Key Takeaways U.S. stocks rose in January, setting up five momentum picks spanning tech, beauty, mining and semiconductors.AI data centers and cloud upgrades are boosting demand for Amphenol solutions, Seagate storage and KLA tools.Ulta Beauty and Coeur Mining post solid growth outlooks, with earnings estimates rising across five picks. U.S. stock markets started 2026 on a positive note after an astonishing rally in the last three years. In January, the three major stock indexes — the Dow, the S&P 500 and t ...

KLA Corporation Conference Call Summary Company Overview - **Company**: KLA Corporation (NasdaqGS: KLAC) - **Date of Conference**: December 03, 2025 - **Speaker**: Brian Higgins, CFO Key Industry Insights Equipment Market Trends - The wafer fabrication equipment (WFE) market is expected to see modest growth in the first half of 2026, with an acceleration in the second half driven by high-performance computing and advanced packaging [6][12] - KLA has experienced mid-teens revenue growth and high 20% EPS growth in 2025, indicating strong market positioning and execution [6][12] - The company anticipates a WFE market size between $105 billion and $110 billion for 2025, with advanced packaging contributing an additional $11 billion [14] Drivers of Growth - Investment in leading-edge technology nodes, particularly the two-nanometer node, is expected to drive growth, with high-bandwidth memory and advanced packaging being significant contributors [9][10] - The design environment has improved since the seven-nanometer node, leading to increased process control intensity and efficiency [7][8] - KLA's share of the WFE market has increased, with expectations of further share gains due to broadening investments in leading-edge technology [15][16] Regional Market Dynamics - The Chinese market is projected to be modestly down, with KLA's share of the market declining from 40% in 2024 to mid-20s in 2026 due to export controls and market access issues [22][24][25] - The impact of the BIS rule change is estimated to have cost KLA approximately $300 million in expected revenue [25] Financial Performance Revenue and Margins - Advanced packaging revenue reached approximately $925 million in 2025, up 70% year-over-year, indicating strong demand in the logic segment [35][36] - Gross margin is guided at 62% for the quarter, with expectations of maintaining this level in the coming year despite tariff headwinds [44][47] Service Business Growth - KLA's service business is growing at a rate of 12%-14%, driven by high customer reliance on process control systems and increased contract pricing [48][52] - The average life of KLA systems has increased, contributing to a growing installed base and service revenue [51][52] Competitive Landscape - KLA faces limited competition in the advanced process control market, particularly in China, where domestic alternatives are not yet formidable [30][31] - The company is optimistic about engaging with new customers and expanding its market presence as the foundry market broadens [32][34] Conclusion - KLA Corporation is well-positioned for growth in the semiconductor equipment market, driven by advancements in technology nodes, strong demand for process control, and a robust service business. The company is navigating challenges in the Chinese market while capitalizing on opportunities in advanced packaging and high-performance computing.

Financial Data and Key Metrics Changes - KLA reported revenue of $3.21 billion for the September quarter, exceeding the guidance midpoint of $3.15 billion [6][11] - Non-GAAP diluted EPS was $8.81, while GAAP diluted EPS was $8.47, both above the guidance midpoint [11] - Gross margin improved to 62.5%, 50 basis points above the guidance midpoint, driven by a stronger product mix and manufacturing efficiencies [12] - Free cash flow reached $3.9 billion with a free cash flow margin of 31% [9] Business Line Data and Key Metrics Changes - Advanced packaging revenue is expected to exceed $925 million for calendar year 2025, representing a 70% year-over-year increase [8] - Service revenue grew to $745 million in the September quarter, up 6% sequentially and 16% year-over-year [8] - Non-GAAP operating margin was reported at 43.2% [12] Market Data and Key Metrics Changes - KLA anticipates mid to high single-digit growth in wafer fab equipment (WFE) for 2025, driven by investments in leading-edge foundry logic and memory [16] - The advanced packaging market is expected to grow more than 20% compared to the previous year [16] - The company estimates a revenue impact of approximately $300 million-$350 million due to export controls affecting certain customers in China [17] Company Strategy and Development Direction - KLA is focusing on expanding its market leadership in advanced packaging and process control, addressing all growth markets in WFE [9][10] - The company emphasizes a disciplined approach to capital allocation, aiming to maximize total shareholder value [10] - KLA's product portfolio is designed to support technology transitions and ensure yield entitlement in high-volume production [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the semiconductor industry's growth in 2026, with expectations for a broader spending profile compared to 2025 [17] - Customer discussions have become more constructive, indicating a growth year for the industry in 2026 [17] - The company remains focused on supporting customers and driving productivity across the enterprise [22] Other Important Information - KLA's total capital return in the September quarter was $799 million, including $545 million in share repurchases and $254 million in dividends [9] - The company announced a $5 billion share repurchase authorization and a 12% increase in quarterly dividends [14][15] Q&A Session Summary Question: Insights on WFE growth outlook - Management noted that the outlook is more about confidence in timing rather than a significant change in magnitude, with constructive discussions around leading-edge investments [29][30] Question: Decline in foundry/logic revenue - The decline is attributed to a reduction in China, which was elevated in the previous quarter, while leading-edge revenue is expected to increase [39][40] Question: Gross margin guidance - The guidance down is primarily due to product mix adjustments, with a consistent tariff impact [44][45] Question: Advanced packaging process control intensity - KLA's share of the advanced packaging market is expected to grow, with increasing process control intensity as designs become more complex [50][52] Question: AI spending impact on WFE - Management agreed that significant AI spending could translate to increased WFE demand, particularly in memory and advanced packaging [56][57] Question: Memory growth expectations - The company expects DRAM investment to grow next year, driven by strong customer announcements and increased spending [98][99] Question: Foundry-related revenue opportunities - There is a broadening of investment discussions with foundries, indicating a shift towards yield improvement tools [102][103]

