Kratos builds defense hardware that costs less and arrives sooner than the equivalent product from a traditional prime contractor. The company designs and manufactures uncrewed jet aircraft, aerial targets that militaries shoot at during live-fire testing, solid rocket motors, small jet engines, hypersonic flight test vehicles, satellite ground systems, and the microwave electronics that sit inside radars, missiles and electronic warfare pods.
The customer set is almost entirely governmental. Kratos sells to the U.S. Department of War and its service branches, to the Missile Defense Agency and the Space Force, to the Department of Energy, and to allied militaries. The company reports through two segments: Kratos Government Solutions, which contains the rocket, turbine, space, training, cyber, C5ISR and microwave businesses, and Unmanned Systems, which contains the target drone and uncrewed tactical aircraft franchises.
The XQ-58A Valkyrie is the flagship: a runway-independent, jet-powered uncrewed aircraft designed to fly alongside crewed fighters at a fraction of a fighter's cost. Kratos also markets the Mako and the Tactical Firejet in the same affordable-mass category. Valkyrie activity drove the 30.9 percent organic revenue growth the Unmanned Systems segment reported in the first quarter of 2026.
The BQM-167 for the Air Force and the BQM-177 for the Navy are the recurring backbone of the unmanned business. These are the drones that air defense and missile crews train and test against, which makes the line a steady, budget-line-item revenue stream rather than a program-of-record gamble.
Kratos supplies hypersonic flight test vehicles including Erinyes and Dark Fury, solid rocket motors including Oriole and Zeus, and small turbine engines including the GEK and Spartan families that power drones and cruise missiles. The Defense and Rocket Support business grew organic revenue 45.8 percent in the first quarter of 2026, the fastest of any Kratos business.
The space business supplies satellite command, control, telemetry and signal-monitoring ground systems. The microwave electronics business supplies frequency converters, transmit-receive modules, amplifiers and multi-functional assemblies that go into radars, electronic warfare systems, missiles and smart munitions. The November 2025 agreement to acquire Israel-based Orbit Technologies for $356.3 million, which closed in the first quarter of 2026, extended this portfolio into satellite communication terminals and broadened the company's international footprint.
The company began in 1994 as Wireless Facilities, Inc., a telecommunications network services firm. It renamed itself Kratos Defense & Security Solutions in 2007 and spent the following decade converting itself into a defense contractor through acquisitions, absorbing target drone, rocket support, microwave electronics, satellite ground system and turbine engine businesses that larger primes considered too small to pursue.
That accumulation looked unfocused for years. It stopped looking unfocused when the Pentagon's procurement thesis shifted toward affordable mass, attritable aircraft, hypersonic test capacity and munitions throughput. Kratos already owned the low-cost production lines those priorities require, and the XQ-58A Valkyrie gave the company a credible entry into the collaborative combat aircraft conversation.
The company has since moved to fund a larger production base. Kratos raised approximately $1.38 billion gross in a March 2026 public offering of 16,428,571 shares priced at $84.00, netting approximately $1.349 billion, and completed the acquisitions of Nomad Global Communication Solutions and Orbit Technologies. Principal executive offices are now in Round Rock, Texas, though San Diego remains the operational and communications center of gravity.
Revenue reached $1.347 billion in fiscal 2025, up 18.5 percent in total and 16.6 percent organically over 2024. First quarter 2026 revenue of $371.0 million grew 22.6 percent in total and 15.8 percent organically over the prior-year quarter. Kratos Government Solutions contributed $288.4 million and Unmanned Systems contributed $82.6 million.
Three forces drive the next one to three years. First, bookings: the first quarter book-to-bill ratio was 1.6 to 1.0 on bookings of $605.2 million, and consolidated backlog rose to $2.011 billion at March 29, 2026 from $1.573 billion at December 28, 2025. Second, appropriations: management stated that the Department intends to spend the entire $156 billion reconciliation-bill defense allocation during fiscal 2026, funding hypersonics, Valkyrie, solid rocket motors and drone engines. Third, acquisitions: Nomad and Orbit add revenue that is not organic but is real.
Management guides fiscal 2026 revenue of $1.700 billion to $1.760 billion and Adjusted EBITDA of $170.0 million to $176.0 million, including Orbit, with organic growth of 15 to 19 percent over 2025.
