KRATOS DEFENSE & SECURITY SOLUTIONS, INC. (KTOS): Results of Operations and Financial Condition
KRATOS DEFENSE & SECURITY SOLUTIONS, INC. (KTOS) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Press Contact: Claire Cantrell claire.cantrell@kratosdefense.com Investor Information: 877-934-4687 investor@kratosdefense.com Kratos Reports Second Quarter 2026 Financial Results Second Quarter 2026 Revenues of $458.8 Million Reflect 19.1 Percent Organic Growth and
How this was made
The 30-second read
Why it matters
The most tradable elements are the raised FY revenue guidance range, the stated organic growth outlook, and the disclosed bookings, book-to-bill, and backlog metrics that inform forward revenue visibility.
Market read
A guidance raise paired with bookings and backlog strength is a direct catalyst for KTOS positioning, while cash flow usage and operating loss add downside sensitivity.
What to watch
Investors may discount the organic growth strength if working-capital build and inventory ramps persist, and they may scrutinize segment-level durability of Valkyrie-related activity in Unmanned Systems.
Second Quarter 2026 Revenues of $458.8 Million Reflect 19.1 Percent Organic Growth and 30.5 Percent Growth Over Second Quarter 2025 Revenues of $351.5 Million
Revenue grew 30.5 percent with 19.1 percent organic growth, both segments expanded, bookings exceeded quarterly revenue, and full-year revenue guidance was increased. Consolidated operating results remained a loss and operating cash flow and free cash flow were uses of cash amid investment and working-capital demands.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| RevenuesGAAP | $458.8 million | – | 30.5 percent |
| Organic revenue growthother | 19.1 percent | – | – |
| Operating LossGAAP | $1.6 million | – | – |
| Net IncomeGAAP | $4.4 million | – | – |
| Net Income per shareGAAP | $0.02 | – | – |
| Adjusted earnings per share (EPS)non-GAAP | $0.21 | – | – |
| Adjusted EBITDAnon-GAAP | $38.2 million | – | – |
| Cash Flow Used in Operationsother | $11.0 million | – | – |
| Free Cash Flow Used in Operationsother | $18.9 million | – | – |
| Consolidated bookingsother | $492.2 million | – | – |
| Consolidated book-to-bill ratioother | 1.1 to 1.0 | – | – |
| Consolidated bookings, last twelve months ended June 28, 2026other | $1.990 billion | – | – |
| Consolidated book-to-bill ratio, last twelve months ended June 28, 2026other | 1.3 to 1.0 | – | – |
| Consolidated backlogother | $2.084 billion | – | – |
| Bid and proposal pipelineother | $15.0 billion | – | – |
| Funded backlogother | $1.572 billion | – | – |
| Unfunded backlogother | $512.7 million | – | – |
| KUS Operating IncomeGAAP | $1.2 million | – | – |
| KUS Adjusted EBITDAnon-GAAP | $5.1 million | – | – |
| KGS Operating IncomeGAAP | $14.3 million | – | – |
| KGS Adjusted EBITDAnon-GAAP | $33.1 million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Unmanned Systems (KUS)The increase was primarily driven by Valkyrie-related activity. | $79.1 million | – | 8.1 percent organic growth |
| Kratos Government Solutions (KGS)Increased revenues included organic revenue growth across Defense and Rocket Support, Turbine Technologies, Microwave Products and Space, Training and Cyber businesses. | $379.7 million | – | 36.4 percent increase and a 22.0 percent organic growth rate |
Q326 and FY26 outlook
- RevenueQ326: $460 - $480; FY26: $1,750 - $1,810
- NoteR&D: Q326: $13 - $15; FY26: $50 - $53
- NoteOperating Income: Q326: $1 - $4; FY26: $16 - $22
- NoteDepreciation: Q326: $11 - $12; FY26: $48
- NoteThird quarter organic growth: approximately 19 percent to 25 percent
- NoteFourth quarter organic growth: approximately 19 percent to 31 percent
- NoteFull year 2026 organic revenue growth: approximately 18 percent to 23 percent as compared to full year 2025
- NoteUnmanned Systems organic growth: approximately 10 percent
What drove it
- Second quarter revenue growth reflected 30.5 percent growth and 19.1 percent organic growth.
