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Semiconductor manufacturing equipment maker KLA Corporation (NASDAQ:KLAC) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 9.1% year on year to $2.57 billion. It made a non-GAAP profit of $6.60 per share, improving from its profit of $5.40 per share in the same quarter last year.
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KLA Corporation (KLAC) Q2 CY2024 Highlights:
- Revenue: $2.57 billion vs analyst estimates of $2.51 billion (2.2% beat)
- EPS (non-GAAP): $6.60 vs analyst estimates of $6.10 (8.1% beat)
- Gross Margin (GAAP): 60.7%, up from 59.1% in the same quarter last year
- Inventory Days Outstanding: 273, down from 275 in the previous quarter
- Free Cash Flow of $831.9 million, similar to the previous quarter
- Market Capitalization: $108.7 billion
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.
Semiconductor ManufacturingThe semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
Sales GrowthKLA Corporation's revenue growth over the last three years has been mediocre, averaging 14.2% annually. As you can see below, this was a weaker quarter for the company, with revenue growing from $2.36 billion in the same quarter last year to $2.57 billion. 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).
While KLA Corporation beat analysts' revenue estimates, this was a sluggish quarter for the company as its revenue only grew 9.1% year on year. KLA Corporation's growth, however, flipped from negative to positive this quarter. This encouraging sign will likely be welcomed by shareholders.
Product Demand & Outstanding InventoryDays 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 273, which is 56 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.
Key Takeaways from KLA Corporation's Q2 Results We were impressed by how significantly KLA Corporation blew past analysts' revenue and EPS expectations this quarter. We were also glad next quarter's revenue and EPS guidance easily topped Wall Street's estimates. Overall, we think this was a really good quarter that should please shareholders. The stock traded up 3.8% to $784 immediately following the results.
