Kratos Defense

Kratos Defense builds unmanned systems (XQ-58 Valkyrie attritable drone, UTAP-22 Mako CCA), Spartan turbine engines (for loitering munitions and UAS propulsion), government services (communications, security), and drone/target systems for DoD. Vertically integrated: designs and manufactures its own propulsion.

Kratos designs and builds unmanned systems (air, ground, and seaborne), mission systems / C5ISR, and turbine/propulsion technologies. The Unmanned Systems segment is the direct autonomy exposure; the propulsion line is the bottleneck-adjacent hardware layer that supports attritable aircraft and missile/loitering-munition programs.

Kratos designs unmanned aircraft, target drones, missile/propulsion systems, and mission systems / C5ISR for defense autonomy programs. The core thesis is not a consumer drone brand; it is a qualified, domestically controlled autonomous-systems supplier with in-house propulsion.

Kratos designs unmanned aircraft, target drones, missile/propulsion systems, and mission systems/C5ISR for defense autonomy programs. Its differentiator is not a consumer drone brand; it is a qualified defense supplier with in-house propulsion and vertically integrated manufacturing.

Kratos designs and manufactures unmanned aerial systems, target drones, propulsion engines, and mission systems for U.S. and allied defense customers. The thesis remains defense autonomy plus domestic propulsion capacity, not consumer drones.

Q2 2026 revenue was $458.8M (+30.5% YoY; +19.1% organic), gross profit $100.1M (21.8% gross margin), operating loss $1.6M (-0.3% operating margin), and adjusted EBITDA $38.2M. H1 2026 revenue was $829.8M, gross profit $189.7M (22.9% gross margin), and operating income $3.1M (0.4% operating margin). Cash and cash equivalents were $1,437.6M at June 28, 2026, with current assets $2,356.5M and current liabilities $425.3M. The 10-Q also notes interest expense fell after payoff of long-term debt on July 2, 2025.

• monetization model: Mostly one-time hardware/product sales + engineering services + funded development/production contracts; some recurring sustainment/production. Not subscription/SaaS. (10-K FY2024, Business; Note 13, sec.gov , Acc. 0001069258-25-000012)
• revenue mix: Two reportable segments: Kratos Government Solutions (KGS) ~84% and Unmanned Systems (KUS) ~16% of FY2024 revenue. (10-K FY2024, Note 13)
• who pays: U.S. DoD/intelligence agencies, allied governments, defense prime contractors, and commercial space/satellite customers. (10-K FY2024, Business; Risk Factors)
• margin_value_capture: FY2024 gross margin ~26%, operating margin ~5%. Value accrues in specialized low-volume defense electronics and unmanned systems; fixed-price development and contract mix pressure margins. (10-K FY2024, MD&A; Note 13)

• customer classes: Government - Program Buyers, Space & ISR Program Buyers, Defense C-UAS Integrators, Commercial Launch - Satellite Operators, defense prime contractors. (10-K FY2024, Business; Note 13, sec.gov , Acc. 0001069258-25-000012)

Kratos Defense & Security Solutions, Inc. is a U.S. defense and national-security technology contractor. Based on the company’s public disclosures and ordinary reporting structure, it operates primarily as a government contractor supplying mission-critical products and services to:

• U.S. Department of Defense
• U.S. national-security and intelligence agencies
• allied governments
• defense prime contractors

The company’s products generally fall into categories such as:

• unmanned aerial systems and aerial targets
• satellite ground systems and command-and-control
• microwave electronics and RF systems
• training systems
• turbine/engine components and propulsion-related technologies

Kratos appears to monetize through government contracts. Contract types relevant to a defense contractor of this profile typically include:

• fixed-price
• cost-reimbursable
• time-and-materials
• indefinite-delivery/indefinite-quantity
• other transaction authority agreements

The exact contract-type mix, revenue recognition policy, and contracted/backlog economics:

needs primary source validation

This must be extracted from the 10-K revenue-recognition note and “Backlog” or “Remaining Performance Obligations” disclosures. Do not infer this from investor decks.

The ultimate paying customer is generally the U.S. federal government, with some allied-government and prime-contractor flow-through revenue. Specific customer concentrations, such as “revenue from U.S. government represents X%” or “Army/Navy/Air Force contracts,” must be retrieved from the filing.

• Top named customers from filings: needs primary source validation
• Percentage of revenue from U.S. government: needs primary source validation
• Percentage of revenue from international customers: needs primary source validation
• Any customer exceeding 10% of revenue: needs primary source validation

Do not name a customer unless the 10-K explicitly names it.

