10.29.25
Sales were again above guidance, by a small percentage. Three-fourths of total process control revenue was for foundry and logic and the rest was to memory customers. DRAM equipment sales this quarter was down somewhat from last quarter, coming in at $596M vs. $669M last quarter. The last four quarters have averaged over $600M per quarter to DRAM. While there were a couple of soft quarters in there, the last ten quarters have averaged $567M per quarter in sales to DRAM use. The year before that—in the early part of the last downturn—those sales were 60% of that level. Still, KLA’s equipment sales, like ASML’s, don’t match up with the memory cycles very well. The primary reason for this is inspection strategies can be changed without altering output, so companies running memory fabs aren’t limited by the delivery of inspection equipment. The trend is still visible, just not as strongly as it is with Applied, Lam, and Tokyo Electron. Having said that, the sharp reduction in NAND capital expenditures is visible in KLA’s sales to NAND. Those sales averaged $91M per quarter for all of calendar 2023 and 2024. The first three quarters of calendar 2025 have averaged $191M per quarter, more than double the downturn level. Sales to fabs in China surged this quarter, accounting for 39% of the total. That was 30% of revenue last quarter. While total sales guidance for the current quarter is almost flat, $3.225B at the midpoint, the fraction of these sales going to memory companies jumped way up from the prior period, to 415 of total. The split between DRAM and NAND is similar to last quarter, 78% to 22%. If this comes to pass, it would be KLA’s largest quarter of sales ever to memory customers, and the first quarter over $1B into memory in six years. Management said in last quarter’s call that the stronger DRAM sales in December is the result of the timing of customer projects.
Sales have shifted from being indexed to leading-edge R&D and logic customers to broad-based sales across logic, memory, and legacy markets. Their outlook is driven by increasing investment in leading-edge logic, HBM, and advanced packaging. 2025 growth has been principally driven by investment in leading-edge foundry logic and memory to support AI and premium mobile, partially offset by lower demand from China. They see investment in the first half of calendar 2026 to be flat to modestly up compared to 2025. The second half of 2026 will be higher than the first half. United States export controls are reducing their business in China. HBM continues to be process control intensive, landing between traditional memory and logic. The NAND market continues to grow. The shift to a higher portion of memory sales in the current quarter is a combination of lower sales to China (which were logic) and an uptick in DRAM. Because of HBM, DRAM is returning to being the leading edge of process technology in some layers, and this is causing higher process control intensity. They are seeing more urgency from DRAM customers on timing, being driven by overall HBM pricing. They expect higher HBM investment levels next year over this year.
– S. Hughes (short MU)