KLA Corp Q3 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Harlan Sur - JPMorgan Chase & Co. - Analyst : Great job on another solid quarter of execution. Despite the view that the team is still going to drive $3 billion-plus per quarter throughout the year, you're holding your WFE view of up mid-single digits percentage year over year, you're not seeing any major changes to your customer spending plans. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 9:00PM, KLAC.OQ - Q3 2025 KLA Corp Earnings Call Yeah. You did highlight the 100 basis points hit to gross margin, due to tariffs. But, at the same time, you did also take up your full-year guidance on gross margins. But you're postponing your Analyst Day by nine months to one year on the potential trade and tariff uncertainty. I understand the direct impact concerns and risk on global demand for electronics. But is there also a significant tariff-related risk on your equipment and systems post, let's say, the 90-day reciprocal tariff reprieve? The team, I thought, was fairly geographically diversified, across your manufacturing base level. I wouldn't think so. Maybe, just take us through some of the puts-and-takes around tariffs and trade and your ability to modulate your global manufacturing operations, under different tariff-related scenarios, to minimize the impact on your system shipping to different geographies.

Question: Harlan Sur - JPMorgan Chase & Co. - Analyst : I appreciate that. And then, maybe on a bright note: Rick, as you mentioned in your shareholder letter, calendar '24 share rankings are out for Process Control. The team and the Process Control segment outgrew overall WFE last year. And despite your dominant number 1 position, you're 6.5 times larger than your number 2 competitor in the space. You still gained 50 basis points of share; and strong number 1 position, I think, by my count, in five out of the six major subsegments within Process Control. I think the one area where it was a bit of a surprise, where you made significant progress, was in e-beam patterned wafer inspection; and despite optical continuing to dominate at a 7x larger market versus e-beam, the KLA team did double their e-beam inspection revenues last year. You gained about 700 basis points of share there. So the team's strategy has always been to introduce new solutions, when the market is ready to adopt. So what's driving the

Question: Atif Malik - Citigroup Inc. - Analyst : I have a question on the Services growth. I understand that it's a bit pressured this year because of the loss of fabs in China. Can you talk about your full-year outlook on the Services for this year?

Question: Atif Malik - Citigroup Inc. - Analyst : Great. And as a follow-up, on Advanced Packaging momentum, good to see you, guys, raising the bar to $850 million and number 1 market share this year. Rick, if you can just pull a curtain a bit on your competitive positioning in Advanced Packaging? Are you stronger on the logic or the (inaudible) side or the HPM side? And what are your thoughts about hybrid-bonding adoption? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 9:00PM, KLAC.OQ - Q3 2025 KLA Corp Earnings Call

Question: Vivek Arya - BofA Securities, Inc. - Analyst :

Question: Vivek Arya - BofA Securities, Inc. - Analyst : All right. And for my follow-up, I know, a little early but I'm curious, like, what's on your dashboard to gauge whether 2026 WFE could be up, down, flat? How does China figure into it, in terms of opportunity and risk because a lot of long-term investors in KLA, they're always looking out? So how would you want them to think about what your opportunity set is in '26?

Question: Joseph Quatrochi - Wells Fargo Securities, LLC - Analyst : Yes. Maybe, just a follow-up on that, Rick. Is cleaner in space a potential gating factors, as you look into '26? Or how do you think about that aspect of it?

Question: Joseph Quatrochi - Wells Fargo Securities, LLC - Analyst : That's very helpful. And, maybe, one for Bren. Just, I wanted to better understand the uptick in the full-year gross margin, given the fact that the dynamics around tariffs that you talked about. Maybe, can you just help us like understand what's giving you the confidence there to increase it?

Question: Timm Schulze-Melander - Redburn Atlantic - Analyst : Maybe, the first one: just on the sequential Q-o-Q. Could you just help us, maybe, with a bit of the gross profit bridge. Pretty flat revenues but a really decent impact on gross margin. Maybe, if you could just peel back some of the moving parts. That would be really helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 9:00PM, KLAC.OQ - Q3 2025 KLA Corp Earnings Call

Question: Timm Schulze-Melander - Redburn Atlantic - Analyst : Yes. I was thinking more about the March quarter compared to the December quarter.

Question: Timm Schulze-Melander - Redburn Atlantic - Analyst : Okay. And, maybe, just as a quick follow-up. I think if I caught it correctly, you talked about the Service business basically being the source of potential tariff impact to margins. Maybe, if you could just give us a bit of color about that. And also maybe just kind of how you're thinking about how you might

Question: Christopher Muse - Cantor Fitzgerald & Co., Inc. - Analyst : Bren, I'm just trying to dig into your relatively stable half-on-half revenue outlook, better than some of your peers. Curious: is that a function of perhaps less memory exposure, sustainable foundry? Or greater seasonality from PCB in the second half? Or SPTS taking off? What are the key drivers of driving that sustainability?

