Kratos (NASDAQ:KTOS) Delivers Impressive Q4 CY2025

Kratos (NASDAQ:KTOS) Delivers Impressive Q4 CY2025

Radek Strnad

Tue, February 24, 2026 at 6:30 AM GMT+9 6 min read

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KTOS -1.84%

Aerospace and defense company Kratos (NASDAQ:KTOS) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 21.9% year over year to $345.1 million. Revenue guidance for the full year exceeded analysts’ estimates, but next quarter’s guidance of $340 million was less impressive, coming in 0.7% below expectations. Its non-GAAP profit of $0.18 per share was 22.1% above analysts’ consensus estimates.

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Kratos (KTOS) Q4 CY2025 Highlights:

• Revenue: $345.1 million vs analyst estimates of $324.7 million (21.9% year-on-year growth, 6.3% beat)
• Adjusted EPS: $0.18 vs analyst estimates of $0.15 (22.1% beat)
• Adjusted EBITDA: $34.1 million vs analyst estimates of $31.78 million (9.9% margin, 7.3% beat)
• Revenue Guidance for Q1 CY2026 is $340 million at the midpoint, below analyst estimates of $342.4 million
• EBITDA guidance for the upcoming fiscal year 2026 is $162 million at the midpoint, above analyst estimates of $159.7 million
• Operating Margin: 2.4%, up from 1.1% in the same quarter last year
• Free Cash Flow was -$12.1 million, down from $32 million in the same quarter last year
• Organic Revenue rose 20% year over year (beat)
• Market Capitalization: $16.37 billion

Eric DeMarco, Kratos’ President and CEO, said, “We finished 2025 exceeding our financial objectives for the fourth quarter, generating approximately 20 percent Q4 year-over-year organic revenue growth, with a book-to-bill ratio of 1.3 to 1 on top of this 20 percent organic growth, a record backlog of $1.573 billion, and a record opportunity pipeline of $13.7 billion. The opportunity set for Kratos has never been stronger and continues to grow. Kratos is positioned to achieve our previously communicated 2026 and 2027 financial targets, and similar to 2025, we expect our business to accelerate throughout 2026, with increasing revenue volume and adjusted EBITDA margins, as several new programs, contracts, and initiatives begin, ramp up, and expand.”

Company Overview

Founded with a commitment to supporting national security, Kratos (NASDAQ:KTOS) provides advanced engineering, technology, and security solutions tailored for critical national security applications.

Revenue Growth

A company’s long-term sales performance is a key indicator of its overall quality. While any business can have a good quarter or two, many sustainable companies grow for years. Fortunately, Kratos’s 12.5% annualized revenue growth over the past five years is excellent. Its growth outpaces the average industrials company and demonstrates that its offerings resonate with customers.

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Kratos Quarterly Revenue

We at StockStory prioritize long-term growth, but within industrials, a five-year historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as new contract wins or successful product lines. Kratos’s annualized revenue growth of 14% over the last two years exceeds its five-year trend, indicating strong and recently accelerating demand.

Kratos Year-On-Year Revenue Growth

Kratos also reports organic revenue, which excludes one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Kratos’s organic revenue averaged 15.1% year-over-year growth. Since this aligns with its two-year revenue growth, most of its results are driven by core operations rather than acquisitions or divestitures.

Kratos Organic Revenue Growth

This quarter, Kratos reported robust year-over-year revenue growth of 21.9%, with revenue of $345.1 million surpassing Wall Street estimates by 6.3%. Management is guiding for a 12.4% year-over-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16.8% over the next 12 months, an improvement compared to the last two years. This optimistic projection suggests that newer products and services will boost top-line performance.

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Operating Margin

Kratos has been profitable over the past five years but has been held back by its large cost base. Its average operating margin of 2.1% has been weak for an industrials business.

Looking at profitability trends, Kratos’s operating margin decreased by 1.5 percentage points over the last five years. This raises questions about the company’s expense management, as revenue growth should have provided leverage on fixed costs, leading to better economies of scale and higher profitability. Overall, Kratos’s performance indicates rising costs that it has struggled to pass on to customers.

Kratos Trailing 12-Month Operating Margin (GAAP)

In Q4, Kratos generated an operating margin of 2.4%, up 1.3 percentage points year over year. This improvement is a positive sign of increased efficiency.

Earnings Per Share

Revenue trends reflect past growth, but long-term EPS changes reveal profitability of that growth—such as whether a company is inflating sales through excessive advertising or promotions.

Kratos’s EPS grew at a modest 7.1% compounded annual growth rate over the last five years, which is lower than its 12.5% annualized revenue growth. This suggests the company became less profitable on a per-share basis as it expanded.

Kratos Trailing 12-Month EPS (Non-GAAP)

A deeper look into Kratos’s earnings shows that, while operating margin expanded this quarter, it declined by 1.5 percentage points over five years. Its share count increased by 36.4%, indicating the company became less efficient with operating expenses and diluted shareholders.

Kratos Diluted Shares Outstanding

Like revenue, we analyze EPS over shorter periods to detect recent changes in the business.

Kratos’s two-year annual EPS growth of 18.8% exceeds its five-year trend, making it one of the faster-growing industrials companies recently.

In Q4, Kratos reported adjusted EPS of $0.18, up from $0.13 in the same quarter last year. This easily beat analysts’ estimates, and shareholders should be pleased. Over the next 12 months, Wall Street expects full-year EPS of $0.55, representing a 41.3% increase.

Key Takeaways from Kratos’s Q4 Results

We were impressed by how significantly Kratos surpassed analysts’ organic revenue expectations this quarter. Its revenue also outperformed Wall Street estimates by a wide margin. However, its EBITDA guidance for next quarter missed expectations, and its revenue guidance was slightly below estimates. Overall, this was a solid report with some upside potential. The stock remained flat at $91.17 immediately after the results.

While Kratos had a strong quarter, considering the bigger picture—valuation, business quality, and recent earnings—is essential before deciding if this stock is a buy. Our comprehensive research report covers these aspects and is available for free here.