KLA forecasts upbeat second-quarter revenue, but China weakness persists

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(Reuters) -KLA Corp forecast second-quarter revenue above Wall Street estimates on Wednesday, banking on strong AI-linked demand for its chipmaking tools, while flagging significant risks to its China business amid Sino-U.S. trade tensions.

Demand for advanced chips that power generative AI applications has grown unabated, benefiting companies such as KLA, which makes niche equipment used in semiconductor manufacturing factories, known as fabs.

KLA expects second-quarter sales of about $3.23 billion, compared with analysts’ average estimate of $3.18 billion, according to data compiled by LSEG.

TSMC, which contributed more than 10% of KLA’s total revenue in the fiscal year ended June 30, 2024, is also expanding U.S. production as President Donald Trump presses to onshore chip supply chains, potentially boosting demand for the company’s equipment.

KLA reported first-quarter revenue of $3.21 billion, beating the estimate of $3.17 billion.

Excluding items, profit came in at $8.81 per share, while analysts expected $8.61 per share.

CHINA RISKS WEIGH

KLA expects U.S. trade tensions with China to hurt sales by $300 million to $350 million over the next five quarters.

This underscores “additional market access loss related to certain customers in China resulting from extended export controls from the U.S. government,” the company said in a letter to shareholders.

KLA shares fell more than 2% in extended trading.

Beijing has long been irked by Washington’s export controls on sales of advanced AI chips to China, raising concerns around retaliation and the ability of U.S. semiconductor industry firms to sell there.

Sales to China made up 39% of KLA’s total third-quarter revenue.

ASML, the world’s biggest supplier of computer chip-making equipment, has also warned that Chinese sales would significantly drop next year.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shilpi Majumdar)