KLA KLAC
Technology · Semiconductors · Synthos Deep Dive · 2026-08-04
The Overview
Making a modern computer chip involves printing patterns onto a silicon wafer, hundreds of times over, at a scale where a speck of dust ruins the whole thing. Fabricators need to know, after each step, whether anything went wrong. KLA makes the machines that check. It has done this for decades and there are very few alternatives.
You can see how few from the numbers. KLA sells physical equipment — heavy, complicated machines — and keeps 61 cents of every revenue dollar after the cost of building them. Companies that make things do not normally earn that. Companies that face real competition do not earn that. It is the arithmetic signature of a business customers cannot easily walk away from.
Last fiscal year, which ended in June, KLA sold $13.6 billion of equipment and services and earned $3.66 per share. Analysts think next year it will sell $18.0 billion — a 32% jump — because the world is building a great many chip factories. That is the whole bull case, and it is a good one.
Here is the problem. The shares cost $195.45. That is about 30 times what analysts expect the company to earn two fiscal years from now, and about 53 times what it actually earned last year. Put differently: if you bought the entire company today, the cash it generated last year would return 1.48% of your money. A savings account does better.
Two other things you should know. About 31% of KLA's sales ship to China, and the U.S. government controls what it is allowed to send there — the company itself says in its filings that those rules may "significantly harm" the business. And the stock has been a rollercoaster: up 120% over twelve months, then down 35% from its peak, then up 7% today alone.
In June, KLA split its stock ten-for-one — every share became ten, each worth a tenth. This changes nothing about what the company is worth; it changes every per-share number you will see quoted, which is why we flag it prominently.
Our estimate of what the shares are worth is about $205, roughly 5% above the price. The average analyst says $225. Neither is far enough above $195 to be interesting, and the downside if the 32% revenue jump does not arrive is much larger than the upside if it does. So: watch, do not buy.
- Downside Risk 7/10. Superb business, cyclical industry, 53x trailing earnings, a third of revenue under export control.
- Growth Quality 8/10. Nine quarters of sequential growth and a consensus 32% revenue step — but the step has not started.
- Exponential Potential 6/10. A near-monopoly toll booth, on a road whose traffic somebody else budgets.
Putting a number on it: our fair-value estimate is $205 against a current price of $175.54 — real upside if our numbers are right.
Our summary metrics
"Rated 7 — an outstanding business inside a violently cyclical industry, priced as though the cycle has been repealed, with a third of its revenue shipping into an export-controlled jurisdiction. The supports are real: a 61.30% gross margin and a 41.69% operating margin in fiscal 2026; return on invested capital of 35.7%; $4,902.4M of cash and short-term investments against $5,887.4M of debt, so net debt of $985.0M against $4,143.1M of annual operating cash flow — roughly a quarter of one year's cash generation; all $5,950,000K of senior notes at fixed rates with the nearest maturity in March 2029; and an effective tax rate of 14.5% for the nine months to March 2026. Against that: China was 31.2% of revenue in the nine months to March 2026 and Taiwan a further 25.3%, so 56.5% of the business ships to two jurisdictions, one under active U.S. export control that the company's own risk factors say 'may significantly harm our business, results of operations, financial condition and cash flows in future periods.' Beta is 1.458. The stock is 35.2% below its 52-week high after rising 120.4% in twelve months — a drawdown of that size in a year of that size is the signature of a crowded cyclical. The trailing multiple is 53.4x GAAP earnings and the free cash flow yield is 1.48%, which leaves no valuation support if the FY2027 revenue consensus of +32.4% proves optimistic. And fiscal 2026 net income of $4,830.8M exceeded operating cash flow of $4,143.1M by $687.7M — an income-quality ratio of 0.858 — as inventory rose to $3,648.5M, 26.9% of annual revenue."
"Rated 8 — the acceleration is genuine, consensus-corroborated and unusually steep for a capital-equipment company. Revenue: $9,211.9M (FY2022), $10,496.1M (FY2023), $9,812.2M (FY2024, a down year), $12,156.2M (FY2025, +23.9%) and $13,579.5M (FY2026, +11.7%). Diluted GAAP EPS over the same span: $2.192, $2.415, $2.028, $3.037, $3.66 — a 13.6% compound rate through a full cyclical trough. The quarterly sequence is the cleaner read and it is unbroken: $2,566.2M, $2,841.5M, $3,076.9M, $3,063.0M, $3,174.7M, $3,209.7M, $3,297.1M, $3,415.1M, $3,657.6M — nine consecutive quarters without a sequential decline of consequence, ending at a June-quarter record. Consensus then wants a step-change: FY2027 revenue of $17,985M (+32.4%, 17 analysts) and EPS of $5.483 (+49.8%, 15 analysts), then FY2028 revenue of $21,287M (+18.4%, 15) and EPS of $6.625 (+20.8%, 13). What holds this at 8 rather than 9 is that the step-change has not started: the vendor's own Q1 FY2027 estimate is $4,037.9M of revenue, which annualises to $16,152M — $1,833M short of the full-year number — so the consensus requires meaningful sequential acceleration through the year rather than a continuation of the current run-rate. The mix is also improving in a way that supports the multiple: service revenue reached $2,305.5M in the nine months to March 2026, up 16.4% year on year and 23.2% of total revenue, and service is recurring."
"Rated 6 — the structural position is close to unique, and the reason it is not scored higher is that the business it sells into is cyclical capital equipment. KLA's product is process control: the inspection and metrology systems that tell a fabricator which of its wafers are defective and why. Two knowledge-base claims, both principle-horizon, describe the position from outside: 'All leading fabs depend on machines from ~five equipment companies (ASML, Tokyo Electron, KLA); this concentration is the leverage point for scaling fab output' (dwarkesh, 2026-02-05) and 'Semi-cap went from ~20 firms to three giants via acquisition' (compound_and_friends, 2026-03-03). A 61.30% gross margin in a business that ships physical tools is the arithmetic evidence of that position; almost no capital-equipment manufacturer earns it. The Defect Inspection line alone was $6,198.8M of FY2025's $12,156.2M — 51.0% — and grew 43.0% year on year. Against that, three limits. Process control is a fixed percentage of a fab's capital budget, so KLA grows with wafer-fab equipment spending and does not escape it; the installed-base service annuity ($2,305.5M in nine months, growing 16.4%) is the genuinely compounding piece and it is under a quarter of revenue; and the customer base is highly concentrated by both name and geography, with 56.5% of nine-month revenue shipping to China and Taiwan. A 6: a toll booth on a road that is being widened, whose traffic is set by somebody else's budget."
What does “fair value” mean?
Fair value is Synthos’s estimate of what one share is worth today, based on our model of the company’s future cash generation and the risks to it. It is not a price target or a prediction of where the stock trades next quarter — it’s the price where we think risk and reward are balanced. Above it, you’re paying for outcomes better than our base case; below it, the market is offering a margin of safety.
The model’s inputs and weightings are proprietary — they’re the product. What we publish is the output, plus an independent, public-math cross-check further down the page (“Check our number”) so you can judge it for yourself.
What do the 5 tiers mean? (Core · Tactical · Watch · Hold · Avoid)
The Road Ahead
What we expect to matter in each window, and the evidence that would prove us wrong.
Short term 0-6 months
No differentiated view- Driver
- "The short-term picture is genuinely two-sided and today's session is the reason. KLA closed 2026-08-04 at $195.45, up 6.95% or $12.70 from $182.75, on 12,649,107 shares — the single largest one-day move in this batch. It opened at $191.98 and closed within 0.7% of the day high of $196.725. That move, however, sits inside a drawdown: the stock is 35.2% below its 52-week high of $301.71, 11.7% BELOW a 50-day moving average of $221.46, and RSI is 36.51 with MACD at −11.94 — the weakest momentum readings in this batch even after a 7% day. Underneath sits a 200-day average of $163.37, 19.6% below the price, and a twelve-month return of +120.4% against SPY's +24.3%. So: a stock that doubled, gave back a third, and bounced hard today. The fundamental news flow supports neither extreme. The 2026-07-28 fourth-quarter release beat consensus EPS by 5.0% and revenue by 1.4% — a beat, but the smallest of the four quarters in the earnings calendar file, which shows +10.6%, +2.3%, +1.1%, +2.5% and +5.0% EPS surprises across five prints. There is no company-specific filing dated 2026-08-04 in the archive; the only 2026-08-04 activity is eight insider F-InKind tax-withholding dispositions priced at the previous close."
- What we’re watching
- "The 2026-10-28 print against a consensus of $1.17 EPS and $4,037,897K of revenue. That revenue figure is 10.4% above the June quarter and is the first observable test of the +32.4% FY2027 revenue consensus; a print in line with it annualises to $16,152M against a full-year consensus of $17,985M, so the guide matters more than the quarter. Within it: whether China revenue holds near the 31.2% nine-month share under the export-control regime the company's risk factors flag; whether gross margin holds above 61%; whether inventory, at $3,648.5M and 26.9% of annual revenue, stops building; and whether the FY2026 10-K, when filed, confirms the unaudited annual figures used throughout this dive. Also watch the August 2026 dividend declaration, guided in the 2026-05-07 release to $0.23 per share post-split."
