A month has gone by since the last earnings report for KLA (KLAC Quick QuoteKLAC - Free Report) . Shares have lost about 5.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is KLA due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

KLA’s Q1 Earnings & Revenues Beat Estimates, Rise Y/Y

KLA reported first-quarter fiscal 2025 non-GAAP earnings of $7.33 per share, beating the Zacks Consensus Estimate by 4.27%. The figure jumped 27.7% year over year.

Revenues increased 18.5% year over year to $2.84 billion, surpassing the Zacks Consensus Estimate by 3.11%. Sequentially, revenues saw double-digit growth.

In terms of reportable segments, Semiconductor Process Control revenues (90.6% of total revenues) increased 20.6% year over year to $2.58 billion. Sequentially, the segment experienced 12% growth.

Foundry & Logic accounted for about 80%, while Memory constituted about 20% of Semiconductor Process Control revenues. Within memory, approximately 85% was from DRAM.

Specialty Semiconductor Process revenues (4.5% of total revenues) were $128.3 million, down 1.3% year over year. Revenues increased 6% on a sequential basis. 

PCB and Component Inspection revenues (4.9% of total revenues) increased 1.4% year over year to $138 million. Sequentially, revenues were down 1%.

Top-Line Details

Product revenues (which accounted for 77.3% of total revenues) increased 19.6% year over year to $2.2 billion. Service revenues (22.7% of total revenues) increased 15% year over year to $644.2 million.

In terms of major products, Wafer Inspection and Patterning Systems (including metrology and reticle inspection) accounted for 48% and 20%, respectively, of KLA’s total revenues for the fiscal first quarter.

Wafer Inspection revenues increased 36% year over year and 17% sequentially to $1.37 billion. Patterning revenues were up 6% year over year and 6% sequentially to $577 million.

In terms of regional breakdown of revenues, China and Taiwan led revenue contributions with 42% and 16%, respectively. North America followed with 18%, while Korea and Japan accounted for 8% and 7%, respectively. Europe accounted for 5% and the remaining 4% came from the rest of Asia.

Operating Details

In first-quarter fiscal 2025, the non-GAAP gross margin was 61.2%, 70 basis points (bps) above the lower end of the guidance range. 

Research and development (R&D) expenses increased 3.8% year over year to $323.1 million. As a percentage of sales, R&D expenses decreased 160 bps year over year to 11.4%.

Selling, general and administrative (SG&A) expenses increased 4.8% year over year to $251 million. As a percentage of sales, SG&A expenses decreased 120 bps year over year to 8.8%.

Non-GAAP operating expenses were $560 million, up 1.27% sequentially. Non-GAAP operating expenses comprised $322 million in R&D and $238 million in SG&A expenses.

The fiscal first-quarter non-GAAP operating margin was 41.5%, up 122 bps sequentially.

Balance Sheet

As of Sept. 30, 2024, cash, cash equivalents and marketable securities totaled $4.63 billion, compared with $4.5 billion as of June 30, 2024.

Long-term debt at the end of the fiscal first quarter was $6.63 billion, unchanged from the figure reported in the previous quarter.

Cash flow from operating activities was $995.2 million for the reported quarter, up from $892.6 million in the prior quarter. Free cash flow was $964.8 million for the fiscal first quarter.

During the fiscal first quarter, KLAC paid out $198 million in dividends and repurchased $567 million worth of shares.

Second-Quarter Fiscal 2025 Guidance

For second-quarter fiscal 2025, revenues are expected to be $2.95 billion, plus/minus $150 million.

KLA expects non-GAAP earnings of $7.75 per share, plus/minus 60 cents.

KLA expects a non-GAAP gross margin of 61.5%, plus/minus 1%. Operating expenses are expected to be $580 million in the December quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 5.22% due to these changes.

VGM Scores

At this time, KLA has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, KLA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

KLA belongs to the Zacks Electronics - Miscellaneous Products industry. Another stock from the same industry, Teradyne (TER Quick QuoteTER - Free Report) , has gained 1.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Teradyne reported revenues of $737.3 million in the last reported quarter, representing a year-over-year change of +4.8%. EPS of $0.90 for the same period compares with $0.80 a year ago.

Teradyne is expected to post earnings of $0.90 per share for the current quarter, representing a year-over-year change of +13.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.3%.

Teradyne has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.