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    KLA Corp (KLAC)

    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 .

    1. 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 .
    2. 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 .
    3. PCB and Component Inspection - Provides products and services for inspecting, testing, and measuring PCBs, IC substrates, and packaged ICs .

    Q4 2024 Summary

    Initial Price$700.00March 30, 2024
    Final Price$824.51June 30, 2024
    Price Change$124.51
    % Change+17.79%

    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

    1. 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.

    2. 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.

    3. 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.

    4. 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.

    5. 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.

    6. 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.

    7. 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.

    8. 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.

    9. 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.

    10. 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

    View all financials →
    Revenue by Segment - in Millions of USDQ2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025
    Semiconductor Process Control2,097.439,324.192,135.4782,194.082,096.0052,308.048,733.62,575.151
    - Wafer Inspection950.424,336.661,010.1981,166.48987.7091,168.914,333.31,368.943
    - Patterning584.862,791.13542.488430.38539.296542.242,054.4576.409
    Specialty Semiconductor Process129.03543.40126.719150.07130.649121.26528.7128.334
    - Specialty Semiconductor Process117.27492.11112.103136.28116.449105.77470.6112.802
    PCB, Display and Component Inspection128.95631.60136.043143.03133.399140.03552.5137.983
    - PCB and Component Inspection65.49378.0371.16477.3068.33274.4291.272.908
    Services538.612,117.03560.292564.92590.461613.932,329.6644.152
    Other98.58381.09100.711111.3757.58363.54333.266.327
    - Other--------
    Total Revenue2,355.1410,496.062,396.9562,486.732,359.8302,568.689,812.22,841.541
    Revenue by Geography - in Millions of USDQ2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025
    China711.062,867.441,025.9441,027.78996.891,146.124,196.731,198.3
    Taiwan497.192,493.38405.343375.26433.92523.551,738.07462.0
    North America313.191,254.96250.713263.61246.99309.481,070.79500.9
    Korea429.091,895.71219.821310.67201.29175.14906.92238.7
    Japan185.03888.02227.377297.76267.05171.01963.20188.6
    Europe and Israel139.28682.10168.436123.36129.35119.11540.26144.8
    Rest of Asia80.3414.4599.32288.2884.35124.32396.27108.2
    Total Revenue2,355.1410,496.062,396.9562,486.732,359.832,568.739,812.252,841.5

    Executive Team

    NamePositionStart DateShort Bio
    Richard WallacePresident and Chief Executive OfficerJanuary 2006Richard Wallace has been serving as the President and Chief Executive Officer of KLA Corporation since January 2006. He began his career at KLA Instruments in 1988 as an applications engineer and has held various general management positions throughout his tenure. Wallace has been with the company for 36 years as of 2024 .
    Bren HigginsExecutive Vice President and Chief Financial OfficerAugust 2013Bren Higgins has served as KLA's Executive Vice President and Chief Financial Officer since August 2013. He oversees the company's finance operations, global manufacturing operations, and investor relations. He has held various financial and investor relations positions since he began his tenure at the company in 1999 .
    Ahmad KhanPresident, Semiconductor Process Control, Electronics, Packaging, and Components, and KLA InstrumentsJuly 2024Ahmad Khan has been serving as President, Semiconductor Process Control, Electronics, Packaging and Components, and KLA Instruments at KLA since July 2024. He joined KLA in 2003 and has held various strategic management positions. Prior to KLA, he spent nine years at Applied Materials .
    Oreste DonzellaExecutive Vice President and Chief Strategy OfficerJuly 2024Oreste Donzella has been with KLA since 1999 and has held various positions. He currently serves as the Executive Vice President and Chief Strategy Officer, a role he has held since July 2024. He has over 34 years of experience in the semiconductor industry .
    Mary Beth WilkinsonExecutive Vice President, Chief Legal Officer, and Corporate SecretarySeptember 2020Mary Beth Wilkinson has served as the Executive Vice President, Chief Legal Officer, and Corporate Secretary of KLA Corporation since September 2020. She is responsible for advising on legal, compliance, and corporate governance matters and oversees cybersecurity for the company .
    Brian LorigExecutive Vice President, Global Support and ServicesAugust 2019Brian Lorig has served as Executive Vice President, Global Support and Services at KLA since August 2019. He joined the company in 1998 and has held various leadership roles, including Senior Vice President and General Manager of the Global Support and Services organization .
    Virendra KirloskarSenior Vice President and Chief Accounting OfficerMarch 2008Virendra Kirloskar has served as the Senior Vice President and Chief Accounting Officer of KLA Corporation since March 2008. He rejoined the company as Vice President and Corporate Controller in May 2003 and has held various finance positions within KLA from 1993 to 1999 .
    Oreste DonzellaPart-time Senior AdvisorApril 14, 2025Oreste Donzella will transition to a part-time Senior Advisor role starting April 14, 2025, and will continue in this capacity until August 16, 2026. He has extensive experience in the semiconductor industry, with over 34 years in the field, including positions at Texas Instruments and Micron Technology before joining KLA .

    Questions to Ask Management

    1. 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?
    2. 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?
    3. 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?
    4. 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?
    5. 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?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateQ1 Fiscal 2024
    End Date/DurationNo expiration date
    Total additional amount$2.00 billion
    Remaining authorization$1.61 billion
    DetailsMitigates dilutive impact of equity plans and returns excess cash to stockholders

    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

      ·
      Nov 15, 2024, 12:00 AM

      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 .