KLAC
KLA CORPNasdaqValuation snapshot
Below bear casePrice is below even the bear case.
Price as of Aug 17, 2026 · Valuation Aug 9, 2026
What drives KLAC's base case?
base-case thesisKLA's latest growth broadened across memory, leading-edge chip production, advanced packaging, and services. The growing installed base adds repeat service work, while more complicated chips require additional inspection and measurement. This case expects those forces to sustain strong growth before gradually settling toward a mature pace.
What shapes the assumptions
High-bandwidth-memory and foundry demand lifted the core segment
Fiscal 2026 Semiconductor Process Control revenue growth of approximately 0.119
Raises revenue growth
Service sales grew with the installed tool base
Fiscal 2026 service revenue growth of approximately 0.165
Raises operating margin
Specialty-process demand lagged the core business
Fiscal 2026 Specialty Semiconductor Process revenue growth of approximately -0.005
Lowers revenue growth
Physical capital needs remained modest
Fiscal 2026 capital expenditure equal to approximately 0.028 of revenue
Lowers reinvestment
Each driver links a business metric to the forecast assumption it shapes — the basis for this case, not investment advice.
Why the gap?
The market is pricing this as if revenue grows -13.4% a year. Over the last 5 years it grew 14.4% a year — so the price assumes far less than it has delivered.
What else could explain it?›
- How much of this is timing?
- The price has risen 5.3% since this valuation was struck on 2026-08-09, so some of the gap opened up after these figures were set.
- Or, holding growth steady
- the price is also consistent with a 13.5% operating margin, against the 43.0% assumed here.
- How confident is this estimate?
- Robustness 48.0/10 (Moderate) — some of any gap is our own uncertainty rather than disagreement.
- What would change the answer?
- Which assumption this valuation swings on, and by how much.
Many combinations of assumptions reproduce the same price. These are ways to read what the market might be expecting, not the market's actual view. How this is worked out
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
View details
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
Three independently researched cases generated automatically from published financials. Every assumption is justified and cited; the discount rate is computed from researched market inputs.
Base inputs from financials
source period →Base revenue (TTM)
$13.6B
Diluted shares
131,750,000
Net cash
$2.1B
Bear
low confidence$372.05
IV / share
+82.8% vs $203.49
- Explicit cash flows
- $116.16
- Terminal value
- $240.11
- Net cash
- $15.78
- Intrinsic value / share
- $372.05
64.5% of the value rests on the terminal value — elevated dependency.
Revenue growth10.0% → 8.0% → 6.0% → 5.0% → 4.0%medium
How derived: KLA's latest quarter grew 0.152 year over year and first-quarter fiscal 2027 guidance implies continued strength, but this path assumes memory spending normalizes, export restrictions persist, and growth fades toward mature industry levels.
Why this confidence: Near-term company guidance ↑, Cyclical customer spending ↓, Five-year forecast horizon ↓
Evidence for
- Fiscal 2026 fourth-quarter revenue increased 0.152 year over year, while KLA guided the following quarter to approximately $4.0 billion of revenue.[KLA FY2026 results]· primary
Evidence against
- KLA identifies semiconductor-industry cyclicality, concentrated customers, China restrictions, tariffs, and changing customer capital-spending patterns as material risks.[KLA 2026 Investor Day release]· primary
Operating margin39.0%medium
How derived: Fiscal 2026 GAAP operating profit was about 0.417 of revenue, and this case reduces it to 0.39 for weaker factory utilization, continued R&D investment, and an unfavorable product mix.
Why this confidence: Audited-style GAAP expense base ↑, Uncertain future product mix ↓
Evidence for
- KLA reported higher R&D employee and engineering-material costs during fiscal 2026, costs that would pressure profitability if revenue growth slowed.[KLA Q3 FY2026 Form 10-Q]· primary
Evidence against
- Fiscal 2026 revenue less cost of revenue, R&D, and SG&A produced a GAAP operating margin of approximately 0.417, already above this assumption.[KLA FY2026 income statement]· primary
Tax rate17.0%medium
How derived: KLA's fiscal 2026 effective tax rate was about 0.138, but this case raises it to 0.17 because the company reported a declining benefit from lower-tax jurisdictions and foreign-derived income deductions.
