KTOS earnings analysis
What we found in KTOS's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
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.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- 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.
- 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.
- 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.
- 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%.
- 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.
- 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.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- 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%.
- 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.
- 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.
- 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.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $0.02
- Gross margin
- 21.8%
- Operating margin
- -0.2%
- Segment
- Kratos Government Solutions (KGS): $379.7 million, up $101.4 million or 36.4% year over year.
- Segment
- Unmanned Systems (US): $79.1 million, up $5.9 million or 8.1% year over year.
What they said about what is next.
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.
The filing reads better than the one before it.
What came before.
- 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…
- 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. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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