Kratos Defense & Security Solutions Inc
Q3 2025 Earnings
Market Reaction
S&P 500 over the same 30 days: +0.89%.
Did KTOS Beat Earnings? Q3 2025 Results
Kratos Defense & Security Solutions delivered a convincing beat across the board in its fiscal third quarter of 2025, with revenue climbing 26.0% year-over-year to $347.60 million against a consensus estimate of $322.22 million — a 7.88% upside surprise — while adjusted EPS of $0.14 topped the $0.1246 consensus by 12.36%. The standout driver was the Unmanned Systems segment, which posted 35.8% organic revenue growth on the back of tactical Valkyrie drone shipments to an international customer, underscoring why <a href="https://247wallst.com/investing/2025/12/27/defense-stocks-are-booming-these-are-the-2-hottest-contractors-to-buy-for-2026/">defense contractors are attracting</a> intense investor attention heading into 2026. A book-to-bill ratio of 1.2x and a $13.50 billion bid pipeline signal sustained momentum, and management backed that confidence with a guidance raise — lifting full-year FY2025 revenue expectations to $1.32–$1.33 billion while projecting 15%–20% organic revenue growth in FY2026, stepping up further to 18%–23% in FY2027, each year paired with approximately 100 basis points of EBITDA margin expansion.
- 26.0% total revenue growth and 23.7% organic revenue growth year-over-year
- Unmanned Systems segment grew 35.8% organically driven by tactical Valkyrie shipments to an international customer
- KGS Defense Rocket Systems business grew 47.2% organically
- KGS Space, Training and Cyber businesses grew 21.2% organically
- Consolidated book-to-bill ratio of 1.2x with $414.1 million in Q3 bookings
- Consolidated backlog of $1.480 billion, up from $1.414 billion in Q2
“Our Q3 financial results are representative of the increasing demand for Kratos' military grade hardware, systems and software to support U.S. National Security and its allies. Also reflective of this demand, we are once again increasing our full year 2025 revenue guidance, and we are increasing our full year 2026 organic revenue growth forecast up to 15 percent to 20 percent above our expected increased annual 2025 revenue. Additionally, we are providing a preliminary 2027 organic revenue growth target of 18 percent to 23 percent above this increased 2026 estimated revenue range. We are also expecting EBITDA margin expansion for both 2026 and 2027, as we scale the business and transition to more profitable contracts, with EBITDA margins expected to increase even as we continue to make significant bid, proposal and other new opportunity related investments as we have in 2025, as we pursue multiple large new program opportunities.”
Kratos Defense & Security Solutions CEO, on the earnings call
Forward Guidance & Outlook
Kratos raised its FY2025 revenue guidance to $1,320–$1,330 million (from $1,290–$1,310 million previously) and affirmed Adjusted EBITDA guidance of $114–$120 million. Q4 FY2025 revenue is guided at $320–$330 million with Adjusted EBITDA of $29–$34 million. Full-year FY2025 operating cash flow is expected at $10–$20 million, capital expenditures at $105–$115 million, and free cash flow use of $95–$105 million. For FY2026, the company increased its organic revenue growth forecast to 15%–20% above FY2025 projected revenue (up from 13%–15%), with an approximate 100 basis point Adjusted EBITDA margin rate increase. Q1 FY2026 revenue is forecasted at $330–$340 million. A preliminary FY2027 target calls for 18%–23% organic revenue growth above the FY2026 forecast, with an additional 100 basis point EBITDA margin improvement. The second half of FY2026 is expected to be stronger than the first half due to government shutdown impacts and timing of long-lead item deliveries.
KTOS YoY Financials
KTOS Revenue by Segment
Figures from SEC filings and company reports. Not investment advice.