KLA's Q3 2025 Earnings Call: Contradictions Unveiled in China Revenue, Service Growth, and Tariff Impacts

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Strong March Quarter Financial Results:
- KLA Corporation reported revenue of $3.06 billion for the March quarter, exceeding the midpoint of guidance, with non-GAAP diluted EPS of $8.41 and GAAP diluted EPS of $8.16.
- The results were driven by strong demand in leading-edge logic and high-bandwidth memory, demonstrating the critical investment required for AI infrastructure.

Advanced Packaging Contribution:
- KLA's advanced packaging revenue grew to over $500 million in calendar 2024 and is expected to exceed $850 million in calendar 2025.
- This growth was attributed to increased demand for high-value packages in AI applications and the successful integration of KLA's front-end solutions into the back-end market.

Service Business Growth:
- The KLA Services business grew to $669 million in the March quarter, marking 52 consecutive quarters of year-over-year growth.
- Despite challenges from U.S. export controls, the service business remained resilient due to strong contract streams, particularly in China, before export control impacts.

Tariff Impact and Strategic Adaptation:
- KLA expects tariffs to have a 100 basis point headwind on gross margin per quarter, assuming stable revenue expectations.
- The company is assessing global trade uncertainties and exploring operational strategies to mitigate tariff impacts, including optimizing global manufacturing footprints.