7.31.25
Sales in the fourth quarter were above guidance, led by investment in advanced foundry/logic nodes and HBM. DRAM equipment purchases from KLA were $669M. This marked four consecutive quarters of growth, reaching the second highest level ever, only bested by the fourth quarter of 2023. In that quarter, customers in China were buying ahead of new export restrictions. While it is encouraging for Micron shorts to see relatively high DRAM investment here, KLA is the company where purchases of WFE least match the underlying memory cycles. In NAND, the nuclear winter is definitely past. The purchase of a total of $223M of NAND equipment from KLA is a level not seen since the end of 2022. This is the first quarter with more than $200M of sales since then. The majority of the quarters in that two-and-a-half year stretch were under $100M in NAND sales. China was back on top, accounting for 30% of total revenue, followed by Taiwan at 27%. Their industry outlook continues to be driven by increasing investment in leading-edge logic, HBM, and advanced packaging. They maintained their full-year 2025 view of a mid-single-digit growth from the $100M total WFE seen in 2024. This will be led by advanced foundry nodes and HBM, partially offset by lower China sales. Their guidance for total sales in the current quarter is $3.15B. That is flat sequentially. Within these sales, memory will be 25%, down from 31% this quarters. The split between DRAM and NAND will be the same 75-25 seen this quarter. That means sales to make both memory types will decline sequentially. KLA believes they will “meaningfully outperform” the overall growth rate of the WFE industry in 2025.
One analyst (CJ Muse) said he believes KLA’s equipment lead times are “eight+ months.” The NAND market is “constructive” and the legacy market has bottomed. China is down in 2025 compared to 2024 and management believes 2026 will face “headwinds.” The strength being seen now in advanced packaging is related to AI infrastructure. Process control intensity is increasing in memory with the emergence of HBM. This is because the die size is larger and the array efficiency is lower, leading to a lower tolerance for defects. Therefore, the investment level in memory is moving closer to the level seen in advanced logic. DRAM sales will be stronger in the December quarter than in the September quarter. This is about timing of projects and when revenue is recognized. They are seeing a normalization of lead time. They were up at eighteen months at one point and they are now down to eight months.
– S. Hughes (short MU)