- Confidence
- Medium
Medium term 6-24 months
Tailwind- Driver
- "The medium term is where the consensus does its work, and the mechanism is legible. Process control spending is a roughly fixed share of wafer-fab equipment budgets, and those budgets are being lifted by leading-edge logic and high-bandwidth memory capacity additions. Consensus has revenue moving $13,579M (FY2026 actual) to $17,985M (FY2027E, 17 analysts) to $21,287M (FY2028E, 15 analysts) and EPS from $3.66 to $5.483 to $6.625 — 49.8% then 20.8% growth. The operating leverage is arithmetically available: fiscal 2026 fixed costs were $1,532.1M of research and development and $1,131.5M of selling, general and administrative against $8,324.4M of gross profit, so on a 61% incremental gross margin an extra $4.4B of revenue drops roughly $2.7B to gross profit against a cost base that does not need to grow proportionally. The service annuity compounds underneath: $2,305.5M in the nine months to March 2026, +16.4%, tied to an installed base that only grows. And the capital return is unconstrained — $10.31 billion of repurchase authorisation remained at 2026-03-31 after the board added $7.00 billion in the third quarter of fiscal 2026, against $2,289.8M actually repurchased in fiscal 2026."
- What we’re watching
- "Whether the FY2027 revenue consensus of $17,985M survives contact with the first two quarters. Whether China revenue — 31.2% of nine-month FY2026 revenue and the subject of an explicit risk-factor warning that export rules 'may significantly harm our business' — holds, shrinks or is licensed. Whether the Defect Inspection line, $6,198.8M and 51.0% of FY2025 revenue after growing 43.0%, can grow again off that base. Whether operating cash flow reconverges with net income: FY2026 net income exceeded operating cash flow by $687.7M and the gap is inventory. Whether the buyback continues at the fiscal-2026 pace of $2,289.8M against $10.31 billion of remaining authorisation. And whether the effective tax rate stays near 14.5% — a rate that depends on the Foreign Derived Intangible Income deduction and the geographic mix of earnings, and which the company itself attributes to both."
- Confidence
- Medium
Long term 2+ years
Tailwind- Driver
- "Long-run this is one of the better structural positions available in listed equity, and the disagreement is entirely about price rather than quality. Every leading-edge wafer made anywhere in the world passes through inspection and metrology, the number of firms capable of supplying those tools is small enough that an outside observer in the knowledge base counted 'about five' for the whole equipment stack, and process control's share of fab capital budgets rises rather than falls as geometries shrink and defect densities matter more. A 61.30% gross margin on physical hardware is the measurable consequence. The service annuity attached to the installed base compounds mechanically and carries no cyclicality of its own. The balance sheet is fixed-rate and long-dated, with the nearest maturity in March 2029 and nothing significant until 2032. And the company has demonstrated it will shrink the share count aggressively — $2,289.8M in fiscal 2026 with $10.31 billion of authorisation still available. What keeps this from a stronger long-term stance is not the business; it is that the business is a derivative of somebody else's capital budget, that 56.5% of it ships to two jurisdictions in one contested region, and that the current price capitalises a good outcome at 29.5x earnings two fiscal years out."
- What we’re watching
- "Whether process control's share of wafer-fab equipment spending continues to rise, which is the only mechanism by which KLA outgrows the industry rather than tracking it. Whether the export-control regime tightens, loosens or bifurcates — 31.2% of nine-month revenue is at stake and the company controls none of it. Whether service revenue's 23.2% share of total keeps rising, because that is the line that converts a cyclical equipment business into a partly-annuity one. Whether the FY2026 10-K, when it is filed, confirms the unaudited annual figures. Whether the company's 15,200 employees and $1,532.1M of annual research spending keep the technology lead that produces the 61% gross margin. And chief-executive succession: Richard Wallace has led KLA since 2006 and the archive contains no succession disclosure."
- Confidence
- Medium
Exponential Potential
"Rated 6 — the structural position is close to unique, and the reason it is not scored higher is that the business it sells into is cyclical capital equipment. KLA's product is process control: the inspection and metrology systems that tell a fabricator which of its wafers are defective and why. Two knowledge-base claims, both principle-horizon, describe the position from outside: 'All leading fabs depend on machines from ~five equipment companies (ASML, Tokyo Electron, KLA); this concentration is the leverage point for scaling fab output' (dwarkesh, 2026-02-05) and 'Semi-cap went from ~20 firms to three giants via acquisition' (compound_and_friends, 2026-03-03). A 61.30% gross margin in a business that ships physical tools is the arithmetic evidence of that position; almost no capital-equipment manufacturer earns it. The Defect Inspection line alone was $6,198.8M of FY2025's $12,156.2M — 51.0% — and grew 43.0% year on year. Against that, three limits. Process control is a fixed percentage of a fab's capital budget, so KLA grows with wafer-fab equipment spending and does not escape it; the installed-base service annuity ($2,305.5M in nine months, growing 16.4%) is the genuinely compounding piece and it is under a quarter of revenue; and the customer base is highly concentrated by both name and geography, with 56.5% of nine-month revenue shipping to China and Taiwan. A 6: a toll booth on a road that is being widened, whose traffic is set by somebody else's budget."
What could take this further than the base case — and where the market may be underpricing it. Full forward-growth and acceleration math in Deeper analysis, §4 below.
Deeper analysis
Technicals, fundamentals, valuation, and the full expert-claim evidence panel — the detail behind the numbers above.
> ARCHIVE NOTE — WHY THIS DIVE WAS REWRITTEN. The earlier dive was written against an incomplete SEC pull. The complete archive adds the 2026-05-07 8-K announcing a ten-for-one forward stock split and a 21% dividend increase, which is the document that explains every per-share figure in the payload. It also makes explicit what the archive does not contain: the fourth-quarter and full-year fiscal 2026 earnings release. The 2026-07-28 8-K in this archive carries only the cover page and the Item 2.02 reference to Exhibit 99.1; the exhibit itself is absent. Every fiscal-2026 annual figure in this dive is therefore unaudited and press-release-derived via the vendor payload, not filing-verified, and is labelled as such. The latest filing-verified financials in this archive stop at the March 2026 quarter.
Reference table
| Street consensus | $225.18 (+15.2%) · median $225 · high $325 (+66.3%) · low $180 (−7.9%, below spot) · 28 buy / 14 hold / 2 sell across 44 analysts |
| Valuation | 53.4x trailing FY2026 GAAP EPS of $3.66 · 35.6x FY2027E $5.483 · 29.5x FY2028E $6.625 · 26.1x FY2029E $7.497 (4 analysts — excluded from conclusions) · 18.8x trailing sales · 40.4x book |
| Cash generation — recomputed, not quoted | FY2026 operating cash flow $4,143.1M less filed-basis capital expenditure $375.9M = free cash flow $3,767.1M, a 1.48% yield and 67.8x price-to-free-cash-flow. Capex/D&A 0.954 — plausible, and verified against three filed years |
| Balance sheet | Cash and short-term investments $4,902.4M · total debt $5,887.4M ($5,950,000K of fixed-rate senior notes at par, nearest maturity March 2029) · true net debt $985.0M — the vendor's $4,237.6M omits short-term investments · equity $6,349.8M |
| The corporate action the earlier archive missed | Ten-for-one forward stock split, effective 11:59pm ET 2026-06-11, first split-adjusted trade 2026-06-12; authorised shares raised 500,000,000 → 5,000,000,000. Announced 2026-05-07 alongside a 21% dividend increase to $2.30 pre-split, with the August 2026 declaration guided to $0.23 post-split |
| Conviction | Very low breadth, mildly positive — 3 raw KB hits, 3 surviving a case-sensitive re-run, 0 discarded, 0 name-level claims. No homograph collision on the token "KLA" |
| Technicals | −35.2% from the 52-week high of $301.71; +131.6% above the low of $84.39; 11.7% BELOW the 50-DMA ($221.46), 19.6% above the 200-DMA ($163.37); RSI 36.51; MACD −11.94; 12-month return +120.4% vs SPY +24.3% |
What the experts actually said 1 traceable claims on KLAC · showing the highest-conviction voices
“AI CAPEX trade isn't played out — semiconductors and hardware paired with utilities; no ceasefire among AI labs, spending goes deeper and further for years.”
Every claim reconciles to a real claim_id in the Synthos knowledge base — this is the evidence the verdict is built on, not vibes. Management (the company itself) is shown but half-weighted; one cautionary voice is included on purpose.
Price & moving averages 12 months · 50 & 200-day averages · 52-week range
Solid line = price · dashed line = 50-day average · dotted line = 200-day average · the two thin horizontal lines mark the 52-week high and low. Price above both averages is an uptrend.
