Semiconductor manufacturing equipment maker KLA Corporation (NASDAQ: KLAC) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 13% year on year to $3.21 billion. Guidance for next quarter’s revenue was better than expected at $3.23 billion at the midpoint, 1.4% above analysts’ estimates. Its non-GAAP profit of $8.81 per share was 2.2% above analysts’ consensus estimates.
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KLA Corporation (KLAC) Q3 CY2025 Highlights:
- Revenue: $3.21 billion vs analyst estimates of $3.18 billion (13% year-on-year growth, 1.1% beat)
- Adjusted EPS: $8.81 vs analyst estimates of $8.62 (2.2% beat)
- Adjusted EBITDA: $1.55 billion vs analyst estimates of $1.43 billion (48.2% margin, 8.5% beat)
- Revenue Guidance for Q4 CY2025 is $3.23 billion at the midpoint, above analyst estimates of $3.18 billion
- Adjusted EPS guidance for Q4 CY2025 is $8.70 at the midpoint, above analyst estimates of $8.51
- Operating Margin: 43%, up from 39.4% in the same quarter last year
- Free Cash Flow Margin: 33.2%, similar to the same quarter last year
- Inventory Days Outstanding: 241, in line with the previous quarter
- Market Capitalization: $158.8 billion
"KLA produced a strong all-around September quarter performance above the guidance midpoints. These results reflect double-digit year-over-year revenue and EPS growth, and KLA is on pace for solid relative revenue growth compared to our industry in calendar 2025," said Rick Wallace, president and CEO of KLA Corporation.
Company Overview
Formed by the 1997 merger of the two leading semiconductor yield management companies, KLA Corporation (NASDAQ: KLAC) is the leading supplier of equipment used to measure and inspect semiconductor chips.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, KLA Corporation’s 16.1% annualized revenue growth over the last five years was excellent. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers, a great starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. KLA Corporation’s annualized revenue growth of 11% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
This quarter, KLA Corporation reported year-on-year revenue growth of 13%, and its $3.21 billion of revenue exceeded Wall Street’s estimates by 1.1%. Beyond the beat, this marks 6 straight quarters of growth, showing that the current upcycle has had a good run - a typical upcycle usually lasts 8-10 quarters. Company management is currently guiding for a 4.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 5.4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, KLA Corporation’s DIO came in at 241, which is 12 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.
Key Takeaways from KLA Corporation’s Q3 Results
It was good to see KLA Corporation beat analysts’ EPS expectations this quarter. We were also glad its revenue guidance for next quarter slightly exceeded Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $1,226 immediately following the results.
So do we think KLA Corporation is an attractive buy at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
