Business Description
KLA Corporation is a leading supplier of process control and yield management solutions for the semiconductor and related electronics industries . The company provides a range of inspection, metrology, and software products, along with services that help manufacturers optimize their production processes . KLA is organized into three main segments: Semiconductor Process Control, Specialty Semiconductor Process, and PCB and Component Inspection . Additionally, KLA's service business is a significant part of their operations, driven by long-term subscription contracts .
- Semiconductor Process Control - Offers a comprehensive portfolio of inspection, metrology, and software products, as well as related services, to help manufacturers achieve target yields throughout the fabrication process .
- Specialty Semiconductor Process - Focuses on advanced vacuum deposition and etch process tools used by manufacturers of microelectromechanical systems (MEMS), radio frequency (RF) communication semiconductors, and power semiconductors for automotive and industrial applications .
- PCB and Component Inspection - Provides products and services for inspecting, testing, and measuring PCBs, IC substrates, and packaged ICs .
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Q4 2024 Summary
What went well
- KLA expects sequential revenue growth in the December quarter and continues to be incrementally more bullish about opportunities in 2025, driven by an improving industry environment and strong customer demand at the leading edge.
- The company has increased its estimate of annualized revenue from advanced packaging solutions to more than $500 million, up from approximately $400 million three months prior, reflecting accelerated investment and significant growth in this market driven by AI and packaging shortages.
- KLA is well-positioned for outperformance due to its strong presence in leading-edge foundry and logic investments, particularly as advanced technologies like N3 and N2 nodes ramp up, and as high-bandwidth memory (HBM) adoption increases process control intensity in DRAM manufacturing.
What went wrong
- Gross margin is forecasted to decrease to 61.5% in the September quarter, down from 62.5% in the previous quarter, due to weaker anticipated product mix.
- Revenue guidance range widened to plus or minus $150 million, larger than usual, possibly indicating higher uncertainty in revenue projections.
- Book-to-bill ratio has been below 1 for seven consecutive quarters, suggesting that orders have been consistently lower than shipments, which may impact future revenue growth.
Q&A Summary
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Memory Growth Outlook
Q: Thoughts on memory growth in 2025, DRAM vs. NAND?
A: KLA expects memory growth to pick up in 2025, driven mainly by DRAM and HBM. Customers' financial performance is improving with significant price increases this year, translating into investment next year. NAND (flash) recovery is less certain, but overall, both DRAM and flash are expected to recover, led by DRAM. -
Memory Process Control Intensity
Q: Where is memory process control intensity trending?
A: Memory process control intensity has increased from historical 10% to over 11% today. With advancements like EUV adoption in DRAM and challenges in NAND bonding technology, KLA sees opportunities to increase intensity further in the coming years. -
Advanced Packaging Growth
Q: Is the $500M advanced packaging forecast for full year?
A: Yes, KLA expects $500 million in advanced packaging revenue for 2024, up from around $300 million last year—a mid-60% growth rate. About 60% is from process control, with the remaining 40% from specialty process and chemical process control. Strong demand is driven by AI and customers seeking front-end capabilities in packaging. -
Sequential Growth and 2025 Outlook
Q: Do you anticipate sequential growth in December quarter?
A: Yes, KLA expects sequential growth in the December quarter, continuing the trend throughout the year. The company is incrementally more bullish on opportunities into 2025, with a strengthened funnel supporting this outlook. -
China Revenue Outlook
Q: Is China revenue expected to remain flat?
A: China revenue is expected to be about flat in the second half compared to the first half. Business levels next year are anticipated to be consistent with this year, supported by the order funnel, backlog, and deposits. -
Gate-All-Around Impact
Q: How does GAA affect process control intensity?
A: Gate-All-Around technology creates new integration challenges, increasing metrology intensity and the need for voltage threshold control. KLA anticipates increased process control intensity, consistent with their 2026 plan, and is bullish on opportunities created by additional critical layers and scaling dynamics. -
Impact of High NA on Process Control
Q: What's the impact of high NA on process control timing?
A: High NA leads to smaller defects and new reticle qualification challenges. KLA doesn't see acceleration in high-volume manufacturing timing for high NA; if anything, there's potential for delay. Customers may extend existing technologies before moving to high NA. -
Revenue Guidance Range Widening
Q: Why is the revenue guidance range wider?
A: The wider guidance range is due to higher revenues, which necessitate adjusting the range. Larger systems can vary significantly in value, impacting overall numbers. -
Gross Margin Outlook
Q: Is gross margin down slightly in September quarter?
A: Gross margin variability is mainly due to product mix. While the June quarter outperformed, adjustments in the September quarter are expected. KLA anticipates gross margins in the mid 61% range this year, moving toward around 65% incremental gross margin into '25. -
Advanced Nodes Outlook
Q: Does TSMC's 2nm outlook affect KLA's WFE share?
