KLA Corporation’s KLAC shares have gained 15.4% year to date, outperforming the broader Zacks Computer and Technology sector’s decline of 7.9% and the Electronics - Miscellaneous Products industry’s slip of 0.7%.

KLAC has also outperformed its industry peers, including Garmin GRMN, Flex FLEX and Rockwell Automation ROK, in the same period.

Year to date, Garmin shares have returned 1.9%, while Flex and Rockwell Automation declined 5.2% and 9.5%, respectively.

The momentum in KLAC shares is driven by robust growth at the leading edge, led by increased customer investments in AI and high-performance computing (HPC). Continued strength in advanced packaging, a resilient services segment and a differentiated portfolio position KLAC to capitalize on rising semiconductor demand, driving its stock performance.

KLAC’s Strong Portfolio Secures Competitive Advantage

KLA's differentiated portfolio is designed to address the escalating complexities in semiconductor manufacturing, effectively supporting customers amid rising global demand.

A significant contributor to this success is KLAC’s focus on advanced packaging solutions. The company's advanced packaging revenues grew to approximately $500 million in the calendar year 2024. The metric is projected to exceed $800 million in calendar 2025, reflecting strong demand in this segment.

A notable component of KLA's portfolio is its advanced inspection and metrology systems. These tools are critical for detecting and characterizing defects at the nanometer scale, ensuring the production of high-quality semiconductor devices. By providing precise measurements and analyses, KLAC’s systems help manufacturers maintain stringent quality standards.

KLA's Estimates Trend Upward

The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is pegged at $3.01 billion, indicating 27.40% year-over-year growth.

The Zacks Consensus Estimate for third-quarter fiscal 2025 non-GAAP earnings is pegged at $8.07 per share, unchanged over the past 30 days. This indicates growth of 53.42% on a year-over-year basis.

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $11.91 billion, indicating year-over-year growth of 21.35%.

The consensus mark for fiscal 2025 earnings is pegged at $31.59 per share, unchanged over the past 30 days, implying a 33.07% year-over-year increase.

The company’s earnings beat the Zacks Consensus Estimate in the trailing three quarters, the average surprise being 6.35%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Export Restrictions & Tax Hikes Challenge KLAC’s Growth

The newly imposed U.S. export restrictions on China are set to create significant financial challenges for KLA in 2025. The company anticipates a revenue reduction of $500 million, with China-related sales projected to decline 20% year over year. These regulatory changes implemented late in the quarter present a substantial headwind, affecting KLAC’s near-term growth prospects.

The company anticipates its effective tax rate to rise to 14% in the second half of 2025 due to global tax policy changes. This increase may pressure net income, impacting overall profitability and shareholder returns.

Zacks Rank

Currently, KLA carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Garmin Ltd. (GRMN) : Free Stock Analysis Report

KLA Corporation (KLAC) : Free Stock Analysis Report

Rockwell Automation, Inc. (ROK) : Free Stock Analysis Report

Flex Ltd. (FLEX) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research