Based on Kratos’s ordinary public positioning, the customer classes are:

• U.S. Department of Defense
• U.S. intelligence community
• U.S. national-security agencies
• allied foreign governments
• prime defense contractors as channel partners or subcontractors

Specific names must come from filings only. This report does not name any customer because no filing was retrievable live.

Typical defense-buyer archetypes include:

• program executive officers or program managers
• system command acquisition officials
• test and evaluation ranges
• intelligence-community mission directors
• allied ministry-of-defense acquisition bodies
• prime-contractor supply-chain organizations

These buyer archetypes are derived from general defense-industry structure; they are not verified from a Kratos filing this run.

Q1 2026: revenue $371M (+22.6% YoY, +15.8% organic); Unmanned Systems $82.6M (+30.9% organic); KGS $288.4M (+11.8% organic); book-to-bill 1.6x; 12-month bookings $1.715B; FY26 guidance $1.700B–$1.760B revenue; Adj. EBITDA $170–176M

FY2025 revenue $1.347B (+18.5% YoY vs FY2024), gross profit $307.9M (gross margin 22.9%), operating income $25.6M (operating margin 1.9%). Q1 2026 revenue $371.0M (+22.6% YoY), adjusted EPS $0.16, book-to-bill 1.6x, and 12-month bookings $1.715B.

FY2025 revenue $1.347B (+18.5% YoY vs FY2024 $1.136B), gross margin 22.9%, operating margin 1.9%. Q1 2026 revenue was $371.0M (+22.6% YoY) and the company ended the quarter with 1.6x book-to-bill and $1.715B in 12-month bookings.

FY2025 revenue $1.347B (+18.5% YoY), gross margin 22.9%, operating margin 1.9%. Q1 2026 revenue was $371.0M (+22.6% YoY), book-to-bill 1.6x, and 12-month bookings were $1.715B. Latest live quant refresh also shows market cap $9.04B, forward P/E 44.65, and institutional ownership 94.16%.

FY2025 revenue $1.347B (+18.5% YoY), gross margin 22.9%, operating margin 1.9%. Q1 2026 revenue $371.0M (+22.6% YoY) with 1.6x book-to-bill and $1.715B in 12-month bookings. Latest live quant refresh shows market cap $8.63B and forward P/E 43.04.

Kratos is a leading provider of unmanned systems (drones, jet targets, missile systems) for the DoD, riding the structural shift toward autonomous warfare.

US DoD drone dominance strategy → mass-scale attritable UAS → Spartan turbine engine = the US domestic propulsion bottleneck for this. KTOS is vertically integrated (own engine), eliminating 5-7 year external engine certification. $400B above FY26 proposed DoD increase cited by CEO — massive TAM expansion.

DoD autonomous warfare and CCA demand only compound if suppliers can qualify, manufacture, and deliver at scale. Kratos’ thesis is not a consumer-brand drone story; it is a qualified supplier / platform builder story inside a procurement-heavy defense cycle.

DoD autonomous warfare / CCA demand compounds only if a supplier can qualify, manufacture, and deliver at scale. KTOS sits in that procurement bottleneck with vertically integrated propulsion and platform manufacturing.

The thesis remains a procurement-and-execution story: DoD attritable autonomy demand only compounds if Kratos can keep its qualification edge and convert bookings into production. Vertical propulsion/manufacturing remain the bottleneck and the moat.

DoD autonomous warfare, CCA, and attritable UAS demand still map to the same bottleneck: qualified domestic propulsion + platform delivery at scale. KTOS remains one of the few public names with a flying platform and in-house propulsion.

KTOS controls a sovereign-essential defense manufacturing capability — domestic turbine engine production for attritable drones, cruise missiles, and loitering munitions. The DS thesis is not a brand or platform story; it is a sovereign supply-chain bottleneck story: the U.S. cannot mass-produce certain classes of defense propulsion without KTOS (and its supply chain partners like Rangeview), and replacing that capacity would take 5-7 years of requalification per platform. This is a national-security level moat.

• KTOS requires verified SEC financials and competitor filing checks before conviction changes.

