Kratos makes low-cost drones, hypersonic test rockets, small jet engines and satellite ground systems. It is the closest listed company to Anduril. Revenue is growing about 20% a year, but the shares are down more than 70% from their January high because the price had run far ahead of the profits.
Today’s close against the report’s numbers, updated every weekday. The analysis is as of October 21, 2026; the rating as of October 22, 2026. Both change only when the report is revised.
The scenario model’s bear-to-bull range, the probability-weighted value, the price, its 52-week range and the analysts’ average target. The copper line marks the base case; the fine dotted line is today’s close.
Written on October 21, 2026, ahead of its third-quarter results in early November. Figures are from the company’s filings and releases unless noted. Not investment advice. The author holds no KTOS shares.
Kratos, based in San Diego, sells to the Pentagon in two segments. Government Solutions (about 83% of revenue) includes hypersonic and rocket systems such as Zeus and Erinyes, small turbojet and turbofan engines for missiles and drones, microwave electronics, and satellite ground networks. Unmanned Systems builds target drones and the XQ-58 Valkyrie, a low-cost jet drone designed to fly alongside crewed fighters, which the Marine Corps is buying.
Its strategy is the same as Anduril’s: spend its own money to build cheap, “attritable” weapons before the government asks for them. The difference is that Kratos is public, so you can see the cost of that strategy every quarter.
Second-quarter revenue beat guidance, led by rocket systems (+50% organic) and engines (+43%). Net income was only $4.4 million ($0.02 a share) and the company had a small operating loss, because it is spending heavily on new factories. Management raised 2026 revenue guidance to $1.75–1.81 billion and expects free cash flow of minus $85–105 million this year, with $250–275 million of investment, including the Prometheus rocket-motor joint venture and capacity for about 40 Valkyries a year from 2028.
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | TTM Jun 2026 | |
|---|---|---|---|---|---|---|
| Revenue | $812M | $898M | $1,037M | $1,136M | $1,347M | $1,522M |
| Operating margin | 3.4% | −0.3% | 3.0% | 2.6% | 1.9% | 1.2% |
| Net income | −$2M | −$37M | −$9M | $16M | $22M | $31M |
| Operating cash flow | $35M | −$26M | $65M | $50M | −$42M | −$40M |
| Capital spending | $46M | $45M | $52M | $58M | $95M | $89M |
| Free cash flow | −$11M | −$71M | $13M | −$8M | −$137M | −$129M |
| Latest | |
|---|---|
| Revenue, last twelve months | $1.52B (+25%) |
| Net income, last twelve months | $31M |
| Adjusted EBITDA guidance, 2026 | $173–176M (about 10%) |
| Free cash flow guidance, 2026 | −$85 to −105M |
| Stock-based pay guidance, 2026 | $60–64M |
| Trailing P/E | About 230× |
Margins are low because much of the work is cost-plus or fixed-price government contracting and because development spending runs through the income statement. Management expects the 2027 EBITDA margin to rise about one percentage point; 2027 guidance comes with the third-quarter results.
Kratos held $1.44 billion of cash in June and almost no borrowings beyond about $140 million of finance leases, after raising roughly $1 billion by selling stock earlier in 2026. The share count is about 188 million. The cash covers the factory build-out, but stock-based pay of about $60 million a year keeps adding shares.
Valued the same way as the other fast-growing companies here: 2030 revenue, operating margin after stock pay, and a multiple of after-tax profit, discounted back at 10% a year (Kratos’s cost of equity from its beta of about 1.1), plus the free cash flow along the way, which starts slightly negative.
| Bear | Base | Bull | |
|---|---|---|---|
| Revenue in 2030 | $2.6B | $3.2B | $4.0B |
| Operating margin | 6% | 9% | 12% |
| Exit multiple | 18× | 22× | 28× |
| Value per share | $14 | $24 | $44 |
| Probability | 25% | 50% | 25% |
Weighted 25/50/25: $26. Net cash of about $1.2 billion and 200 million shares by 2030 are included. The base case already assumes revenue grows about 16% a year and the operating margin more than triples.
