Key Stats for Kratos Defense Stock
- 2025 Price Change for Kratos Defense stock: 190%
- $KTOS Share Price as of Dec. 31: $77
- 52-Week High: $113
- $KTOS Stock Price Target: $100
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What Happened?
Kratos (KTOS) stock delivered extraordinary returns in 2025, surging 190% as the defense contractor capitalized on a perfect storm of contract wins, technological breakthroughs, and explosive demand for affordable military systems.
The company has transformed from a niche supplier of target drones into a diversified defense technology powerhouse, positioning itself at the center of America’s military modernization.
The KTOS stock rally gained serious momentum after Kratos announced multiple major program wins throughout the year.
- In January 2025, the company secured a massive $1.45 billion contract for the Multi-Service Advanced Capability Hypersonic Test Bed (MACH-TB) 2.0 program, the single-largest award in the company’s history. That contract alone validated Kratos as a serious player in the hypersonics race.
- In October, Kratos unveiled its Ragnarök Low-Cost Cruise Missile system, a $150,000 strike weapon specifically designed to be carried by the company’s Valkyrie drone.
- The same month, Kratos won a Phase 1 contract to develop sustainment capabilities for the Navy’s AN/SPY-1 radar systems through a new facility called Anaconda.
- Then came another major announcement: Kratos secured the Helios contract to build and operate a next-generation hypersonic materials testing center.
CEO Eric DeMarco made it clear on the latest earnings call that momentum is accelerating. The company reported Q3 revenues of $347.6 million, well above the expected range of $315-$325 million.
Management raised full-year 2025 organic growth guidance to 14-15%, up from the original 11-13% forecast. More impressively, Kratos now expects 15-20% organic growth in 2026 and an additional 18-23% in 2027.
KTOS stock also jumped on news that Kratos’ Valkyrie drone would become a program of record with the Marines under the MUX TACAIR program. Valkyrie, which has been flying since 2019, represents exactly what the military wants: an affordable, combat-capable drone that can be produced in mass quantities.
DeMarco emphasized that Valkyrie systems will include both rocket-assisted takeoff and conventional configurations, with pricing that enables deployment in “very high quantities.”
The international opportunity is expanding rapidly too. Airbus partnered with Kratos to develop a German variant of Valkyrie for the European market. In Q3, Kratos shipped the first two Valkyries to Airbus under this new arrangement.
With European nations dramatically increasing defense spending following the Ukraine conflict, the addressable market for affordable tactical drones has exploded.
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What the Market Is Telling Us About KTOS Stock
The market is rewarding KTOS stock for executing a clear strategy: be first to market with affordable, production-ready systems while competitors are still doing PowerPoint presentations.
DeMarco hammered this point repeatedly, noting that Kratos has actual flying aircraft customers can see and touch, not development programs requiring hundreds of millions more in investment.
The company’s backlog reached $1.41 billion by the end of Q3, reflecting strong demand across multiple product lines.
Kratos expects to convert roughly 36% of that backlog into revenue during 2025, with another 37% in 2026. That provides substantial visibility into future growth.
What’s particularly compelling about KTOS stock is the diversification happening beneath the surface. While drones grab headlines, Kratos is building multiple franchise businesses.
The hypersonics segment is exploding, driven by programs like MACH-TB and the company’s Zeus solid rocket motors. DeMarco believes the rocket systems business could become the company’s largest division within 2-3 years, potentially surpassing even the space segment.
The jet engine business represents another major growth driver. Kratos Turbine Technologies is designed into multiple low-cost cruise missile and drone programs.
Management expects to receive two initial turbojet engine production contracts in Q2-Q3 2026. At roughly $30,000- $50,000 per engine, reaching 1,000 engines annually would represent significant revenue.
Management projects approximately 100 basis points of EBITDA margin expansion in both 2026 and 2027 as the company scales and transitions to more profitable production contracts. Current margins are being suppressed by heavy bid and proposal costs, but those investments are generating the contract wins driving future growth.
There are risks investors need to consider. Kratos remains unprofitable on a GAAP basis and continues burning cash as it invests in new facilities and capacity expansion.
Free cash flow was negative $41.3 million in Q3. Management has visibility into when cash flow turns positive, but acknowledged that the timeline could extend if new opportunities continue to materialize.
The company also faces margin pressure from specific multi-year fixed-price drone-contract targets, where material costs have increased. Those contracts won’t be renegotiated until they expire in roughly 2 years, which will create a drag on near-term profitability.
Competition is intensifying too, with well-funded defense tech startups like Anduril and Shield AI raising billions to develop competing systems. However, Kratos’ first-mover advantage with production-ready platforms provides meaningful differentiation.
Looking ahead, the Trump administration’s announced changes to the Missile Technology Control Regime (MTCR) could significantly benefit Kratos by easing international sales of drones and missiles. DeMarco called this a “clear differentiator” that’s already helping with global initiatives.
The company also announced plans to acquire Orbit Communications for approximately $356 million. Orbit provides satellite-based communication systems for unmanned systems, perfectly complementing Kratos’ existing capabilities. Management expects the deal to be immediately accretive upon closing in Q1 2026.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
