KLAC, KLA Corporation
We provide advanced process control and process-enabling solutions for manufacturing wafers, reticles/masks, chemicals/materials, integrated circuits, packaged ICs and printed circuit boards, as well as comprehensive support and services across our installed base.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- A consumer-brand business, where the durable asset is the brand and its hold on the shelf.
- What moves the needle
- Volume against price, and shelf position. What decides it: whether it can raise prices without losing the customer, and whether the brand still commands its margin.
- Is it a good business?
- Return on capital has run high across the record (median 38%, above 15% in 9 of 9 years), though buybacks and expensed R&D and brands shrink the capital base, so the figure overstates the underlying economics. The steadier read is owner earnings: roughly 30% of revenue reaches owners as cash, consistently. High, durable returns can mark a moat, but whether this one is real pricing power or an accounting artifact is the judgment the 10-K is for.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
The record, 2017–2025
realized figures from each filing, no estimates| 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $3.5B | $4.0B | $4.6B | $5.8B | $6.9B | $9.2B | $10.5B | $9.8B | $12.2B | $13.1B |
| Gross marginGross mgn | 63% | 64% | 59% | 58% | 60% | 61% | 60% | 60% | 61% | 61% |
| Operating marginOp. mgn | 37.2% | 38.9% | 31.1% | 25.5% | 36.4% | 39.6% | 38.9% | 35.7% | 40.7% | 4.8% |
| Net incomeNet inc. | $926M | $802M | $1.2B | $1.2B | $2.1B | $3.3B | $3.4B | $2.8B | $4.1B | $4.7B |
| EPS (diluted)EPS | $5.88 | $5.10 | $7.49 | $7.70 | $13.37 | $21.92 | $24.15 | $20.28 | $30.37 | $35.36 |
| Owner earningsOwner earn. | $1.0B | $1.2B | $1.0B | $1.6B | $2.0B | $3.0B | $3.3B | $3.0B | $3.7B | $4.0B |
| ROICROIC | 33% | 35% | 25% | 28% | 41% | 54% | 53% | 38% | 51% | 6% |
| Cash & investmentsCash+inv | $3.0B | $2.9B | $1.0B | $1.2B | $1.4B | $1.6B | $1.9B | $2.0B | $2.1B | $3.3B |
| Net debt / (cash)Net debt | ($86M) | ($643M) | $2.4B | $2.2B | $2.0B | $5.1B | $4.0B | $4.7B | $3.8B | $2.6B |
| Dividends / shareDiv/sh | $2.18 | $2.55 | $3.01 | $3.31 | $3.60 | $4.21 | $5.22 | $5.68 | $6.76 | — |
| Book value / shareBVPS | $8.42 | $10.30 | $16.94 | $16.87 | $21.73 | $9.25 | $20.82 | $24.73 | $35.08 | $44.15 |
Owner’s Scorecard
Will it survive?
- AdequateOperating income $772M ÷ interest expense $302M
Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.
- HighTotal debt $5.9B ÷ operating income $772M
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash $2.3BMeaningful net debtCash $2.1B + ST investments $1.5B − debt $5.9B
Netting $3.6B of cash and short-term investments against $5.9B of debt leaves $2.3B owed, about 3.0× a year's operating profit, versus the gross figure above. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- Capital-hungryDSO 68 + DIO 247 − DPO 35 days
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.
Is it a good business?
- Below averageNOPAT $675M ÷ invested capital $8.5B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Cash machineOwner Earnings $3.7B = operating cash $4.1B − capex $335M
What an owner could take out without starving the business. That's 31% of revenue. Treating stock comp as the real expense it is (less $265M of SBC) leaves $3.5B. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $4.1B ÷ net income $4.1B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Returns about halfDividends + buybacks $3.1B ÷ Owner Earnings $3.7B
Of $3.7B Owner Earnings, $3.1B (82%) went back to shareholders, $905M dividends, $2.1B buybacks. Net of $265M stock comp, the real buyback was about $1.9B. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 0.85×MaintainingCapex $335M ÷ depreciation $394M
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2017–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 9 of 9
Never lost money over the record, the earnings stability Graham insisted on.
- Return on capital ≥ 15% 9 of 9 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 37% (FY2017) → 41% (FY2025)
Margins widened over the record, pricing power intact or improving.
- Reinvestment, incremental ROIC 61%
Every extra dollar the company reinvested earned a high return, it is still compounding, not coasting on an old moat.
- Owner earnings growth +15%/yr
Free cash to owners grew about 15% a year over the record.
- Worst year 2020 · 25.5% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
- Share count −2.0%/yr
The share count is shrinking, buybacks are quietly growing your slice of the business.
- Dividend record rising
Paid and raised the dividend across the record, the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2017–2025
Over the record, the business generated $21.8B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a mature cash machine, most of what it earns goes straight back to owners.
- Reinvested$1.9B · 9%
- Dividends$5.3B · 25%
- Buybacks$12.3B · 56%
- Retained (debt / cash)$2.3B · 11%
It reinvested $1.9B (9%) back into the business and returned $17.6B (81%) to owners, $5.3B in dividends, $12.3B in buybacks. Total debt rose $3.0B across the span.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Management & pay
Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- Stock-based compensation$265M
The slice of the business handed to employees in shares this year, 2% of revenue, equal to 34% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
6 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $12.2B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity PassCurrent ratio ≥ 2× · 2.62×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt PassDebt ≤ working capital · $5.9B vs $6.6B WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability PassA profit every year (9-yr record) · no losses
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (9)
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth PassEarnings +33% over the record · +252%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $30.37/share and book value $35.08/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFA price is the one input we don't pull, you bring it. Type today's close (read it off any broker or quote site) and see the owner-earnings growth you'd have to believe to justify it, set beside what KLA Corporation has actually delivered. Nothing is stored; the number stays in your browser.
