<News Alert> 2Q24 results above expectations; 3Q24 guidance miss
- 2Q24 results above market’s expectations and management guidance
- Management guiding for a 4.5% y-o-y earnings decline in 3Q24, 12% below consensus estimates
- On track to maintain leadership position in metrology/inspection space; Services business’s growth to accelerate to 12-14% in 2024. Maintain BUY and TP $657.0.
3Q224 guidance miss. KLAC reported 2Q24 revenue of $2.49bn (-16.4% y-o-y,+4% q-o-q) while non-GAAP EPS came in at $6.16 (-16.5% y-o-y, +7.3% q-o-q), above the mid point of the management’s guidance and consensus estimates. In terms of segmental exposure, the revenue contribution from foundry & logic decrease to 56% from 70% in 1Q24, and that from memory increase to 44% from 30% in 1Q24. The relatively strong performance of memory is driven by the rising demand for NAND for consumer electronics. China accounts for the bulk of 41% revenue, followed by Taiwan 15%, Korea 12% and USA 11%. For 3Q24, KLAC is guiding for total revenue to be in a range of $2.30bn +/- $125m, GAAP gross margin of 61.5% +/- 1.0% and non-GAAP EPS of $5.26 +/- $0.60. The midpoint of earnings guidance is 12% below market consensus.
On track to maintain leadership position in metrology/inspection space; Service business’ growth to accelerate to 14% in 2024. KLA services segment (accounting 23% of revenue) continues its growth, driven by the growing installed base. Despite the uncertainty on the demand recovery in the wafer fabrication equipment, KLA expects the services segment to remain on track to grow 12-14% in 2024 vs 7% in 2023. This is driven by a record number of new tools shipping over the past two years and the warranty period ending, and moving into service contracts. In addition, we expect the growing demand for leading edge foundry like 3nm or expected mass production of 2nm in 2025 to continue to boost demand for wafer inspection products, where KLAC is the pioneer in this space. KLAC is expected to maintain its leadership position, given its dominance in the semiconductor metrology/inspection sector. Maintain BUY, TP $657.0.