KLA Corporation (קיי-אל-איי)
Analytical review · Fiscal year ended June 30, 2026 (Form 10-K)
Bakshi Finance — Family Office | Research Depth: Comprehensive
What this review is based on. KLA's Form 10-K for the fiscal year ended June 30, 2026, filed August 6, 2026; the fiscal 2026 quarterly earnings releases; the Form 10-Q for the quarter ended March 2026; the Form 10-K for fiscal 2025; and Form 8-K filings on the stock split and dividend. All per-share data are adjusted for the 10-for-1 split effected June 11, 2026. No later quarterly report had been filed. Market data: closing price on October 9, 2026; Bank of Israel representative USD rate 3.055.
Company Profile
KLA Corporation makes inspection and measurement equipment for chip fabs: systems that find defects on silicon wafers, measure films and structures at nanometer scale, and inspect the reticles (masks) chips are printed from. This field is called "process control" — the tools that tell a fab what went wrong in production so it can be fixed before yield suffers.
Fiscal 2026 revenue was $13.58 billion. The Semiconductor Process Control segment generated $12.24 billion (90% of revenue) and 97% of segment profit. Two smaller segments sit alongside it: Specialty Semiconductor Process (etch and deposition, $584 million) and PCB and Component Inspection ($750 million) — the former Orbotech business, with manufacturing sites in Migdal HaEmek and Yavne, Israel.
Maintenance services for the installed base generated $3.13 billion, about 23% of revenue. The company has roughly 17,000 employees, 27% in R&D, and over 9,100 active patents. Its largest customers are the leading chipmakers; TSMC alone accounted for about 19% of revenue. On June 11, 2026 the stock was split 10-for-1.
Financial Performance
The year: earnings up, cash flow flat
Revenue rose 11.7%, operating income 18.5% and net income 18.9%. Part of the reported earnings growth reflects a low base: the prior year included a $239 million impairment in the PCB business. Excluding it, pre-tax income rose 14.8%. Q4 revenue alone rose 15.2%, and in all four quarters of the year revenue came in above the midpoint of the company's guidance range.
The gap that stands out: free cash flow barely moved — $3.77 billion vs $3.75 billion. Working capital absorbed $1.61 billion: receivables rose $642 million, inventory $466 million and other assets $501 million (including a new long-term receivables line of $181 million). In the same year, receivables sold to financial institutions (factoring) rose to $515 million from $231 million. In the first half of the year all of net income converted to free cash flow; in the second half, 56%.
| $ millions | Q1 FY26 | Q2 FY26 | Q3 FY26 | Q4 FY26 | Year |
|---|---|---|---|---|---|
| Revenue | 3,210 | 3,297 | 3,415 | 3,658 | 13,579 |
| Gross margin | 61.3% | 61.4% | 61.1% | 61.4% | 61.3% |
| Net income | 1,121 | 1,146 | 1,201 | 1,363 | 4,831 |
| Free cash flow | 1,070 | 1,260 | 622 | 817 | 3,767 |
| FCF as % of net income | 95% | 110% | 52% | 60% | 78% |
The multi-year context
From fiscal 2021 to 2026 revenue grew 14.4% a year on average, but not in a straight line: in fiscal 2024 it fell 6.5%. The company itself describes the business as cyclical, dependent on chipmakers' capital budgets. Operating margin excluding impairments ranged from 37.1% at the fiscal 2024 trough to 41.7% this year.
| Fiscal year, $ millions | 2022 | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|---|
| Revenue | 9,212 | 10,496 | 9,812 | 12,156 | 13,579 |
| Operating margin* | 39.7% | 37.9% | 37.1% | 41.2% | 41.7% |
| Net income | 3,322 | 3,387 | 2,762 | 4,062 | 4,831 |
| Diluted EPS ($)** | 2.19 | 2.42 | 2.03 | 3.04 | 3.66 |
| Free cash flow | 3,005 | 3,328 | 3,031 | 3,747 | 3,767 |
| FCF as % of net income | 90% | 98% | 110% | 92% | 78% |
* Excluding goodwill and intangible impairments ($289 million in 2024, $239 million in 2025). Operating income computed as pre-tax income plus interest expense less other income. ** Adjusted for the 10:1 split.
Balance Sheet & Capital
At June 30, 2026 KLA held $4.90 billion in cash and marketable securities, against $5.95 billion of senior notes maturing between 2029 and 2063. Net debt — about $1.05 billion, less than 20% of annual EBITDA. Credit ratings: A (Fitch), A2 (Moody's), A− (S&P). A $1.5 billion credit facility was undrawn.
Capital return: during the fiscal year the company repurchased $2.29 billion of stock and paid $1.06 billion in dividends — together 89% of free cash flow. Diluted share count fell 1.3%. The quarterly dividend rose to $0.23, the 17th consecutive annual increase, and $9.74 billion remains under the repurchase authorization. In Q4, shares were repurchased at average monthly prices of $170–$227.