Why this confidence: Recent reported tax rates ↑, Geographic earnings variability ↓, Changing international tax rules ↓
Evidence for
- The March 2026 quarter's effective tax rate increased to 0.152 as less income was earned in lower-tax jurisdictions and less U.S. income qualified for the foreign-derived income deduction.[KLA Q3 FY2026 Form 10-Q]· primary
Evidence against
- KLA's full-year fiscal 2026 provision of $775.2 million on $5.606 billion of pretax income equaled an effective rate of approximately 0.138.[KLA FY2026 income statement]· primary
Reinvestment rate24.0%low
How derived: Although fiscal 2026 capital expenditure was only about 0.028 of revenue, this case retains 0.24 of after-tax operating profit because slower sales and rising receivables and inventory would make working capital less efficient.
Why this confidence: Reported capital expenditure and working capital ↑, Reinvestment rate is a model estimate rather than a reported metric ↓, Working-capital timing volatility ↓
Evidence for
- During fiscal 2026, accounts receivable increased by approximately $625 million and inventory increased by approximately $436 million, absorbing capital as revenue expanded.[KLA FY2026 balance sheet]· primary
Evidence against
- Fiscal 2026 capital expenditure was $375.9 million against $13.58 billion of revenue, demonstrating a relatively asset-light production model.[KLA FY2026 free-cash-flow reconciliation]· primary
Terminal growth2.0%low
How derived: KLA targets much faster growth through 2030, but this case uses 0.02 thereafter because semiconductor-equipment demand is cyclical and no company can permanently outgrow the broader economy by a wide margin.
Why this confidence: Mature-economy growth constraint ↑, Very long forecast horizon ↓, Semiconductor cycle uncertainty ↓
Evidence for
- KLA explicitly identifies semiconductor-industry cyclicality and changes in customer capital spending as risks to sustained growth.[KLA 2026 Investor Day release]· primary
Evidence against
- Management's 2030 program describes process-control systems and services as positioned for sustained market outperformance from AI, memory, leading-edge logic, and advanced packaging.[KLA 2026 Investor Day release]· primary
Base
low confidence$611.50
IV / share
+200.5% vs $203.49
- Explicit cash flows
- $168.44
- Terminal value
- $427.29
- Net cash
- $15.78
- Intrinsic value / share
- $611.50
69.9% of the value rests on the terminal value — elevated dependency.
Revenue growth18.0% → 16.0% → 14.0% → 11.0% → 8.0%medium
How derived: Starting from fiscal 2026 growth of about 0.117, stronger fourth-quarter momentum and KLA's 2030 growth framework support an initial acceleration followed by a gradual fade as the current AI and memory investment cycle matures.
Why this confidence: Company guidance and 2030 plan ↑, Multiple disclosed growth engines ↑, Cyclical capital spending ↓, Five-year forecast horizon ↓
Evidence for
- KLA attributed fiscal 2026 growth to high-bandwidth-memory DRAM investment, advanced-packaging adoption, steady foundry and logic growth, and a 0.16 increase in service revenue during the first nine months.[KLA Q3 FY2026 Form 10-Q]· primary
Evidence against
- The same filing reported a 0.05 decline in nine-month Specialty Semiconductor Process revenue, particularly from lower China product volume.[KLA Q3 FY2026 Form 10-Q]· primary
Operating margin43.0%medium
How derived: Fiscal 2026 GAAP operating margin was approximately 0.417, and this case allows moderate scale benefits and service growth to lift it to 0.43 without fully adopting management's higher non-GAAP 2030 objective.
Why this confidence: Current GAAP profitability ↑, Installed-base service growth ↑, Mix and R&D uncertainty ↓
Evidence for
- KLA stated that greater revenue volume lets it leverage existing infrastructure, while service revenue rose 0.16 with the installed base during the first nine months of fiscal 2026.[KLA Q3 FY2026 Form 10-Q]· primary
Evidence against
- Fiscal 2026 R&D expense increased to $1.532 billion and SG&A increased to $1.132 billion, showing that continued growth requires substantial operating investment.[KLA FY2026 income statement]· primary
Tax rate15.0%medium
How derived: The assumption rounds above fiscal 2026's approximately 0.138 effective rate and near the latest nine-month rate of 0.145 to allow for Pillar Two rules and a smaller contribution from low-tax jurisdictions.
