Depreciation Is the Cost BaseThin moat

Kioxia Holdings (285A) — moat facet

Most of what it costs Kioxia to make a bit was spent three years before the bit was sold, which is why margins swing violently in both directions and never gently.

Understanding a memory producer means understanding that its cost of sales is mostly a decision taken three years earlier.

Gross margin, two years apart-12.0%FY202433.4%FY202543.3%FY202680%Jun-26 qtrSame fabs, same depreciation schedule. Days of inventory were 102 in the June quarter.
Revenue moves with price, cost barely moves at all, and the gap falls straight through.

Property, plant and equipment dominates Kioxia's balance sheet, and the depreciation on it flows into cost of sales whether the fabs are busy or idle and whatever flash happens to be worth. That is why the industry's margins swing so violently: revenue moves with price, cost barely moves at all, and the difference falls straight to the operating line in both directions.

The two directions are both on record. In the year to March 2024 cost of sales was ¥1,205,927 million against revenue of ¥1,076,584 million — a gross loss1. In the June 2026 quarter the adjusted gross margin was 80%2. Same fabs, same depreciation schedule.

It also explains why utilisation is the operational number that matters most. A fab running at 70% has the same depreciation as one running at 100% and produces 30% less to spread it over.

The strategic response is the one Kioxia has taken: share the capital through Flash Ventures, and push the product mix toward drives where the value added sits above the wafer.

The number to watch is days of inventory. It was 102 in the June 2026 quarter3. Rising inventory in a business with fixed costs is the first thing that happens before margins break.

Moat trajectory: Holding steady

The mechanism is unchanged: fixed costs committed years ahead, revenue set by a price nobody here controls. Gross margin went from negative to 80% without a single change to the factories.

The number that tests this moat
Moat Explorer calc
Gross margin, two years apart
Negative to March 2024, 80% in June 2026

Cost of sales exceeded revenue for the full year to March 2024; the adjusted gross margin in the June 2026 quarter was 80%. Same fabs, same depreciation schedule. That swing is what a fixed cost base does to a business with a floating price. Watch days of inventory — 102 in the June quarter — which breaks before margins do.

How it's calculated: Gross profit divided by revenue, from the annual securities report and the quarterly results.
Source: Kioxia Q1 FY2026 results (quarter ended 30 June 2026) ↗
⚠ Threats to the moat
⚠ THREAT 01
Fixed Costs Do Not Negotiate
The reason six producers all sell below cost at once is that stopping costs more than continuing, which is how a glut becomes a two-year loss.
References
  1. ReportedIn the year to March 2024 cost of sales of ¥1,205,927M exceeded revenue of ¥1,076,584M.
    Kioxia Holdings Corporation, consolidated results for the year to 31 March 2024 (reported in the Annual Securities Report for the following year) — revenue ¥1,076,584M against cost of sales of ¥1,205,927M, a gross loss of ¥129,343M, an operating loss of ¥252,698M and a loss for the year of ¥243,728M; the year to 31 March 2023 recorded revenue of ¥1,282,101M, an operating loss of ¥99,015M and a loss for the year of ¥138,141M. — years to 31 March 2023 and 2024 · publ. 2025-06 · source ↗
  2. ReportedAdjusted gross margin was 80% in the June 2026 quarter.
    Kioxia Holdings, first-quarter FY2026 results for the three months to 30 June 2026, as reported from the company's results presentation and earnings call — revenue ¥1,767.1bn, up 76.2% sequentially and 415.5% year on year; non-GAAP operating profit ¥1,326.2bn at a 75% margin; non-GAAP net income ¥887.0bn; non-GAAP EBITDA ¥1,402.1bn; adjusted non-GAAP gross profit ¥1,405.5bn, an 80% margin. Average selling prices rose about 70% with bit shipments growing a low single-digit percentage; eighth-generation BiCS FLASH exceeded 50% of total output. SSD & Storage ¥1,174.7bn, 66% of sales, with data centre and enterprise more than 60% of that and PC-related drives slightly below 40%; Smart Devices ¥525.7bn; Other ¥66.7bn. Operating cash flow ¥866.3bn, days inventory outstanding 102. Cash ¥791.0bn from ¥470.7bn, ¥407.5bn of senior loans repaid, a net cash position of ¥186.7bn against a net debt-to-equity ratio of 120% a year earlier, and an equity ratio of 51%. Guidance for the September quarter: revenue ¥2,390.0bn and non-GAAP operating profit ¥1,900.0bn, again roughly 70% of the growth from price. Capital expenditure of about ¥470bn a year is planned across the three years from FY2026, with roughly ¥200bn of research spending for the year and concentrated investment in the tenth and eleventh BiCS FLASH generations; the company targets roughly 50% long-term agreement coverage for calendar 2028. A buyback of up to 30 million shares (5.5% of those outstanding) for up to ¥800.0bn was authorised for 3 August to 30 October 2026, alongside a three-for-one share split with a 30 September 2026 record date. Calendar 2026 NAND bit growth is put in the high teens, with demand expected to exceed supply in 2027. — quarter to 30 June 2026 · publ. 2026-08-03 · source ↗
  3. ReportedDays inventory outstanding was 102 in the June 2026 quarter.
    Kioxia Holdings, first-quarter FY2026 results for the three months to 30 June 2026, as reported from the company's results presentation and earnings call — revenue ¥1,767.1bn, up 76.2% sequentially and 415.5% year on year; non-GAAP operating profit ¥1,326.2bn at a 75% margin; non-GAAP net income ¥887.0bn; non-GAAP EBITDA ¥1,402.1bn; adjusted non-GAAP gross profit ¥1,405.5bn, an 80% margin. Average selling prices rose about 70% with bit shipments growing a low single-digit percentage; eighth-generation BiCS FLASH exceeded 50% of total output. SSD & Storage ¥1,174.7bn, 66% of sales, with data centre and enterprise more than 60% of that and PC-related drives slightly below 40%; Smart Devices ¥525.7bn; Other ¥66.7bn. Operating cash flow ¥866.3bn, days inventory outstanding 102. Cash ¥791.0bn from ¥470.7bn, ¥407.5bn of senior loans repaid, a net cash position of ¥186.7bn against a net debt-to-equity ratio of 120% a year earlier, and an equity ratio of 51%. Guidance for the September quarter: revenue ¥2,390.0bn and non-GAAP operating profit ¥1,900.0bn, again roughly 70% of the growth from price. Capital expenditure of about ¥470bn a year is planned across the three years from FY2026, with roughly ¥200bn of research spending for the year and concentrated investment in the tenth and eleventh BiCS FLASH generations; the company targets roughly 50% long-term agreement coverage for calendar 2028. A buyback of up to 30 million shares (5.5% of those outstanding) for up to ¥800.0bn was authorised for 3 August to 30 October 2026, alongside a three-for-one share split with a 30 September 2026 record date. Calendar 2026 NAND bit growth is put in the high teens, with demand expected to exceed supply in 2027. — quarter to 30 June 2026 · publ. 2026-08-03 · source ↗
Sources
Generated September 23, 2026