A: Increased activity in reticle inspection due to more design starts, particularly as 2nm ramps into 2025 and 2026, supports KLA's goal to increase its share of WFE. Unexpected strength in M3 also contributes to the positive outlook. Larger die sizes in advanced AI chips drive more inspection needs.
Key Metrics
Revenue by Segment - in Millions of USD | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | FY 2024 | Q1 2025 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Semiconductor Process Control | 2,097.43 | 9,324.19 | 2,135.478 | 2,194.08 | 2,096.005 | 2,308.04 | 8,733.6 | 2,575.151 | |||||||||||||||||||||||||||||||||||||||||||||||
- Wafer Inspection | 950.42 | 4,336.66 | 1,010.198 | 1,166.48 | 987.709 | 1,168.91 | 4,333.3 | 1,368.943 | |||||||||||||||||||||||||||||||||||||||||||||||
- Patterning | 584.86 | 2,791.13 | 542.488 | 430.38 | 539.296 | 542.24 | 2,054.4 | 576.409 | |||||||||||||||||||||||||||||||||||||||||||||||
Specialty Semiconductor Process | 129.03 | 543.40 | 126.719 | 150.07 | 130.649 | 121.26 | 528.7 | 128.334 | |||||||||||||||||||||||||||||||||||||||||||||||
- Specialty Semiconductor Process | 117.27 | 492.11 | 112.103 | 136.28 | 116.449 | 105.77 | 470.6 | 112.802 | |||||||||||||||||||||||||||||||||||||||||||||||
PCB, Display and Component Inspection | 128.95 | 631.60 | 136.043 | 143.03 | 133.399 | 140.03 | 552.5 | 137.983 | |||||||||||||||||||||||||||||||||||||||||||||||
- PCB and Component Inspection | 65.49 | 378.03 | 71.164 | 77.30 | 68.332 | 74.4 | 291.2 | 72.908 | |||||||||||||||||||||||||||||||||||||||||||||||
Services | 538.61 | 2,117.03 | 560.292 | 564.92 | 590.461 | 613.93 | 2,329.6 | 644.152 | |||||||||||||||||||||||||||||||||||||||||||||||
Other | 98.58 | 381.09 | 100.711 | 111.37 | 57.583 | 63.54 | 333.2 | 66.327 | |||||||||||||||||||||||||||||||||||||||||||||||
- Other | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 2,355.14 | 10,496.06 | 2,396.956 | 2,486.73 | 2,359.830 | 2,568.68 | 9,812.2 | 2,841.541 | |||||||||||||||||||||||||||||||||||||||||||||||
Revenue by Geography - in Millions of USD | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | FY 2024 | Q1 2025 |
China | 711.06 | 2,867.44 | 1,025.944 | 1,027.78 | 996.89 | 1,146.12 | 4,196.73 | 1,198.3 | |||||||||||||||||||||||||||||||||||||||||||||||
Taiwan | 497.19 | 2,493.38 | 405.343 | 375.26 | 433.92 | 523.55 | 1,738.07 | 462.0 | |||||||||||||||||||||||||||||||||||||||||||||||
North America | 313.19 | 1,254.96 | 250.713 | 263.61 | 246.99 | 309.48 | 1,070.79 | 500.9 | |||||||||||||||||||||||||||||||||||||||||||||||
Korea | 429.09 | 1,895.71 | 219.821 | 310.67 | 201.29 | 175.14 | 906.92 | 238.7 | |||||||||||||||||||||||||||||||||||||||||||||||
Japan | 185.03 | 888.02 | 227.377 | 297.76 | 267.05 | 171.01 | 963.20 | 188.6 | |||||||||||||||||||||||||||||||||||||||||||||||
Europe and Israel | 139.28 | 682.10 | 168.436 | 123.36 | 129.35 | 119.11 | 540.26 | 144.8 | |||||||||||||||||||||||||||||||||||||||||||||||
Rest of Asia | 80.3 | 414.45 | 99.322 | 88.28 | 84.35 | 124.32 | 396.27 | 108.2 | |||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 2,355.14 | 10,496.06 | 2,396.956 | 2,486.73 | 2,359.83 | 2,568.73 | 9,812.25 | 2,841.5 |
Executive Team
Questions to Ask Management
- Given that your gross margin is forecasted to decline to 61.5% plus or minus 1% in the September quarter , can you elaborate on the weaker anticipated product mix and whether you expect further margin pressure in the coming quarters?
- Your 12-month shippable RPO decreased by about $70 million quarter on quarter, remaining flattish compared to last quarter ; what factors contributed to this decline, and how confident are you in bookings increasing over the next few quarters?
- With China revenues expected to remain relatively flat , while peers indicate that China mature nodes are in a digesting mode and calendar Q1 was the peak , are you anticipating any slowdown in China sales into next year, and how might this impact your overall growth?
