Executive Summary
KLA Corporation reported a solid QQ3 2025 performance, delivering revenue of $3.063B, non-GAAP EPS of $8.41, and GAAP EPS of $8.16, all at the upper end of guided ranges. The quarter benefited from continued demand at the leading edge for logic and high-bandwidth memory, along with a resilient advanced packaging portfolio, which contributed to more than $500M of annualized advanced packaging revenue in 2024 and an expectation to exceed $850M in calendar 2025. The Services business remained a steady contributor, advancing 13% YoY to $669M in QQ3, despite export-control headwinds that tempered growth in some regions. Free cash flow remained exceptionally strong at $990M for the quarter and $3.5B over the trailing 12 months, reinforcing KLAC’s capital-return framework and balance-sheet strength.
Management signaled continued confidence in AI-driven demand as a secular growth driver, noting that process-control leadership and product breadth position KLA to outperform the mid-single-digit WFE growth backdrop in 2025. However, near-term visibility is tempered by tariff-related margin headwinds (roughly 100 basis points quarterly) and China exposure, which the company quantified at roughly 26% of QQ3 revenue and expected to approach 30% for the full year. The company also elected to postpone its Investor Day to early 2026 amid macro uncertainty, underscoring a prudent stance on capital-allocation timing until the environment stabilizes.
Looking forward, KLA provides a June quarter guide of $3.075B +/- $150M revenue with a 63% gross margin (plus/minus one percentage point) and a GAAP EPS of $8.28 +/- $0.78. For calendar 2025, the margin target is 62.5% +/- 50 basis points, with an anticipated Pillar 2 tax-rate shift to about 14% in the second half. Management expects core AI-driven growth to persist, with continued outperformance versus WFE growth and ongoing opportunities in advanced packaging, including memory stack implementations and hybrid bonding. Given the strong cash-generation profile, strategic portfolio, and balance-sheet flexibility, KLAC remains well-positioned to capitalize on AI infrastructure spend while managing near-term macro and policy risks.
Key Performance Indicators
Key Insights
Revenue: $3.063B in QQ3 2025, YoY +30.0%, QoQ -0.5%. Gross profit: $1.887B, YoY +35.6%, QoQ +1.7%. Gross margin: 63.0% (0.616). Operating income: $1.300B, YoY +53.3%, QoQ +4.7%. Net income: $1.089B, YoY +80.9%, QoQ +32.0%. EPS (diluted): $8.21 (GAAP $8.16) with non-GAAP at $8.41. Operating margin: 42.4%. EBITDA: $1.300B; EBITDARatio: 42.45%. Free cash flow: $990M for the quarter; trailing 12-month FCF: $3.5B; FCF margin: ~30%. Cash and equivalents: $1.858B; total cash + short-term investments: $...
Financial Highlights
Revenue: $3.063B in QQ3 2025, YoY +30.0%, QoQ -0.5%. Gross profit: $1.887B, YoY +35.6%, QoQ +1.7%. Gross margin: 63.0% (0.616). Operating income: $1.300B, YoY +53.3%, QoQ +4.7%. Net income: $1.089B, YoY +80.9%, QoQ +32.0%. EPS (diluted): $8.21 (GAAP $8.16) with non-GAAP at $8.41. Operating margin: 42.4%. EBITDA: $1.300B; EBITDARatio: 42.45%. Free cash flow: $990M for the quarter; trailing 12-month FCF: $3.5B; FCF margin: ~30%. Cash and equivalents: $1.858B; total cash + short-term investments: $4.028B; total debt: $6.089B; net debt: $4.231B. Balance sheet: Total assets $15.188B; total liabilities $11.184B; total stockholders’ equity $4.005B. Cash flow from operations: $1.072B; capex: $82.1M; ROE: 27.2%; ROA: 7.17%; debt ratio: 0.401; debt/equity: 1.520; return on capital employed: 11.5%; payout ratio: 20.7%; current ratio: 2.54; quick ratio: 1.74; cash flow per share (operating): $8.09; free cash flow per share: $7.44; price/earnings: 20.71x; price/book: 22.51x; dividend yield: 0.25%; enterprise value multiple: 72.58x.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
3.06B |
30.04% |
-0.45% |
| Gross Profit |
1.89B |
35.56% |
1.72% |
| Operating Income |
1.30B |
53.29% |
4.69% |
| Net Income |
1.09B |
80.94% |
32.00% |
| EPS |
8.21 |
84.08% |
32.85% |
Key Financial Ratios
operatingProfitMargin
42.5%
operatingCashFlowPerShare
$8.09
freeCashFlowPerShare
$7.44
dividendPayoutRatio
20.7%
Management Commentary
Management commentary and transcript takeaways by theme:
- Strategy and AI-driven growth: Rick Wallace highlighted AI as a key catalyst and noted that revenue was driven by leading-edge logic, HBM, and a growing advanced packaging portfolio, with advanced packaging revenue exceeding $850M in calendar 2025 expected after $500M in calendar 2024.