| Filed | Form | Description | Link |
|---|---|---|---|
| May 2026 | 10-Q | Quarterly report for the period ended March 29, 2026: revenue $371.0M, net income $11.9M, backlog $2.011B | View → |
| Mar 2026 | 8-K | Item 5.02 — appointment of David King to the board of directors, effective March 23, 2026 | View → |
| Mar 2026 | 8-K | Public offering of common stock: 16,428,571 shares priced at $84.00, net proceeds $1.349B | View → |
| Feb 23, 2026 | 10-K | Annual report for fiscal year ended December 28, 2025: revenue $1.347B, GAAP EPS $0.13, ≈4,300 employees | View → |
| Feb 2026 | 8-K | Fourth quarter and full year 2025 financial results, furnished as Exhibit 99.1 | View → |
| Date | Awarding Body | Program / Scope | Value | Status |
|---|---|---|---|---|
| Jul 14, 2026 | U.S. Department of War | Incremental funding for hypersonic-system and other national-security programs | ≈$400M | Funded |
| Jul 21, 2026 | U.S. Department of Energy, NNSA Office of Secure Transportation | Project Solar Shield — mobile counter-unmanned aircraft systems, sole-source single-award IDIQ | ≈$156M | Awarded |
| Jul 13, 2026 | U.S. Government customer (not disclosed) | Ground-based modular space domain awareness system, sole-source prime production award | ≈$100M | Production |
| Jul 2, 2026 | U.S. Government customer (not disclosed) | New air defense missile system, sole-source single-award contract; program details withheld | ≈$36M | Awarded |
| Apr 8, 2026 | U.S. Space Force, Space Systems Command | Resilient missile-warning and missile-tracking ground management and integration; Kratos serves as system integrator | $446.8M | Awarded |
| Feb 25, 2026 | U.S. Navy | Full-rate production of 70 BQM-177A subsonic aerial targets and related equipment | $61.1M | Production |
| 2026 YTD | Multiple U.S. Government customers | Aviation system and related warfighter contract awards | ≈$65M potential | Awarded |
| Q1 2026 | Consolidated bookings, all customers | Total bookings for the quarter ended March 29, 2026; book-to-bill 1.6 to 1.0 | $605.2M | Booked |
| Date | Insider / Role | Type | Shares | Price | Value |
|---|---|---|---|---|---|
| Jul 1, 2026 | Deanna Lund · EVP & Chief Financial Officer | Sale · Rule 10b5-1 | 5,000 | Per Form 4 | 285,405 held after |
| Jun 1, 2026 | Deanna Lund · EVP & Chief Financial Officer | Sale · Rule 10b5-1 | 5,000 | $61.56 – $65.36 | Per Form 4 |
| Apr 1, 2026 | Deanna Lund · EVP & Chief Financial Officer | Sale · Rule 10b5-1 | 5,000 | $68.06 – $72.45 | $348,129 |
Kratos is a supplier to the drone, hypersonic and missile-defense cycle rather than a bet on any single program. The operating record supports that framing: backlog of $2.011 billion, a 1.6 to 1.0 quarterly book-to-bill and raised full-year guidance. The tension sits in the gap between demand and profit. Trailing twelve-month GAAP earnings per share of $0.17 against a market price in the high $40s implies a multiple near 280 times, and free cash flow was negative $43.1 million in the first quarter as working capital absorbed growth. The March 2026 offering priced at $84.00 and the stock traded at $48.64 on July 28, 2026, a decline of roughly 42 percent from the offering price, indicating the market has repriced the growth assumption materially. This is analysis, not investment advice.
Four items determine whether the thesis holds. Bookings durability is first: a single quarter at 1.6 to 1.0 is not a trend, and the trailing twelve-month ratio was 1.2 to 1.0. Margin conversion is second: revenue grew 22.6 percent while operating income was $4.7 million, weighed down by $15.0 million of non-cash stock compensation and $10.7 million of company-funded research and development. Cash conversion is third, since growth is currently consuming working capital rather than generating it. Appropriations follow-through is fourth: management's growth case rests on the Department spending the full $156 billion reconciliation allocation in fiscal 2026, and that is a stated intention, not an obligation.
The August 4, 2026 second quarter report is the next verification point. It carries the first full quarter of Orbit Technologies, an updated backlog figure and the cash flow trajectory that the first quarter left open.
The durable advantage is manufacturing position in categories the primes historically declined to defend. Kratos owns qualified production lines for aerial targets, solid rocket motors, small turbine engines and microwave components. Qualification on defense hardware takes years and carries switching costs, which makes an incumbent supplier difficult to displace once a program is fielded. The BQM-167 and BQM-177 target franchises are the clearest example: recurring, budget-funded, and structurally unattractive for a prime to contest at Kratos price points.
The moat is narrower on collaborative combat aircraft. The XQ-58A gave Kratos an early position, but Anduril, General Atomics and the primes are all competing for the same requirement with substantial capital behind them. Kratos competes there on cost and speed rather than on an entrenched position, and cost advantage is the least defensible form of moat when better-capitalized competitors decide to price aggressively.
Valuation risk is the most immediate. Trailing GAAP earnings support a multiple near 280 times, which prices in execution the company has not yet demonstrated at scale. Margin risk follows: the fiscal 2025 Form 10-K identifies rising labor cost and difficulty hiring and retaining cleared personnel as an active drag on operating margins, particularly on longer-term firm fixed-price contracts. Cash flow risk is third, with first quarter 2026 free cash flow at negative $43.1 million.
Budget and appropriations risk is structural. The 10-K flags continuing resolutions, potential government shutdowns and program funding delays as material threats. Integration risk is elevated following the Nomad and Orbit acquisitions, and Orbit adds cross-border exposure through an Israel-based operation. Disclosure risk is worth naming plainly: several 2026 awards are sole-source with the customer and scope withheld, so readers cannot independently confirm scope against public government notices. Dilution risk is now realized rather than prospective, with roughly 16.4 million shares added in March 2026.
Kratos gives the Department of War a non-prime source for drones, targets, motors, engines and test infrastructure, which is strategically useful to the government and commercially useful to Kratos. The concentration cost is that essentially all revenue depends on government budget cycles, appropriations timing and program-of-record decisions the company does not control.