[image: 1746082140962-screenshot-2025-05-01-at-07.41.22.png]
Management Perspective
Chief Executive Rick Wallace announced that Q3 2025 revenue reached $3.06 billion, exceeding the forecast midpoint. He highlighted strong demand for cutting-edge logic and high-bandwidth memory (HBM), with growing contributions from advanced packaging, fuelled by AI infrastructure investments. Wallace noted that KLA’s advanced packaging revenue rose to over $500 million in 2024 and is projected to surpass $850 million in 2025, supported by market diversification and product innovation. He emphasised KLA’s continued leadership in global market share for wafer fabrication equipment (WFE) and process control in 2024, with its process control share increasing by approximately 250 basis points over five years.
Finance Director Bren Higgins reported a non-GAAP earnings per share (EPS) of $8.41, at the upper end of guidance, with a gross margin of 63%. Operating costs totalled $575 million, below the expected midpoint due to lower expenditure on prototype materials. Free cash flow for the quarter was $990 million, with total capital returns amounting to $733 million. Higgins announced a 12% dividend increase to $1.90 per share quarterly and a new $5 billion share buyback programme, expressing confidence in KLA’s growth trajectory.
Outlook
KLA provided Q2 2025 revenue guidance of $3.075 billion, with non-GAAP EPS expected at $8.53, plus or minus $0.78. The gross margin is forecast to remain at 63%, despite a 100 basis point headwind from global tariffs. The company reaffirmed its WFE growth outlook for 2025, projecting mid-single-digit growth, with KLA aiming to outperform the market through increased process control intensity and market share gains. Leadership anticipates continued growth in advanced packaging revenue, driven by broader AI-led semiconductor advancements, with potential increases in process control intensity in DRAM and logic segments.
Financial Performance
For Q3 2025, KLA recorded revenue of $3.06 billion and non-GAAP diluted EPS of $8.41. The gross margin of 63% benefited from a favourable product mix. Advanced packaging played a significant role, with revenue projected to grow from $500 million in 2024 to over $850 million in 2025. Service revenue reached $669 million in the quarter, marking the 52nd consecutive quarter of year-on-year growth, despite challenges from U.S. export controls. Free cash flow over the trailing twelve months was $3.5 billion, with a 30% free cash flow margin, placing KLA among the top 10% of S&P 500 companies.
Q&A Session
Harlan Sur, JPMorgan: Raised concerns about tariff impacts and the postponement of Investor Day. Finance Director Higgins explained the delay was due to global trade uncertainties and outlined strategies to mitigate tariff-related cost pressures.
Atif Malik, Citi: Enquired about service growth and advanced packaging positioning. Higgins projected approximately 10% service growth for 2025 and underscored KLA’s strong position in logic and HBM for advanced packaging.
Vivek Arya, Bank of America Securities: Asked about 2026 WFE prospects. CEO Wallace expressed optimism about sustained AI-driven investments and demand for leading-edge technology, anticipating steady growth through 2030.
Sentiment Analysis
Analysts expressed concerns over global trade uncertainties and tariff impacts, adopting a slightly cautious tone. Management remained confident, citing robust demand in AI, advanced packaging, and market share gains. In prepared remarks, leadership highlighted “strong opportunities” and “consistent performance” but adopted a more measured tone when addressing tariff pressures during the Q&A. Compared to the previous quarter, management’s tone remained steady, while analysts focused more on macroeconomic uncertainties and competitive dynamics.
Quarter-on-Quarter Comparison
Advanced packaging revenue guidance showed significant growth, rising from $750 million projected in Q2 to over $850 million in Q3 for 2025. Continued emphasis on AI infrastructure as a key driver of leading-edge investments, consistent with prior quarter commentary. Gross margin guidance for 2025 edged up slightly despite new tariff-related challenges, reflecting confidence in product mix improvements and operational efficiency. Analysts maintained their focus on tariff impacts and China-related risks, echoing concerns from the previous quarter.
Final Takeaway
KLA Corporation delivered robust Q3 2025 results, driven by strong demand in cutting-edge logic, HBM, and advanced packaging, fuelled by AI infrastructure investments. The company raised its advanced packaging revenue target to over $850 million for 2025 and announced a substantial share buyback programme and dividend increase. Despite challenges from global trade uncertainties and tariff impacts, KLA remains optimistic about its leadership in process control and growth prospects, underpinned by its diversified portfolio and market share gains.