Question: Christopher Muse - Cantor Fitzgerald & Co., Inc. - Analyst : Great. And then, as my follow-up, you highlighted great growth in Advanced Packaging. The lion's share of that is CoWoS. Can you speak to the work you're doing on HBM? How you're thinking about insertions? Is it 8PM 4E? And is there a way to size the opportunity sitting here, today? Or is it too early?

Question: Krish Sankar - TD Cowen - Analyst : First, on branding. When I look at the US revenue, it's up Q-o-Q but the dollar figures are still pretty low. And I'm just trying to reconcile that with what (inaudible) said about investing in Arizona. Do you think the Process Control, being an early cyclical, some of the early purchases for Arizona are done? Or do you think there's still potential for the rest of the year? And then, I have a follow-up.

Question: Krish Sankar - TD Cowen - Analyst : Got it And then, a quick follow-up on tariffs. Thanks for the color on the service impact from the tariffs. I understand a lot of moving parts. But I'm just wondering, if it ever comes to it, can you meet non-U. demand from your non-US manufacturing facilities and U.S. demand from the US? Or is it not as simple as that?

Question: Krish Sankar - TD Cowen - Analyst : No, as it relates to Systems.

Question: Thomas O'Malley - Barclays Capital Inc. - Analyst : My first was just in regards to CJ's question earlier; just on the second half and whether it's weighted memory or foundry/logic. And it sounded like memory is up a little bit; foundry/logic maybe down a little bit. If you look at the mix of memory, some of your peers have already talked about, like, a sharper falloff in the second half when it comes to NAND. And I fully appreciate that your business is very small there. But is the correct interpretation of that that the DRAM side gets a little bit stronger and you see a little weakness on that? Are you seeing anything different, just given the make-up or the timing of your NAND business?

Question: Thomas O'Malley - Barclays Capital Inc. - Analyst : Helpful. And then, I think that it's obviously brave of you, guys, to go out there and talk about tariff impacts, already, when many of your peers have kind of said, hey, don't look at the second half; and you, guys, are being pretty ,prescriptive when it comes to the gross margin. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 9:00PM, KLAC.OQ - Q3 2025 KLA Corp Earnings Call So maybe it's helpful: Can you, guys, talk about what you, guys, did in order to get to that 100 basis points per quarter? Like, did you look at different facilities? Did you take everything as a whole? Like, any kind of description or color as to how you got to that number would be super helpful.

Question: Srini Pajjuri - Raymond James Financial, Inc. - Analyst : I have a follow-up about the second-half comments that you made, in particular about the foundry/logic. I think the comment was that it's going to tick down a little bit. It was down a bit. And then, you're guiding flattish for this quarter. I'm guessing most of that is China. I'm just curious as to how you're expecting N2 demand to fare? And if you can talk about where we are in the N2 cycle? And then, I guess, as we go to next year, when do we expect [1.4] to kick in?

Question: Srini Pajjuri - Raymond James Financial, Inc. - Analyst : Got it. And then, more of a longer-term question. I'm just curious to understand a little better what the implications from High-NA. I know it's early days but as we go to High-NA, I'm reading that the reticle sizes will come down. I'm guessing the complexity will increase quite a bit. And of course, packaging complexity will go up. But reticle come down.

Question: Timothy Arcuri - UBS Group AG - Analyst : Bren, I wanted to ask about Semi-systems, half on half. You quantified in the presentation -- you actually quantified the outgrowth,

Question: Timothy Arcuri - UBS Group AG - Analyst : Okay. Then, you outgrow by a lot more than 7% --

Question: Timothy Arcuri - UBS Group AG - Analyst : Yes. Well, if the numbers are going to be up, like 12%. So that's like a lot more than several. But anyway, okay, then on RPO. So why stop reporting RPO midyear? Was it, like, causing the problem? And then, you said that you're going to include it to be the transaction price for contracts that have not yet been recognized at the end of the quarter. So how is the new practice different from current practice?

Question: Melissa Weathers - Deutsche Bank Securities Inc. - Analyst : I wanted to ask on the high-volume manufacturing side. This is a big theme that you, guys, talked about at your last Analyst Day, as you shift from more of, like, R&D-type spending to [HVM] spending and being a bigger part of the mix there. So how are you seeing this play out in the current leading-edge nodes and, maybe, future nodes? Like, is there any way you can help us contextualize how much the [HVM] opportunity is for KLA?