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Ondas vs. Kratos: Which Drone Stock Is the Better Pick for Now?
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Key Takeaways
Kratos benefits from Valkyrie CCA programs and key defense partnerships, boosting its drone business.
Ondas posted over 600% revenue growth but faces integration risks from multiple acquisitions.
Kratos is scaling production and diversifying, while Ondas' profitability timeline stretches to 2028.
The global drone industry has reached a pivotal growth phase, driven by broad adoption across the commercial, government and military sectors. According to a report from Mordor Intelligence, the global drone tech market is expected to witness a CAGR of 9.3% from 2026 to 2031. The convergence of drones with artificial intelligence, cloud computing and edge processing is further driving adoption across verticals.
Ondas Inc. (ONDS - Free Report) and Kratos Defense & Security Solutions (KTOS - Free Report) both operate in the defense and unmanned systems domain, but from very different positions in terms of scale and maturity.
But for investors seeking exposure to this theme, the key question remains: which stock offers the better opportunity right now?
Let us do a deep dive into the companies’ competitive dynamics to understand which is better positioned in the industry.
ONDS: Plenty of Challenges
Ondas entered 2026 following a transformational year marked by a pivot to autonomous systems, aggressive portfolio expansion and platform scaling. At the core of this transformation is Ondas Autonomous Systems (“OAS”), which has quickly become a multi-domain autonomy platform spanning Intelligence, Surveillance, Reconnaissance or ISR, Counter-UAS, loitering munitions/strike systems, unmanned ground vehicles and stratospheric sensing via World View acquisition.
Revenues surged 629% for the fourth quarter of 2025, while full-year revenues were up 605% to $50.7 million. Building on this momentum, management raised its 2026 revenue outlook to at least $375 million, from an earlier target of $170-$180 million.
ONDS’ bullish guidance for 2026 is anchored mostly by its inorganic efforts. The company expects the five acquisitions announced in the first quarter of 2026 to add $230 million to revenues. This is a little problematic as so many acquisitions in such a short period can create integration overload and execution risks, as achieving targets depends on timely integration and conversion of backlog into revenues. Moreover, revenues from Ondas Networks are expected to remain modest due to uncertain rail network buildout timelines.
Substantial losses remain concerning. In the fourth quarter of 2025, operating expenses increased to $36.1 million, up from $9.4 million in the prior-year quarter, mainly driven by M&A activity, infrastructure investments and higher personnel costs. As a result, adjusted EBITDA loss widened to $9.9 million compared with a loss of $7 million in the year-ago quarter. Net loss was $101 million for the fourth quarter and $133.4 million for the full year.
Ondas Holdings Inc. Price, Consensus and EPS Surprise
Adjusted EBITDA losses are expected to widen in the first quarter due to higher operating expenses, including increased leadership hiring and marketing investments to support rapid growth. Ondas expects EBITDA margins to improve over the year and product-level profitability by the third quarter of 2026. However, OAS profitability is expected by the third quarter of 2027, and more importantly, company-wide profitability only by the first quarter of 2028.
Also, the path to profitability remains heavily dependent on flawless execution. Any delays in integration and order conversion could push the profitability timeline further out. Increasing competition in the already crowded drone space is another headwind.
KTOS: Established Player in the Drone Space
The broader demand backdrop strongly supports sustained growth in Kratos’ drone business. At the heart of this business lies the XQ-58A Valkyrie combat collaborative aircraft (“CCA”), which has secured a key role in the U.S. defense ecosystem. Northrop Grumman, a KTOS partner, received the $230 million MUX TACAIR CCA program award, which will be split equally with Kratos.
For this program, Northrop will equip its mission systems with Kratos Valkyrie CCA, validating Valkyrie’s operational relevance. KTOS is also working with Airbus to deliver a UCCA offering (Valkyrie + Airbus’ MARS mission system) for the German Air Force.
KTOS is scaling its Valkyrie production capacity, aiming to produce 40 aircraft per year by 2028, up from eight at present. Management further added that future production quantities and delivery schedules with clients are expected to be “definitized” by late 2026 or early 2027, likely tied to 2027 federal U.S. defense appropriations approvals.
