Kratos Defense & Security Solutions (KTOS) Q4 2025 earnings summary

Executive summary

• Achieved Q4 2025 revenue of $345.1M, up 21.9% year-over-year with 20% organic growth, and set records in backlog ($1.573B) and opportunity pipeline ($13.7B).

• Positioned to meet 2026 and 2027 financial targets, with Q1 expected to be the lowest due to resolved government shutdown and CRA.

• Demand for affordable, military-grade hardware and software is accelerating, driven by global defense spending increases and industry consolidation.

• Strategic focus on internally funded investments, rapid product development, and no dividends or share buybacks.

• Major growth drivers include hypersonics, microwave electronics, jet engines, space/satellite businesses, and tactical drones.

Financial highlights

• Q4 2025 revenue was $345.1M, exceeding guidance, with 20% organic growth over Q4 2024; full year 2025 revenue was $1.347B, up 16.6% organically.

• Adjusted EBITDA for Q4 2025 was $34.1M (9.9% margin), and for the year $119.9M (8.9% margin), both above guidance.

• Free cash flow used in operations for Q4 2025 was $0.1M; full year free cash flow used was $(125.4)M after $95.3M in capex.

• Days Sales Outstanding increased to 121 days due to revenue growth and delayed government payments.

• 67% of Q4 revenue came from U.S. federal government contracts.

Outlook and guidance

• Fiscal 2026 revenue guidance: $1.59B–$1.675B, with 12.7%–18.5% organic growth over 2025; adjusted EBITDA forecast: $157M–$167M (9.9%–10.0% margin).

• Organic revenue growth for 2026 expected at 15%–20% over 2025; 2027 organic growth expected at 18%–23% over 2026.

• Q1 2026 revenue guidance: $335M–$345M, reflecting 7.5%–9.5% organic growth over Q1 2025.

• 2026 capex forecast: $135M–$145M, with significant investments in hypersonics, unmanned systems, and facility expansions.

• Operating cash flow expected to ramp in 2027–2028 as new programs scale.