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Kratos Defense's Q3 earnings beat estimates by 14.3%, while revenues rose 35.7% but missed forecasts.
KTOS' Government Solutions revenues jumped 52.5%, while Unmanned Systems sales declined 14.4%.
Kratos Defense's backlog reached $2.65B on strong bookings, while management raised its 2026 EBITDA outlook.
Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) reported third-quarter 2026 adjusted earnings of 24 cents per share, which beat the Zacks Consensus Estimate of 21 cents by 14.3%. The bottom line also increased 71.4% from the year-ago quarter’s 14 cents.
KTOS’ Revenue Growth Accelerates
Revenues of $471.8 million missed the consensus estimate of $474 million by 0.4% but rose 35.7% year over year. Kratos Government Solutions led the growth, while total organic revenues advanced 23.2%.
Product sales climbed 28.1% year over year to $294.9 million. Service revenues increased 50.7% to $176.9 million.
Kratos Defense & Security Solutions, Inc. Price, Consensus and EPS Surprise
Selling, general and administrative expenses jumped 44.6% to $78.8 million. Research and development expenses rose 50% to $15 million.
Amortization of intangible assets increased to $11 million from $2.4 million, while depreciation rose to $5.2 million from $2.9 million.
Kratos recorded an operating loss of $4.9 million against operating income of $7.1 million a year earlier.
KTOS’ Segmental Performance
Unmanned Systems: Revenues from this segment totaled $74.6 million compared with $87.2 million in the year-ago quarter, reflecting a decline of 14.4%. The decrease was primarily driven by $16.1 million of Valkyrie shipments to an international customer in the prior-year quarter.
Kratos Government Solutions: Revenues from this segment amounted to $397.2 million compared with $260.4 million in the year-ago quarter, reflecting an increase of 52.5%. This rise was driven by organic revenue growth across its Defense and Rocket Support business, Turbine Technologies, Microwave Products and Space, Training and Cyber businesses, with organic revenue growth rates of 149%, 27.1%, 16.6% and 11.6%, respectively, year over year.
Financial Details of KTOS
As of Sept. 27, 2026, cash and cash equivalents totaled $1.40 billion, up from $560.6 million as of Dec. 28, 2025.
The company reported other current liabilities of $24.2 million as of Sept. 27, 2026 compared with $9 million recorded as of Dec. 28, 2025.
The net cash used in operating activities amounted to $43.6 million during the first nine months of 2026 compared with $54.2 million in the same period of 2025.
KTOS’ Backlog Supports Demand Visibility
Consolidated bookings totaled $1.04 billion in the third quarter, resulting in a book-to-bill ratio of 2.2. The last-12-month book-to-bill ratio was 1.6, with bookings of $2.61 billion.
Backlog increased to $2.65 billion as of Sept. 27, 2026 from $2.08 billion at the end of the second quarter. Funded backlog was $2.07 billion, while unfunded backlog totaled $582.9 million. The bid and proposal pipeline expanded to $15.5 billion from $15 billion, reflecting increased opportunities in the space, training and hypersonic businesses.
Kratos Defense Raises 2026 Guidance
For the fourth quarter of 2026, Kratos expects revenues of $480-$510 million. The Zacks Consensus Estimate for revenues is pegged at $498 million, which is higher than the midpoint of the company’s guided range.
KTOS expects adjusted EBITDA of $48-$52 million. Operating income is projected between $1 million and $4 million.
Management tightened its full-year 2026 revenue guidance to $1.78-$1.81 billion. The Zacks Consensus Estimate for revenues is pegged at $1.8 billion, which is just higher than the midpoint of the company’s guided range.
The company raised adjusted EBITDA expectations to $176-$180 million. Operating cash flow is projected between a $10 million outflow and a $10 million inflow, while free cash flow usage is expected at $110-$120 million.
For 2027, revenues are forecast between $2.10 billion and $2.20 billion, with adjusted EBITDA of $230-$240 million. Management expects the first quarter to be the weakest because of continued federal budget funding restrictions, with stronger performance anticipated during the second half of 2027.
RTX Corporation’s (RTX - Free Report) third-quarter 2026 adjusted earnings per share (EPS) of $2.26 beat the Zacks Consensus Estimate of $1.78 by 27%. The bottom line improved 32.9% from the year-ago quarter’s level of $1.70.
Revenues rose 11.1% year over year to $24.97 billion and topped the consensus mark of $24.01 billion by 4%.
Northrop Grumman Corporation (NOC - Free Report) reported third-quarter 2026 adjusted earnings of $7.89 per share, which beat the Zacks Consensus Estimate of $7.22 by 9.3%. The bottom line also increased 2.9% from the year-ago quarter’s level of $7.67.
NOC’s total sales of $11.12 billion in the third quarter outpaced the Zacks Consensus Estimate of $11.06 billion by 0.6%. The top line also improved 6.7% from $10.42 billion reported in the year-ago quarter.
Textron Inc. (TXT - Free Report) reported third-quarter 2026 adjusted earnings of $1.76 per share, which surpassed the Zacks Consensus Estimate of $1.43 by 23.1%. The bottom line also rose 13.5% from $1.55 in the year-ago quarter.
The company reported total revenues of $3.75 billion, which missed the Zacks Consensus Estimate of $3.76 billion by 0.2%. However, the top line increased 4.1% from the year-ago quarter’s level of $3.6 billion.
