Kla Corporation ((KLAC)) has held its Q1 earnings call. Read on for the main highlights of the call.
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KLA Corporation’s recent earnings call painted a picture of robust financial health and growth, underscored by impressive gains in advanced packaging and service revenue. The company reported record cash flow and significant capital returns, while also addressing concerns regarding the impact of extended export controls on China. Despite these challenges, the overall sentiment remains optimistic, with expectations of continued growth into 2026.
Strong Financial Performance
KLA Corporation delivered impressive financial results, reporting revenue of $3.21 billion and a non-GAAP diluted EPS of $8.81, with a GAAP diluted EPS of $8.47. The company’s gross margin stood at 62.5%, driven by a favorable product mix and manufacturing efficiencies.
Advanced Packaging Revenue Growth
The company highlighted significant growth in its advanced packaging segment, with expectations that related revenue will exceed $925 million for the calendar year 2025. This represents an approximate 70% increase year-over-year, showcasing the strength of this segment.
Service Business Growth
KLA’s service revenue also showed robust growth, reaching $745 million in the September quarter. This marks a 6% sequential increase and a 16% year-over-year rise, indicating strong demand for the company’s service offerings.
Record Cash Flow
The quarter saw KLA achieving a record cash flow of $1.066 billion. Over the past 12 months, the company generated a free cash flow of $3.9 billion, with a free cash flow margin of 31%, highlighting its strong cash generation capabilities.
Capital Returns
KLA returned $799 million in capital during the September quarter, comprising $545 million in share repurchases and $254 million in dividends. Over the past 12 months, total capital returns amounted to $3.09 billion, reflecting the company’s commitment to returning value to shareholders.
Positive Outlook for 2026
Looking ahead, KLA anticipates mid- to high single-digit growth in wafer fab equipment (WFE) for 2025 and expects 2026 to be a growth year. The company foresees a broader spending profile for both WFE and advanced packaging, reinforcing its positive outlook.
Impact of China Export Controls
KLA addressed the potential revenue impact of extended U.S. export controls affecting certain customers in China, estimating a hit of approximately $300 million to $350 million through calendar 2026. Despite this, the company remains optimistic about its growth prospects.
Mixed Segment Performance
While KLA expects strong performance in leading-edge logic and DRAM, it anticipates reduced demand from domestic China and the legacy market. This mixed performance highlights the varied dynamics across different segments.
Guidance and Future Outlook
During the earnings call, KLA provided a robust set of financial metrics and guidance for the upcoming quarters. The company forecasted revenue of $3.225 billion for the December quarter, with an expected gross margin of 62%. Looking further ahead, KLA anticipates a growth year in 2026, driven by investments in advanced packaging and leading-edge logic, despite the challenges posed by U.S. export controls.
In summary, KLA Corporation’s earnings call reflected a strong financial performance with significant growth in key areas such as advanced packaging and service revenue. While the impact of export controls on China remains a concern, the company’s outlook remains positive, with expectations of continued growth into 2026. Investors and stakeholders can take confidence in KLA’s robust cash flow and commitment to capital returns, as the company navigates both opportunities and challenges in the market.