Every figure in this valuation comes from one model script, rerun and checked against this page each time the site is built. The XLSX model rebuilds it in live formulas: change any blue input and every year’s cash flow, the bridge to the value, the scenarios and the sensitivity table recalculate.
| To justify the price, you need | Against |
|---|---|
| About $5.7 billion of revenue in 2030 at the base margin and multiple | $1.75–1.81 billion guided for 2026 |
| Or roughly 34% growth a year for four years | 18–23% organic growth guided |
Even after a 70% fall, the price sits near the bull case. At the January high of $134 it implied revenue several times larger. The analysts’ average target of $98 assumes faster growth and higher margins than this model does.
| Risk | Why it matters |
|---|---|
| Valuation | Still about 4× sales and 40× next year’s earnings for a contractor with 10% EBITDA margins. |
| Cash burn and dilution | Negative free cash flow and heavy stock pay; another share sale is possible. |
| Program wins | The Air Force’s main collaborative combat aircraft awards went to rivals; Valkyrie depends on the Marines and new customers. |
| Competition | Anduril, General Atomics and the large primes chase the same drone and missile budgets. |
Upside: hypersonic testing, engines for low-cost cruise missiles, a second-source role on JASSM, Golden Dome and a larger Valkyrie order could all lift growth.
Kratos has many of the same products as Anduril and is growing, but it earns very little today, and the price assumes revenue far above its own plan.
What would change the value: Rising margins in the 2027 guidance, or a larger production contract for its drones, would raise the value.
Ranges, not three cases. The expected value is the average of 4,000 runs of this report’s own model, with every input drawn from a range: the base case is the middle, and the bear and bull cases are the 10th and 90th percentiles. Business inputs move together; the discount rate moves on its own. The 25/50/25 weighting in the valuation section gives $26. How the ranges work
Two different questions. The rating is relative: it asks whether the stock is cheaper or dearer than the S&P 500 on the same assumptions. The absolute view asks whether it is worth its price at all: on its own the stock trades above our estimated value, which is 32% below the price.
On the same assumptions every report uses (a 5.15% Treasury yield and a 4.5% equity premium), the S&P 500 itself is worth about 68% of its price. The rating compares each stock with that: Buy if it is at least 15% cheaper than the market on this basis, Sell if at least 15% dearer, Hold in between. It is the same rule for every company, whoever owns it. The rating is the same whether the index is assumed to grow 6% or 10% a year. How ratings work
Against the Street: Analysts average about $98, assuming faster growth and margins well above the 9% base case here. Kratos has never earned more than a low single-digit operating margin.
| Measure | Kratos Defense | Industry median | Rank | |
|---|---|---|---|---|
| Revenue growth, last fiscal year | 18.5% | 10.0% | 3 of 13 | Better than the median |
| Operating margin | 1.2% | 10.4% | 12 of 13 | Worse than the median |
| Price to earnings | 264.8× | 25.4× | 13 of 13 | Worse than the median |
| Free cash flow yield | −1.6% | 3.2% | 13 of 13 | Worse than the median |
Peers: the 12 other S&P 500 companies in Aerospace & Defense with complete data (AXON, BA, GD, GE, HII, HWM, LHX, LMT, NOC, RTX, TDG, TXT). Last twelve months where reported, from SEC filings; prices from the latest close. A lower price-to-earnings ratio ranks higher. These figures update with each data run; the rating does not.
Revenue growth is real; the profits that would justify the price are not here yet.
| What | Figures | Source |
|---|---|---|
| Latest results | $458.8M (Revenue, Q2 2026, +30.5%), 19.1% (Organic growth), $38.2M (Adjusted EBITDA, 8.3% margin), $2.08B (Backlog) and others | Q2 2026 results; Earnings call |
| The numbers (five-year table) | Five years of annual figures and the last twelve months | SEC XBRL company facts; latest: 10-K for the period to 2025-12-28, 10-Q for the period to 2026-06-28 |
| Price at writing | $38.81 (Midday, Oct 21, 2026) | Yahoo Finance; the time of the quote is stated beside the price |
| Discount rate inputs | 10-year Treasury 5.15%, equity risk premium 4.5% | Fixed for every report so they can be compared; How ratings work |
| Valuation | Every value, case and sensitivity | This site’s model: XLSX, CSV |
| Checked by hand | Not yet | Reports are added to the audit log as they are revised |
| Input | Bear (10th percentile) | Base (median) | Bull (90th percentile) |
|---|---|---|---|
| Revenue, target year | $3B | $3B | $4B |
| Margin, target year | 6.0% | 9.0% | 12.0% |
| Exit multiple | 18× | 22× | 28× |
| Simulation result | |
|---|---|
| Expected value (average of 4,000 runs) | $26.30 |
| Likely range, 10th to 90th percentile | $14.83 to $40.48 |
| Median | $24.30 |
| Chance the value is above the price | 12% |
| Chance it is cheaper than the S&P 500 | 42% |
Each input is drawn from a split normal: its bear and bull values are the 10th and 90th percentiles, so the two sides can differ. Business inputs share a common factor (correlation 0.6); the discount rate is the same in every case, so it is not drawn. Inputs not listed are held at their base value. How the simulation works.