- Tariffs and trade environment: Bren Higgins cautioned that global tariffs pose a roughly 100 bp headwind to gross margin per quarter and stressed that management would pursue mitigating actions, including supply-chain positioning and pricing strategies, while postponing the Investor Day to 2026 due to macro uncertainty.
- China exposure and regional mix: China revenue was 26% in Q1 and is expected to be about 30% for the year; management emphasized a diversified manufacturing footprint and operational flexibility to respond to tariff and regulatory changes.
- E-beam and Process Control differentiation: Rick cited strong growth in e-beam within Process Control and the value of interoperable optical/e-beam solutions for the most challenging nodes, suggesting a durable long-term growth trajectory.
- Capital allocation and capital returns: The company announced its 16th consecutive annual dividend increase (+12% to $1.90 per quarter) and a new $5B share-repurchase authorization, underscoring its commitment to shareholder-friendly capital deployment and strong free cash flow generation.
KLA's March quarter results were above the midpoint -- all the guidance range with revenue of $3.06 billion, non-GAAP diluted EPS of $8.41 and GAAP diluted EPS of $8.16.
— Richard Wallace
Gross margin was 63%, about 50 basis points higher than the midpoint of guidance, as product mix within our Process Control segment was stronger than modeled for the quarter.
— Bren Higgins
Forward Guidance
Outlook and risk considerations:
- June quarter guidance: Revenue of $3.075B +/- $150M; Foundry/Logic ~69% of Semiconductor Process Control revenue; Memory ~31% (DRAM ~76%, NAND ~24%). Gross margin guidance: 63% +/- 1 ppt, with roughly 100 bp tariff-related headwind assumed for the period. Tax rate guidance: 13.5% for June.
- Calendar 2025 guidance: Gross margin expected to be about 62.5% +/- 50 bp; other income/expense net around a $35M charge in Q2 and roughly consistent through the year; Pillar 2 tax rate effective around 14% in H2.
- RPO disclosures: RPO to be reported as part of quarterly SEC disclosures starting in fiscal 2026 (Q1 2026) to reflect a transaction-price-based backlog, aligning with peers.
- Growth thesis and catalysts: KLAC expects to outpace the WFE market in 2025 by several points due to market share gains, process-control intensity, and ongoing AI infrastructure investments. The company remains focused on advancing advanced packaging (aiming for >$850M in 2025), expanding its e-beam capabilities, and leveraging service resilience despite export-control headwinds.
- Key monitorables for investors: (1) WFE market dynamics and AI-driven capacity expansion, (2) tariff policy evolution and the effectiveness of mitigation strategies, (3) China demand trajectory and geographic diversification, (4) progression of advanced packaging adoption and margins, (5) RPO disclosure transition and backlog visibility, (6) execution of capital-return plan and working capital efficiency.