KLAC · Q4 2025 Earnings
BullishKLA Corporation
Reported July 31, 2025
30-second summary
KLA closed FY2025 with $3.18B in Q4 revenue (+23.6% YoY, +3.7% QoQ), $9.38 non-GAAP EPS, and a record $1.06B in free cash flow at a 33.5% FCF margin. Q4 non-GAAP gross margin came in at 63.2%, with the September-quarter non-GAAP GM guide of 62.0% ± 1.0% implying ~120bps of QoQ compression at the midpoint. The September-quarter revenue guide of $3.15B ±$150M sits roughly flat sequentially but bakes in continued advanced-packaging and process-control intensity tailwinds — Q&A pegged advanced packaging at a $925M run-rate (raised from $850M, +80% YoY) with process-control intensity migrating from ~9–10% of WFE pre-EUV toward ~12% as HBM ramps. The setup into 2026 is constructive on logic/HPC and DRAM/HBM, with China the lone identified headwind.
Headline numbers
EPS
Q4 FY2025
$9.38
Revenue
Q4 FY2025
$3.17B
+23.6% YoY
Gross margin
Q4 FY2025
62.0%
Free cash flow
Q4 FY2025
$1.06B
Operating margin
Q4 FY2025
35.4%
Key financials
Q4 FY2025| Metric | Q4 FY2025 | YoY |
|---|---|---|
| Revenue | $3.17B | +23.6% |
| EPS | $9.38 | — |
| Gross margin | 62.0% | — |
| Operating margin | 35.4% | — |
| Free cash flow | $1.06B | — |
Guidance
Prior quarter data unavailable — comparison not possible.
Segment performance
Q4 FY2025| Segment | Q4 FY2025 | YoY |
|---|---|---|
| Semiconductor Process Control | $2.878B | +24.7% |
| Specialty Semiconductor Process | $0.142B | +17.0% |
| PCB and Component Inspection | $0.154B | +10.0% |
Capacity & utilization
Q4 FY2025| Segment | Q4 FY2025 |
|---|---|
| Product Revenue | $2.47B |
| Service Revenue | $0.70B |
Profitability
Q4 FY2025| Segment | Q4 FY2025 |
|---|---|
| Operating Cash Flow (Q4) | $1.16B |
| Operating Margin (GAAP) | 35.4% |
| Gross Margin (GAAP) | 62.0% |
| Free Cash Flow Margin (Q4) | 33.5% |
Other KPIs
Q4 FY2025| Segment | Q4 FY2025 |
|---|---|
| Capital Returns | $0.68B |
| FY2025 Capital Returns | $3.05B |
Management tone
Management's posture is structurally bullish on intensity and share, hedged on absolute WFE. The framing repeats that process-control intensity has stepped from 9–10% pre-EUV to ~12% with EUV plus HBM contributions, and that customers are pulling KLA toward higher process-control intensity rather than KLA pushing — the most confident posture management can take without committing to a 2026 number.
China is the one place where management is unambiguously cautious: down 10–15% in 2025 (revised from an earlier 15–20% expectation as the broader business strengthened), with additional headwinds expected in 2026 as regional competition intensifies across Wuhan, Shanghai and Beijing. Management is willing to characterize China as past its peak but won't quantify the recovery path.
On the long-term model, the answer to Morgan Stanley's $14B target question — "we don't need 125 to make that plan" given share gains (now ~7.25% of WFE, approaching 8% ex-packaging) and packaging momentum — is the cleanest statement of confidence on the call: the path to the long-term target no longer hinges on the original WFE assumption.
Q&A highlights
CJ Muse · Cantor Fitzgerald
Asked about early customer discussions on 2026 growth, what visibility KLA has given 8+ month lead times, and what needs to happen for firm conviction on 2026 growth. Follow-up on China dynamics and how regional competition (Wuhan, Shanghai, Beijing) and increased number of players informs KLA's view on China investment levels.
Management indicated early discussions are constructive on 2026 being a growth year, driven by HPC and advanced logic momentum. China expected to see headwinds in 2026 after elevated investment in 2023-2024. Regional competition makes visibility difficult; management believes market is near bottom. Stated it's too early to quantify 2026 specifically.
Harlan Sir · JP Morgan
Asked about drivers of 50% YoY growth in inspection vs. flat patterning; whether KLA expects another year of total share gains in process control. Follow-up on third/fourth upward revision of advanced packaging guidance from $850M to $925M and where incremental upside is coming from.
