Semiconductor manufacturing equipment maker KLA Corporation (NASDAQ: KLAC) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 29.8% year on year to $3.06 billion. Guidance for next quarter’s revenue was optimistic at $3.08 billion at the midpoint, 2.7% above analysts’ estimates. Its non-GAAP profit of $8.41 per share was 4% above analysts’ consensus estimates.
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KLA Corporation (KLAC) Q1 CY2025 Highlights:
- Revenue: $3.06 billion vs analyst estimates of $3.01 billion (29.8% year-on-year growth, 1.8% beat)
- Adjusted EPS: $8.41 vs analyst estimates of $8.08 (4% beat)
- Adjusted EBITDA: $1.43 billion vs analyst estimates of $1.37 billion (46.8% margin, 4.8% beat)
- Revenue Guidance for Q2 CY2025 is $3.08 billion at the midpoint, above analyst estimates of $2.99 billion
- Adjusted EPS guidance for Q2 CY2025 is $8.53 at the midpoint, above analyst estimates of $7.98
- Operating Margin: 41.3%, up from 31.2% in the same quarter last year
- Free Cash Flow Margin: 32.3%, down from 35.5% in the same quarter last year
- Inventory Days Outstanding: 244, up from 227 in the previous quarter
- Market Capitalization: $91.42 billion
Company Overview
Formed by the 1997 merger of the two leading semiconductor yield management companies, KLA Corporation (NASDAQ: KLAC) is the leading supplier of equipment used to measure and inspect semiconductor chips.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, KLA Corporation’s 15.6% annualized revenue growth over the last five years was excellent. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers, a great starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. KLA Corporation’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 4.2% over the last two years was well below its five-year trend. 
This quarter, KLA Corporation reported robust year-on-year revenue growth of 29.8%, and its $3.06 billion of revenue topped Wall Street estimates by 1.8%. Beyond the beat, this marks 4 straight quarters of growth, implying that KLA Corporation is in the middle of its cycle - a typical upcycle generally lasts 8-10 quarters. Company management is currently guiding for a 19.7% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 4.3% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and suggests its newer products and services will not catalyze better top-line performance yet. At least the company is tracking well in other measures of financial health.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, KLA Corporation’s DIO came in at 244, which is 19 days above its five-year average, suggesting that the company’s inventory has grown to higher levels than we’ve seen in the past.
Key Takeaways from KLA Corporation’s Q1 Results
We enjoyed seeing KLA Corporation beat analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also glad its revenue and EPS guidance for next quarter exceeded Wall Street’s estimates. On the other hand, its inventory levels materially increased. Still, this quarter had some key positives. The stock remained flat at $702.69 immediately after reporting.
Should you buy the stock or not? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