- KGS organic revenue growth rates were 50.2 percent in Defense Rocket Systems, 43.3 percent in Turbine Technologies, 29.5 percent in Microwave Products and 8.7 percent in Space, Training and Cyber.
- KUS revenue growth was primarily driven by Valkyrie-related activity.
- KUS and KGS adjusted EBITDA reflected revenue volume and mix.
- The bid and proposal pipeline was $15.0 billion at June 28, 2026.
- Management expects EBITDA margins to continue increasing in the second half of 2026 and into 2027 as the business scales, production increases and fixed-cost infrastructure is leveraged.
Concerns
- The company reported an Operating Loss of $1.6 million.
- Cash Flow Used in Operations of $11.0 million primarily reflected working-capital requirements tied to revenue growth, receivables, increased inventory balances and development investments.
- Management stated that investments in bid, proposal and other new-program opportunities, along with staffing to ramp production, are currently adversely impacting profit margins and free cash flow generation.
- Guidance assumptions include potential manufacturing, production and supply-chain disruptions, parts shortages, and continued significant cost and price increases.
- Management cited the strength of the Shekel as adversely impacting Israel operations profitability.
What to watch
- Execution against Q326 revenue guidance of $460 - $480 and Operating Income guidance of $1 - $4.
- Delivery of forecasted third-quarter organic growth of approximately 19 percent to 25 percent and fourth-quarter organic growth of approximately 19 percent to 31 percent.
- Working-capital needs for rocket motors, related systems, jet-engine production ramps and Valkyrie production plans.
- Conversion of the $15.0 billion bid and proposal pipeline into bookings and backlog.
- The trajectory of EBITDA margins while Kratos continues investment in inventory, property, plant, equipment and facilities.
Balance sheet and cash flow
- Second quarter 2026 Cash Flow Used in Operations was $11.0 million.
- Free Cash Flow Used in Operations for the second quarter of 2026 was $18.9 million after funding $17.2 million of capital expenditures, and net of cash received of $9.3 million for the sale of company-owned Valkyries.
- Consolidated backlog was $2.084 billion on June 28, 2026, as compared to $2.051 billion on March 29, 2026.
- Backlog on June 28, 2026, included funded backlog of $1.572 billion and unfunded backlog of $512.7 million.
Analysis
Kratos delivered $458.8 million of second-quarter 2026 revenue, up 30.5 percent from $351.5 million in the second quarter of 2025, including 19.1 percent organic growth. Growth was led by KGS, where revenue rose to $379.7 million and organic growth was 22.0 percent. KUS generated $79.1 million of revenue, with 8.1 percent organic growth, primarily driven by Valkyrie-related activity. KGS growth was broad across Defense Rocket Systems, Turbine Technologies, Microwave Products, and Space, Training and Cyber businesses.
The profit picture showed operational progress at the segment level but continued consolidated investment pressure. KUS operating income was $1.2 million compared with an Operating Loss of $0.3 million, while KGS operating income was $14.3 million compared with $12.6 million. KUS Adjusted EBITDA increased to $5.1 million and KGS Adjusted EBITDA increased to $33.1 million. Consolidated Adjusted EBITDA was $38.2 million, but the company reported a GAAP Operating Loss of $1.6 million. Second-quarter net income was $4.4 million and GAAP net income per share was $0.02, while adjusted EPS was $0.21.
Demand indicators remained favorable. Quarterly consolidated bookings were $492.2 million, producing a 1.1 to 1.0 book-to-bill ratio, and last-twelve-month bookings were $1.990 billion with a 1.3 to 1.0 book-to-bill ratio. Consolidated backlog was $2.084 billion at June 28, 2026, compared with $2.051 billion at March 29, 2026. The bid and proposal pipeline increased to $15.0 billion from $14.3 billion over the same dates, while funded backlog was $1.572 billion and unfunded backlog was $512.7 million.