Data summary: last close $175.54, 18% below the 50-day average ($214), 3% above the 200-day average ($170) — a mixed trend. 42% below the 52-week high of $302, 108% above the 52-week low of $84.
Bollinger Bands 20-day average ± 2 standard deviations
The shaded band widens when the stock gets more volatile. Riding the upper edge = strong momentum (sometimes stretched); the lower edge = weak / potentially oversold.
Data summary: price $175.54 is currently inside the band (band $173–$211).
RSI (14) momentum gauge · 0–100
Above 70 (overbought zone, shaded) = overbought, below 30 (oversold zone, shaded) = oversold. Currently 36.
MACD 12 / 26 / 9 · trend & momentum
The MACD line crossing above the signal line (bars flip to the up color) = momentum turning up; crossing below (bars flip to the down color) = turning down. Bar height = the size of that gap.
Data summary: MACD is currently below its signal line by 0.82, negative momentum.
Relative performance vs S&P 500 & its sector (XLK (sector)), set to 100 a year ago
Solid = KLAC · dashed = S&P 500 · dotted = XLK (sector). A rising line means it is beating that benchmark — the sector line shows whether it is a leader or laggard within its own group.
Forward revenue & earnings actual → estimate · "FY" = fiscal year, "E" = estimate
Darker bars = actual results, brighter = analyst estimates. Taller bars to the right = expected growth.
Key stats an RIA wants
1. The business, and the one number that describes it
KLA Corporation designs, manufactures and services process control and yield management systems for semiconductor and electronics manufacturing — the inspection and metrology tools that find defects in wafers and reticles. Chief executive Richard Wallace; approximately 15,200 employees; incorporated in Delaware, headquartered in Milpitas, California; common stock, $0.001 par value, listed on the Nasdaq Global Select Market.
Four reportable segments. From seg_prod, fiscal 2025 (the last year with a filed annual report), in $M:
| Line | FY2025 | share | FY2024 | YoY |
|---|---|---|---|---|
| Defect Inspection | $6,198.8 | 51.0% | $4,333.3 | +43.0% |
| Service | $2,683.3 | 22.1% | $2,329.6 | +15.2% |
| Patterning | $2,196.3 | 18.1% | $2,054.4 | +6.9% |
| Specialty Semiconductor Process | $517.2 | 4.3% | $470.6 | +9.9% |
| PCB and Component Inspection | $355.9 | 2.9% | $291.2 | +22.2% |
| Other | $204.6 | 1.7% | $333.2 | −38.6% |
| Total | $12,156.2 | 100.0% | $9,812.2 | +23.9% |
The block sums to $12,156,162K, which is inc_a FY2025 revenue to the dollar. That is a clean tie and it is reported as a finding, because seg_prod over-counting is a confirmed defect class elsewhere in this programme — one name in a prior batch summed to 162.8% of revenue.
Defect Inspection is the company. At 51.0% of revenue and growing 43.0% year on year, it is both the largest and the fastest line. Service is the second-most-important and is the strategically interesting one: $2,683.3M in fiscal 2025, and $2,305.5M in the nine months to March 2026 per the 10-Q, up 16.4% year on year and 23.2% of nine-month revenue. Service revenue attaches to an installed base that only ever grows, and it does not go away in a downturn. A fifth of KLA is already an annuity.
The 61.30% gross margin is the fact that matters most about this business. Fiscal 2026 gross profit was $8,324.4M on $13,579.5M of revenue. Applied Materials and Lam Research sit in the vendor's peer set but no earnings data for them is present in this file, so no peer-multiple comparison is drawn — but the general shape is not in dispute: process control is the highest-margin niche in semiconductor capital equipment, and KLA holds most of it.
2. The corporate action the earlier archive could not confirm
On 2026-05-07 KLA announced a ten-for-one forward stock split. From the 8-K exhibit:
> "KLA Corporation (NASDAQ: KLAC) today announced that its board of directors approved a Ten-for-One forward stock split of the company's outstanding shares of common stock... Each stockholder of record at close of trading on Thursday, June 4, 2026, will receive nine additional shares for each share held after the close of trading on Thursday, June 11, 2026. Shares will begin trading on a split adjusted basis at market open on Friday, June 12, 2026. KLA's overall market capitalization and stockholder ownership percentages will not be affected by the stock split."
The 2026-06-12 8-K confirms execution:
> "The Company filed the Charter Amendment to effect the Stock Split and to proportionately increase the number of authorized shares of the Company's Common Stock from 500,000,000 to 5,000,000,000. The Charter Amendment became effective at 11:59 p.m. Eastern Time on June 11, 2026."
The same 2026-05-07 release carries a 21% dividend increase, and it is the source of the forward dividend used in this dive:
> "KLA's board of directors approved a quarterly dividend payment of $2.30 per share, payable on June 2, 2026, to shareholders of record on May 18, 2026. This represents a 21% increase in the quarterly dividend which was announced on March 12, 2026. The dividend to be declared in August 2026 is expected to be $0.23 per share, after giving effect to the stock split."
Why this matters to the numbers. Every per-share figure in this dive is post-split. The vendor payload has adjusted correctly — the 10-Q reports 131,750 thousand diluted shares and diluted EPS of $9.12 for the March 2026 quarter, and inc_q reports 1,317,500 thousand and $0.91, an exact ten-fold reconciliation. But the estimate array has not adjusted consistently, and that is finding 4 in Section 8.
The forward dividend is $0.23 per quarter, $0.92 annualised, a 0.47% yield at $195.45. The vendor's dividendPerShareTTM of $0.80 is a trailing figure spanning the increase and is 15% below the forward run rate. We use the filing's guided figure and flag the vendor's as trailing.
3. Fiscal 2026 — and why the annual figures carry an asterisk
The archive contains a 10-K for fiscal 2025 (filed 2025-08-08) and 10-Qs through the March 2026 quarter. It does NOT contain the fiscal 2026 annual report, which is not yet filed, and it does NOT contain the fourth-quarter earnings release. The 2026-07-28 8-K states:
> "On July 28, 2026, KLA Corporation (the 'Company') issued a press release announcing selected financial and operating results for its fourth quarter of and full fiscal year 2026. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K."
Exhibit 99.1 is not in the extracted archive. The fiscal-2026 annual figures below therefore come from the vendor payload, which sourced them from that release. They are unaudited, they are not filing-verified, and they are labelled as such wherever they appear.
What IS filing-verified, from the 10-Q for the quarter ended 2026-03-31:
| ($K) | Q3 FY2026 | Q3 FY2025 | 9M FY2026 | 9M FY2025 |
|---|---|---|---|---|
| Product revenue | 2,640,287 | 2,393,821 | 7,616,386 | 7,000,672 |
| Service revenue | 774,791 | 669,208 | 2,305,534 | 1,980,749 |
| Total revenues | 3,415,078 | 3,063,029 | 9,921,920 | 8,981,421 |
| Interest expense | 70,423 | 71,889 | 211,166 | 229,041 |
| Income before income taxes | 1,416,761 | 1,264,433 | 4,056,540 | 3,315,649 |
| Provision for income taxes | 215,771 | 176,017 | 588,828 | 456,855 |
| Net income | 1,200,990 | 1,088,416 | 3,467,712 | 2,858,794 |
| Diluted EPS (pre-split) | $9.12 | $8.16 | $26.26 | $21.32 |
| Diluted shares (pre-split, K) | 131,750 | 133,303 | 132,073 | 134,066 |
| Effective tax rate | 15.2% | 13.9% | 14.5% | 13.8% |
Every one of these ties to the vendor's inc_q exactly after the ten-for-one adjustment. Q3 revenue $3,415,078K matches; net income $1,200,990K matches; the three FY2026 quarters sum to $9,921,920K, the filing's nine-month total, to the dollar. The vendor's quarterly income statement for KLA is clean, and that is recorded as a finding.
The full quarterly sequence, showing the trajectory the FY2027 consensus has to extend:
| Quarter | Revenue ($M) | Gross profit | GM% | Operating income | OM% | Net income | Diluted EPS |
|---|---|---|---|---|---|---|---|
| Q4 FY2024 (Jun-24) | 2,566.2 | 1,592.2 | 62.0% | 1,052.5 | 41.0% | 836.4 | $0.618 |
| Q1 FY2025 (Sep-24) | 2,841.5 | 1,694.1 | 59.6% | 1,119.9 | 39.4% | 945.9 | $0.701 |
| Q2 FY2025 (Dec-24) | 3,076.9 | 1,855.4 | 60.3% | 1,242.2 | 40.4% | 824.5 | $0.613 |
| Q3 FY2025 (Mar-25) | 3,063.0 | 1,887.3 | 61.6% | 1,300.4 | 42.5% | 1,088.4 | $0.816 |
| Q4 FY2025 (Jun-25) | 3,174.7 | 1,967.5 | 62.0% | 1,351.8 | 42.6% | 1,202.8 | $0.906 |
| Q1 FY2026 (Sep-25) | 3,209.7 | 1,966.6 | 61.3% | 1,337.2 | 41.7% | 1,121.0 | $0.847 |
| Q2 FY2026 (Dec-25) | 3,297.1 | 2,025.9 | 61.4% | 1,362.1 | 41.3% | 1,145.7 | $0.868 |
| Q3 FY2026 (Mar-26) | 3,415.1 | 2,087.4 | 61.1% | 1,407.5 | 41.2% | 1,201.0 | $0.910 |
| Q4 FY2026 (Jun-26) | 3,657.6 | 2,244.4 | 61.4% | 1,554.0 | 42.5% | 1,363.1 | $1.04 |
Three observations.
