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NASDAQ · KTOS
Kratos Defense & Security Solutions
Unmanned Systems · Drones · Defense Electronics · Hypersonics · Space
Price (Nov 4, 2026)
$33.39
70% · BUY
📅 Last updated: Nov 4, 2026
Market Cap
—
P/E (Trailing)
—
P/E (Forward)
~32x
Revenue (TTM)
$1.5B
Div Yield
—
Next Earnings
Feb 24, 2027 (est.)
PennyCheck™
70% BUY
Business Overview
  • What They Do: Kratos designs and manufactures next-generation unmanned systems (drones), defense electronics, hypersonic targets, satellites, rocket propulsion, and cybersecurity solutions for the US Department of Defense and allied governments.
  • Drone Leadership: Kratos is the leading manufacturer of affordable, attritable combat drones — the XQ-58A Valkyrie is designed to fly alongside manned fighters as a "loyal wingman." Low-cost, expendable drone doctrine is exactly where the DoD is investing heavily post-Ukraine.
  • Two Segments: Kratos Government Solutions (KGS) covers electronics, satellites, microwave, space, and cybersecurity. Unmanned Systems covers jet-powered drones and targets. KGS is larger; Unmanned is the higher-growth narrative segment.
  • Revenue Q4 2025: $345.1M, +21.9% YoY, 500bps above consensus. Backlog $1.57B (book-to-bill 1.3x). Full-year 2026 growth expected 20–25% at the high end of guidance.
  • Key Contracts: USAF attritable drone programs, Navy hypersonic target drones, Space Force satellite services, DoD cyber ranges. Contract wins are classified or low-disclosure due to program sensitivities.
Investment Thesis
  • Attritable Drone Megatrend: The Ukraine conflict demonstrated that cheap, expendable drones reshape battlefield economics. The US DoD is spending billions on attritable drone programs — Kratos's affordable manufacturing model is structurally aligned with this doctrine shift.
  • Backlog Visibility: $1.57B backlog at a 1.3x book-to-bill provides strong forward revenue visibility. As production ramps on awarded contracts, revenue growth should accelerate 2026-2027.
  • Optionality on Hypersonics & Space: Beyond drones, Kratos builds hypersonic target vehicles for DoD test programs and satellite ground systems — additional revenue streams with similar DoD-contract characteristics.
  • Analyst Consensus: 73% buy-side, avg target ~$96 (pre-recent selloff). Price target range $44–$135 across 23 analysts — wide dispersion reflects execution uncertainty but strong upside skew.
Key Metrics
Stock Price
$33.39
Nov 4, 2026 (down ~12% on day)
Market Cap
~$6.7B
Mid-cap defense
TTM Revenue
$1.5B
~22% YoY growth pace
TTM Net Income
$30.9M
Thin margins, reinvesting in growth
Trailing P/E
~218x
Forward P/E ~32x — valued on growth
Backlog
$1.57B
Book-to-bill 1.3x
Financial Character
  • Growth-Mode Business: Kratos trades on forward estimates, not trailing earnings. TTM P/E of 218x is misleading — the forward P/E of ~32x reflects the market's expectation of rapid margin expansion as production scales.
  • Thin Current Margins: Net income of $30.9M on $1.5B revenue = ~2% net margin. This reflects early-stage production ramps, R&D investment, and cost-plus contract structures that limit near-term profitability.
  • Revenue Acceleration: Q4 2025 at $345.1M represents significant sequential acceleration. Management guided for 25%+ full-year 2026 growth at the high end, with margin expansion lagging revenue growth by 1–2 years.
Competitive Advantages
  • Classified Program Relationships: Many Kratos contracts are with classified or low-disclosure DoD programs. These relationships are extremely difficult for competitors to displace — once you're the qualified supplier for a classified drone or hypersonic target program, you stay.
  • Affordability Doctrine Fit: Kratos's entire design philosophy is "affordable, attritable" — drones cheap enough to be expendable. This aligns with the DoD's post-Ukraine doctrine shift in a way that legacy defense primes (Raytheon, Northrop) are structurally slower to serve.
  • Vertical Integration in Drones: Kratos designs the airframe, propulsion, electronics, and ground systems for its drone platforms — full-stack integration that improves margins over time and reduces supply chain dependencies.
  • First-Mover Advantage: The XQ-58A Valkyrie has accumulated years of flight hours and DoD test data. New entrants must spend years catching up on accumulated classified test program data and security clearances.
Risk Factors
HIGH
Valuation Demands Flawless ExecutionAt $6.7B market cap on $1.5B revenue and $30.9M net income, the stock prices in years of perfect execution. Any program delay, contract loss, or earnings miss causes outsized stock reactions — as seen in the -12% day in the screenshots.
HIGH
Defense Budget RiskKTOS is almost entirely dependent on US DoD spending. Budget sequestration, continuing resolutions, or program cancellations are existential risks to specific revenue lines. DOGE-style defense spending cuts would hit growth-focused programs like attritable drones first.
MED
Competition from PrimesAs attritable drones prove out, Lockheed Martin, Boeing, and General Atomics are building competing offerings. Kratos's cost advantage could erode if primes commit to affordable manufacturing at scale.
MED
Production Ramp ExecutionScaling drone manufacturing from prototypes to hundreds or thousands of units is operationally complex. Supply chain disruptions, labor issues, or quality problems on classified programs could delay revenues and damage relationships.
LOW
FCF WeaknessHeavy investment in production ramp and inventory buildup has kept FCF negative or near-zero. At current growth rates, meaningful FCF generation is likely 2–3 years out.
Upcoming Catalysts
  • Collaborative Combat Aircraft (CCA) Awards: The USAF's CCA program to field hundreds of loyal-wingman drones is the biggest potential contract in Kratos's history. Award news could be a 20-50% re-rating event.
  • Backlog Conversion Acceleration: As the $1.57B backlog converts to revenue at 1.3x book-to-bill pace, revenue growth could accelerate to 25-30% in 2026, driving the first year of meaningful net income and positive FCF.
  • International Sales: Allied nations (Australia, Japan, UK) are developing their own attritable drone programs and looking to Kratos as a supplier — international revenue is currently minimal but represents significant optionality.
  • Orbit Technologies Acquisition Close: The pending Orbit Technologies acquisition adds satellite ground systems and space payload capabilities — expanding the addressable market into the Space Force budget.
PennyCheck™ Scorecard
Business Model Clarity
4/5
Revenue Quality
4/5
Competitive Moat
4/5
Management & Execution
3/5
Balance Sheet Health
3/5
Sector Tailwinds
5/5
Valuation vs. Potential
3/5
Catalyst Pipeline
4/5
⚠ Score check: the 8 criteria above add to 30/40 = 75% (BUY), but this page shows 70%. The dashboard uses the criteria math. This gets reconciled in the next refresh. Fix with Claude →
70%
BUY — 35/50 · Attritable drone megatrend + strong backlog; valuation demands execution
BUY
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