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Kratos Defense Q3 Earnings Outpace Estimates, Revenues Increase Y/Y
Key Takeaways
Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) reported third-quarter 2026 adjusted earnings of 24 cents per share, which beat the Zacks Consensus Estimate of 21 cents by 14.3%. The bottom line also increased 71.4% from the year-ago quarter’s 14 cents.
KTOS’ Revenue Growth Accelerates
Revenues of $471.8 million missed the consensus estimate of $474 million by 0.4% but rose 35.7% year over year. Kratos Government Solutions led the growth, while total organic revenues advanced 23.2%.
Product sales climbed 28.1% year over year to $294.9 million. Service revenues increased 50.7% to $176.9 million.
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
Operational Update of Kratos Defense
Selling, general and administrative expenses jumped 44.6% to $78.8 million. Research and development expenses rose 50% to $15 million.
Amortization of intangible assets increased to $11 million from $2.4 million, while depreciation rose to $5.2 million from $2.9 million.
Kratos recorded an operating loss of $4.9 million against operating income of $7.1 million a year earlier.
KTOS’ Segmental Performance
Unmanned Systems: Revenues from this segment totaled $74.6 million compared with $87.2 million in the year-ago quarter, reflecting a decline of 14.4%. The decrease was primarily driven by $16.1 million of Valkyrie shipments to an international customer in the prior-year quarter.
Kratos Government Solutions: Revenues from this segment amounted to $397.2 million compared with $260.4 million in the year-ago quarter, reflecting an increase of 52.5%. This rise was driven by organic revenue growth across its Defense and Rocket Support business, Turbine Technologies, Microwave Products and Space, Training and Cyber businesses, with organic revenue growth rates of 149%, 27.1%, 16.6% and 11.6%, respectively, year over year.
Financial Details of KTOS
As of Sept. 27, 2026, cash and cash equivalents totaled $1.40 billion, up from $560.6 million as of Dec. 28, 2025.
The company reported other current liabilities of $24.2 million as of Sept. 27, 2026 compared with $9 million recorded as of Dec. 28, 2025.
The net cash used in operating activities amounted to $43.6 million during the first nine months of 2026 compared with $54.2 million in the same period of 2025.
KTOS’ Backlog Supports Demand Visibility
Consolidated bookings totaled $1.04 billion in the third quarter, resulting in a book-to-bill ratio of 2.2. The last-12-month book-to-bill ratio was 1.6, with bookings of $2.61 billion.
Backlog increased to $2.65 billion as of Sept. 27, 2026 from $2.08 billion at the end of the second quarter. Funded backlog was $2.07 billion, while unfunded backlog totaled $582.9 million. The bid and proposal pipeline expanded to $15.5 billion from $15 billion, reflecting increased opportunities in the space, training and hypersonic businesses.
Kratos Defense Raises 2026 Guidance
For the fourth quarter of 2026, Kratos expects revenues of $480-$510 million. The Zacks Consensus Estimate for revenues is pegged at $498 million, which is higher than the midpoint of the company’s guided range.
KTOS expects adjusted EBITDA of $48-$52 million. Operating income is projected between $1 million and $4 million.
Management tightened its full-year 2026 revenue guidance to $1.78-$1.81 billion. The Zacks Consensus Estimate for revenues is pegged at $1.8 billion, which is just higher than the midpoint of the company’s guided range.
The company raised adjusted EBITDA expectations to $176-$180 million. Operating cash flow is projected between a $10 million outflow and a $10 million inflow, while free cash flow usage is expected at $110-$120 million.
For 2027, revenues are forecast between $2.10 billion and $2.20 billion, with adjusted EBITDA of $230-$240 million. Management expects the first quarter to be the weakest because of continued federal budget funding restrictions, with stronger performance anticipated during the second half of 2027.
KTOS’ Zacks Rank
Kratos Defense currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Defense Releases
RTX Corporation’s (RTX - Free Report) third-quarter 2026 adjusted earnings per share (EPS) of $2.26 beat the Zacks Consensus Estimate of $1.78 by 27%. The bottom line improved 32.9% from the year-ago quarter’s level of $1.70.
Revenues rose 11.1% year over year to $24.97 billion and topped the consensus mark of $24.01 billion by 4%.
Northrop Grumman Corporation (NOC - Free Report) reported third-quarter 2026 adjusted earnings of $7.89 per share, which beat the Zacks Consensus Estimate of $7.22 by 9.3%. The bottom line also increased 2.9% from the year-ago quarter’s level of $7.67.
NOC’s total sales of $11.12 billion in the third quarter outpaced the Zacks Consensus Estimate of $11.06 billion by 0.6%. The top line also improved 6.7% from $10.42 billion reported in the year-ago quarter.
Textron Inc. (TXT - Free Report) reported third-quarter 2026 adjusted earnings of $1.76 per share, which surpassed the Zacks Consensus Estimate of $1.43 by 23.1%. The bottom line also rose 13.5% from $1.55 in the year-ago quarter.
The company reported total revenues of $3.75 billion, which missed the Zacks Consensus Estimate of $3.76 billion by 0.2%. However, the top line increased 4.1% from the year-ago quarter’s level of $3.6 billion.