Inspection strength driven by optical pattern inspection supply constraint lift, packaging sampling rates, and gate-all-around relevance. Patterning weakness in overlay due to litho slowdown; film measurement and reticle inspection expected to improve in H2. Advanced packaging upside from product adoption, ramps, customer momentum, and market share gains outside WFE dynamics. Currently at 5-6% intensity vs. 1% in 2022.
Vivek Arya · Bank of America
Asked about process control intensity evolution in memory as industry migrates from traditional DRAM to HBM, and quantification of benefits to KLA. Follow-up on gross margin implications if September quarter sales are flat and medium-term tariff mitigation strategies.
HBM driving higher process control intensity due to bigger valuable die, less redundancy, higher duty cycle, new technology introduction, and lower acceptable defectivity levels. Pre-EUV to current state represents ~200bps of incremental process control intensity; HBM adds another ~100bps opportunity. Tariffs estimated at 50-100bps headwind to gross margin in 2025; mitigation includes free trade zones, process improvements, and structural supply chain changes. Q4 margin expected higher than Q3 based on revenue mix expectations.
Shane Brett · Morgan Stanley
Asked about September quarter business mix expectations where foundry/logic likely strengthens sequentially but memory (DRAM/NAND) declines, contrary to expectations for H2 memory uptick. Follow-up on 2026 revenue target path relative to 2022 analyst day $14B target assuming $125B WFE.
DRAM expected to strengthen in December quarter vs. September due to timing, revenue recognition, and shipment acceptance processes. Against 2022 $14B target based on $125B WFE, KLA doesn't need that WFE level given market share gains and packaging growth. Current 7.25% WFE share assumption; excluding packaging, approaching 8%. Needs mid-tens WFE levels to achieve $14B. Financial model executing per plan; gross margins ~62.5% (pre-tariff would be in line or better), leveraging incremental operating margin model with 1.5x revenue growth to EPS growth.
Tom O'Malley · Barclays
Asked about use of word 'broadening' in 2026 commentary—whether additional customers coming to leading-edge or just more opportunities within existing customer base. Follow-up on how KLA feels comfortable talking about broader market strength when describing dynamics where KLA takes more share and pie might not be as large; seeking to understand total WFE outlook vs. share gain dynamics.
Broadening refers to both new customers entering leading-edge and increased design proliferation at leading-edge with existing customers. Process control intensity inflection driven by multiple factors: larger die, defect density challenges, HPC value/performance requirements, HBM needs, advanced packaging, and design proliferation. Management confident in 2026 based on customer conversations confirming they need higher process control intensity and asking KLA to support portfolio expansion. Share gains in conjunction with market growth, but intensity drivers are structural.
What to watch into next quarter
Q1 FY2026 gross margin landing relative to the 60.7% GAAP / 62.0% non-GAAP guide midpoints — management told Vivek Arya tariffs are now 50–100bps drag (down from ~100bps), so a print at the high end of the band would validate mitigation; a miss below 60% reopens the tariff question.
Advanced packaging revenue trajectory toward the raised $925M target — this number has been revised up multiple times; the September quarter is when the +80% YoY pace needs to start showing in segment splits, otherwise the structural intensity narrative weakens.
China revenue mix — management called China down 10–15% in 2025 with further 2026 headwinds. Watch whether the September print confirms continued deceleration or whether DUV shipments to mature nodes stabilize.
Initial framing of FY2026 on the next call — management deflected quantification but signaled a growth year. Look for whether they commit to a numeric WFE assumption and how they frame DRAM/HBM strength against China weakness.
Process-control intensity claims showing up in product revenue mix — service grew to $703M (+14% YoY) but the structural intensity story rests on inspection. Watch whether inspection sub-segment commentary continues to outpace patterning.
Sources
- KLA Corporation Q4 FY2025 earnings press release (SEC EDGAR, exhibit 99.1, filed 2025-07-31): https://www.sec.gov/Archives/edgar/data/319201/000031920125000020/exhibit991earningsrelease7.htm
- KLA Corporation Q4 FY2025 earnings call — prepared remarks and Q&A (Rick Wallace, Brent Higgins; analyst exchanges with Cantor Fitzgerald, JP Morgan, Bank of America, Morgan Stanley, Needham, Barclays).
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