Programs such as the Drone Dominance initiative (part of a $1 billion DoW effort) and international efforts like the Mighty Hornet Tactical Firejet CCA program in Taiwan, which targets high-volume deployment, further expand Kratos’ pipeline and reinforce its positioning in both domestic and allied markets.
Kratos Defense & Security Solutions, Inc. Price, Consensus and EPS Surprise
Beyond drones, it is also expanding into other high-growth areas, including space and satellite software, hypersonics and microwave electronics, diversifying revenue streams.
That said, Kratos is not without challenges. Aggressive expansion across multiple domains brings along operational and execution risks. Heavy dependence on government contracts and volatile macroeconomic conditions, including supply-chain disruptions, remains concerning. KTOS expects organic growth in the first quarter of 2026 to be between 7.5% and 9.5% year over year. In comparison, organic growth was 20% year over year in the fourth quarter of 2025. This is mainly due to the impact of the extended U.S. federal government shutdown.
Increasing costs and capital expenditures could impede profitability and cash conversion. Kratos is experiencing higher material and subcontractor costs on some multiyear fixed-price contracts, particularly in its unmanned systems target drone business. These higher costs are expected to continue into 2026 and are already reflected in guidance. Kratos expects capital expenditures of $135 million to $145 million for 2026 as it ramps up investment. This could weigh on the near-term cash generation.
Price Performance & Valuation for ONDS & KTOS
Over the past month, ONDS has inched up 0.4% while KTOS is down 18.1%.
Image Source: Zacks Investment Research
In terms of the forward 12-month price-to-sales ratio, ONDS trades at 10.96X, higher than KTOS’ 7.22X.
Image Source: Zacks Investment Research
How Do Estimates Compare for ONDS & KTOS?
For ONDS, earnings estimates for the current year have improved in the past 60 days.
Image Source: Zacks Investment Research
For KTOS, earnings estimates have been up 4.1% over the same time frame.
Image Source: Zacks Investment Research
ONDS or KTOS: Which Is a Better Pick?
KTOS carries a Zacks Rank #3 (Hold), while ONDS has a Zacks Rank #5 (Strong Sell) at present.
In terms of the Zacks Rank, KTOS emerges as the better pick at present.
View the Zacks #1 Rank List
Image: Bigstock
Ondas vs. Kratos: Which Drone Stock Is the Better Pick for Now?
Key Takeaways
The global drone industry has reached a pivotal growth phase, driven by broad adoption across the commercial, government and military sectors. According to a report from Mordor Intelligence, the global drone tech market is expected to witness a CAGR of 9.3% from 2026 to 2031. The convergence of drones with artificial intelligence, cloud computing and edge processing is further driving adoption across verticals.
Ondas Inc. (ONDS - Free Report) and Kratos Defense & Security Solutions (KTOS - Free Report) both operate in the defense and unmanned systems domain, but from very different positions in terms of scale and maturity.
But for investors seeking exposure to this theme, the key question remains: which stock offers the better opportunity right now?
Let us do a deep dive into the companies’ competitive dynamics to understand which is better positioned in the industry.
ONDS: Plenty of Challenges
Ondas entered 2026 following a transformational year marked by a pivot to autonomous systems, aggressive portfolio expansion and platform scaling. At the core of this transformation is Ondas Autonomous Systems (“OAS”), which has quickly become a multi-domain autonomy platform spanning Intelligence, Surveillance, Reconnaissance or ISR, Counter-UAS, loitering munitions/strike systems, unmanned ground vehicles and stratospheric sensing via World View acquisition.
Revenues surged 629% for the fourth quarter of 2025, while full-year revenues were up 605% to $50.7 million. Building on this momentum, management raised its 2026 revenue outlook to at least $375 million, from an earlier target of $170-$180 million.
ONDS’ bullish guidance for 2026 is anchored mostly by its inorganic efforts. The company expects the five acquisitions announced in the first quarter of 2026 to add $230 million to revenues. This is a little problematic as so many acquisitions in such a short period can create integration overload and execution risks, as achieving targets depends on timely integration and conversion of backlog into revenues. Moreover, revenues from Ondas Networks are expected to remain modest due to uncertain rail network buildout timelines.
