KLA Corporation (KLAC): A Bull Case Theory 

We came across a bullish thesis on KLA Corporation on Arya’s Substack by Arya. In this article, we will summarize the bulls’ thesis on KLAC. KLA Corporation’s share was trading at $1,427.94 as of January 30th. KLAC’s trailing and forward P/E were 41.57 and 39.22 respectively according to Yahoo Finance.

KLA Corporation, together with its subsidiaries, designs, manufactures, and markets process control, process-enabling, and yield management solutions for the semiconductor and related electronics industries worldwide. KLA Corporation (KLAC) is positioned as a structural compounder in semiconductor process control, uniquely benefiting from the rising complexity of AI-driven chip manufacturing. The company provides inspection, metrology, and analytics tools that function as the “immune system” of fabs, scanning wafers for nanoscale defects, process drift, and pattern failures.

 This critical role grows as chips adopt larger dies, advanced packaging, and tighter tolerances, creating a structural wedge that drives recurring demand. KLA’s Semiconductor Process Control segment accounts for roughly 90% of revenue, with services from its installed base providing stable, high-margin income that has grown for 52 consecutive quarters. In FY2025, KLA generated $12.5 B in revenue with 61% gross margins and 92% free cash flow conversion, returning $3.05 B to shareholders while maintaining a conservative net debt of ~$1.4 B, highlighting both profitability and balance sheet strength.

Its moat rests on decades of defect data, proprietary algorithms, and deep fab integration, making switching costly and reinforcing recurring demand. Key 2026 drivers include AI logic and advanced packaging capex, memory market recovery, and China exposure amid export controls, while technological inflections like EUV adoption and chiplet expansion provide incremental upside.

Risks include cyclicality, geopolitical disruptions, competitor advances, and macro shocks, but mitigants exist through diversification, R&D, and early customer co-development. At ~$1,350+, KLAC trades at elevated multiples reflecting secular growth expectations. The investment case hinges on whether process control remains the binding constraint in semiconductor manufacturing; if so, KLA can continue converting complexity into durable margins, cash flow, and share gains, offering compelling structural upside.

Previously, we covered a bullish thesis on KLA Corporation (KLAC) by Quality Equities in January 2025, which highlighted rising semiconductor capex, AI-driven equipment demand, and strong spending from customers like TSMC. KLAC’s stock price has appreciated by approximately 88.51% since our coverage due to sustained AI-related investment and industry optimism. Arya shares a similar view but emphasizes KLA’s role as a structural yield-focused compounder.

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Disclosure: None.