Financial Data and Key Metrics Changes - KLA reported revenue of $3.21 billion for the September quarter, exceeding the guidance midpoint of $3.15 billion [8][9] - Non-GAAP diluted EPS was $8.81, while GAAP diluted EPS was $8.47, both above the midpoint of their respective guidance ranges [8][9] - Gross margin improved to 62.5%, 50 basis points above the midpoint of guidance, driven by a stronger product mix and manufacturing efficiencies [9] - Free cash flow reached $3.9 billion with a free cash flow margin of 31% [6] Business Line Data and Key Metrics Changes - Advanced packaging revenue is expected to exceed $925 million for calendar year 2025, representing a 70% year-over-year increase [5] - Satellite service business revenue grew to $745 million in the September quarter, up 6% sequentially and 16% year over year [5] - Non-GAAP operating margin was reported at 43.2% [9] Market Data and Key Metrics Changes - The advanced packaging market is projected to grow more than 20% compared to the previous year [12] - KLA's share of the wafer fab equipment (WFE) market is expected to grow, with the advanced packaging market now estimated at approximately $11 billion [11][12] - China’s contribution to KLA's revenue is expected to decline to the high 20s percentage range due to export controls and normalization [51] Company Strategy and Development Direction - KLA is focusing on capitalizing on the growing demand for advanced packaging and AI infrastructure investments [4][8] - The company aims to outperform the mid to high single-digit growth rate in WFE for 2025, driven by rising process control intensity [12][17] - KLA's strategy includes consistent capital returns and long-term investment to maximize shareholder value [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the semiconductor industry's growth in 2026, with expectations for a broader spending profile compared to 2025 [13] - The company anticipates a revenue impact of approximately $300 million to $350 million due to export controls affecting certain customers in China [14] - Management noted constructive customer discussions regarding investments in leading-edge logic and DRAM, indicating a positive outlook for the industry [25][76] Other Important Information - KLA's total capital return in the September quarter was $799 million, including $545 million in share repurchases and $254 million in dividends [6] - The company announced a $5 billion share repurchase authorization and a 12% increase in quarterly dividends [10][11] Q&A Session Summary Question: Insights on WFE growth outlook - Management indicated that the outlook is more about confidence in timing rather than a significant change in growth expectations, with positive signs from leading-edge foundry logic and DRAM investments [25][26] Question: Decline in foundry/logic revenue - The decline is attributed to a reduction in China’s contribution, which was elevated in the previous quarter, while leading-edge and memory segments are expected to uptick [31][32] Question: Gross margin guidance - The guidance down is primarily due to product mix adjustments, with expectations for gross margins to remain stable based on consistent factory output [35][36] Question: Advanced packaging process control intensity - Management clarified that KLA's share of the advanced packaging market is growing, with expectations for continued growth in process control intensity as designs become more complex [39][42] Question: DRAM growth expectations - Management expects DRAM to be a growth area next year, driven by increased capital intensity and customer investments [75][76] Question: Foundry-related revenue opportunities - There is encouragement regarding broader investment discussions with foundry customers, particularly those looking to improve yield and process control [78]

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]

