KLA(US:KLAC)2025-04-30 21:00Financial 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]