First, this is a remarkably stable business at the margin line. Gross margin has sat in a 59.6%–62.0% band across nine quarters and operating margin in a 39.4%–42.6% band, through a period in which quarterly revenue rose 42.5%. That is not what a cyclical looks like at the moment; it is what a price-setter looks like.
Second, growth is steady rather than accelerating. Sequential revenue growth across the last four quarters: +1.1%, +2.7%, +3.6%, +7.1%. The June quarter was the strongest of them. But nothing in that sequence yet looks like the +32.4% year the consensus wants.
Third, the annual figures. Fiscal 2026 revenue of $13,579.5M (+11.7%), gross profit $8,324.4M (61.30%), operating income $5,660.8M (41.69%), net income $4,830.8M (35.58% net margin), diluted EPS $3.66 on 1,319,633 thousand average diluted shares. Unaudited.
4. Cash generation — recomputed, and a clean capex check
Free cash flow is never quoted from the vendor in this programme. It is recomputed as operating cash flow minus filed capital expenditure. On KLA, both halves check out.
| Fiscal year | Operating cash flow | Capex — vendor | Capex — filed | Difference | Free cash flow (filed basis) |
|---|---|---|---|---|---|
| FY2023 | $3,669,805K | $341,591K | $341,591K | exact | $3,328,214K |
| FY2024 | $3,308,575K | $277,384K | $277,384K | exact | $3,031,191K |
| FY2025 | $4,081,903K | $340,209K | $335,259K | +$4,950K | $3,746,644K |
| FY2026 (unaudited) | $4,143,079K | $375,945K | (not yet filed) | — | $3,767,134K |
The FY2025 difference is exactly $4,950K, and the 10-K identifies it: a separate investing line, "Acquisition of intellectual property | (4,950)". The vendor has folded intellectual-property acquisition into capital expenditure. This is a definitional difference of 1.5%, and unusually it runs in the conservative direction — the vendor's larger capex produces a SMALLER free cash flow than the filing supports. Every other confirmed capex defect in this programme flatters. We use the filing's $335,259K for FY2025, giving free cash flow of $3,746,644K rather than the vendor's $3,741,694K.
The nine-month FY2026 cross-check from the 10-Q is also clean: capital expenditures of $286,657K against operating cash flow of $3,236,649K, which leaves a fourth quarter of $89.3M of capex and $906.4M of operating cash flow implied by the unaudited annual figures. Both are plausible against the run rate.
The diagnostic is separately clean. capexToDepreciationTTM is 0.9542, and the direct computation from cf_a is $375,945K / $393,978K = 0.954 — identical. Neither the datum nor the diagnostic is corrupt. This is a fully verified-clean capex check and it is reported as a finding, because 40.9% of payloads in this programme fail it.
The resulting free cash flow yield is 1.48% ($3,767.1M against a $255,312.4M market capitalisation), and price-to-free-cash-flow is 67.8x. freeCashFlowYieldTTM of 0.014755 and priceToFreeCashFlowRatioTTM of 67.77 both agree. The number is small because the price is large, not because the cash flow is weak.
One genuine quality flag. Fiscal 2026 net income of $4,830.8M exceeded operating cash flow of $4,143.1M by $687.7M — an incomeQualityTTM of 0.858. The mechanism is working capital: inventory rose from $3,212.1M to $3,648.5M, and receivables are running at 77.7 days. Inventory at $3,648.5M is 26.9% of annual revenue and 69.4% of annual cost of revenue — 253 days of inventory on hand. For a company building tools to order against a rising backlog that is defensible; if the FY2027 revenue step does not arrive it becomes the problem.
5. Balance sheet, capital return and the geography
Filing-verified debt structure, from the 10-Q at 2026-03-31 — all fixed-rate, all long-dated:
| Instrument | Principal ($K) | Effective rate |
|---|---|---|
| 4.100% Senior Notes due 2029-03-15 | 800,000 | 4.159% |
| 4.650% Senior Notes due 2032-07-15 | 1,000,000 | 4.657% |
| 4.700% Senior Notes due 2034-02-01 | 500,000 | 4.777% |
| 5.650% Senior Notes due 2034-11-01 | 250,000 | 5.670% |
| 5.000% Senior Notes due 2049-03-15 | 400,000 | 5.047% |
| 3.300% Senior Notes due 2050-03-01 | 750,000 | 3.302% |
| 4.950% Senior Notes due 2052-07-15 | 1,450,000 | 5.023% |
| 5.250% Senior Notes due 2062-07-15 | 800,000 | 5.259% |
| Total | 5,950,000 |
Not one dollar matures before March 2029, and $4.15 billion of it matures after 2049. Against that sits $4,902.4M of cash and short-term investments at 2026-06-30 ($1,649.8M cash, $3,252.6M short-term investments). True net debt is $985.0M — roughly three months of operating cash flow.
The vendor reports netDebt of $4,237,573K, which is total debt less cash ONLY, omitting the $3,252,566K of short-term investments. That is the known short-term-investments omission, and it propagates: enterpriseValueTTM of $259,550.0M is market capitalisation plus the overstated net debt. Corrected enterprise value is $256,297.4M, 1.3% lower. All enterprise-value multiples in this dive use the corrected figure.
Capital return, filing-verified for the nine months and vendor-sourced for the year:
- Repurchases. From the 10-Q: 1,523 thousand pre-split shares (15,230 thousand post-split) repurchased in the nine months to March 2026 at a total cost of $1,733,866K — an average of $1,138.5 pre-split, $113.85 post-split. Fiscal-year 2026 repurchases per
cf_awere $2,289,769K, implying roughly $556M in the June quarter. The company has been buying its own stock at an average price 41.7% below today's. - Authorisation. The 10-Q: "an increase in the authorized repurchase amount of $7.00 billion in the third quarter of fiscal 2026... As of March 31, 2026, an aggregate of $10.31 billion of authorization was available." That is 4.0% of the current market capitalisation, unused.
- Dividends. $1,057,832K paid in fiscal 2026. Forward run rate $0.92 per share annualised, a 0.47% yield.
Total shareholder yield is approximately 0.90% buyback plus 0.47% dividend ≈ 1.37%. That is very low, and it is low for a specific reason: the share price has risen 120.4% in twelve months while the cash returned has not. Shareholder yield is not part of the return case here, which distinguishes KLA sharply from the return-bridge arithmetic that supports a name like a high-yielding financial.
Geography — and the seg_geo block passes the home-market test. Fiscal 2025 from seg_geo, in $M: China $4,042.6, Taiwan $3,205.4, Korea $1,452.8, North America $1,362.3, Japan $1,133.0, Europe and Israel $574.2, Rest of Asia $385.9. Sum: $12,156.2M — inc_a FY2025 revenue to the dollar, with the home market present and correctly labelled. Three names in a prior batch published a geography block with the US line missing; KLA does not, and the block is used.
The filed nine-month FY2026 detail is more current and is what the risk case rests on:
| Region | 9M FY2026 ($K) | share | 9M FY2025 | share | change |
|---|---|---|---|---|---|
| China | 3,091,630 | 31.2% | 3,083,713 | 34.3% | +0.3% |
| Taiwan | 2,507,705 | 25.3% | 2,331,672 | 26.0% | +7.5% |
| Korea | 1,459,747 | 14.7% | 974,656 | 10.9% | +49.8% |
| North America | 1,102,379 | 11.1% | 1,081,114 | 12.0% | +2.0% |
China and Taiwan together are 56.5% of nine-month revenue. The 10-Q's own explanation of the China line is the important sentence: "Revenues from our customers in China increased 5% and by less than 1% in the three and nine months ended March 31, 2026, respectively, compared to the same periods in the prior year, primarily due to continued legacy node demand, partially offset by the effects of U.S. export controls and regulations." China revenue is flat, it is legacy-node, and it is being actively suppressed by export controls. The growth is coming from Korea (+49.8%) and Taiwan (+7.5%). The risk factors are explicit: export rules "may significantly harm our business, results of operations, financial condition and cash flows in future periods, unless we are able to obtain required licenses."
