KLA Corporation’s first quarter results were driven by robust demand in advanced semiconductor manufacturing, particularly in applications supporting artificial intelligence (AI) and high-bandwidth memory. Management highlighted strong momentum in its advanced packaging portfolio and continued leadership in process control, both of which benefited from increased investments by customers in leading-edge logic. CEO Richard Wallace acknowledged that, despite global macroeconomic uncertainty and new U.S. export controls impacting service revenue growth, the company’s service business managed its 52nd consecutive quarter of year-over-year growth. Wallace also noted, “KLA’s results continue to be fueled by strong demand in leading-edge logic and high-bandwidth memory.”
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KLA Corporation (KLAC) Q1 CY2025 Highlights:
- Revenue: $3.06 billion vs analyst estimates of $3.01 billion (29.8% year-on-year growth, 1.8% beat)
- Adjusted EPS: $8.41 vs analyst estimates of $8.08 (4% beat)
- Adjusted EBITDA: $1.44 billion vs analyst estimates of $1.37 billion (46.9% margin, 5.2% beat)
- Revenue Guidance for Q2 CY2025 is $3.08 billion at the midpoint, above analyst estimates of $2.99 billion
- Adjusted EPS guidance for Q2 CY2025 is $8.53 at the midpoint, above analyst estimates of $7.98
- Operating Margin: 42.5%, up from 31.2% in the same quarter last year
- Inventory Days Outstanding: 244, up from 227 in the previous quarter
- Market Capitalization: $117.6 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions KLA Corporation’s Q1 Earnings Call
- Harlan Sur (JPMorgan) asked about the direct and indirect impacts of tariffs on global operations. CFO Bren Higgins explained that while the company’s manufacturing footprint is global, tariffs mostly affect service parts imported to China and the U.S., with mitigation strategies including operational adjustments and potential price changes.
- Atif Malik (Citi) inquired about the service segment’s growth outlook given export controls in China. Higgins stated that while full-year service growth would be modest compared to previous years, long-term prospects remain solid as capacity shifts to other regions could offset lost business.
- Vivek Arya (Bank of America Securities) questioned the revenue contribution from China and the impact of export controls on 2025 results. Higgins indicated that China would account for about 30% of revenue, down 15-20% year-over-year, with the majority of export control impact already reflected.
- Tom O'Malley (Barclays) asked about the methodology behind the estimated 100 basis point gross margin headwind from tariffs. Management detailed its comprehensive review of supply chains and contract streams, emphasizing that further changes in trade policy could alter this estimate.
- Srini Pajjuri (Raymond James) sought clarification on the outlook for foundry/logic demand and process control intensity at advanced nodes. Management highlighted that increased semiconductor complexity and the move to new process nodes would drive higher inspection requirements and continued adoption of KLA’s solutions.
Catalysts in Upcoming Quarters
Looking ahead, our analysts will monitor (1) the pace of AI-driven semiconductor investments and their effect on advanced packaging revenue, (2) the company’s ability to offset gross margin pressures from ongoing tariffs through operational and pricing initiatives, and (3) developments in global trade policy that could impact customer demand or supply chains. The evolution of service revenue in the face of export controls and updates to RPO reporting will also be critical markers of KLA’s execution.
KLA Corporation currently trades at $895, up from $703.20 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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