Kratos Raises Outlook as Government Solutions Accelerates
The defense technology company lifted its 2026 revenue forecast by $50 million at both ends.
Kratos Defense & Security Solutions (KTOS) reported a 30.5% rise in second-quarter revenue as faster Government Solutions growth outweighed a sharp slowdown in Unmanned Systems.
Revenue reached $458.8 million, up from $371.0 million in the first quarter, while organic growth accelerated to 19.1% from 15.8%. Adjusted earnings increased to $0.21 a share from $0.11 a year earlier and $0.16 in the prior quarter.
Government Solutions supplied most of the momentum. Segment revenue rose 36.4% from a year earlier to $379.7 million, including 22.0% organic growth, and increased 31.7% sequentially. Organic growth accelerated in Defense Rocket Systems, Turbine Technologies and Microwave Products.
Unmanned Systems revenue increased 8.1% from a year earlier to $79.1 million, slowing from 30.9% growth in the first quarter and declining 4.2% sequentially. Kratos raised its full-year organic-growth forecast to about 18% to 23% and projected roughly 10% organic growth for Unmanned Systems, supported by recent awards including Valkyrie.
The faster sales pace came with near-term expense pressure. Adjusted EBITDA rose 35.0% from a year earlier to $38.2 million but slipped from $38.7 million in the first quarter, reducing the implied adjusted EBITDA margin to about 8.3% from 10.4%. Higher selling, general and administrative, research and development, acquisition and amortization expenses contributed to a $1.6 million operating loss.
Kratos raised its full-year revenue guidance to $1.750 billion to $1.810 billion and lifted the lower end of its adjusted EBITDA outlook, producing a range of $173 million to $176 million. The company expects second-half revenue, adjusted EBITDA and margins to exceed first-half levels, with the full-year adjusted EBITDA margin improving about 100 basis points from 2025.
Backlog increased 1.6% from the prior quarter to $2.084 billion even as quarterly bookings and book-to-bill declined. Planned production expansion, including capacity for 3,000 jet engines in 2027 and about 40 Valkyries annually by early 2028, contributed to a forecast of $250 million to $275 million in 2026 investments.