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Even though KLA Corporation (KLAC -4%) delivered sizeable beats on its top and bottom lines in Q1 (Sep), its shares are slipping today. The semiconductor equipment supplier also projected healthy Q2 (Dec) numbers, keeping a wide range of outcomes, which has been typical over the past several quarters. KLAC's Q1 report is reminiscent of its Q4 (Jun) report in late July that spurred a decent uptick in the stock.

So why are shares down? The broader market is one factor. Semiconductors are sliding across the board today, a similar trend from what transpired last quarter. In fact, shares of KLAC initially ticked higher following its Q1 numbers. However, more specifically to KLAC, a few concerns continue to hang over the stock.

• China, which typically comprises over 40% of KLAC's annual revs, is amid an economic downturn. The problems in the region may have already been anticipated as peers ASML (ASML) and Lam Research (LRCX) disclosed that their share of China sales will normalize over the coming months. Still, the same situation materializing for KLAC presents a headwind. The company noted that its percentage of China-related revenue will come down to around 30%, plus or minus a few points going forward.
• Export controls are also lingering in the background, adding another layer of concern regarding further sales normalization surrounding China. Management commented briefly on this concern, stating that it does not have clarity yet and will assess any impact once it does. The market is not a fan of uncertainty, and this variable may remain an overhang.
• KLAC's perspective on CY25 was mostly unchanged from last quarter, continuing to project another year of wafer fab equipment spending growth. While promising, the market may be wanting more, given the unwavering demand for all things AI. In fact, during Q1, AI remained the highlight, supporting high-bandwidth memory investments and staying a critical driver of KLAC's long-term growth.

KLAC's Q1 report was sound, boasting another round of top and bottom-line upside as well as decent quarterly guidance, projecting Q2 adjusted EPS of $7.15-8.35, a 25% jump yr/yr at the midpoint, and revs of $2.8-3.1 bln, a 19% improvement at the midpoint, consistent with the company's Q1 growth. However, after ASML sounded alarms earlier this month with its downbeat FY25 outlook, investors still feel rather uneasy about near-term prospects. KLAC's Q1 report did not do enough to squash these nerves, keeping bears in control for now.