Enter a price above to run it.
Graham capped the multiple at 15×; Buffett and Munger let that rule go, a wonderful business can deserve 50× if the thesis holds. Read it as the bargain-hunter's floor, not a ceiling on good sense.
The discount rate is your interest rate, what a dollar years from now is worth today, anchored to the long-term Treasury yield (~4–5% today, plus whatever premium you want for risk). Drag it toward the risk-free rate and watch how much growth the price suddenly “needs”: interest rates are gravity on valuations.
Owner earnings $4.0B on 132M diluted shares; net debt $2.6B. This is a lens, not a price target, it says what you'd have to believe, not what the company is worth, and it runs on one year of (noisy) owner earnings at assumptions you can see and change.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Customer concentrationBusiness
Who the revenue leans on. When one buyer is a large slice of sales, that buyer holds the pricing power, and its troubles become the company's.
“Approximately 32% of our regular full-time employees are located in the U.S., 19% in Europe and Middle Eastern countries and 49% in Asia, with approximately 20% engaged in manufacturing, 27% in R&D, 28% in customer service, 5% in sales and marketing and 20% in other roles.”
From the recordRevenue exposed (TTM)$13.1B - Pricing power & competitionRisk Factors
Whether the company sets its price or takes it. Durable pricing power is the surest mark of a moat; price competition is the surest mark there isn't one.
“Any of the changes described above may negatively affect our customers' rate of investment in the capital equipment that we produce, which could result in downward pressure on our prices, customer orders, revenues and gross margins.”
From the recordOperating margin4.8% now (TTM), off a 40.7% peak (FY2025) - Supplier & input dependenceBusiness
A choke point upstream. A sole or limited supplier can dictate terms, and a single shortage can stop the line.
“Certain parts and raw materials included in our systems may be obtained only from a single supplier or a limited group of suppliers.”
From the recordGross-margin cushion (TTM)61% - Concentrated dependenceMD&A
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“Our future operating results will depend significantly on our ability to make products and provide services that have a competitive advantage in our marketplace.”
From the recordOwner-earnings margin at stake (TTM)31% - Debt terms & refinancingMD&A
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“As of June 30, 2025, we were in compliance with all of our covenants under the relevant indentures associated with the Senior Notes.”
From the recordBalance sheet (TTM)$2.3B meaningful net debt · interest covered 2.6× - Litigation & contingenciesRisk Factors
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“In addition, we may from time to time be involved in legal proceedings or claims regarding employment, immigration, contracts, product performance, product liability, antitrust, ESG, IP, export controls, cybersecurity and data privacy, tax, securities, unfair competition and other matters.”
A judgment, not a number, weigh it against the filing yourself. - Cyclicality & demandBusiness
How the business behaves when the economy turns. A cyclical earns its keep across the whole cycle, not at the peak.
“Still, our business has historically been cyclical with respect to the capital equipment procurement practices of semiconductor, semiconductor-related and electronic device manufacturers, and it is impacted by the investment patterns of such manufacturers in different global markets.”
From the recordWorst year on record25.5% operating margin (FY2020)
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “The change in Other expense (income), net during the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024 was primarily attributable to higher interest income of $17.1 million due to higher interest earning balances and a higher net fair value gain of $7.0 million from an …”
- “Revenue from our PCB and Component Inspection segment increased in fiscal 2025 as compared to fiscal 2024 primarily due to increased revenue from packaging products related to AI and a settlement received in the second quarter of fiscal 2025 related to cancellation of a technology project by a major…”
- “The decrease was mainly due to an increase in net proceeds from available-for-sale securities of $1.33 billion, primarily due to the sale of investments to support the $750.0 million debt principal payment in November 2024, and $6.3 million in proceeds from capital-related government assistance, par…”
- “Additionally, while many Chinese customers, encouraged by the growth potential of certain semiconductor markets and Chinese government initiatives around self-sustainability in domestic semiconductor production, continued to increase their semiconductor-related investments, more stringent U.S. expor…”
- “Moreover, tariffs can make it difficult for us and our customers and suppliers to make and execute business and capital equipment investment plans or increase supply chain complexity, which may have an impact on our ability to source the materials necessary to manufacture our products.”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Instruments
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| KLACKLA Corporation | $12.2B | 61% | 6.4% | 8% | 31% |
| ROKRockwell Automation, Inc. | $8.3B | 48% | 20.4% | 25% | 16% |
| ROPRoper Technologies Inc | $7.9B | 69% | 28.3% | 6% | 32% |
| AMEAmetek, Inc. | $7.4B | 36% | 25.8% | 13% | 23% |
| AAgilent Technologies, Inc. | $6.9B | 52% | 21.3% | 17% | 17% |
| KEYSKeysight Technologies, Inc. | $5.4B | 62% | 16.3% | 11% | 24% |
| MTDMettler-toledo International Inc. | $4.0B | 79% | 27.8% | 45% | 21% |
| WATWaters Corporation | $3.2B | 59% | 25.4% | 20% | 17% |