6. Valuation — priced in or room?
At $195.45 (market cap $255,312.4M, ~1,306.3M shares implied):
| FY2026 (actual, unaudited) | FY2027E | FY2028E | FY2029E | |
|---|---|---|---|---|
| Revenue | $13,579.5M | $17,985.0M (17) | $21,286.5M (15) | $23,627.3M (9) |
| Revenue growth | +11.7% | +32.4% | +18.4% | +11.0% |
| EPS | $3.66 | $5.483 (15) | $6.625 (13) | $7.497 (4) |
| EPS growth | +20.5% | +49.8% | +20.8% | +13.2% |
| P/E | 53.4x | 35.6x | 29.5x | 26.1x |
| EPS range (low–high) | — | $5.024–$5.697 | $6.118–$7.401 | $6.599–$8.428 |
Estimate coverage thins fast and the thin years are excluded. FY2027 rests on 15 analysts and FY2028 on 13 — usable. FY2029 rests on 4, FY2030 on 1 and FY2031 on 2. The FY2030 and FY2031 rows are not used anywhere in this dive and the FY2029 row informs nothing.
est.ebitdaAvg and est.ebitAvg are rejected outright. In every forward year ebitdaAvg is exactly 42.51% of revenueAvg and ebitAvg is exactly 39.32% — FY2026, FY2027, FY2028, FY2029, FY2030 and FY2031 alike. That is the fixed-ratio fabrication signature, and it appears in all six forward rows. All forward valuation in this dive uses epsAvg, verified against actuals: the FY2026 estimate of $3.70986 sits 1.4% above the delivered $3.66, and the FY2025 estimate of $3.24047 sat 6.7% above the delivered $3.037 — close enough to trust the field's basis, which is not true of the EBITDA rows.
Enterprise value multiples, on the corrected $256,297.4M: 18.9x fiscal 2026 revenue, 42.3x true EBITDA. evToEBITDATTM of 45.07x uses the vendor's overstated enterprise value AND a corrupted EBITDA figure (see Section 8) and is not used.
6a. What today's price assumes (the inversion)
At $195.45 — 35.6x FY2027 consensus EPS, 29.5x FY2028, 67.8x free cash flow — the price embeds:
- Revenue reaches $17,985M in fiscal 2027, a 32.4% increase. (Consensus; 17 analysts.) This is the most fragile assumption in the price, and the reason is arithmetic rather than narrative. The vendor's own Q1 FY2027 revenue estimate is $4,037,897K, which annualises to $16,152M — $1,833M, or 10.2%, short of the full-year consensus. The consensus therefore requires substantial sequential acceleration through the year, on top of a June quarter that was already a record. A flat sequential year at the Q1 estimate delivers roughly $16.2B and roughly $4.90 of EPS, at which the stock is 39.9x.
- EPS reaches $5.483 in fiscal 2027 and $6.625 in fiscal 2028. (Consensus; 15 and 13 analysts.) That is 49.8% then 20.8% growth against a nine-quarter operating-margin band of 39.4%–42.6%, so it is a revenue call rather than a margin call. On unchanged 41.7% operating margins, $17,985M of revenue produces roughly $7,500M of operating income against fiscal 2026's $5,661M — the leverage is available if the revenue is.
- Gross margin holds above 61%. (Our derivation from the filed quarterly series.) Nine consecutive quarters between 59.6% and 62.0%. This is the least fragile assumption on the page and is the reason the business quality is not in question.
- China revenue does not fall. (Our number; 31.2% of nine-month FY2026 revenue.) It has already stopped growing — up "less than 1%" over nine months, on legacy-node demand, with export controls named by the company as the offsetting force. The price contains no discount for China going to zero, and no premium for it being licensed open.
- The market keeps paying roughly 29–36x forward earnings. (Our number.) At 25x FY2028E the stock is $166; at 35x it is $232. The band is wide because semiconductor capital equipment de-rates hard at cycle peaks, and the historical evidence for KLA specifically is in the file: this stock fell 35.2% from $301.71 within the last twelve months without any deterioration in reported results.
6b. The return bridge (why the multiple moves)
Expected return over the next twenty-four months decomposes as: EPS growth (+81.0% cumulative, from the delivered $3.66 to FY2028E $6.625) + multiple drift (COMPRESSION, from 53.4x trailing to roughly 31x on the then-forward year) + shareholder yield (+1.37% per year) ≈ +5% to +10% total, of which none comes from the multiple.
Say plainly what that means: the entire base case is earnings growth being handed straight back through a de-rating. Our base of $205 applies 31x FY2028E — i.e. we assume the multiple on the then-current forward year holds roughly flat, and the return is the earnings. We do not assume expansion. A business growing 20% with 42% operating margins can defend 30x; it cannot easily defend the 53.4x it carries on trailing earnings, and the roll-down from 53.4x to 29.5x over two fiscal years is mechanical rather than a re-rating, which the format rules require us to state rather than dress up.
The asymmetry is what fails. At 21x FY2028E consensus low ($6.118) the price is $128; at 39x FY2028E consensus high ($7.401) it is $289. That is −34.5% against +47.9% — 1.39:1, and our slightly wider anchors give 1.44:1. A cyclical at 29.5x two years forward with a 1.48% cash yield needs better than that.
6c. Variant perception (where we differ, what would surprise)
- We differ from consensus on the FY2027 revenue step, and the disagreement is checkable rather than rhetorical. Consensus says $17,985M. The vendor's Q1 estimate annualises to $16,152M. Both numbers are in the same file. We are not forecasting a miss; we are declining to pay for a 32.4% year whose first quarter has not been guided to a run-rate consistent with it. Watchable number: the revenue guide given on 2026-10-28.
- We think the China line is more binary than the price allows. It is 31.2% of nine-month revenue, it grew "less than 1%" over that period, it is explicitly legacy-node, and the company's own risk factors use the phrase "may significantly harm." The market is treating a flat, controlled, legacy-node third of the business as a stable base. It is more likely a step function in one direction or the other.
- Where we have NO variant perception: business quality. Nothing in our analysis says KLA's competitive position is weaker than the market believes. The 61.30% gross margin, the 35.7% return on invested capital, the near-monopoly in process control and the compounding service annuity are all real and all confirmed in the filings. Our disagreement is entirely about price, and we say so rather than manufacturing a quality concern to justify the verdict.
- Positive surprise that would force a re-rate: an October guide consistent with $17,985M for the full year — i.e. Q1 revenue at or above $4.3B with a second-half-weighted outlook — or a licensing development that reopens leading-edge shipments to China. Either would make the 32.4% consensus credible and put the bull anchor in play.
- Negative surprise that would break the thesis: a China revenue decline of more than 20% year on year in any quarter; gross margin below 59%; inventory rising above $4.0B without a corresponding revenue step; or an October guide that annualises below $16.0B. Any of these hits a stock that has already fallen 35.2% from its high once this year without needing a fundamental reason.
Synthos fair values
All three anchors are multiples of the FY2028 consensus EPS distribution (mean $6.62489, low $6.11758, high $7.40078, 13 analysts), cross-checked against FY2027 and against free cash flow.
- Bear ~$130 — 21.2x the FY2028 consensus LOW of $6.118. Cross-check: 25.9x the FY2027 low of $5.024; 54.1% above the 52-week low of $84.39; a 2.9% free cash flow yield on the fiscal 2026 figure. The scenario: the FY2027 revenue step does not arrive, China revenue falls, inventory is written down, and a cyclical re-rates to a cyclical multiple. −33.5%.
- Base ~$205 — 30.9x the FY2028 consensus MEAN of $6.625. Cross-check: 37.4x FY2027E; 1.84% free cash flow yield; 9.0% below the street's $225.18. The scenario: revenue grows strongly but short of the 32.4% consensus, margins hold in their nine-quarter band, China is flat, and the multiple on the then-forward year stays near 30x. +4.9%.
- Bull ~$290 — 39.2x the FY2028 consensus HIGH of $7.401. Cross-check: 3.9% below the 52-week high of $301.71; 89.0x fiscal 2026 free cash flow. The scenario: the consensus revenue step lands in full, the Korea and Taiwan strength compounds, China is licensed open, and the market pays a monopoly multiple for a business compounding above 20%. +48.4%.
Base is 4.9% above spot; asymmetry roughly 1.44:1 (33.5% down, 48.4% up), against a shareholder yield of only 1.37%. A base case under 5% and a payoff ratio under 1.5:1 is a Watch. There is no version of the arithmetic that makes this a Buy at $195.45, and manufacturing one would require assuming both the full consensus revenue step and no multiple compression.
7. Knowledge base — three claims, none of them about KLA
Raw hits: 3. After a case-sensitive entity re-run: 3. Discarded: 0. Name-level claims on KLA as an investment: 0.
The sweep ran entity tokens KLAC, KLA, KLA Corporation and KLA-Tencor, plus free text on "kla ", "process control", "wafer inspection" and "metrology", across all 52,021 distilled claims. It returned three hits. All three survive a case-sensitive entity match and none is a free-text-only hit.