Substantial losses remain concerning. In the fourth quarter of 2025, operating expenses increased to $36.1 million, up from $9.4 million in the prior-year quarter, mainly driven by M&A activity, infrastructure investments and higher personnel costs. As a result, adjusted EBITDA loss widened to $9.9 million compared with a loss of $7 million in the year-ago quarter. Net loss was $101 million for the fourth quarter and $133.4 million for the full year.
Ondas Holdings Inc. Price, Consensus and EPS Surprise
Ondas Holdings Inc. price-consensus-eps-surprise-chart | Ondas Holdings Inc. Quote
Adjusted EBITDA losses are expected to widen in the first quarter due to higher operating expenses, including increased leadership hiring and marketing investments to support rapid growth. Ondas expects EBITDA margins to improve over the year and product-level profitability by the third quarter of 2026. However, OAS profitability is expected by the third quarter of 2027, and more importantly, company-wide profitability only by the first quarter of 2028.
Also, the path to profitability remains heavily dependent on flawless execution. Any delays in integration and order conversion could push the profitability timeline further out. Increasing competition in the already crowded drone space is another headwind.
KTOS: Established Player in the Drone Space
The broader demand backdrop strongly supports sustained growth in Kratos’ drone business. At the heart of this business lies the XQ-58A Valkyrie combat collaborative aircraft (“CCA”), which has secured a key role in the U.S. defense ecosystem. Northrop Grumman, a KTOS partner, received the $230 million MUX TACAIR CCA program award, which will be split equally with Kratos.
For this program, Northrop will equip its mission systems with Kratos Valkyrie CCA, validating Valkyrie’s operational relevance. KTOS is also working with Airbus to deliver a UCCA offering (Valkyrie + Airbus’ MARS mission system) for the German Air Force.
KTOS is scaling its Valkyrie production capacity, aiming to produce 40 aircraft per year by 2028, up from eight at present. Management further added that future production quantities and delivery schedules with clients are expected to be “definitized” by late 2026 or early 2027, likely tied to 2027 federal U.S. defense appropriations approvals.
Programs such as the Drone Dominance initiative (part of a $1 billion DoW effort) and international efforts like the Mighty Hornet Tactical Firejet CCA program in Taiwan, which targets high-volume deployment, further expand Kratos’ pipeline and reinforce its positioning in both domestic and allied markets.
Kratos Defense & Security Solutions, Inc. Price, Consensus and EPS Surprise
Kratos Defense & Security Solutions, Inc. price-consensus-eps-surprise-chart | Kratos Defense & Security Solutions, Inc. Quote
Beyond drones, it is also expanding into other high-growth areas, including space and satellite software, hypersonics and microwave electronics, diversifying revenue streams.
That said, Kratos is not without challenges. Aggressive expansion across multiple domains brings along operational and execution risks. Heavy dependence on government contracts and volatile macroeconomic conditions, including supply-chain disruptions, remains concerning. KTOS expects organic growth in the first quarter of 2026 to be between 7.5% and 9.5% year over year. In comparison, organic growth was 20% year over year in the fourth quarter of 2025. This is mainly due to the impact of the extended U.S. federal government shutdown.
Increasing costs and capital expenditures could impede profitability and cash conversion. Kratos is experiencing higher material and subcontractor costs on some multiyear fixed-price contracts, particularly in its unmanned systems target drone business. These higher costs are expected to continue into 2026 and are already reflected in guidance. Kratos expects capital expenditures of $135 million to $145 million for 2026 as it ramps up investment. This could weigh on the near-term cash generation.
Price Performance & Valuation for ONDS & KTOS
Over the past month, ONDS has inched up 0.4% while KTOS is down 18.1%.
Image Source: Zacks Investment Research
In terms of the forward 12-month price-to-sales ratio, ONDS trades at 10.96X, higher than KTOS’ 7.22X.
Image Source: Zacks Investment Research
How Do Estimates Compare for ONDS & KTOS?
For ONDS, earnings estimates for the current year have improved in the past 60 days.
Image Source: Zacks Investment Research
For KTOS, earnings estimates have been up 4.1% over the same time frame.
Image Source: Zacks Investment Research
ONDS or KTOS: Which Is a Better Pick?
KTOS carries a Zacks Rank #3 (Hold), while ONDS has a Zacks Rank #5 (Strong Sell) at present.
In terms of the Zacks Rank, KTOS emerges as the better pick at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.