10-Q · May 6, 2026
Kratos Defense & Security Solutions (KTOS) reported a strong first quarter for 2026 with revenues of $371 million, representing a 22.6% increase year-over-year and exceeding estimates by 7.65%. Diluted EPS was reported…
Earnings analysis · 10-Q
KTOS earnings analysis
Filed August 4, 2026 · Our reading of the company's report
The latest report
Kratos delivered Q2 revenue of $458.8 million, up 30.5% year over year and 23.7% sequentially, with KGS growth of 36.4% the principal driver. Gross margin improved 80 basis points year over year to 21.8%, but elevated…
Read full summary
Kratos delivered Q2 revenue of $458.8 million, up 30.5% year over year and 23.7% sequentially, with KGS growth of 36.4% the principal driver. Gross margin improved 80 basis points year over year to 21.8%, but elevated SG&A and R&D produced an approximately 0.2% operating loss; GAAP diluted EPS was $0.02, flat year over year and down from $0.07 in Q1 2026. The balance sheet is exceptionally liquid at $1.438 billion of cash and zero long-term debt, though cash deployment remains substantial as first-half operating cash flow was negative $38.4 million and management outlined significant 2026 investment requirements.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $0.02
What stood out
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Revenue growth accelerated to 30.5%
Q2 revenue rose $107.3 million, or 30.5% year over year, to $458.8 million. It also increased $87.8 million, or 23.7%, from Q1 2026 revenue of $371.0 million.
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KGS led growth with $101.4M increase
KGS revenue increased $101.4 million, or 36.4%, to $379.7 million, driven by hypersonic-related Defense Rocket Support activity and $18.8 million and $21.4 million of quarterly revenue from Nomad and Orbit, respectively.
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Unmanned Systems returned to growth
Unmanned Systems revenue increased $5.9 million, or 8.1%, to $79.1 million, primarily reflecting Valkyrie aircraft-related production.
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Year-over-year gross-margin expansion
Gross margin improved 80 basis points year over year to 21.8%, with KGS margin rising 60 basis points to 22.9% and US margin rising 90 basis points to 16.7%.
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Backlog increased to $2.084B
Backlog reached $2.084 billion, including $1.572 billion funded, versus $1.414 billion total and $1.125 billion funded a year earlier. Acquisitions contributed approximately $243.4 million to the backlog increase.
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Large net-cash liquidity position
Liquidity was strengthened by $1.438 billion of cash and cash equivalents and zero long-term debt; the company also had a $300.0 million undrawn revolver, less $2.1 million in domestic letters of credit.
What to watch
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Revenue growth did not translate to operating profit
Operating margin was approximately negative 0.2% in Q2: $100.1 million of gross profit was more than offset by $87.3 million of SG&A and $13.6 million of R&D. SG&A rose $27.4 million year over year and increased to 19.0% of revenue from 17.0%.
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Working-capital investment pressures cash flow
Operating cash flow used $38.4 million in the first six months, while capital expenditures were $37.1 million. Working-capital changes consumed $134.2 million, including approximately $36.6 million related to prepaid expenses and other assets.
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Investment program raises execution needs
Management expects fiscal-2026 capital expenditures of approximately $35-$40 million and approximately $50 million of 2026 funding for the Prometheus venture. These commitments follow $346.8 million of acquisition payments during the first six months.
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No risk-factor update; backlog conversion remains uncertain
The filing states there were no material changes to previously disclosed risk factors. Nonetheless, only approximately 35% of the $2.084 billion backlog is expected to convert in fiscal 2026, and government contracts may be cancelled or adjusted.
Management's outlook
The 10-Q does not provide numeric revenue or EPS guidance. Embedded outlook: approximately 35% of the $2.084 billion backlog is expected to convert to fiscal 2026 revenue; fiscal-2026 capex is expected to be approximately $35-$40 million, including approximately $25-$30 million for capital aerial drones and support equipment, and the company expects to fund approximately $50 million to the Prometheus joint venture during 2026.
Earlier filings 4
10-K · February 23, 2026
Kratos (KTOS) reports revenue momentum with total 2025 revenue of $1,348.0M (sum of quarterly results) versus $1,136.0M in 2024, driven by its two reportable segments (KGS and Unmanned Systems) and continued internally…
10-Q · November 7, 2024
Revenue was essentially flat at $275.9 million for the quarter (up $1.3M vs $274.6M prior year). Operating profitability weakened as gross profit fell to $69.2 million and operating income declined to $6.5 million,…
10-Q · August 7, 2024
Kratos reported Q2 revenue of $300.1M (up $43.2M vs $256.9M a year ago) with gross profit of $77.2M (25.7% margin) and operating income of $12.5M (4.2% margin), producing GAAP diluted EPS of $0.05. The company…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.