KLA Corporation Earnings Preview: AI Demand and Broader Market Recovery in the Spotlight

As KLA Corporation prepares to release its Q1 earnings results, investor attention is centered on the semiconductor manufacturing company’s prospects for both AI-driven growth and the recovery of its non-AI end markets. KLA has set expectations for adjusted earnings in the range of $6.40-7.60 per share, along with revenue guidance between $2.60 billion and $2.90 billion.

With AI-related demand a substantial growth driver, the company’s ability to deliver on both AI and broader market recovery will shape its outlook.

Robust AI Demand Supports Optimism

A key component of KLA’s recent success lies in its role in the AI technology supply chain, an area in which demand has proven resilient even as other semiconductor markets show signs of slower recovery. Last quarter, KLA raised its annual AI-related revenue forecast for 2024 to over $500 million from an initial $400 million estimate, reflecting the strong demand for AI-specific semiconductor technology.

Given the robust performance of AI-centered products for industry peers such as Lam Research, Taiwan Semiconductor, and Advanced Micro Devices, there is a high likelihood KLA could revise this projection even higher in its report today. AI demand has thus become a pivotal part of the narrative for KLA and a key area investors will monitor closely.

Challenges in Non-AI End Markets Raise Concerns

Despite the strength in AI, KLA’s broader market exposure introduces some potential volatility, particularly following downbeat guidance from ASML, a significant industry peer. ASML recently issued cautious projections for Q4 and 2025, signaling slower-than-expected recovery in non-AI sectors such as smartphones, PCs, and automotive. KLA’s stock has also faced downward pressure since ASML’s guidance, trading near prior support levels of 600-700.

While AI demand has buoyed investor sentiment, this cautious tone on non-AI markets from industry counterparts has dampened enthusiasm for near-term growth outside of AI, especially given the challenges faced in key regions like China.

Long-Term Outlook Remains Positive, With 2025 Projected as a Growth Year

KLA’s management has previously highlighted its belief in a strong long-term trajectory, particularly as the company anticipates a synchronized recovery across its end markets alongside sustained AI growth.

During the last earnings call, KLA shared its anticipation of a broader market recovery, with 2025 expected to be a milestone growth year. In light of ASML’s recent guidance, KLA’s reaffirmation of this optimism would be instrumental in bolstering investor confidence for its longer-term strategy.

By emphasizing its continued expansion within AI while remaining cautiously optimistic about the recovery across other end markets, KLA may strengthen its position as a key player in the semiconductor equipment industry.

Q1 Insights to Inform Broader Semiconductor Industry Trends

KLA’s earnings report is also expected to provide insights for upcoming reports from other industry players, including NXP Semiconductors and Applied Materials, both of which are scheduled to release their results in the coming weeks. With its pivotal role in wafer fabrication equipment and a diversified revenue base that includes both AI and non-AI semiconductor demand, KLA’s Q1 performance will likely offer indicators for how other semiconductor manufacturers may fare amid current market dynamics.

Conclusion

KLA Corporation’s Q1 results will serve as a barometer for its own trajectory within the semiconductor space, as well as for the broader industry. Strong AI-related revenue remains a critical driver of growth, yet the company’s ability to capture recovery in its non-AI segments will be key to meeting investor expectations. Amid ongoing market volatility and cautious guidance from peers, KLA’s strategic emphasis on AI and the anticipated rebound of its broader market exposure in 2025 underscore its long-term investment appeal. With its stock trading near technical support levels, the results from today’s earnings report could significantly impact market sentiment, setting the stage for KLA’s role in the evolving semiconductor landscape.