Cash generation was constrained by growth and investment requirements. Cash Flow Used in Operations was $11.0 million, primarily tied to receivables, inventory ramps and development initiatives. Free Cash Flow Used in Operations was $18.9 million after $17.2 million of capital expenditures and net cash received of $9.3 million from the sale of company-owned Valkyries. Management said continuing investments in production capacity, staffing, inventory, facilities and new-program opportunities are adversely impacting profit margins and free cash flow generation.
Management increased FY26 revenue guidance to $1,750 - $1,810 and forecast full-year organic revenue growth of approximately 18 percent to 23 percent. It provided initial Q326 revenue guidance of $460 - $480, R&D guidance of $13 - $15 and Operating Income guidance of $1 - $4. The company forecast EBITDA-margin expansion in the second half of 2026 and into 2027, supported by scale and fixed-cost leverage, while flagging potential supply-chain disruptions, parts shortages, cost increases and adverse profitability effects in Israel operations from the strength of the Shekel.
Management, verbatim
Kratos’ second quarter results are reflective of the execution of the Kratos team and that our strategy, including making internally funded investments to be first-to-market with relevant hardware and software, that is engineered up front for affordable mass production, at scale, is aligned with the Department of War’s priorities.
Eric DeMarco, President and CEO
Kratos’ second quarter year over year organic growth rate was 19.1 percent, we are now forecasting third quarter organic growth of approximately 19 percent to 25 percent, and for fourth quarter organic growth of approximately 19 percent to 31 percent.
Eric DeMarco, President and CEO
Kratos’ EBITDA margins are also increasing, and are forecast to continue to increase in the second half of 2026 and into 2027, as the business scales, production increases and we realize financial leverage on our fixed cost infrastructure.
Eric DeMarco, President and CEO
Not in the filing
stated, not guessed- Gross profit and gross margin
- Consolidated operating income for the second quarter of 2025
- Prior-year consolidated Adjusted EBITDA
- Diluted share count
- Tax rate
- Cash balance
- Debt balance
- Capital returns, including share repurchases and dividends
- Prior guidance, so no comparison with reported results can be made
- Guidance table entries following FY26 Depreciation were not included in the supplied filing text
- Quarter-over-quarter revenue, earnings, EPS and segment comparisons
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
This is an SEC 8-K (Item 2.02) with Kratos’ Q2 2026 financial results and updated full-year 2026 revenue guidance.
Ticker impact
Kratos reported Q2 2026 results and raised full-year 2026 revenue guidance to $1.750 to $1.810 billion with 18% to 23% organic growth forecast.
Likely positive bias for KTOS shares on guidance and bookings strength, with follow-through dependent on investor focus on free cash flow and operating loss normalization.
The filing discloses multiple decision-relevant datapoints: Q2 revenue growth, adjusted EPS, consolidated bookings and backlog, and an explicit full-year revenue guidance increase. However, it also shows cash used in operations and an operating loss, which can limit upside if the market prioritizes cash generation.
Market effects
Defense and national security contractors may see read-across demand signals from Kratos’ bookings, bid pipeline, and segment organic growth.
Limited direct regional impact; primarily US defense procurement sentiment.
Modest global relevance given Kratos’ US-focused government solutions and backlog visibility.
Counterpoint
The operating loss and free cash flow used in operations suggest earnings quality risk, so the guidance raise may not translate into near-term stock rerating if cash conversion disappoints.
Key entities
- companyKratos Defense & Security Solutions, Inc.
Subject of the filing, reporting Q2 2026 results and raising FY 2026 revenue guidance.
- executiveEric DeMarco
CEO quoted on strategy alignment, bid pipeline, and expected acceleration in H2 2026 and into 2027.