The three claims, verbatim:
> 2026-05-03 · bullish · conviction 68 · horizon: thesis · entities: NVDA, AMD, AVGO, KLAC, DELL · channel: compound_and_friends · speaker: Josh Brown · skill 1.0
> "AI CAPEX trade isn't played out — semiconductors and hardware paired with utilities; no ceasefire among AI labs, spending goes deeper and further for years."
> 2026-03-03 · bullish · conviction 70 · horizon: principle · entities: Applied Materials, Lam Research, KLA · channel: compound_and_friends · no named speaker · skill 1.0
> "Semi-cap went from ~20 firms to three giants via acquisition; illustrates how every sector consolidates."
> 2026-02-05 · neutral · conviction 70 · horizon: principle · entities: ASML, Tokyo Electron, KLA-Tencor · channel: dwarkesh · no named speaker · skill 1.0
> "All leading fabs depend on machines from ~five equipment companies (ASML, Tokyo Electron, KLA); this concentration is the leverage point for scaling fab output."
What this lane is, without inflation. Not one of the three claims is a view on KLA as an investment. Two are principle-horizon structural observations in which KLA appears as an illustrative example of industry concentration — genuinely relevant to the exponential-potential score, and cited there, but they are statements about the shape of the industry, not about whether the stock is worth $195.45. The third is a sector basket call that lists KLAC alongside four other tickers.
No homograph problem was found, and that is worth recording. The token "KLA" is three characters and appears inside no other entity name in the store; the case-sensitive re-run discarded nothing. This is a materially better outcome than the collisions confirmed elsewhere in this programme, and it means the small lane is small because the store genuinely has little on KLA — a real void, reported as a void rather than padded.
Attribution. Two of three claims carry speaker: null and are attributed only to a channel. The third names Josh Brown, and its content is a market view rather than management guidance, so the management-voice half-weighting rule does not engage. No claim in this lane carries a management speaker_role, and none is excluded on content mismatch. Both compound_and_friends claims come from the same channel, so effective independent breadth is two channels, not three.
Conclusion. Breadth 3, name-level claim count 0, net conviction positive-negligible. The knowledge base is faintly and indirectly favourable to KLA and contributes essentially nothing to the verdict. It is reported at that weight.
8. Data integrity — what we rejected and why
Nine findings: three clean checks and six defects. KLA's payload is among the better ones in this programme — the quarterly income statement ties to the filing exactly, capital expenditure verifies against three filed years, and both segment blocks sum to reported revenue — but the annual figures are unaudited, the EBITDA rows are fabricated, and the estimate array contains a split-adjustment inconsistency.
CLEAN 1 — capitalExpenditure verified against the filings, and the one difference runs the conservative way. FY2023 vendor $341,591K against the 10-K's $341,591K — exact. FY2024 vendor $277,384K against $277,384K — exact. FY2025 vendor $340,209K against the 10-K's $335,259K, a $4,950K difference which the 10-K's own investing section identifies as a separate line, "Acquisition of intellectual property | (4,950)", that the vendor has folded in. The vendor's capex is therefore 1.5% too LARGE, which understates rather than flatters free cash flow — the opposite of every confirmed defect in this class. The diagnostic is also clean: capexToDepreciationTTM of 0.9542 reconciles exactly to $375,945K / $393,978K from cf_a. Both the datum and the diagnostic pass. The nine-month FY2026 10-Q figure of $286,657K against operating cash flow of $3,236,649K is consistent with the unaudited full year. Free cash flow is recomputed on the filed basis throughout: FY2025 $3,746,644K rather than the vendor's $3,741,694K.
CLEAN 2 — seg_prod sums to revenue exactly, with no over-count. The FY2025 block totals $12,156,162K against inc_a FY2025 revenue of $12,156,162,000. Every year back to FY2019 also ties. No line exceeds its plausible share and there is no double-counted aggregate, which is the defect that produced a 162.8% total on another name.
CLEAN 3 — seg_geo sums to revenue exactly, and the home market is present. The FY2025 block totals $12,156,162K, matching revenue to the dollar, and includes North America at $1,362,311K (11.2%). The home-market omission defect is checked and absent. The block is used, and cross-checked against the 10-Q's more current nine-month figures, which are the ones cited in Section 5.
DEFECT 1 — inc_a FY2026 depreciation and amortisation is one quarter, not four, and it corrupts the EBITDA line. inc_a reports FY2026 depreciationAndAmortization of $98,606,000 against cf_a's $393,978,000 for the same year — a factor of four, and the FY2026 quarterly figures in inc_q ($97.0M, $99.3M, $99.1M) confirm that $98.6M is a single quarter. FY2025 is correct ($394,088,000 in both statements), so the defect is specific to the newest year. The consequence is that inc_a FY2026 ebitda of $5,759,386,000 is operating income plus one quarter's D&A. The correct figure is approximately $6,054,758,000, 5.1% higher. All EBITDA-derived ratios computed off the vendor's annual line are understated; none is used in this dive.
DEFECT 2 — inc_q reports NEGATIVE depreciation and amortisation for the June 2026 quarter. The value is −$196,766,000. Depreciation cannot be negative. The three preceding quarters read $99,088K, $99,268K and $97,016K. The field is rejected for that quarter, and it is the mechanical cause of DEFECT 1: $97,016 + $99,268 + $99,088 − $196,766 = $98,606 — exactly the corrupt annual figure. One bad quarterly datum has propagated into the annual income statement and the EBITDA line, which is worth recording because it means the two defects are one defect with two symptoms.
DEFECT 3 — est.ebitdaAvg and est.ebitAvg carry the fixed-ratio fabrication signature in all six forward years — REJECTED. ebitdaAvg is exactly 42.51% of revenueAvg and ebitAvg exactly 39.32% in FY2026, FY2027, FY2028, FY2029, FY2030 and FY2031 without exception. Real EBITDA margins do not hold to four decimal places across six years. All forward valuation uses epsAvg, which verifies acceptably against actuals: FY2026E $3.70986 against a delivered $3.66 (+1.4%), FY2025E $3.24047 against a delivered $3.037 (+6.7%).
DEFECT 4 — the estimate array is split-adjusted inconsistently, and the FY2024 row is wrong by three orders of magnitude on net income. The FY2024 row reports epsAvg of $22.00973 — a pre-split figure, roughly ten times the delivered post-split $2.028 — while the FY2025 row reports $3.24047, a post-split figure against a delivered $3.037. So the array switches basis between FY2024 and FY2025 with no marker. Worse, the FY2024 row reports netIncomeAvg of $28,647,292,590 against revenueAvg of $10,256,832,000 — a net income 2.79x revenue, and 10.4x the $2,761,896,000 actually delivered. The historical rows of est are not usable for KLA. Only the forward epsAvg values are, and only after the FY2026 verification above.
DEFECT 5 — netDebt omits short-term investments, and enterpriseValueTTM inherits the error. netDebt of $4,237,573K is total debt of $5,887,415K less cash of $1,649,842K, ignoring $3,252,566K of short-term investments. True net debt is $985,007K. enterpriseValueTTM of $259,550.0M is therefore $3,252.6M (1.3%) too high; corrected, $256,297.4M. netDebtToEBITDATTM of 0.736x should be approximately 0.163x on corrected net debt and corrected EBITDA. This is the known short-term-investments omission and it is below the 15% withholding threshold, so the multiple is corrected rather than withheld.
DEFECT 6 — capitalLeaseObligations reads zero in fiscal 2026 after $204,025K in fiscal 2025 and $189,508K in fiscal 2024. Lease obligations do not vanish. The consequence is that totalDebt is not comparable across years: FY2025's $6,088,282K is senior notes of $5,884,257K plus leases of $204,025K, while FY2026's $5,887,415K is senior notes alone. This is an inclusion inconsistency rather than the lease double-counting defect confirmed on other names — the leases are added to debt in one year and dropped in the next. We use the filing's $5,950,000K of senior notes at principal as the debt figure and note the leases separately.
Also checked and correct, and worth recording: the quarterly income statement ties to the 10-Q exactly (Q3 FY2026 revenue $3,415,078K, net income $1,200,990K, diluted shares 131,750K pre-split against inc_q's 1,317,500K post-split — an exact ten-fold reconciliation, so the vendor's split adjustment on the statements is correct even though the estimate array's is not); effectiveTaxRateTTM of 13.83% against the 10-Q's 14.5% nine-month rate, a difference explained by the fourth quarter; km_ttm is present and complete — the truncation defect found on other names does not appear here; and quote.yearHigh/yearLow ($307.37/$83.224) against tech.hi52/lo52 ($301.71/$84.39), a 1.9% and 1.4% discrepancy, with tech used throughout for internal consistency.
Vendor composite rating — noted and largely discounted. The rating block gives B / 3 overall, with 5 out of 5 on both return on equity and return on assets, and 1 out of 5 on each of debt-to-equity, price-to-earnings and price-to-book. The three 1-scores are the honest part of that block and they say the same thing this dive does: the returns are outstanding and the price is not. The discounted-cash-flow sub-score of 3 rests on the vendor's free cash flow figure, which we have recomputed, and carries no weight.
