KLA Corporation Stock Up 21% Year to Date: Is It Still a Good Buy?

KLA Corporation KLAC shares have surged 21.5% in the year-to-date period, outperforming the broader Zacks Computer & Technology sector’s rise of 2.6% and the Zacks Electronics - Miscellaneous Products return of 4.7%.

The company’s shares have outperformed its industry peers including Garmin GRMN and Flex FLEX and Carrier Global CARR over the same time frame. While Garmin and Flex shares have gained 1.9% and 10.5% in the year-to-date period, CARR have lost 6.7% over the same time frame.

The outperformance can be attributed to strong demand for leading-edge logic, high-bandwidth memory, and advanced packaging, along with its differentiated process control solutions, driving sequential and year-over-year revenue growth. AI-driven semiconductor demand remains a significant tailwind.

KLAC Beats Sector, Industry

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In the second quarter of fiscal 2025, KLAC’s revenues hit $3.08 billion, surpassing the guidance midpoint of $2.95 billion. This was driven by increasing demand for advanced semiconductor equipment and services.

KLAC Capitalizes on AI and Advanced Packaging Growth

KLAC’s capitalization on AI adoption is enhancing higher volume wafer manufacturing, leading to more complex designs and larger chip sizes. This has resulted in growing demands for advanced packaging, which is expected to drive KLA’s revenue growth.

The company’s advanced packaging revenues reached approximately $500 million in the calendar year 2024. The metric is projected to exceed $800 million in the calendar year 2025, up from the previously mentioned $750 million. 

Growth in advanced packaging is driven by the increasing demand for heterogeneous chip integration, which is essential for developing more powerful systems-on-chips. KLAC’s solutions are integral in ensuring high-quality process control for these increasingly complex chip packages.

KLAC benefits from growth in semiconductor industries like Foundry/Logic and AI-driven DRAM investments, positioning them to capitalize on wafer fab equipment investment and further boost revenue in 2025.

KLA’s Solutions Boost IC Substrate Manufacturing Growth

KLA’s expanding portfolio has emerged as a major growth driver for its success, particularly in the advancing technology in integrated circuit (IC) substrate manufacturing.

In October 2024, KLAC introduced the industry’s most comprehensive suite of process control and process-enabling solutions for IC substrate manufacturing. 

The company’s portfolio, including the Corus and Serena direct imaging platforms, along with the Lumina inspection system, aims to optimize yield, accelerate delivery cycles, and enhance profitability for customers in the advanced packaging sector, supporting high-performance applications and next-gen interconnect technologies.

KLAC is also benefiting from its expanding portfolio in the crowded refurbished equipment market. This space includes a diverse range of participants, such as auctioneers, universities, and various online sales channels.

KLA Corp Provides Stable 3Q25 Guidance

KLAC’s upbeat third-quarter fiscal 2025 forecast is led by strong demand for chipmaking tools, which drives top-and-bottom-line growth and positions the company for continued success.

For third-quarter fiscal 2025, revenues are expected to be $3.0 billion, plus/minus $150 million. 

The company expects non-GAAP earnings of $8.05 per share, plus/minus 60 cents.

Earnings Estimate Revisions Show Upward Trend for KLAC

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 non-GAAP earnings is pegged at $8.07 per share, up 5.7% over the past 30 days. This indicates growth of 53.42% on a year-over-year basis.

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

KLAC Stock is Currently Overvalued

We point out that KLAC stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.

In terms of the forward 12-month price/sales (P/S), KLAC is trading at 8.37X, significantly higher than the industry's 3.68X.

Price/Sales F12M

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Conclusion

KLAC is benefiting from its strong demand for advanced semiconductor technologies, AI, and its robust service and process control business, reinforcing its market leadership and financial strength. This momentum has positioned KLA as a leader in its industry, which is further highlighted by its exceptional financial performance.

These factors also justify the company’s premium valuation. KLA’s solid financials, market leadership, and future growth potential make it an attractive prospect for investors and reinforce its strong position in the market.

KLAC currently carries a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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