Kratos Defense (KTOS) stock extended its rally after the company reported strong second-quarter growth and improving defense demand. Shares closed 5.41% higher at $51.87, then added 0.52% after hours to $52.14. The results showed rising sales, stronger bookings, and renewed momentum across unmanned systems and government programs.
Kratos Defense & Security Solutions, Inc., KTOS
Kratos Defense reported second-quarter revenue of $458.8 million, up 30.5% from $351.5 million one year earlier. Broad growth across government and unmanned defense operations pushed organic revenue 19.1% higher. The company also generated adjusted EBITDA of $38.2 million during the quarter.
Kratos recorded net income of $4.4 million, compared with $2.9 million during the same period last year. Adjusted earnings reached $0.21 per share, nearly doubling from $0.11 per share in 2025. However, the company recorded a $1.6 million operating loss after research and non-cash expenses.
Stock compensation costs reached $16.3 million, while company-funded research spending totaled $13.6 million. Kratos also recorded $12.5 million in amortization expenses across its growing defense technology portfolio. These investments supported satellites, space systems, unmanned aircraft, and microwave electronics development.
The Unmanned Systems segment generated $79.1 million in revenue, rising from $73.2 million one year earlier. Valkyrie activity drove much of the increase and supported stronger operating performance during the quarter. Segment operating income improved to $1.2 million from a $300,000 loss last year.
Adjusted EBITDA for Unmanned Systems rose to $5.1 million from $3.6 million in 2025. The segment secured $78.4 million in quarterly bookings and maintained a 1.0 book-to-bill ratio. Its total backlog ended the quarter at $374.6 million, almost unchanged from the previous quarter.
Kratos also received $9.3 million from company-owned Valkyrie sales during the reporting period. Meanwhile, production ramps increased inventory and working capital needs across several active development programs. These pressures produced $11 million in operating cash outflow and $18.9 million in negative free cash flow.
The Government Solutions segment produced $379.7 million in revenue, up 36.4% from $278.3 million last year. Organic growth reached 22%, excluding revenue from the Nomad and Orbit acquisitions. Defense rockets, turbines, microwave products, space, training, and cyber operations led the expansion.
Defense and Rocket Support revenue grew 50.2%, while Turbine Technologies revenue increased 43.3%. Microwave Products advanced 29.5%, and Space, Training and Cyber revenue rose 8.7%. Higher sales volume lifted segment adjusted EBITDA to $33.1 million from $24.7 million.
Kratos ended the quarter with consolidated backlog of $2.084 billion and a $15 billion proposal pipeline. Quarterly bookings reached $492.2 million, while the twelve-month book-to-bill ratio stood at 1.3. Management raised its 2026 organic revenue growth forecast to between 18% and 23%.
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