Executive Summary
KLA Corporation (KLAC) delivered a solid QQ1 2025 performance, marking another quarter of sequential revenue growth and notable profitability strength driven by demand at the leading edge of semiconductor manufacturing. Reported quarterly revenue of $2.84 billion and non-GAAP diluted EPS of $7.33, with GAAP EPS of $7.01, both above guidance midpoints. The company continues to benefit from AI-enabled product enhancements and an expanding service business, while maintaining a track record of strong cash generation and capital returns. Management reiterated a constructive view for calendar 2025, anchored by continued growth in leading-edge foundry, logic, and memory investments, with manufacturing demand supported by AI chips and advanced packaging, even as China-related demand digests. December quarter guidance implies continued revenue progression and stable margins, underscoring KLA’s resilient operating model and market leadership in process control for semiconductor manufacturing.
Key drivers include AI adoption and increased process control intensity at the most advanced nodes (2nm/3nm transitions, reticle and metrology expansion, and advanced packaging). The September quarter cash flow and free cash flow remained robust (OCF $995M; FCF $935M), enabling another round of capital returns (quarterly share repurchases of $567M and $198M in dividends; 12-month total returns of $2.6B). The results reinforce KLA’s thesis that the rising importance of process control—and the cost of insufficient inspection at critical steps—will sustain long-term growth and industry outperformance.
Key Performance Indicators
Key Insights
Revenue: $2.8415B, up YoY ~18.6% and QoQ ~10.7% (YoY and QoQ figures reflect the quarterly performance). Gross margin: 61.2% (slightly below the guidance midpoint due to mix). Operating margin: 41.5%. EBITDA: $1.2576B. Net income: $0.946B (GAAP) and non-GAAP net income $0.988B. Diluted EPS: GAAP $7.01; non-GAAP $7.33. Cash flow from operations: $0.995B; free cash flow: $0.935B. Cash and investments: cash/cash equivalents around $1.98B; short-term investments about $2.65B; total cash and short-te...
Financial Highlights
Revenue: $2.8415B, up YoY ~18.6% and QoQ ~10.7% (YoY and QoQ figures reflect the quarterly performance). Gross margin: 61.2% (slightly below the guidance midpoint due to mix). Operating margin: 41.5%. EBITDA: $1.2576B. Net income: $0.946B (GAAP) and non-GAAP net income $0.988B. Diluted EPS: GAAP $7.01; non-GAAP $7.33. Cash flow from operations: $0.995B; free cash flow: $0.935B. Cash and investments: cash/cash equivalents around $1.98B; short-term investments about $2.65B; total cash and short-term investments ~ $4.63B. Total debt: $6.83B; net debt (approx.) $2.20B; Total assets: ~$15.68B; Total stockholders’ equity: ~$3.56B. Current ratio: 2.13; quick ratio: 1.48; cash conversion cycle: ~280 days; ROE ~26.6%; ROA ~6.0%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
2.84B |
18.55% |
10.73% |
| Gross Profit |
1.69B |
16.83% |
6.40% |
| Operating Income |
1.12B |
24.55% |
6.40% |
| Net Income |
945.85M |
27.58% |
13.08% |
| EPS |
7.05 |
29.83% |
13.34% |
Key Financial Ratios
operatingProfitMargin
39.4%
operatingCashFlowPerShare
$7.42
freeCashFlowPerShare
$6.97
dividendPayoutRatio
20.9%
Management Commentary
Key management insights from the QQ1 2025 earnings call:
- Strategy and AI as growth accelerants: “AI as an important driver and enabler of our business… KLA was an early adopter in using and incorporating AI into our products and designing our computer architecture to leverage GPUs.” (Rick Wallace) This underscores ongoing AI integration to enhance performance and cost of ownership of leading-edge systems.
- Demand momentum and execution: “KLA September quarter exhibited strengthening customer demand and solid execution by our global team… revenue of $2.84 billion, non-GAAP diluted EPS of $7.33, and GAAP diluted EPS of $7.01.” Management described “strong double-digit sequential and year-over-year revenue growth” and a favorable demand environment for leading-edge processes.
- Outlook and calendar 2025 thesis: “we expect another year of growth, fueled principally by growth and investment in both leading-edge foundry, logic and memory, mostly DRAM, offset by lower China demand” with December quarter guidance (revenue ~$2.95B; gross margin ~61.5%; GAAP EPS ~$7.45; non-GAAP EPS ~$7.75). These elements form the backbone of a constructive 2025 narrative anchored in WFE intensity and process control demand.
AI as an important driver and enabler of our business. Growth in demand for AI chips supports rising process control intensity, which benefits KLA meaningfully. Additionally, KLA was an early adopter in using and incorporating AI into our products and designing our computer architecture to leverage GPUs.
— Richard Wallace
In conclusion, we are guiding to our third consecutive quarter of sequential revenue growth and improving market demand at the leading edge and expect annual growth to continue in calendar 2025.
— Bren Higgins
Forward Guidance
Guidance highlights (December quarter): Total revenue $2.95B ± $150M; Foundry logic ~76% of revenue; Memory ~24% (DRAM ~76% of memory; NAND ~24%). Non-GAAP gross margin 61.5% ±1 percentage point (up ~30 bps at the midpoint from higher revenue and favorable mix). Non-GAAP operating expenses about $580M; incremental quarterly OPEX of ~ $15M over the next several quarters to support product development and scaling. GAAP diluted EPS guidance of $7.45 ± $0.60; Non-GAAP diluted EPS $7.75 ± $0.60; fully diluted share count ~134M. Management expects third consecutive quarter of sequential revenue growth in calendar 2025, with growth driven by leading-edge demand and ongoing process-control investments, and a potential offset from China demand digestion. Key factors investors should monitor include: (1) progression of 2nm/3nm ramp and corresponding process-control intensity; (2) DRAM/HBM investments and their impact on WFE demand; (3) continued AI-enabled product enhancements; (4) evolving China exposure and policy developments; (5) capacity expansion and backlog (RPO) dynamics and lead times.