Non-equity tripwire — checked and passed. KLAC is common stock, $0.001 par value, listed on the Nasdaq Global Select Market, per the 8-K cover pages. Price of $195.45 is not par-like; beta is 1.458; the dividend is variable and was raised 21% in May 2026; volume was 12.65M shares (roughly $2.47B of turnover); the 52-week band of $84.39 to $301.71 is a 258% range. This is common equity.
9. Technicals
- Price $195.45, up 6.95% on the day — the largest single-session move in this batch — on 12,649,107 shares. Opened $191.98, ranged $188.13 to $196.725, closed within 0.7% of the high.
- −35.2% from the 52-week high of $301.71; +131.6% above the 52-week low of $84.39. Position within the annual range: 51st percentile.
- The moving averages disagree, which is the honest summary of the setup. The price is 11.7% BELOW a 50-day average of $221.46 and 19.6% ABOVE a 200-day average of $163.37. A 50-day beneath which price is trading, above a 200-day far beneath it, is the configuration of a strong uptrend in its first serious correction.
- RSI 36.51 — near-oversold, and still near-oversold after a 7% day, which tells you how deep the preceding decline was. MACD −11.94, deeply negative.
- Maximum drawdown from peak over the trailing year: −35.2%.
- Relative performance: 3-month +14.1% against SPY +7.6% and QQQ +7.7%; 6-month +38.6% against SPY +11.1% and QQQ +15.7%; 12-month +120.4% against SPY +24.3% and QQQ +30.8% — a 96-point excess return over the index in one year. This is a stock that has already delivered the outcome; the question this dive answers is whether it can deliver another one.
- Sentiment: 28 buy, 14 hold, 2 sell across 44 analysts; consensus target $225.18 (+15.2%), median $225, high $325 (+66.3%), low $180 — 7.9% BELOW spot. Unlike several names in this programme, the lowest analyst target is beneath the current price, which means the street itself admits downside. We treat that as appropriate rather than alarming.
Today's move and what it does to the entry
KLAC closed 2026-08-04 at $195.45, up $12.70 from $182.75, on volume of 12.65 million shares. There is no company-specific filing dated 2026-08-04 in this archive. The only 2026-08-04 activity in the payload is eight insider F-InKind dispositions, all priced at $182.75 — the previous close, not the closing price — which is the mechanical signature of scheduled vesting rather than any response to news.
The honest read: a 6.95% single-session move with no company-specific disclosure behind it, in a stock 35% off its high with RSI at 36.5, is a sector or flow event, and we do not know which. It does not change the arithmetic. At $182.75 this morning the base case was +12.2%; at $195.45 tonight it is +4.9%. Today's move consumed more than half of the case for owning it, which is a useful demonstration of why a 1.44:1 payoff ratio is not enough margin to work with.
10. Insiders — eight transactions, all mechanical, all today
| Date | Person | Role | Type | Shares | Price | Held after |
|---|---|---|---|---|---|---|
| 2026-08-04 | Richard P. Wallace | President and CEO | F-InKind | 19,950.993 | $182.75 | 615,571.41 |
| 2026-08-04 | Richard P. Wallace | President and CEO | F-InKind | 89,786.901 | $182.75 | 525,784.51 |
| 2026-08-04 | Bren D. Higgins | EVP & Chief Financial Officer | F-InKind | 7,387.42 | $182.75 | 244,357.06 |
| 2026-08-04 | Bren D. Higgins | EVP & Chief Financial Officer | F-InKind | 22,169.698 | $182.75 | 222,187.37 |
| 2026-08-04 | Ahmad A. Khan | President, Semiconductor Products & Customers | F-InKind | 7,759.271 | $182.75 | 177,374.73 |
| 2026-08-04 | Ahmad A. Khan | President, Semi. Prod. & Cust. | F-InKind | 23,277.811 | $182.75 | 154,096.92 |
| 2026-08-04 | Brian Lorig | EVP, KLA Global Services | F-InKind | 3,693.711 | $182.75 | 92,783.35 |
| 2026-08-04 | Brian Lorig | EVP, KLA Global Services | F-InKind | 11,081.131 | $182.75 | 81,702.22 |
Total: 185,106.9 shares, approximately $33.8 million, across four executive officers, all on a single day.
The reading, and it is close to signal-free. Every one of the eight transactions is coded F-InKind — shares withheld by the company to satisfy tax obligations on vesting equity, not an open-market decision. All eight are priced at $182.75, the previous close, which is the mechanical convention for such withholdings. All eight fall on the same date, which is the signature of a scheduled annual vest. There is not one S-Sale and not one purchase in the file.
What can be read from it is holdings rather than intent. After the withholdings, Richard Wallace retains 525,784.51 shares — approximately $102.8 million at $195.45 — and Bren Higgins retains 222,187.37 (approximately $43.4 million). Those are substantial personal stakes and they are the relevant alignment fact. The absence of any open-market sale into a 120% twelve-month run is mildly notable in the favourable direction, though eight forms on one day is too narrow a window to build anything on.
What the file does not contain: any open-market transaction of any kind, in either direction, by anyone, at any point in the window covered. The insider block for KLA is uninformative and is scored as such.
11. Verdict, kill-criteria and flip conditions
Watch.
The business is not the problem, and this dive will not pretend otherwise. A 61.30% gross margin on physical hardware, a 41.69% operating margin, a 35.7% return on invested capital, nine consecutive quarters of sequential revenue growth to a June-quarter record of $3,657.6M, a service annuity growing 16.4% to 23.2% of revenue, $5,950,000K of fixed-rate debt with nothing due before March 2029, $10.31 billion of unused buyback authorisation, and a competitive position that an independent observer in the knowledge base describes as one of about five companies on which every leading fab depends. On quality this is among the best names this programme has covered.
The price is the problem, and it is a specific, checkable problem. At $195.45 KLA trades at 53.4x trailing GAAP earnings, 35.6x FY2027 consensus and 29.5x FY2028's $6.625, for a free cash flow yield of 1.48% and a total shareholder yield of 1.37%. The entire case for those multiples is a consensus that revenue rises 32.4% in fiscal 2027 to $17,985M — and the vendor's own first-quarter estimate for that year annualises to $16,152M, 10.2% short. Both figures are in the same file. We are not calling a miss; we are declining to underwrite the gap at 30x.
Our base of $205 is 4.9% above spot with 1.44:1 asymmetry. The bar in this programme is 2:1. It is not met, and today's 6.95% move is why: this morning the same analysis produced +12.2%.
Four specific reservations, stated as reservations rather than hedging.
First, the FY2027 revenue step has not started. Sequential growth over the last four quarters was +1.1%, +2.7%, +3.6%, +7.1%. That is good and it is not 32%.
Second, 56.5% of nine-month revenue shipped to China and Taiwan, and the China half — 31.2% — grew "less than 1%" over nine months on legacy-node demand, explicitly suppressed by export controls the company says "may significantly harm" it.
Third, fiscal 2026 net income exceeded operating cash flow by $687.7M, with inventory at $3,648.5M — 253 days on hand and 26.9% of annual revenue. That is a bet on the revenue step being real.
Fourth, the annual figures are unaudited. The fiscal 2026 10-K is not filed and the fourth-quarter earnings release is not in this archive. Every FY2026 annual number in this dive is press-release-derived through the vendor and labelled as such.
Pre-registered KILL criteria — what would take this to Avoid:
- An October guide that annualises below $16.0B of FY2027 revenue, which would put the consensus $17,985M out of reach and leave the stock at roughly 40x a number nobody believes.
- China revenue down more than 20% year on year in any quarter, or a tightening of the export regime that names process control specifically.
- Gross margin below 59% — beneath the floor of a nine-quarter band that has never broken.
- Inventory above $4.0B without a corresponding revenue step, which converts the working-capital build from a bet into a write-down.
- The FY2026 10-K, when filed, differing materially from the unaudited figures used here.
Pre-registered UPGRADE conditions — what would take this to Buy — Tactical:
- A price below roughly $165, at which the base case is +24% and the payoff ratio moves through 2:1 without any change in our numbers. This is the cleanest and most likely path to a Buy on this name, and it requires nothing from the company.
- An October guide consistent with the full $17,985M, i.e. Q1 revenue at or above $4.3B with a second-half-weighted outlook, which would validate the consensus and justify carrying the multiple.
- A China licensing development that reopens leading-edge shipments, which is worth a re-rating rather than an estimate change.
- Operating cash flow reconverging with net income as inventory converts, which would take the free cash flow yield above 2% at an unchanged price.
Where KLAC sits in the Synthos Framework Portfolio. No position today. On the watch list at the $165 trigger, which is 15.6% below spot and 25.5% below the 50-day average, with a first tranche of 1.0% and a 2.5% target on confirmation of the FY2027 revenue path. Logged as a tracked Synthos call (Watch) as of 2026-08-04 at $195.45, with the fair-value anchors, kill criteria and upgrade conditions all gradeable. The dive that would have made this a Buy is the one written at $165, and we would rather wait for it than round up the asymmetry now.