Three balance-sheet items that moved sharply:
- Purchase commitments: $5.97 billion, vs $2.42 billion a year earlier — 2.5 times. Most are due within 12 months. The company states it increased commitments in part to secure key components.
- Inventory: $3.65 billion (+14%). Raw materials rose 24% while finished goods fell 17%.
- Customer deposits: $434 million, vs $643 million — down 33% in a year when backlog grew 60%. Deposits as a share of backlog fell from 8.2% to 3.5%.
Segments
| $ millions | Revenue 2025 | Revenue 2026 | Change | Segment profit 2026 | Segment margin |
|---|---|---|---|---|---|
| Semiconductor Process Control | 10,947 | 12,245 | +12% | 5,483 | 44.8% |
| Specialty Semiconductor Process | 587 | 584 | −1% | 65 | 11.1% |
| PCB and Component Inspection | 622 | 750 | +21% | 108 | 14.4% |
Within process control, wafer inspection generated $6.63 billion (+7%) and patterning (reticle and pattern metrology) $2.71 billion (+23%). The PCB segment, which posted losses in the two prior years (including impairments), swung to a $108 million profit, mainly on demand for advanced chip packaging.
Geography: revenue from China was almost unchanged ($4.05 billion), and its share fell to 29.8% from 33.3% a year earlier and 42.8% two years earlier. According to the company, legacy-node investment by Chinese chipmakers was offset by export restrictions. Outside China revenue grew 17.5%: Taiwan +13.7%, Korea +26.2% (high-bandwidth memory investment), North America +29%. Japan fell 19%.
Competitive Position
The 10-K names Applied Materials, ASML, Hitachi High-Tech, Lasertec and Onto Innovation among competitors. According to the company, customers' overriding requirement is the ability to integrate tools into existing production and improve yield, not tool price alone. The data in the filing that bear on this position: a 44.8% margin in the process control segment, R&D of $1.53 billion a year (11% of revenue), and an installed base whose service revenue grew 16%.
What the filing does not disclose: market share. This review shows no such figure because it does not appear in the company's filings. Nor does the filing break out customer weights beyond TSMC.
Where the filing shows pressure: U.S. export controls on China expanded from 2022 through September 2025, including a rule covering entities 50% or more owned by listed parties. The company describes China-bound shipments held by U.S. Customs and a risk of refunding Chinese customer deposits. The restrictions may also strengthen domestic Chinese competitors.
How to Think About This Company
At KLA, the question is not the quality of the business but where in the cycle its earnings sit. A 42% operating margin and a return on invested capital in the tens of percent are exceptional in any industry. But the same margin was 37% in fiscal 2024, when revenue fell. Reading a single year mixes quality with timing.
Backlog is a strong data point, but the filing qualifies it. A $12.57 billion backlog covers almost a year of revenue. Yet the same filing removed the note that presented backlog as a performance obligation and added a new risk sentence: order modifications and cancellations "may not be communicated to us in a timely manner, causing backlog to remain elevated" until timing changes are agreed. Backlog appears only in the annual report, not in quarterly reports.
Backlog has fallen before. It stood at $9.83 billion in June 2024 and $7.86 billion in June 2025. The company attributed this to shorter lead times. The filing does not split the decline into deliveries and cancellations.
Earnings versus cash. In most years KLA converted 90%–110% of net income into free cash flow. This year — 78%, and 56% in the second half. The company's explanation: higher collections alongside higher supplier payments. The alternative a reader can test: longer credit terms for customers, as suggested by the new long-term receivables line and the rise in factoring. The next quarterly report will help distinguish the two.
Orders versus deposits. With backlog up 60% and deposits down 33%, the share of orders backed by prepaid cash fell. This may reflect a shift in customer mix — less China, where deposits are customary — and not necessarily weakening.
Purchase commitments are management's own bet. $5.97 billion owed to suppliers reflects the company's own demand forecast. If demand materializes, this is preparation. If orders slip, these are costs that remain. KLA has recorded inventory write-offs in past downturns, as its risk factors note.
China: less weight, same risk. China revenue has been flat for three years and its share has fallen to about a third. All growth came from elsewhere. But $4 billion a year still depends on export licenses and on the interpretation of shifting rules.
Guidance versus history. According to company management, revenue for the July–September 2026 quarter will be about $4.0 billion, roughly 25% growth, and the CEO describes acceleration in the second half of calendar 2026 and through 2027. In all four quarters of fiscal 2026, revenue landed slightly above the guidance midpoint, by about 2%.
