KLA Corporation (KLAC, Financial) is nearing all-time highs following its Q3 (Mar) results and Q4 (Jun) outlook, alongside positive market commentary, dispelling fears of a demand downturn in 2023. This comes after Lam Research (LRCX, Financial) also provided reassuring results, countering last week's warnings from Taiwan Semi (TSM, Financial), ASML (ASML, Financial), and Super Micro Computer (SMCI, Financial). Investors were keenly awaiting KLAC's confirmation that the semiconductor sector, especially wafer fab equipment (WFE) spending and the memory market, had reached its lowest point in Q3.
Despite the ongoing inventory rebalancing impacting suppliers like KLAC in Q3, with a 14.6% and 5.2% decline from Q2 in adjusted EPS and revenues respectively, KLAC met its forecast midpoints with $5.26 in adjusted EPS and $2.36 billion in revenues. The company remains optimistic about market stability and anticipates noticeable improvements into 2024, buoyed by customer business enhancements across various end markets.
Looking ahead, KLAC expects a return to quarter-over-quarter growth, projecting Q4 adjusted earnings between $5.47 and $6.67 and revenues between $2.375 and $2.625 billion. The company's outlook for CY24 remains positive, forecasting WFE spending to hover around $90-91 billion, anticipating a stronger H2. This outlook aligns with LRCX's and sets a hopeful tone for the upcoming quarterly results from NXP Semi (NXPI, Financial) and Applied Materials (AMAT, Financial).
While facing a volatile demand landscape in 2024, KLAC and investors are optimistic about a strong recovery in 2025, driven by stability and rising demand, particularly from AI advancements. KLAC highlights the growing need for its products in advanced packaging applications for AI, despite challenges in other sectors like personal electronics and automotive. The company's assurance of a demand bottom in Q3 has bolstered investor confidence for steady growth ahead, especially with the unwavering demand for AI.
