Kla Corporation ((KLAC)) has held its Q2 earnings call. Read on for the main highlights of the call.
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KLA Corporation’s recent earnings call conveyed a strong positive sentiment, underscored by their solid revenue growth, profitability, and cash flow performance for 2024. The company celebrated significant achievements in advanced packaging and service sectors, although it acknowledged challenges stemming from U.S. export controls affecting China revenue and the conclusion of flat panel business shipments. Despite these hurdles, KLA’s robust guidance for 2025 highlighted its resilience and market leadership.
Record Revenue and Market Growth
KLA Corporation reported a remarkable 12% increase in revenue, reaching a record $10.85 billion for 2024. Notably, their process control revenue surged over 12%, reflecting enhanced market share, while the services business grew by 15% to $2.5 billion, marking a significant milestone in their market growth trajectory.
Strong Profitability and Cash Flow
The company showcased its industry-leading profitability with gross and operating margins of 61% and 41%, respectively. Free cash flow grew to an impressive $3.4 billion, and KLA returned $2.9 billion to shareholders through dividends and share buybacks, emphasizing their strong financial performance and shareholder commitment.
Advanced Packaging Growth
KLA’s advanced packaging sector experienced substantial growth, with revenue reaching approximately $500 million in 2024. This segment is projected to exceed $800 million in 2025, surpassing previous estimates and highlighting the company’s strategic focus on expanding advanced packaging capabilities.
Services Business Milestone
The services business marked a significant achievement with $667 million in revenue for the December quarter, representing 50 consecutive quarters of growth and an 18% year-over-year increase. This milestone underscores KLA’s consistent performance and robust service offerings.
Impact of U.S. Export Controls on China
The U.S. government’s export controls are projected to impact KLA’s 2025 revenue by approximately $500 million, predominantly affecting the systems business. This regulatory challenge presents a significant hurdle, which KLA aims to navigate strategically.
Flat Panel Business Exit
KLA is set to complete its flat panel business shipments by the end of the current quarter, which will influence growth in the EPC segment. This strategic exit marks a shift in focus towards more promising market opportunities.
Potential Licensing Delays
The company faces potential setbacks due to licensing delays by the U.S. government, which could impede efforts to mitigate revenue impacts from export controls. This issue highlights the complexities of operating within a regulated environment.
Solid Guidance for 2025
KLA’s guidance for fiscal 2025 projects a growing WFE market by mid-single digits, driven by investments in leading-edge logic and high-bandwidth memory. Despite a $500 million revenue impact from export controls, the company anticipates revenue growth with a focus on significant product development investments. The March quarter revenue is forecasted at $3 billion, alongside a non-GAAP gross margin of 62%.
In summary, KLA Corporation’s earnings call revealed a steadfast commitment to growth and innovation, reflected in its record revenue and strong financial performance. While challenges such as export controls and flat panel business completion loom, the company remains poised to leverage market leadership and strategic investments to drive future success.