Financial Data and Key Metrics Changes - KLA reported revenue of $3,175,000,000 for the quarter, representing a 24% year-over-year growth [5][8] - Non-GAAP diluted EPS was $9.38, while GAAP diluted EPS was $9.06, both at or above the high end of guidance [11][12] - Free cash flow reached a record of over $1,000,000,000 for the quarter, totaling $1,065,000,000 [10][12] - Gross margin was 63.2%, slightly above the midpoint of guidance [12][19] Business Line Data and Key Metrics Changes - Advanced Packaging revenue is expected to exceed $925,000,000 in calendar 2025, up from a previous estimate of $850,000,000 [9] - The Services segment grew to $703,000,000 in June, up 5% sequentially and 14% year-over-year [9] - The process control systems business, particularly inspection, saw a 50% year-to-date increase, while patterning remained flat [35][36] 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][22] - Foundry logic revenue is forecasted to be approximately 75% of semiconductor process control systems revenue, with memory expected to be about 25% [18] - The company expects DRAM 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 enhancing AI capabilities, which has driven growth in the semiconductor industry through complex designs and advanced packaging [6][7] - The company aims to capitalize on strong growth and expanded market share by prioritizing innovation in product roadmaps [7][22] - KLA's strategy includes maintaining a disciplined capital allocation to maximize long-term shareholder value [10][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in outperforming the overall WFE market in 2025, driven by strong business momentum and expanding market share opportunities [16][22] - Early customer discussions indicate constructive expectations for growth in 2026, particularly in advanced logic and packaging [27][28] - The company remains cautious about geopolitical trends but is encouraged by customer engagement and technology transitions [22][22] Other Important Information - KLA announced a new $5,000,000,000 share repurchase authorization and a 12% increase in quarterly dividends [14][15] - The company maintains a flexible bond maturity profile supported by strong investment-grade ratings [13] Q&A Session Summary Question: Insights on growth expectations for 2026 - Management is optimistic about growth in 2026 based on early customer discussions, particularly in high-performance computing and advanced logic [27][28] Question: Impact of competition in China - It is too early to determine the extent of competition in China, but management expects some headwinds in investment levels [31][32] 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 [35][36] Question: Expectations for memory revenue - Management anticipates DRAM revenue to strengthen in December compared to September, driven by timing of revenue recognition [65][66] Question: Market share gains and revenue targets for 2026 - KLA is well-positioned for market share gains, with expectations of achieving a revenue target of $14,000,000,000 for 2026 based on current growth rates [67][71]

Core Insights - Investors are encouraged to focus on companies that deliver strong returns after accounting for all operating and non-operating expenses, emphasizing the importance of profitability over loss-making firms [1] Company Analysis - Intuit Inc. (INTU), Dave Inc. (DAVE), and Nova Ltd. (NVMI) are highlighted as top investment picks for the second half of the year due to their high net income ratios [2] - The net income ratio is a critical measure of a company's profitability, indicating the percentage of net income relative to total sales revenues, with higher ratios suggesting better revenue generation and expense management [3] - The 12-month net profit margins for the selected companies are as follows: NVMI at 28.5%, INTU at 19.1%, and DAVE at 13.8%, all demonstrating strong sales and income growth compared to industry averages [9][10] Screening Criteria - Additional screening parameters include: - Zacks Rank of 1, indicating a strong buy recommendation based on historical performance [4] - Trailing 12-month sales and net income growth exceeding industry averages [5] - A net income ratio higher than the industry average, reflecting solid profitability [5] - A strong buy percentage rating greater than 70%, indicating a majority of broker recommendations are positive [5]

Group 1: Market Overview - High volatility in markets throughout 2025 has created opportunities for momentum investors to capture gains when target stocks rise [1] - Timing momentum plays can be challenging, but early identification of targets in a sustained rally can provide an advantage [1] Group 2: EyePoint Pharmaceuticals (EYPT) - EyePoint Pharmaceuticals, a clinical-stage biopharma firm, has seen its stock price forecasted to reach $25.38, indicating a potential upside of 188.39% from the current price of $8.80 [2] - The company reported first-quarter revenue of nearly $25 million, significantly exceeding analyst expectations of just under $9 million [3] - EyePoint's lead drug candidate, DURAVYU, is in a critical Phase 3 clinical trial, with top-line data expected in 2026 [4] - The company ended the first quarter with over $318 million in cash and investments, sufficient to sustain operations through 2027 [4] - EYPT shares have increased by more than 19% in the last month, with analysts suggesting that growth is just beginning [5] Group 3: Nova Ltd. (NVMI) - Nova Ltd., which designs process control systems for semiconductor manufacturing, has a stock price forecast of $277, representing a 26.02% upside from the current price of $219.81 [6] - The company reported quarterly revenue growth of over 50% year-over-year, with earnings per share of $2.18 beating analyst estimates by 10 cents [7] - Analysts project Nova's earnings growth could exceed 7% in the future, supported by a year-over-year cash flow growth of about 32% [8] - NVMI shares have risen by more than 10% in the last month, with a consensus price target suggesting over 27% upside potential [9] Group 4: Ouster Inc. (OUST) - Ouster Inc. specializes in LiDAR technology for 3D mapping and imaging, with a stock price forecast of $14.10, indicating a 2.45% upside from the current price of $13.76 [10] - The company reported first-quarter revenue of $33 million, a 26% year-over-year increase, and a GAAP gross margin improvement to 41% from 29% [11] - Ouster projects second-quarter revenue between $32 million and $35 million, indicating significant upside potential [11] - The company's stock has rallied over 71% in the last year, with analysts optimistic about further growth due to increasing demand for robotics and automation services [12]