Why this confidence: Recent quarterly and annual tax data ↑, International tax reform ↓, Future geographic profit mix ↓
Evidence for
- KLA reported a nine-month fiscal 2026 effective tax rate of 0.145 and a March-quarter rate of 0.152.[KLA Q3 FY2026 Form 10-Q]· primary
Evidence against
- KLA's full-year fiscal 2026 effective rate was approximately 0.138, below this normalized assumption.[KLA FY2026 income statement]· primary
Reinvestment rate20.0%low
How derived: Low capital expenditure and strong cash conversion support a 0.20 retention of after-tax operating profit, with enough investment left for R&D capacity, inventory, receivables, and the growing installed service base.
Why this confidence: Reported cash flow and capital expenditure ↑, Unreported normalized working-capital requirement ↓, Model-definition sensitivity ↓
Evidence for
- KLA invested $375.9 million in capital expenditure during fiscal 2026 and also carried larger receivable and inventory balances to support higher shipments.[KLA FY2026 results]· primary
Evidence against
- Fiscal 2026 free cash flow was $3.767 billion, approximately 0.278 of revenue, indicating that growth has historically required relatively little net physical investment.[KLA FY2026 free-cash-flow reconciliation]· primary
Terminal growth2.8%low
How derived: KLA's near-term plan anticipates substantially faster expansion, but 0.0275 reflects a mature business that retains modest real growth from rising chip complexity after the explicit high-growth period ends.
Why this confidence: Structural increase in process complexity ↑, Very long forecast horizon ↓, Industry cyclicality ↓
Evidence for
- Management describes KLA's process-control systems and services as positioned for sustained outperformance because increasingly complex foundry, memory, and packaging processes require more inspection and measurement.[KLA 2026 Investor Day release]· primary
Evidence against
- KLA warns that the semiconductor industry is cyclical and that future growth depends on customer capital-spending patterns, trade rules, competition, and successful product development.[KLA 2026 Investor Day release]· primary
Bull
low confidence$830.72
IV / share
+308.2% vs $203.49
- Explicit cash flows
- $205.22
- Terminal value
- $609.72
- Net cash
- $15.78
- Intrinsic value / share
- $830.72
73.4% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth22.0% → 20.0% → 17.0% → 14.0% → 11.0%low
How derived: KLA's accelerating fourth-quarter growth, $4.0 billion next-quarter guidance, and management's 2030 strategy support a path near the high end of its disclosed opportunity if AI logic, high-bandwidth memory, packaging, and services all remain strong.
Why this confidence: Broad current demand momentum ↑, Company 2030 strategy ↑, Requires simultaneous strength across several cyclical markets ↓, Aggressive five-year compounding ↓
Evidence for
- KLA reported strengthening momentum into calendar 2027, citing AI-driven leading-edge logic, high-bandwidth memory, advanced packaging, and services as simultaneous growth vectors.[KLA FY2026 results]· primary
Evidence against
- KLA's non-core Specialty Semiconductor Process segment was approximately flat in fiscal 2026, and management lists customer concentration, cyclicality, export controls, and supply availability as material risks.[KLA FY2026 results]· primary
Operating margin46.0%low
How derived: Starting from fiscal 2026's approximately 0.417 GAAP margin, this case reaches 0.46 through strong revenue leverage, a larger service contribution, and sustained process-control pricing power.
Why this confidence: Demonstrated infrastructure leverage ↑, Recurring service mix ↑, Large required GAAP margin expansion ↓, Continuing R&D cost growth ↓
Evidence for
- KLA reported that higher revenue volume leverages existing infrastructure, while its service business grew 0.16 in the first nine months of fiscal 2026 as the installed base expanded.[KLA Q3 FY2026 Form 10-Q]· primary
Evidence against
- Fiscal 2026 GAAP operating margin was approximately 0.417, so this assumption requires expansion of more than 0.04 despite ongoing increases in R&D, compensation, materials, and facilities costs.[KLA FY2026 income statement]· primary
Tax rate14.0%medium
How derived: The assumption stays close to fiscal 2026's approximately 0.138 effective rate on the view that KLA preserves its geographic tax mix and R&D benefits despite global minimum-tax pressure.