- The revenue guidance range for the September quarter has widened to plus or minus $150 million from the usual $125 million ; does this reflect increased uncertainty or volatility in your business, and can you provide more color on the factors influencing this wider range?
- Advanced packaging revenue run rate has increased to $500 million from $400 million three months ago ; is this growth primarily due to market expansion, or are you gaining share in new markets like macro inspection where competitors have traditionally been stronger, and how sustainable is this growth?
Past Guidance
Q4 2024 Earnings Call
- Issued Period: Q4 2024
- Guided Period: Q1 2025
- Guidance:
- Total Revenue: $2.75 billion, plus or minus $150 million .
- Foundry/Logic Revenue: Approximately 80% of semiconductor process control systems revenue .
- Memory Revenue: Approximately 20% of semiconductor process control systems revenue, with DRAM making up about 83% of the segment mix and NAND the remaining 17% .
- Gross Margin: 61.5%, plus or minus 1 percentage point .
- Operating Expenses: Approximately $565 million .
- Other Income and Expense Net: $34 million expense .
- GAAP Diluted EPS: $6.69, plus or minus $0.60 .
- Non-GAAP Diluted EPS: $7, plus or minus $0.60 .
- Fully Diluted Share Count: Approximately 135 million shares .
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: June quarter of 2024
- Guidance:
- Revenue: $2.5 billion, plus or minus $125 million .
- Foundry/Logic Revenue: Approximately 82% of semiconductor process control systems revenue .
- Memory Revenue: 18% of semiconductor process control systems revenue, with DRAM making up about 78% of the segment mix and NAND the remaining 22% .
- Non-GAAP Gross Margin: 61.5%, plus or minus 1 percentage point .
- Non-GAAP Operating Expenses: Approximately $550 million .
- Non-GAAP Other Income and Expense: Net of $38 million expense .
- GAAP Diluted EPS: $5.66, plus or minus $0.60 .
- Non-GAAP Diluted EPS: $6.07, plus or minus $0.60 .
- Fully Diluted Share Count: Approximately 135.4 million shares .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: March quarter of 2024
- Guidance:
- Revenue: $2.3 billion, plus or minus $125 million .
- Revenue Mix:
- Foundry/logic: Approximately 60% of Semi Process Control systems revenue.
- Memory: 40% of Semi Process Control systems revenue, with DRAM making up about 85% of the segment mix and NAND the remaining 15% .
- Non-GAAP Gross Margin: 61.5%, plus or minus 1 percentage point .
- Operating Expenses: Approximately $545 million, with an expected incremental growth of $5 million to $10 million per quarter beyond the March quarter .
- Tax Rate: 13.5% effective rate for modeling purposes .
- Other Income and Expense, Net: $45 million .
- GAAP Diluted EPS: $4.93, plus or minus $0.60 .
- Non-GAAP Diluted EPS: $5.26, plus or minus $0.60 .
- Fully Diluted Share Count: Approximately 135.6 million shares .
Q1 2025 Earnings Call
- Issued Period: Q1 2025
- Guided Period: N/A
- Guidance: The documents do not provide specific guidance from KLA's Q1 2025 earnings call. However, they include guidance for the September quarter of 2024, which is as follows:
- Total Revenue: $2.75 billion, plus or minus $150 million .
- Gross Margin: 61.5%, plus or minus 1 percentage point .
- Operating Expenses: Approximately $565 million .
- Other Income and Expense Net: $34 million expense .
- GAAP Diluted EPS: $6.69, plus or minus $0.60 .
- Non-GAAP Diluted EPS: $7, plus or minus $0.60 .
- Fully Diluted Share Count: Approximately 135 million shares .
Note: The guidance for Q1 2025 is not explicitly detailed in the documents, and the period for which guidance was provided in the Q1 2025 earnings call is not available.
Competitors
Competitors mentioned in the company's latest 10K filing.
- Applied Materials, Inc. - Competitors in technologically advanced process control, process-enabling and yield management solutions used by semiconductor and electronics manufacturers .
- ASML Holding N.V. - Competitors in technologically advanced process control, process-enabling and yield management solutions used by semiconductor and electronics manufacturers .
- Hitachi High-Technologies Corporation - Competitors in technologically advanced process control, process-enabling and yield management solutions used by semiconductor and electronics manufacturers .
- Onto Innovation, Inc. - Competitors in technologically advanced process control, process-enabling and yield management solutions used by semiconductor and electronics manufacturers .
- Lasertec, Inc. - Competitors in technologically advanced process control, process-enabling and yield management solutions used by semiconductor and electronics manufacturers .
Latest news
Recent developments and announcements about KLAC.
Corporate Leadership
Leadership Change
Oreste Donzella, Executive Vice President and Chief Strategy Officer of KLA Corporation, will transition to a part-time senior advisor role starting April 14, 2025. He will remain in his current position until April 13, 2025, to assist with the transition of his duties. No immediate changes to his employment terms will occur until then. No successor has been announced yet .