KLA(US:KLAC)2025-10-29 22:02Financial 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 midpoint of their respective guidance ranges [11] - Gross margin improved to 62.5%, 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] - Satellite service business 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 to $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 aimed at maximizing 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] - The company noted constructive customer discussions regarding investments in leading-edge technology and process control [29][32] - Management acknowledged challenges from export controls but remains confident in KLA's ability to outperform the WFE market [16][17] 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 has a flexible bond maturity profile supported by investment-grade ratings from major rating agencies [13] - KLA's December quarter guidance includes expected total revenue of $3.225 billion, with a gross margin forecast of 62% [18][19] 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 magnitude, with encouraging signs from leading-edge foundry logic and DRAM 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 expectations for long-term operating margins to remain robust [44][46] Question: Advanced packaging process control intensity - Management clarified that KLA's share of the advanced packaging market is growing, with expectations for continued intensity as design complexities increase [50][52] Question: AI spending impact on WFE - Management agreed with the correlation between AI spending and WFE growth, suggesting that packaging investments will also contribute significantly [56][57] Question: Memory growth expectations - Management expects DRAM investments to grow next year, driven by customer announcements and increased spending [98][99] Question: Foundry revenue opportunities outside Taiwan - There is a positive trend in engagement with other foundries, with discussions focused on yield improvement tools and advanced logic investments [102][103]