KLA Corp. Stock Sinks As Outlook Disappoints Following Drop in Chip Demand

Earnings report follows job cuts at equipment maker Lam Research

KLA Corp. reported results amid a slowdown in demand for electronics.

Shares of KLA Corp. slid in after-hours trading Thursday after the semiconductor-equipment maker forecast third-quarter profit and sales to come in below expectations, as chip demand fades following a surge in pandemic-related demand.

The company — whose equipment helps make the silicon plates that become chips, as well as other chip components — said it expected adjusted earnings per share to come in between $4.52 and $5.92 for its fiscal third quarter, with sales landing somewhere between $2.2 billion and $2.5 billion.

Analysts polled by FactSet expected adjusted earnings of $5.90 per share, on revenue of $2.53 billion.

KLA shares sank nearly 6% after hours.

“Looking at 2023, we know that this will be a year of industry capacity adjustments as customers fine-tune their capex plans to address decreased demand in some segments,” Chief Executive Rick Wallace said on the company’s earnings call.

He said that the company in the year ahead would “stabilize” spending levels overall — while still likely increasing research and development — while training employees after a big hiring push.

For its fiscal second quarter, KLA reported net income of $979 million, or $6.89 a share, compared with $717 million, or $4.71 a share, in the same quarter last year. Revenue rose to $2.98 billion, compared with $2.35 billion in the prior-year quarter.

Adjusted for acquisition-related charges and tax items, KLA earned $7.38 a share, compared with $5.59 in the same quarter last year.

Analysts polled by FactSet expected KLA to report adjusted earnings per share of $7.10, on revenue of $2.82 billion for the second quarter.

KLA reported the results after Lam Research Corp., which also makes gear that helps make semiconductors, said this week that it would cut its workforce by 7%, amid a fall-off in memory-chip demand. That slowdown has run in tandem with a drop in demand for electronics, in the wake of the digital boom that occurred during the first two years of the pandemic.

KLA Corp. shares have climbed 12% over the past 12 months. By comparison, the S&P 500 Index has fallen 7% over that time.