KLA(US:KLAC)2025-10-29 22:00Financial Data and Key Metrics Changes - KLA reported revenue of $3,210,000,000 for the September quarter, exceeding the guidance midpoint of $3,150,000,000 [6][10] - Non-GAAP diluted EPS was $8.81, while GAAP diluted EPS was $8.47, both above the respective guidance ranges [10] - Gross margin improved to 62.5%, driven by a stronger product mix and manufacturing efficiencies [10] - Cash flow from operations reached a record $1,160,000,000, with free cash flow at $1,070,000,000 [11][12] - Total capital return for the quarter was $799,000,000, including $545,000,000 in share repurchases and $254,000,000 in dividends [8][12] Business Line Data and Key Metrics Changes - Advanced Packaging revenue is expected to exceed $925,000,000 for calendar year 2025, representing a 70% year-over-year increase [7] - Service business revenue grew to $745,000,000, up 6% sequentially and 16% year over year [8] - Non-GAAP operating margin was reported at 43.2% [10] 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 [15] - Advanced Packaging market is expected to grow more than 20% compared to the previous year [15] - The company estimates a revenue impact of approximately $300,000,000 to $350,000,000 due to export controls affecting certain customers in China [16][17] Company Strategy and Development Direction - KLA's strategy focuses on capitalizing on the growing relevance of process control and AI infrastructure investments [6] - The company aims to address all growth markets in WFE, including memory, advanced packaging, and leading-edge logic [9] - KLA is committed to maximizing total shareholder value through disciplined capital allocation and consistent execution [9][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth outlook for 2026, with expectations for a broader spending profile in WFE and Advanced Packaging [15][16] - The company noted constructive customer discussions regarding investments in process control, particularly in leading-edge technologies [30][31] - Management highlighted the importance of advanced process control as design complexity increases, particularly in custom silicon development [21] Other Important Information - KLA's total cash, cash equivalents, and marketable securities stood at $4,700,000,000, with total debt at $5,900,000,000 [12] - The company announced a 12% increase in its quarterly dividend to $1.9 per share, marking the sixteenth consecutive annual dividend increase [13] Q&A Session Summary Question: Insights on WFE growth outlook - Management indicated that the outlook is becoming clearer as customer lead times improve, with positive signs for leading-edge foundry logic and DRAM investments [28][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 [38][39] Question: Gross margin guidance - The decrease in gross margin is primarily due to product mix adjustments, with ongoing tariff impacts also considered [42][44] Question: Advanced packaging process control intensity - Management noted that KLA's share in the advanced packaging market has increased significantly, with expectations for continued growth [50][51] Question: DRAM growth expectations - Management expects DRAM to be a growth area next year, driven by increased customer spending and new market requirements [104][105] Question: Foundry-related revenue opportunities - There is encouragement regarding increased engagement with foundries outside the dominant Taiwanese customer, with ongoing discussions about process control needs [108]