Unhappy With Redwire’s Dilution? 5 Space and Defense Stocks to Buy Instead

Redwire (NYSE: RDW) is the space-and-drones story dominating retail feeds right now, riding a 107.2% year-to-date run on record backlog and a viral “drones plus space” thesis. But the data underlying the rally tells a different story.

The dilution complaint is well-documented. Redwire’s Q1 shareholders’ equity ballooned 1,531% to $1.09 billion, distorted by stock-based compensation, including a $42.5 million accelerated equity charge tied to Edge Autonomy incentive units. AE Industrial Partners converted Series A Convertible Preferred Stock and acquired 15,247,586 common shares at $3.05 on May 18, after liquidating tens of millions of shares across April at descending prices, including 21,365,909 shares at $10.85 on April 22. Layer in a $500 million at-the-market share-sale program, repeated Form 144 filings, and management’s own flag of material weaknesses in internal controls. Q1 revenue missed consensus by 7.33%, and adjusted EPS also fell short. The stock has already dropped 23.5% in the past week. At 10.28x trailing sales with −$2.59 TTM EPS, retail investors are paying full price even as the share count keeps climbing.

Kratos: The Clean Dilution Escape

Kratos Defense & Security Solutions (NASDAQ: KTOS) is the alternative that directly addresses the dilution concern. Here are three reasons it stands out compared to Redwire on the metrics retail investors are debating:

1. It is profitable and raising guidance. Q1 adjusted EPS came in at $0.16, a 19.2% beat, with revenue of $371 million (+22.6% year over year) and net income of $11.9 million. Management raised FY26 revenue guidance to $1.70 billion to $1.76 billion, the fourth consecutive guidance raise.

2. The budget tailwind is generational. CEO Eric DeMarco told investors that “Fiscal 2027 National Security spend is currently projected to be $1.5 trillion, an approximate $400 billion increase above Fiscal Year 2026,” with Kratos sitting on Valkyrie CCA, Hypersonic, Solid Rocket Motors, and Jet Engines for Drones programs.

3. Strong backlog and execution. Kratos has a $2.01 billion backlog, 1.6x book-to-bill ratio, and Unmanned Systems organic growth of 30.9%. EBITDA margins are expanding by roughly 100 basis points annually through FY27.

Four More Names to Compare Against Redwire

Rocket Lab (NASDAQ: RKLB | RKLB Price Prediction) is the mature, diversified platform. Its Q1 revenue totaled $200.35 million (+63.5% year over year), and it has a $2.2 billion backlog and non-GAAP gross margins of 43.0%. CEO Peter Beck flagged “access to more than $2 billion in liquidity” alongside a Golden Dome program selection alongside Raytheon.

Planet Labs (NYSE: PL) brings the recurring-revenue satellite-data model. It posted Q1 revenue of $94.15 million (+42% year over year), remaining performance obligations up 81% year over year to $816 million, and 99% recurring annual contract value. FY27 guidance targets adjusted EBITDA breakeven.

AST SpaceMobile (NASDAQ: ASTS) is the higher-octane swing. Q1 2026 revenue of $14.74 million rose sharply year over year but missed consensus expectations. AST SpaceMobile carries a $3.03 billion cash position and is targeting about 45 BlueBird satellites in orbit by year-end 2026. 2027 revenue is projected to approach $1 billion.

Intuitive Machines (NASDAQ: LUNR) is the lunar-logistics play. It posted record Q1 2026 revenue of $186.73 million (nearly triple the prior-year figure) and achieved positive adjusted EBITDA of $2.7 million. Driven by the Lanteries acquisition and its fifth NASA CLPS contract award, the company’s backlog surged to a record $1.1 billion. Management reaffirmed 2026 revenue guidance of $900 million to $1 billion, bolstered by a new $6.24 billion Space Force Andromeda IDIQ contract.

For investors weighing the dilution risk against the sector’s budget tailwind, the profitable defense names have the contract wins to justify their multiples.