Chip toolmaker KLA flags weak Q3 as customers use up inventory; shares sink

<html xmlns=""><head><title>UPDATE 2-Chip toolmaker KLA flags weak Q3 as customers use up inventory; shares sink</title></head><body>

Sees slowest growth in 16 quarters in Jan-March period

Customers supplying end-users from stockpiles amid weak demand

KLA forecast below estimates, shares drop 5%

Recasts to add executive comments and Intel results

By Mrinalika Roy

Jan 26 (Reuters) -U.S. chip toolmaker KLA Corp KLAC.O on Thursday forecast its slowest growth in 16 quarters for the January-March period, saying it expects customers to whittle down existing stockpiles of chips as demand from end-users slows.

The company's revenue and profit outlook for the current third quarter was below Wall Street estimates, sending its shares down 5% in trading after the bell.

Milpitas, California-based KLA, which supplies chipmaking equipment for companies like Intel Corp INTC.O and Asia's TSMC 2317.TW, is the latest company to warn that demand is slumping as people buy fewer smartphones and gadgets, and recession-wary businesses tighten spending on data centers.

"Looking at 2023, we know that this will be a year of industry capacity adjustments as customers fine-tune their capex (capital expenditure) plan to address decreased demand in some segments," KLA Chief Executive Richard Wallace said in a conference call.

Intel said on Thursday it expects "some of the largest inventory corrections literally that we've ever seen in the industry" to hurt its March quarter. TSMC said earlier this month it would slash its annual investments.

KLA had earlier said its systems and service revenue could be affected in the near term by U.S. export regulations on the sale of semiconductor technology to China.

On Thursday, however, it said it expects business in China to decline less than overall chip demand in 2023.

The company expects third-quarter revenue between $2.2 billion and $2.5 billion, below analysts' average expectation of $2.55 billion, according to Refinitiv IBES.

It expects an adjusted profit of $4.52 to $5.92 per share in the period, the mid-point being below an average expectation of $5.89.

KLA, whose stock had risen 13% in the past year and touched a high for the year during normal trading hours on Thursday, however, beat estimates for the October-December quarter.

Reporting by Mrinalika Roy in Bengaluru; Editing by Devika Syamnath, Sriraj Kalluvila and Kenneth Maxwell


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