Bren Higgins
Executive Vice President and Chief Financial Officer at KLA
Thanks, Rick. KLA's December quarter results demonstrate market leadership, combined with the consistent execution and dedication of our global team to meet customer commitments and drive sequential and year-over-year growth and profitability improvements.
Revenue was $3.08 billion, above the guidance midpoint of $2.95 billion. Non-GAAP diluted EPS was $8.20 above the guidance midpoint. GAAP-diluted EPS was $6.16. Gross margin was 61.7%, operating expenses were $596 million, operating expenses were comprised of $342 million in R&D and $254 million in SG&A. Operating margin was 42.3%. Other income and expense net was a $31 million expense. The quarterly effective tax-rate was 13.7%. Net income was $1.1 billion, cash-flow from operations was $850 million and free-cash flow was $757 million. The breakdown of revenue by reportable segments, end-markets, major products and regions can be found within the shareholder letter and slides.
Moving to the balance sheet, KLA ended the quarter with $3.8 billion in total cash, cash equivalents and marketable securities, debt of $5.9 billion and a flexible and attractive bond maturity profile supported by strong investment-grade ratings from all three major rating agencies. During the December quarter, we retired our $750 million November 2024 bonds at maturity with cash-on-hand. KLE's balance sheet provides the ability to fund our growth strategies, organic and inorganic and offer attractive capital returns to shareholders.
Turning to our outlook, the industry outlook continues to gain momentum in the near-term, driven by increasing investment in leading-edge logic, high-bandwidth memory and advanced packaging. We expect the WFE market to grow by a mid-single-digit percentage in 2025 from the high $90 billion level for calendar 2024. Growth in calendar 2025 is expected to be fueled principally by increasing investment in both leading-edge foundry logic and memory to support growing AI and premium mobile demand, demand offset by lower overall demand from China due to the digestion of elevated levels of investment over the past couple of years.
In an encouraging development, our top customer recently said in an earnings call that they expect the number of new takeouts for N2 or for the 2-nanometer node in the first two years to be higher than both N3 and N5 in their first two years, fueled by both smartphone and HPC applications. As communicated in early December, we continue to estimate the impact on KLA's revenue in calendar 2025 from recent export controls in China to be approximately $500 million-plus or minus $100 million with roughly 70% of the impact affecting our systems business.
While we are hopeful based on our interpretation of the regulations that there should be licensing opportunities that will mitigate some of this impact, we are taking a cautious view given the significant delays in processing license requests by the US government over the past few years. However, given KLA's business momentum, market-share opportunities and higher expected process control intensity at the leading-edge across all segments, we are confident we will continue to deliver growth outperformance compared with the WFE market in 2025.
KLA's March quarter guidance is as follows: total revenue is expected to be $3 billion, plus or minus $150 million. Our revenue guidance is up 27% year-over-year at the midpoint, further illustrating the improvement we expect to see in calendar 2025. Foundry logic revenue from semiconductor customers is forecasted to be approximately 73% and memory is expected to be approximately 27% of semi process control systems revenue to semiconductor customers. Within memory, DRAM is expected to be about 75% of the revenue mix and NAN the remaining 25%.
Non-GAAP gross margin is forecasted to be 62%, plus or minus 1 percentage point or up approximately 30 basis-points sequentially at the midpoint despite slightly lower revenue, primarily due to more favorable product mix expectations. For calendar 2025, based on expectations for business mix across systems and service, systems product mix and factory utilization, we expect gross margin for the year to be approximately 62%, plus or minus 50 basis-points. Non-GAAP operating expenses are forecasted in the March quarter to be approximately $585 million as we continue to make significant product development and scaling investments to support expected revenue growth.
Given our expectations for company growth over the next couple of years, we will maintain our operating expense trajectory. For the remainder of calendar 2025, we expect sequential increases of approximately $15 million in incremental operating expenses per quarter. This is driven by our priority around our product development roadmap requirements as well as revenue growth expectations.
Our business model is predicated on ensuring 40% to 50% incremental non-GAAP operating margin leverage on revenue growth over the long-run. Other model assumptions include non-GAAP other income and expense net of approximately a $36 million expense for the March quarter and expect this to be roughly consistent throughout the calendar year.
The tax assumption for March remains at 13.5% and we expect this to remain through the June quarter. Beginning in the September quarter, which is the first-quarter of our fiscal year, our tax-rate will reflect the adoption of global Taxation Pillar 2. Based on our current modeling, we think Pillar 2 implementation will drive the tax-rate slightly higher to approximately 14% in the second-half of the calendar year. We will provide an update on this planning rate midyear if necessary. For the March quarter, GAAP-diluted EPS is expected to be $7.77 plus or minus $0.60 and non-GAAP diluted EPS of $8.05 plus or minus $0.60. EPS guidance is based on a fully-diluted share count of approximately 133.3 million shares. In conclusion, our near-term revenue guidance points to relative stability around current business levels.
Based on the strength of our backlog and market position, we see growth in calendar 2025 and expect to outperform the mid-single-digit growth rate we expect from the WFE market. KLA is focused on delivering a differentiated product portfolio that addresses customers' technology roadmap requirements and drives our longer-term relevancy and growth expectations. With the KLA operating model guiding our best-in-class execution, KLA is focused on implementing our strategic objectives designed to drive outperformance. KLA's focus on customer success, innovative solutions and operational excellence drives industry-leading financial and free-cash flow performance and allows us to return capital consistently.
That concludes our prepared remarks. Let's begin the Q&A.
