KLA Corp Q3 Earnings Surpass Estimates, Revenues Increase Y/Y

KLA Corporation KLAC reported third-quarter fiscal 2025 non-GAAP earnings of $8.41 per share, beating the Zacks Consensus Estimate by 4.34%. The figure soared 59.9% year over year.

Revenues increased 29.8% year over year to $3.06 billion, surpassing the Zacks Consensus Estimate by 1.92% and rising from the mid-point of the company’s guidance.

KLA Corp’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the surprise being 6.35%, on average. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

KLAC’s Q3 Segmental Details

In terms of reportable segments, Semiconductor Process Control revenues (89.4% of total revenues) increased 30.7% year over year to $2.74 billion despite a modest 1% sequential decline.

KLA Corporation Price, Consensus and EPS Surprise

 

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

Foundry and Logic accounted for about 71%, whereas Memory constituted about 29% of Semiconductor Process Control revenues. Within memory, about 76% came from DRAM and 24% from NAND.

Specialty Semiconductor Process revenues (5.1% of total revenues) were $156.5 million, up 19.8% year over year and down 2% sequentially.

PCB and Component Inspection revenues (5.5% of total revenues) increased 26.4% year over year to $168.6 million and 5% on a sequential basis.

KLA Corp’s Top-Line Details

Product revenues (accounting for 78.2% of total revenues) increased 35.3% year over year to $2.39 billion. Service revenues (21.8% of total revenues) increased 13.3% to $669.2 million.

In terms of major products, Wafer Inspection and Patterning Systems (including metrology and reticle inspection) accounted for 49% and 21%, respectively, of KLA Corp’s total revenues in the fiscal third quarter.

Wafer Inspection revenues increased 51% year over year and decreased 4% sequentially to $1.50 billion. Patterning revenues moved up 18% year over year and 20% sequentially to $636 million.

In terms of regional breakdown of revenues, Taiwan and China led revenue contributions with 32% and 26%, respectively. Korea accounted for 12%, Japan 11% and North America 10%. Europe contributed 6%, whereas the remaining 3% came from the rest of Asia.

KLAC’s Operating Details

In the third quarter of fiscal 2025, the non-GAAP gross margin was 63%, 50 basis points (bps) above the middle of the company’s guidance range.

Research and development (R&D) expenses increased 5.1% year over year to $338 million. As a percentage of revenues, R&D expenses decreased 260 bps to 11%.

Selling, general and administrative (SG&A) expenses increased 4.8% year over year to $248.9 million. As a percentage of revenues, SG&A expenses decreased 190 bps to 8.1%.

Non-GAAP operating expenses were $575 million, down 3.5% sequentially. Non-GAAP operating expenses comprised $338 million in R&D and $237 million in SG&A expenses.

The fiscal third-quarter non-GAAP operating margin was 44.2%.

KLA Corp’s Balance Sheet & Cash Flow

As of March 31, 2025, cash, cash equivalents and marketable securities totaled $4.03 billion compared with $3.78 billion as of Dec. 31, 2024.

Long-term debt at the end of the fiscal third quarter was $5.88 billion, unchanged from the previous quarter.

Cash flow from operating activities was $1.07 billion for the reported quarter, up from $849.5 million in the prior quarter. The free cash flow was $990 million for the fiscal third quarter.

In the fiscal third quarter, KLA Corp paid out $225.8 million in dividends and repurchased $506.7 million worth of shares.

KLAC Provides Positive 4Q25 Guidance

For fourth-quarter fiscal 2025, revenues are expected to be $3.075 billion, plus/minus $150 million. The Zacks Consensus Estimate for revenues is pegged at $2.99 billion, indicating 16.27% year-over-year growth.

KLA Corp expects non-GAAP earnings of $8.53 per share, plus/minus 78 cents. The Zacks Consensus Estimate for non-GAAP earnings is pegged at $7.93 per share, suggesting year-over-year growth of 20.15%.

The company expects a non-GAAP gross margin of 63%, plus/minus 1%. Operating expenses are expected to be $595 million for the June-end quarter.

Zacks Rank & Stocks to Consider

Currently, KLA Corp carries a Zacks Rank #3 (Hold).

Paycom Software PAYC, Synchronoss Technologies SNCR and Compass COMP are some better-ranked stocks in the broader Zacks Computer & Technology sector.

Affirm sports a Zacks Rank #1 (Strong Buy) at present, and Synchronoss Technologies and Compass carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Paycom Software shares have rallied 10.1% year to date. PAYC is set to report first-quarter 2025 results on May 7.

Synchronoss Technologies shares have rallied 9% year to date. SNCR is set to report first-quarter 2025 results on May 6.

Compass shares have gained 32% year to date. COMP is set to post first-quarter 2025 results on May 8.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research