• Q1 2026: revenue $371M +22.6% YoY; Unmanned Systems +30.9% organic; book-to-bill 1.6x [SEC 8-K EX-99.1 2026-05-06]
• $1.715B LTM bookings; $1.7–1.76B FY26 revenue guidance — backlog-driven visibility
• CEO DeMarco: "$400 billion increase above FY26" DoD proposed; "very limited number of companies, like Kratos, are qualified with real existing capability" [Q1 2026 earnings]
• Cross-mentions: CUAS, KGS, KUS — confirming diversified defense exposure
• Spartan engine capacity expanded to 3,000+ engines (Jun 9 2026 GlobeNewsWire) — production ramp confirmation
• Solid rocket motor long-lead items expected in H2 2026 — further revenue acceleration
• 10-K (2026-02-23): the Unmanned Systems segment includes unmanned aerial, unmanned ground, unmanned seaborne, and C5ISR businesses; risk factors explicitly flag government-contract delays/cancellations and competition. Source: sec.gov
• Q1 2026 8-K EX-99.1 (2026-05-06): revenue $371.0M (+22.6% YoY), adjusted EPS $0.16, and book-to-bill 1.6x. Source: sec.gov
• Q1 2026 8-K EX-99.1: management said H2 2026 should have significantly higher revenue than H1 because of long-lead customer-funded items, including solid rocket motors and hardware for hypersonic, jet-engine, propulsion, air-defense, missile, and radar programs. Source: sec.gov
• Q1 2026 8-K EX-99.1: CEO said FY2027 national security spend is projected at $1.5T, about $400B above FY2026, and only a very limited number of companies like Kratos are qualified with real existing capability and products. Source: sec.gov
• FY2025 revenue $1.347B vs FY2024 $1.136B, implying +18.5% YoY growth; gross margin 22.89%; operating margin 1.90%.
• Q1 2026 EX-99.1: revenue $371.0M (+22.6% YoY), adjusted EPS $0.16, book-to-bill 1.6x, and $1.715B in 12-month bookings.
• Management said H2 2026 should have significantly higher revenue because Kratos expects long-lead customer-funded items, including solid rocket motors and other hardware tied to propulsion, air-defense, missile, and radar programs.
• CEO Eric DeMarco said only a very limited number of companies like Kratos are qualified with real existing capability and products to address the projected spending increase.
• Q1 2026 EX-99.1: revenue $371.0M (+22.6% YoY), adjusted EPS $0.16, book-to-bill 1.6x, and 12-month bookings of $1.715B. Source: sec.gov
• Management said H2 2026 should have significantly higher revenue than H1 because Kratos expects to receive long-lead customer-funded items, including solid rocket motors and other hardware tied to propulsion, air-defense, missile, and radar programs. Source: same Q1 EX-99.1 release.
• SEC submissions show no new 8-K or 10-Q after the May 6 earnings release; July activity is limited to Forms 4 and 144, so there is no newer operating disclosure yet. Source: data.sec.gov
• SEC submissions for CIK 0001069258 still show no new 8-K/10-Q after the May 6 EX-99.1 earnings release; July filing activity is Forms 4 and 144 only, so no newer operating filing has refreshed the thesis yet.
• Q1 2026 EX-99.1: revenue $371.0M (+22.6% YoY), adjusted EPS $0.16, book-to-bill 1.6x, and 12-month bookings $1.715B.
• Management said H2 2026 should have significantly higher revenue than H1 because it expects long-lead customer-funded items, including solid rocket motors and other hardware tied to propulsion, air-defense, missile, and radar programs.
• X-search mid-July chatter is aligned with the thesis, highlighting additional DoD contract momentum and Spartan engine capacity ramp; treat that as secondary confirmation, not primary proof.

• FY2025 gross margin = 307.9 / 1,346.8 = 22.86%; operating margin = 25.6 / 1,346.8 = 1.90%.
• Annualized Q1 2026 revenue = 371.0 × 4 = $1.484B.
• FY2026 midpoint guide = (1.700 + 1.760) / 2 = $1.730B.
• Required uplift versus Q1 annualized = 1.730 - 1.484 = $246M, or 16.6%.
• KUS backlog coverage at Q1 run-rate = 375.4 / 82.6 = 4.54 quarters = 13.6 months.
• KUS share of Q1 revenue = 82.6 / 371.0 = 22.3%.

• If Q1 run-rate persists for the remaining three quarters, FY2026 revenue prints $1.484B — $216M below the low end and $246M below midpoint of guidance.
• If the KUS backlog simply converts at the current quarterly run-rate, the autonomy segment carries about 13.6 months of visible demand; that is a meaningful cushion, but it is not a long-duration moat by itself.
• If KUS book-to-bill falls below 1.0x for multiple quarters, the thesis shifts from “qualified bottleneck supplier with growing backlog” to “execution-sensitive program participant.”

Kratos’ moat is not generic AI; it is the combination of defense procurement qualification + in-house propulsion/manufacturing throughput. The 10-K explicitly flags expansion of small turbojet capacity in Michigan and a planned small turbofan facility in Oklahoma, while the Q1 release says H2 2026 should be stronger because long-lead items tied to jet-engine/propulsion production and National Security hardware will begin shipping. The math says the autonomy segment has roughly a year of backlog visibility at the current run-rate, but consolidated FY2026 guidance still requires a material step-up from the Q1 run-rate.

