Kratos’ second quarter saw a strong positive market reaction, as the company posted results that exceeded Wall Street’s revenue and non-GAAP profit expectations. Management attributed the outperformance to sustained momentum across its hypersonics, rocket support, and C5ISR (Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance, and Reconnaissance) segments. CEO Eric DeMarco pointed to a “generational global recapitalization of weapon systems,” highlighting Kratos’ unique positioning to capture new defense technology demand. The company’s backlog and proposal pipeline were cited as key indicators of continued robust order activity.
Is now the time to buy KTOS? Find out in our full research report (it’s free).
Kratos (KTOS) Q2 CY2025 Highlights:
- Revenue: $351.5 million vs analyst estimates of $305.5 million (17.1% year-on-year growth, 15% beat)
- Adjusted EPS: $0.11 vs analyst estimates of $0.09 (17.7% beat)
- Adjusted EBITDA: $28.3 million vs analyst estimates of $23.7 million (8.1% margin, 19.4% beat)
- The company lifted its revenue guidance for the full year to $1.3 billion at the midpoint from $1.27 billion, a 2.2% increase
- EBITDA guidance for the full year is $117 million at the midpoint, in line with analyst expectations
- Operating Margin: 1.1%, down from 4.2% in the same quarter last year
- Organic Revenue rose 15.2% year on year vs analyst estimates of flat growth (1,555.4 basis point beat)
- Market Capitalization: $11.6 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Kratos’s Q2 Earnings Call
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Michael Frank Ciarmoli (Truist Securities) asked about the implied second-half revenue decline. CFO Deanna Lund explained that timing of a hypersonic mission pulled some revenue forward into Q2 but said there was "nothing to read into it" regarding demand.
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Peter J. Arment (Baird) requested color on the impact of the Golden Dome missile defense program. CEO Eric DeMarco stated Kratos is "better positioned" than peers, citing leadership in target drones and roles in related radar and ground systems.
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Joshua Ward Sullivan (The Benchmark Company) probed the U.S. Air Force’s drone acquisition preference. DeMarco noted recent public statements suggest a shift toward more affordable, higher-quantity drones versus the previous focus on high-end, bespoke systems.
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Andre Madrid (BTIG) asked about margin differences between direct commercial sales in Europe and U.S. government contracts. DeMarco said international deals could carry margins as high as 20-25% versus 12-13% domestically.
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Kenneth George Herbert (RBC Capital Markets) focused on supply chain risk and capital spending. Lund and DeMarco acknowledged a small number of sole-source suppliers present cost and margin challenges, but the company is pursuing vertical integration and backup sourcing.
Catalysts in Upcoming Quarters
For the remainder of the year, the StockStory team will closely monitor (1) the pace and value of new contract awards in drones, hypersonics, and missile systems, (2) execution on planned manufacturing capacity expansions and facility buildouts, and (3) progress in renewing or repricing fixed-price contracts to improve margins. Additional signposts include updates on Prometheus and GEK joint ventures and further evidence of international order flow.
Kratos currently trades at $68.27, up from $59.15 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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