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KLA Shares Rise on Q2 Earnings & Revenues Beat, Optimistic Q3 Outlook

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KLA Corporation (KLAC - Free Report) reported second-quarter fiscal 2025 non-GAAP earnings of $8.20 per share, beating the Zacks Consensus Estimate by 6.08%. The figure jumped 11.9% year over year.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Revenues increased 23.7% year over year to $3.08 billion, surpassing the Zacks Consensus Estimate by 4.88%.

KLA shares rose 3.71% in the pre-market trading, following strong quarterly results, with profitability across all segments despite challenges from new U.S. export controls. The company's strong AI and high-performance computing investments, advanced packaging growth, and solid cash flow and capital returns drove its shares.

KLA Corporation Price, Consensus and EPS Surprise

 

KLA Corporation Price, Consensus and EPS Surprise

KLA Corporation price-consensus-eps-surprise-chart | KLA Corporation Quote

KLAC’s Segmental Details

In terms of reportable segments, Semiconductor Process Control revenues (89.6% of total revenues) increased 25.6% year over year to $2.76 billion. Sequentially, the segment experienced 7% growth. 

Foundry & Logic accounted for about 76%, whereas Memory constituted about 24% of Semiconductor Process Control revenues. Within memory, about 76% came from DRAM and 24% from NAND.

Specialty Semiconductor Process revenues (5.2% of total revenues) were $160.4 million, up 6.9% year over year and 25% sequentially.

PCB and Component Inspection revenues (5.2% of total revenues) increased 12.6% year over year to $161.1 million and 17% on a sequential basis.

KLAC Top-Line Details

Product revenues (accounted for 78.3% of total revenues) increased 25.4% year over year to $2.41 billion. Service revenues (21.7% of total revenues) increased 18.1% year over year to $667.4 million.

In terms of major products, Wafer Inspection and Patterning Systems (including metrology and reticle inspection) accounted for 51% and 17%, respectively, of KLA’s total revenues in the fiscal second quarter. 

Wafer Inspection revenues increased 34% year over year and 14% sequentially to $1.56 billion. Patterning revenues moved up 23% year over year and down 8% sequentially to $531 million. 

In terms of regional breakdown of revenues, China and Taiwan led revenue contributions with 36% and 29%, respectively. Korea accounted for 12%, North America 9% and Japan 7%. Europe contributed 4%, whereas the remaining 3% came from the rest of Asia.

KLA’s Operating Details

In the second quarter of fiscal 2025, the non-GAAP gross margin was 61.7%, 20 basis points (bps) above the mid of the guidance range.

Research and development (R&D) expenses increased 8% year over year to $346.2 million. As a percentage of revenues, R&D expenses decreased 160 bps year over year to 11.3%.

Selling, general and administrative (SG&A) expenses increased 12.6% year over year to $267.1 million. As a percentage of revenues, SG&A expenses decreased 90 bps year over year to 8.7%.

Non-GAAP operating expenses were $596 million, up 6.4% sequentially. Non-GAAP operating expenses comprised $342 million in R&D and $254 million in SG&A expenses.

The fiscal second-quarter non-GAAP operating margin was 42.3%, up 80 bps sequentially.

KLAC Balance Sheet & Cash Flow

As of Dec. 31, 2024, cash, cash equivalents and marketable securities totaled $3.78 billion compared with $4.63 billion as of Sept. 30, 2024.

Long-term debt at the end of the fiscal second quarter was $5.88 billion, unchanged from the figure reported in the previous quarter.

Cash flow from operating activities was $849.5 million for the reported quarter, down from $995.2 million in the prior quarter. The free cash flow was $757.2 million for the fiscal second quarter.

In the fiscal third quarter, KLAC paid out $226.8 million in dividends and repurchased $650.1 million worth of shares.

KLAC 3Q25 Guidance

For third-quarter fiscal 2025, revenues are expected to be $3.0 billion, plus/minus $150 million. The Zacks Consensus Estimate for revenues is pegged at $2.90 billion, indicating 23.10% year-over-year growth.

KLA expects non-GAAP earnings of $8.05 per share, plus/minus 60 cents. The Zacks Consensus Estimate for non-GAAP earnings is pegged at $7.63 per share, suggesting year-over-year growth of 45.06%.

The company expects a non-GAAP gross margin of 62%, plus/minus 1%. Operating expenses are expected to be $585 million for the March-end quarter.

Zacks Rank & Stocks to Consider

Currently, KLA carries a Zacks Rank #4 (Sell). 

Pitney Bowes (PBI - Free Report) , Paylocity Holding (PCTY - Free Report) and Qualcomm (QCOM - Free Report) are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector.

Pitney Bowes sports a Zacks Rank #1 (Strong Buy) at present, and Paylocity Holding and Qualcomm carry a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pitney Bowes’ shares have skyrocketed 115.6% over the past year. PBI is set to report its fourth-quarter 2024 results on Feb. 11.

Paylocity Holding shares have gained 28.4% over the past year. PCTY is set to report its second-quarter fiscal 2025 results on Feb. 6.

Qualcomm shares have risen 15.3% over the past year. QCOM is set to report its first-quarter fiscal 2025 results on Feb. 5.

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