Why this confidence: Close to the latest full-year effective rate ↑, Quarterly tax-rate volatility ↓, Global minimum-tax adoption ↓
Evidence for
- KLA's fiscal 2026 provision of $775.2 million on $5.606 billion of pretax income produced an effective rate of approximately 0.138.[KLA FY2026 income statement]· primary
Evidence against
- The March 2026 quarter's effective rate rose to 0.152 because less income came from lower-tax jurisdictions and fewer U.S. earnings qualified for the foreign-derived income deduction.[KLA Q3 FY2026 Form 10-Q]· primary
Reinvestment rate18.0%low
How derived: This case retains 0.18 of after-tax operating profit because KLA's low capital intensity, infrastructure leverage, and recurring services allow rapid growth without a proportionate increase in physical assets.
Why this confidence: Low reported capital intensity ↑, High free-cash-flow conversion ↑, Aggressive growth could require more working capital ↓, Reinvestment rate is estimated ↓
Evidence for
- Fiscal 2026 capital expenditure was only $375.9 million, or approximately 0.028 of revenue, while free cash flow reached $3.767 billion.[KLA FY2026 free-cash-flow reconciliation]· primary
Evidence against
- Fiscal 2026 accounts receivable and inventory increased by a combined approximately $1.061 billion, showing that rapid shipment growth still consumes substantial working capital.[KLA FY2026 balance sheet]· primary
Terminal growth3.5%low
How derived: The 0.035 rate assumes KLA continues gaining from rising inspection intensity, installed-base services, and semiconductor demand after 2031, while remaining far below the explicit-period growth path.
Why this confidence: Increasing inspection intensity ↑, Growing installed service base ↑, Rate exceeds conservative mature-economy growth ↓, Very long forecast horizon ↓
Evidence for
- KLA says greater leading-edge design sophistication, memory complexity, advanced packaging, and a growing installed base increase long-term demand for process control and services.[KLA FY2026 results]· primary
Evidence against
- KLA identifies semiconductor cyclicality, competition, customer concentration, export restrictions, and changing capital-spending patterns as threats to sustained growth.[KLA 2026 Investor Day release]· primary
Valuation robustness
reliability of the estimate, not a stock rating48 / 100 · Moderate
Formula v1.0.0. Higher means a more reliable estimate — not a recommendation.
Quality checks
Automated model-risk flags — warnings, not recommendations.
- The reinvestment assumption is low-confidence.→ reinvestment
- The terminal growth assumption is low-confidence.→ terminal growth
Per-share economics
Business growth after changes in the diluted share count.
| Period | Revenue growth | FCF/share | FCF/share growth | Shares | Share growth |
|---|---|---|---|---|---|
| Q1 2025 | 18.5% | 6.93 | 16.5% | 134.86M | -1.6% |
| Q2 2025 | 23.7% | 5.65 | 41.2% | 133.93M | -1.7% |
| Q3 2025 | 29.8% | 7.43 | 20.4% | 133.3M | -1.9% |
| Q1 2026 | 13.0% | 8.05 | 16.1% | 132.38M | -1.8% |
| Q2 2026 | 7.2% | 9.56 | 69.1% | 132.01M | -1.4% |
| Q3 2026 | 11.5% | 4.72 | -36.4% | 131.75M | -1.2% |
Valuation history every run
History builds as the valuation is recalculated — this is the first recorded run.
Market inputs researched
The rate uses the latest available 10-year U.S. Treasury market yield around the valuation date as the nominal U.S.-dollar risk-free benchmark.
The input uses KLAC's five-year monthly beta against the broad U.S. equity market, capturing the stock's historically above-market sensitivity.
The input uses the forward-looking implied U.S. equity risk premium published for July 1, 2026 rather than a historical average.
The input uses KLAC's split-adjusted market price at the August 7, 2026 close, the last trading session before the valuation date.
Generated 8/9/2026, 4:47:38 AM · pipeline v1.1.0