Single biggest risk: a 56.5% concentration of shipments into China and Taiwan. The China portion — 31.2% of nine-month fiscal 2026 revenue, $3,091,630K — has stopped growing, is legacy-node, and is governed by an export-control regime the company's own risk factors describe as capable of "significantly harm[ing] our business, results of operations, financial condition and cash flows in future periods." At 29.5x FY2028 consensus earnings with a 1.48% cash yield there is no valuation cushion beneath that exposure, and the 35.2% drawdown already recorded this year is the market's own demonstration of how fast it reprices.
Provenance & disclosures
- Traceability: 0 name-level knowledge-base claims name KLA as an investment out of 52,021 distilled claims. Raw hits 3; surviving a case-sensitive entity re-run 3; discarded 0; breadth 3; net conviction positive-negligible. The three:
compound_and_friends2026-05-03 (bullish, conviction 68, speaker Josh Brown, a five-ticker AI-capex basket including KLAC);compound_and_friends2026-03-03 (bullish, conviction 70, principle — semi-cap consolidation, KLA as example);dwarkesh2026-02-05 (neutral, conviction 70, principle — five equipment companies as the leverage point for fab output, KLA-Tencor as example). Two of the three come from the same channel, so effective independent breadth is two. Two carryspeaker: null; the third names Josh Brown and is not management voice. No homograph collision was found on the token "KLA" and nothing was discarded on that basis — a better outcome than the two- and three-letter tokens elsewhere in this batch, and the lane is small because the store genuinely holds little on this name. All quotes are verbatim from the stored claim text. - Data as-of: filing-verified financials through 2026-03-31 (10-Q filed 2026-04-30) · unaudited fiscal-2026 annual figures through 2026-06-30, sourced from the vendor payload which derived them from a 2026-07-28 earnings release that is not in this archive · estimates 2026-08-04 · prices 2026-08-04, quote timestamp 1785873601 = 2026-08-04T20:00:01Z ($195.45, +6.95%; 50-DMA $221.46; 200-DMA $163.37; RSI 36.51; MACD −11.94) · knowledge-base claims 2026-08-04. KLA's fiscal year ends 30 June. All figures come from the Synthos vendor data file for KLAC or from the SEC filings in the KLAC archive; no figure comes from memory, recall or external retrieval.
- Filing archive contents: 10-K filed 2025-08-08 (fiscal 2025 — the source of the three-year capital-expenditure series and the fiscal-2025 statements); 10-Q filed 2026-01-30 (December 2025 quarter); 10-Q filed 2026-04-30 (March 2026 quarter — the source of the geographic detail, the senior-notes table, the repurchase authorisation, the effective tax rate and the nine-month cash flows); 8-K filed 2026-05-07, carrying the press release announcing the ten-for-one stock split and the 21% dividend increase; 8-K filed 2026-06-12, carrying the Charter Amendment effecting the split and raising authorised shares from 500,000,000 to 5,000,000,000; 8-K filed 2026-07-28 (fourth-quarter and full-year fiscal 2026 results — cover page and Item 2.02 reference only; Exhibit 99.1 is not in the extract). All carry preserved
[TABLE]statement data. - What the complete archive changed versus the earlier truncated one. The earlier 2026-08-04 dive was written against a partial pull. The complete archive supplies the 2026-05-07 8-K — the announcement of the ten-for-one split and the 21% dividend increase to a guided $0.23 post-split quarterly rate — which the truncated pull did not contain. Without it the split appeared only as a June charter amendment with no announcement, no record date, no ratio rationale and no dividend guidance, and the forward dividend had to be inferred from a trailing
dividendPerShareTTMof $0.80 that is 15% below the true forward run rate of $0.92. The complete archive also makes the absence of the fourth-quarter earnings release explicit rather than ambiguous, which is what allows this dive to state plainly that every fiscal-2026 annual figure is unaudited and un-filed. No conclusion reversed; the valuation, the verdict and the risk ranking are unchanged. What changed is that the per-share basis, the forward dividend and the audit status of the annual numbers are now established from documents rather than inferred. - Where the filings contradicted or corrected the vendor (detailed in Section 8): capital expenditure — the FY2025 10-K states $335,259K against the vendor's $340,209K, a $4,950K difference the filing identifies as a separately-disclosed intellectual-property acquisition the vendor folded into capex; we use the filing, giving FY2025 free cash flow of $3,746,644K rather than $3,741,694K, and note that this is the rare case in which the vendor's capex error runs conservative rather than flattering.
inc_aFY2026 depreciation and amortisation of $98,606,000 againstcf_a's $393,978,000 — one quarter mistaken for four, arithmetically produced by a negative June-quarter value of −$196,766,000 ininc_q, and corruptinginc_a's FY2026ebitdaof $5,759,386,000 (correct: approximately $6,054,758,000).netDebtof $4,237,573K, which omits $3,252,566K of short-term investments; true net debt $985,007K and corrected enterprise value $256,297.4M against the vendor's $259,550.0M.capitalLeaseObligationsreading zero in FY2026 after $204,025K in FY2025 and $189,508K in FY2024, makingtotalDebtnon-comparable across years; we use the filing's $5,950,000K of senior notes at principal.est.ebitdaAvg/ebitAvg, rejected for a fixed-ratio signature of exactly 42.51% and 39.32% of revenue in all six forward years. Theesthistorical rows, rejected outright: the FY2024 row is pre-split ($22.00973 against a delivered $2.028) while FY2025 is post-split, and itsnetIncomeAvgof $28,647,292,590 is 2.79x that year's revenue estimate and 10.4x the $2,761,896,000 delivered. Where vendor and filing AGREED — recorded, because these were the checks this batch was directed to run: the capex check PASSED on both the datum and thecapexToDepreciationTTMdiagnostic (0.9542, reconciling exactly to $375,945K/$393,978K);seg_prodPASSED, summing to $12,156,162K against FY2025 revenue of $12,156,162,000 — exact, with no over-counted line;seg_geoPASSED, summing to the same figure exactly with North America present at $1,362,311K, so the home-market omission defect is absent;km_ttmis complete, not truncated; and the entire quarterly income statement reconciles to the 10-Q to the dollar after the ten-for-one adjustment (Q3 FY2026 revenue $3,415,078K, net income $1,200,990K, 131,750K pre-split diluted shares against 1,317,500K post-split). - Basis note: analyst EPS estimates for KLA are on a basis that tracks GAAP diluted EPS closely — the FY2026 estimate of $3.70986 sat 1.4% above the delivered $3.66 and the FY2025 estimate of $3.24047 sat 6.7% above the delivered $3.037 — so no separate adjusted-versus-GAAP bridge is applied and all forward multiples in this dive are struck on
epsAvgagainst a trailing GAAP comparison. Fiscal 2026 annual figures are unaudited. - Estimate coverage: 15 analysts on FY2027 EPS and 13 on FY2028, which is the anchor for all three fair values, with an FY2028 range of $6.118 to $7.401 (21.0%); 4 on FY2029, 1 on FY2030 and 2 on FY2031, all excluded from every conclusion.
- Peer note: the vendor peer set — Accenture, Analog Devices, Applied Materials, Amphenol, Arm, Intel, Lam Research, Qualcomm, Sony, Texas Instruments — contains the two relevant comparables (Applied Materials, Lam Research) but no earnings or estimate data for any peer is present in this file, only price and market capitalisation. No peer-multiple comparison is drawn anywhere in this dive.
- Fair-value caveat: the $130 / $205 / $290 anchors are multiples of the FY2028 consensus EPS distribution — 21.2x the low of $6.11758, 30.9x the mean of $6.62489, and 39.2x the high of $7.40078 — cross-checked against FY2027 and against fiscal 2026 free cash flow. Stated arithmetic, not a discounted cash flow. The base assumes NO multiple expansion; the roll-down from 53.4x trailing to 29.5x FY2028 at an unchanged price is mechanical, not a re-rating, and is described as such.
- Timing: fourth-quarter and full-year fiscal 2026 results were released 2026-07-28, seven days before this dive, and beat consensus EPS by 5.0% ($1.05 against $1.00) and revenue by 1.4% ($3,657,556K against $3,607,908K). The next print is 2026-10-28, 85 days away, against consensus of $1.17 and $4,037,897K. All eight insider filings in the payload are dated 2026-08-04, the day of this dive, and all eight are tax-withholding dispositions. 2026-08-04 carried no company-specific SEC filing in this archive, which is why the day's 6.95% move is attributed to sector or flow rather than to news.
- Accessibility note: no information in this dive is conveyed by colour. All emphasis is carried by bold text, table structure and explicit labelling.
- Not investment advice. Independent research, educational and informational only, never personalised. No recommendation to buy, sell or hold any security is made to any person.
- Version: 2026-08-04-full-rewrite.