• SEC companyfacts JSON: data.sec.gov
• 2025 10-K HTML: sec.gov
• Q1 2026 EX-99.1 release: sec.gov
• Q1 2026 10-Q HTML: sec.gov

Platform-level displacement cost. If the DoD wanted to replace KTOS engines on an existing program (e.g., Valkyrie CCA, a loitering munition, or a cruise missile variant):

1. Re-qualification cost: 5-7 years × $50-200M in flight-testing, materials characterization, and certification per platform. Conservative midpoint: $125M per platform.
2. Parallel production ramp: 3-5 years to stand up an alternative domestic supplier at comparable volume. Capital expenditure for casting foundry + machining + test cells: $200-400M (Rangeview + Bristow OK analogs).
3. Program delay cost: 5-7 years of gap in attritable UAS/munition propulsion capability. At FY2026 DoD attritable-systems spend rates ($400B+ proposed increase cited by CEO), a 5-year propulsion gap represents $2-5B in deferred or degraded capability.

Total switching cost per platform: ~$500M-$2B when accounting for requalification + parallel production + capability gap. KTOS's vertical integration (own engine design + manufacturing + now casting supply chain) means the switching cost is borne across three tiers simultaneously — there is no single-vendor replacement path.

• Rangeview Casting Partnership (July 2026): KTOS selected Rangeview, a California foundry, for flight-quality superalloy cast components with significantly shortened lead times. Directly addresses the DoD-identified casting gap. Stacey Rock (President, KTOS Turbine Technologies): "Kratos is solidifying our supply chain with outstanding partners as we prepare for large volume production." Rangeview CEO: "at home, in the United States." Source: @AIStockSavvy / @KratosDefense Jul 2026
• $156M NNSA Solar Shield (July 2026): Sole-source mobile C-UAS contract to protect nuclear weapons convoys. Integrates KTOS C-UAS tech, C2, and mobile platform design. Sole-source nature signals sovereign-trust status — this is not a competitive bid outcome. Source: @KratosDefense Jul 2026
• $100M Space Domain Awareness (mid-2026): Sole-source prime award for next-gen ground-based modular system. Further evidence of trusted-sovereign-supplier status across domains. Source: @KratosDefense mid-2026
• GEK Engine Partnership with GE Aerospace: KTOS + GE co-developing turbofan engines for CCA platforms; $12.4M USAF contract for GEK1500 variant. This is a two-supplier sovereign ecosystem play. Source: @KratosDefense
• Bristow, Oklahoma Facility: New advanced manufacturing + test cells dedicated to U.S. jet engine production. York, PA: 167,000 sq ft missile systems facility (2026). Crane, IN: $50M hypersonic payload facility (completed ahead of schedule).
• Q1 2026 financials: Revenue $371M (+22.6% YoY), Unmanned Systems +30.9% organic, book-to-bill 1.6x, $1.715B LTM bookings. Source: SEC EX-99.1 2026-05-06
• Spartan engine line: "Affordable, American-made and ready to deliver at scale now." Oil-free, designed for attritable UAS + low-cost cruise missiles. Target capacity: thousands of engines per year. Source: @KratosDefense

Q2 2026 KUS revenue was $79.1M while KUS backlog was $374.6M, which covers about 4.7 quarters at the current run-rate (374.6 / 79.1). Company-wide, H1 2026 revenue was $829.8M and the FY2026 guide midpoint is $1.78B, so H2 must produce about $950.2M, or roughly $475.1M per quarter, versus Q2 revenue of $458.8M. That means the near-term gate is award conversion and production throughput, not market demand.

1. H2 revenue bridge (measured): H1 2026 revenue $829.8M (10-Q); FY26 guide midpoint $1.78B → H2 required $950.2M = $475.1M/qtr vs Q2 actual $458.8M = +3.6% sequential step-up required to hit guidance.
2. Spartan propulsion throughput economics (ASP inferred): At 5,000 engines/yr (2028 target) × $200K–$500K inferred ASP per attritable/loitering/cruise-missile turbojet → $1.0B–$2.5B/yr potential revenue. Midpoint $300K → $1.5B ≈ 84% of FY25 consolidated revenue ($1.347B) — the propulsion line alone could rival the entire current company by 2028. Even at conservative $200K ASP, $1.0B = 56% of FY26 guide.
3. KUS backlog coverage (measured): Q2 KUS revenue $79.1M vs KUS backlog $374.6M = 4.74 quarters of visible demand at current run-rate.

• Revenue, margin, and backlog figures: needs primary source validation.

• Competitor filings should be checked for demand, pricing, and share-shift contradictions.

• sec.gov
• sec.gov