KLA (KLAC) Q1 2025 earnings summary

Executive summary

• Q1 FY25 revenue reached $2.84 billion, up 19% year-over-year and 11% sequentially, driven by strong demand in leading-edge logic, memory, inspection, and advanced packaging markets.

• Non-GAAP net income was $988 million, with non-GAAP diluted EPS of $7.33 and GAAP diluted EPS of $7.01, both near the upper end of guidance.

• Service business achieved $644 million in revenue, up 5% sequentially and 15% year-over-year, marking 49 consecutive quarters of year-over-year growth.

• China accounted for 42% of total revenues, with North America and Taiwan also showing significant growth.

• Management expects sequential quarterly revenue growth through the calendar year, citing optimism for semiconductor market growth in Q4 2024 and into 2025.

Financial highlights

• Gross margin (non-GAAP) was 61.2% and operating margin (non-GAAP) was 41.5%; GAAP gross margin was 59.6%.

• Free cash flow for the quarter was $935 million, with a margin of 32.9% and 95% conversion of non-GAAP net income.

• Cash flow from operations was $995 million; cash, cash equivalents, and marketable securities totaled $4.63 billion as of September 30, 2024.

• Capital returns totaled $765 million for the quarter, including $567 million in share repurchases and $198 million in dividends.

• Investment grade balance sheet with $6.7 billion in total cash and $6.6 billion in debt; total shareholders' equity at $3.56 billion.

Outlook and guidance

• Q2 FY25 revenue guidance is $2.95 billion ± $150 million; non-GAAP gross margin expected at 61.5% ± 1%.

• Non-GAAP operating expenses for December quarter forecasted at $580 million, with incremental quarterly spend of $15 million expected over the next several quarters.

• GAAP diluted EPS guidance is $7.45 ± $0.60; non-GAAP diluted EPS is $7.75 ± $0.60.

• 2025 expected to see continued growth, led by leading-edge Foundry/Logic and DRAM, offset by lower China demand.

• Expect 65–70% of $10.04 billion in remaining performance obligations to be recognized as revenue in the next 12 months.