TLDR
- Kratos Defense revenue climbs 31% as demand strengthens across major units.
- KTOS extends gains after earnings improve and full-year guidance moves higher.
- Valkyrie activity lifts unmanned systems revenue and operating performance.
- Government Solutions growth pushes total quarterly bookings beyond $492 million.
- Kratos raises its 2026 organic growth outlook as backlog tops $2.08 billion.
Kratos Defense (KTOS) stock extended its rally after the company reported strong second-quarter growth and improving defense demand. Shares closed 5.41% higher at $51.87, then added 0.52% after hours to $52.14. The results showed rising sales, stronger bookings, and renewed momentum across unmanned systems and government programs.
Kratos Defense & Security Solutions, Inc., KTOS
Kratos Defense Revenue Climbs 31% in Second Quarter
Kratos Defense reported second-quarter revenue of $458.8 million, up 30.5% from $351.5 million one year earlier. Broad growth across government and unmanned defense operations pushed organic revenue 19.1% higher. The company also generated adjusted EBITDA of $38.2 million during the quarter.
Kratos recorded net income of $4.4 million, compared with $2.9 million during the same period last year. Adjusted earnings reached $0.21 per share, nearly doubling from $0.11 per share in 2025. However, the company recorded a $1.6 million operating loss after research and non-cash expenses.
Stock compensation costs reached $16.3 million, while company-funded research spending totaled $13.6 million. Kratos also recorded $12.5 million in amortization expenses across its growing defense technology portfolio. These investments supported satellites, space systems, unmanned aircraft, and microwave electronics development.
Valkyrie Activity Supports Unmanned Systems Growth
The Unmanned Systems segment generated $79.1 million in revenue, rising from $73.2 million one year earlier. Valkyrie activity drove much of the increase and supported stronger operating performance during the quarter. Segment operating income improved to $1.2 million from a $300,000 loss last year.
Adjusted EBITDA for Unmanned Systems rose to $5.1 million from $3.6 million in 2025. The segment secured $78.4 million in quarterly bookings and maintained a 1.0 book-to-bill ratio. Its total backlog ended the quarter at $374.6 million, almost unchanged from the previous quarter.
Kratos also received $9.3 million from company-owned Valkyrie sales during the reporting period. Meanwhile, production ramps increased inventory and working capital needs across several active development programs. These pressures produced $11 million in operating cash outflow and $18.9 million in negative free cash flow.
Government Solutions Drives Backlog and Forecast Upgrade
The Government Solutions segment produced $379.7 million in revenue, up 36.4% from $278.3 million last year. Organic growth reached 22%, excluding revenue from the Nomad and Orbit acquisitions. Defense rockets, turbines, microwave products, space, training, and cyber operations led the expansion.
Defense and Rocket Support revenue grew 50.2%, while Turbine Technologies revenue increased 43.3%. Microwave Products advanced 29.5%, and Space, Training and Cyber revenue rose 8.7%. Higher sales volume lifted segment adjusted EBITDA to $33.1 million from $24.7 million.
Kratos ended the quarter with consolidated backlog of $2.084 billion and a $15 billion proposal pipeline. Quarterly bookings reached $492.2 million, while the twelve-month book-to-bill ratio stood at 1.3. Management raised its 2026 organic revenue growth forecast to between 18% and 23%.
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