth strategies [9][33] Management's Comments on Operating Environment and Future Outlook - Management noted that despite macro uncertainties, there has been no change in customer demand or investment plans, indicating confidence in continued growth [8][9] - The company highlighted the importance of AI as a key driver for growth, with increasing complexity in semiconductor design and production [11][62] - Management expressed optimism about the 2026 outlook, citing ongoing investments in AI infrastructure and the need for capacity expansion among customers [61][70] Other Important Information - KLA's balance sheet remains strong, with $4,000,000,000 in cash and cash equivalents, and a debt of $5,900,000,000, supporting growth strategies and capital returns [18] - The company is adapting its product offerings to meet the evolving needs of the advanced packaging market, particularly in high bandwidth memory and hybrid bonding technologies [51][93] Q&A Session Summary Question: Impact of tariffs on equipment and systems - Management acknowledged the fluidity of tariff impacts and the potential headwinds on gross margins, particularly in the service business, while emphasizing their ability to manage global manufacturing operations [27][30][34] Question: Growth outlook for services - The services business is expected to grow in the low double digits for the year, slightly below long-term targets due to export control impacts [46][48] Question: Competitive positioning in advanced packaging - KLA has seen significant growth in advanced packaging, particularly in CoAOS, and is well-positioned to capitalize on the increasing demand for high bandwidth memory [49][51] Question: Revenue expectations from China - Management expects China to contribute around 30% of revenue for the year, with potential fluctuations due to macroeconomic factors [56][57] Question: Factors influencing gross margin guidance - The increase in gross margin guidance is attributed to product mix improvements and scale benefits from advanced packaging, despite tariff impacts [72][74]

Financial Data and Key Metrics Changes - KLA reported revenue of $3,060 million for the March quarter, exceeding the guidance midpoint of $3,000 million, with a non-GAAP diluted EPS of $8.41 and GAAP diluted EPS of $8.16, both at the upper end of guidance ranges [5][12] - The gross margin was 63%, about 50 basis points higher than the guidance midpoint, driven by a stronger product mix within the Process Control segment [12][18] - Quarterly free cash flow was $990 million, with total capital returns of $733 million, including $507 million in share repurchases and $226 million in dividends [10][11] Business Line Data and Key Metrics Changes - KLA's advanced packaging revenue grew to over $500 million in calendar 2024 and is expected to exceed $850 million in calendar 2025, reflecting strong customer adoption [9][15] - The services business grew to $669 million in March, marking a 13% year-over-year increase, despite challenges from U.S. government export controls [10][12] - The process control share of the advanced wafer level packaging market has grown significantly, moving from third position in 2019 to a leading position expected in 2025 [7][8] Market Data and Key Metrics Changes - KLA maintained a strong global share in the WFE and process control markets, with a notable share gain in advanced wafer level packaging [7][8] - The company expects the WFE market to grow by mid-single digits in 2025, driven by investments in leading-edge foundry and logic, and high bandwidth memory [15][16] Company Strategy and Development Direction - KLA's strategy focuses on capital return and confidence in business opportunities, with a commitment to assertive capital allocation [6][11] - The company is adapting its product offerings to support advanced packaging and AI infrastructure, which are critical for future growth [9][17] - KLA plans to postpone its Investor Day to early 2026, hoping for a more stable macro environment to discuss growth strategies [6][30] Management's Comments on Operating Environment and Future Outlook - Management noted that despite macro uncertainties, there has been no change in customer demand or investment plans [6][30] - The company remains optimistic about growth opportunities in leading-edge logic, high bandwidth memory, and advanced packaging, despite potential impacts from global trade uncertainties [15][21] - KLA's management emphasized the importance of customer discussions and alignment with shipment requirements in a fluid business environment [17][21] Other Important Information - KLA announced a 12% increase in its quarterly dividend to $1.90 per share and a new $5 billion share repurchase authorization [14] - The company expects gross margins for the year to be approximately 62.5%, factoring in potential tariff impacts [18][19] Q&A Session Summary Question: Impact of tariffs on equipment and systems - Management acknowledged the fluidity of tariff impacts and the potential headwinds on gross margins, particularly in the service business [24][26][30] Question: Competitive positioning in e-beam inspection - KLA has seen significant progress in e-beam inspection, doubling revenues and gaining market share due to strong customer evaluations and interoperability with optical tools [34][36][38] Question: Full year outlook on services growth - Services growth is expected to trend around 10% for the year, slightly below long-term targets due to impacts from export controls [43][46] Question: Advanced Packaging competitive positioning - KLA's differentiation lies in adapting front-end solutions for back-end applications, particularly in CoAOS, driving significant growth in advanced packaging [47][49][50] Question: Outlook for China revenue - Management expects China to represent around 30% of total business for the year, with potential fluctuations in quarterly performance [54][56] Question: Factors influencing 2026 outlook - The company remains optimistic about continued growth driven by AI infrastructure investments, despite uncertainties in the macro environment [58][62][68]

Core Insights - KLA Corporation is expected to report third-quarter fiscal 2025 results on April 30, with projected revenues of $3 billion, plus/minus $150 million, indicating a year-over-year increase of 27.36% [1] - The company anticipates non-GAAP earnings of $8.05 per share, plus/minus 60 cents, reflecting a year-over-year growth of 53.23% [2] Revenue and Earnings Expectations - The Zacks Consensus Estimate for revenues is pegged at $3.01 billion, which is slightly above KLA's own revenue guidance [1] - The consensus mark for earnings is at $8.06 per share, which has decreased by a penny over the past month [2] Growth Drivers - KLA's advanced packaging portfolio is experiencing momentum due to rising demand for powerful chip systems and complex chip integration, with advanced packaging revenues projected to exceed $800 million in 2025, up from $500 million in 2024 [3] - The company's growth in the wafer fab equipment market is supported by strong investments in leading-edge logic, high-bandwidth memory, and advanced packaging, contributing positively to its performance [4] - Advancements in artificial intelligence (AI) are driving demand for advanced semiconductors and process control solutions, which are expected to significantly impact KLA's third-quarter performance [5] Services Segment Performance - KLA's Services segment reported $667 million in revenues in the second quarter of fiscal 2025, marking its 50th consecutive quarter of year-over-year growth, which is likely to have a positive impact on the upcoming quarter [6] Tax and Regulatory Considerations - KLA anticipates a modest increase in its effective tax rate to approximately 14% in the second half of 2025 due to global tax reforms, which may negatively affect the reported quarter [7] - Ongoing uncertainty regarding the U.S. government's processing of export licenses could pose additional risks to revenue performance [7] Earnings Prediction Model - According to the Zacks model, KLA has an Earnings ESP of +0.23% and a Zacks Rank of 3, indicating a reasonable chance of an earnings beat [8]