The multiple. P/E at fiscal year-ends 2022–2026 ranged from 14x to 82x, with a median of about 29x. On October 9, 2026 it stood at about 53x this year's reported earnings, after a roughly 35% price decline since the end of June. Such a range mainly shows that the market prices the cycle, not just the annual earnings.
The framework is meant to organize the questions. It does not decide and does not take part in the decision — the decision belongs to the reader.
This framework is intended to structure analysis, not to produce an investment conclusion.
Risks & Monitoring
Risks drawn from the filings
- Cyclicality: the business depends on chipmakers' capital budgets. In fiscal 2024 revenue fell 6.5%.
- China export controls: 29.8% of revenue. New rules, shipment holds at customs, and deposit-refund risk.
- Backlog reliability: per the company, cancellations and pushouts may not be communicated in time.
- Purchase commitments and inventory: $5.97 billion and $3.65 billion. Write-down risk if demand cools.
- Concentration: TSMC about 19% of revenue.
- Tariffs and supply: an open Section 232 investigation on semiconductors and equipment; Chinese export limits on rare-earth elements used in components.
- Tax: the effective tax rate rose to 13.8% on U.S. legislative changes and earnings mix.
Items to monitor in the Q1 fiscal 2027 report (October 28, 2026)
| # | Item | Latest reading |
|---|---|---|
| 1 | Revenue vs management guidance | $4.0 billion ±0.2 |
| 2 | Free cash flow as % of net income | 56% in the second half of fiscal 2026 |
| 3 | Receivables sold (factoring) in the quarter | $229 million in Q4 |
| 4 | Customer deposits | $434 million |
| 5 | Purchase commitments | $5.97 billion |
| 6 | China share of revenue | 29.8% |
| 7 | Gross margin | 61.4% in Q4 |
| 8 | Inventory and write-downs | $3.65 billion |
Scenario Framework
The scenarios below are descriptive, not predictive. They contain no prices, no probabilities, and no ranking of outcomes. Their only purpose is to organize the conditions that would need to hold for each state to materialize, so they can be checked against future filings.
Scenarios are descriptive, not predictive.
- If quarterly revenue reaches the guidance range and keeps rising in subsequent quarters
- If free cash flow returns close to net income, without further growth in factoring
- If gross margin holds above 61% alongside higher volume
- If growth outside China keeps offsetting export restrictions
- If revenue grows but working capital keeps absorbing a large part of earnings
- If China revenue stays around $4 billion a year
- If margins move within the range of the past two years
- If capital return stays around 90% of free cash flow
- If customers push out backlog orders while purchase commitments stay high
- If additional export restrictions reduce China revenue
- If the gap between earnings and cash widens, with collection days rising further
- If chipmaker investment cools as it did in fiscal 2024
Analytical Lens
The six questions below are identical in every company review we publish. They are deliberately open and do not lead to a single conclusion. Their role is to let the reader examine the company along the same six dimensions as any other company.
Key Observations
1. For the fiscal year ended June 30, 2026, KLA reported revenue of $13.58 billion (+11.7%), net income of $4.83 billion (+18.9%) and a 41.7% operating margin.
2. Free cash flow was $3.77 billion (+0.5%), 78% of net income. In the second half the ratio was 56%, and receivables sold to financial institutions rose to $515 million from $231 million.
3. Backlog stood at $12.57 billion (+60%), purchase commitments at $5.97 billion (+147%) and customer deposits at $434 million (−33%). The note presenting backlog as a performance obligation was removed from the annual report.
4. China revenue was $4.05 billion, unchanged, and its share fell to 29.8%. Revenue outside China rose 17.5%. TSMC accounted for about 19% of revenue.
Bakshi Finance operates as a Family Office for qualified clients only. Mr. Yaron Bakshi held an investment advisory license from 2008 to 2023. As of the publication date of this document, the company does not hold an investment advisory, investment marketing, or portfolio management license.
This document is intended for research and professional education purposes only. Nothing herein constitutes a recommendation to buy, sell, hold, or take any action in securities. It is not a substitute for advice that takes into account each person's individual data and needs. Any decision is the sole responsibility of the investor.
Past performance is not indicative of future results. Data was drawn from official sources: the Form 10-K for the fiscal year ended June 30, 2026 (filed August 6, 2026), the Form 10-K for fiscal 2025 (August 8, 2025), the Form 10-Q for the quarter ended March 31, 2026, the quarterly earnings releases, and the company's Form 8-K filings with the U.S. Securities and Exchange Commission. Historical multiples and price: stockanalysis.com, October 9, 2026. Filings published after this date are not included.
Qualified-Client Review — Family Office
The full analytical review of KLA Corporation (KLAC) for the fiscal year ended June 2026 is available to Bakshi Finance premium clients.
The review includes a 10-section analysis, "How to Think About This Company", a structured scenario framework, and a 6-dimension Analytical Lens.
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