Kratos Defense & Security Solutions (KTOS) Q2 2026 earnings summary

Executive summary

• Q2 2026 revenue reached $458.8 million, up 30.5% year-over-year, with 19.1% organic growth, driven by strong performance in defense, hypersonics, engine, and unmanned systems, as well as contributions from Orbit Technologies and Nomad Global Communication Solutions acquisitions.

• Adjusted EBITDA for Q2 2026 was $38.2 million, above guidance and up from $28.3 million in Q2 2025, reflecting favorable revenue mix and operational leverage.

• Net income for Q2 2026 was $4.4 million, up from $2.9 million in Q2 2025; adjusted EPS was $0.21 versus $0.11 year-over-year.

• Backlog reached $2.084 billion, up from $1.414 billion a year ago, with 35% expected to convert to revenue in 2026.

• Major new program awards in hypersonics, directed energy, and space domain awareness, with a robust $15 billion bid pipeline and $1.99 billion in bookings over the last 12 months.

Financial highlights

• Q2 2026 revenue: $458.8 million (+30.5% YoY), with 22% organic growth in KGS and 8.1% in Unmanned Systems; six-month revenue: $829.8 million (+26.9% YoY).

• Adjusted EBITDA: $38.2 million (vs. $30–$35 million guidance); Q2 2026 gross margin: 21.8% (up from 21.0% YoY).

• Net income for Q2 2026: $4.4 million; six-month net income: $16.3 million.

• Free cash flow used in operations: $18.9 million, reflecting working capital investments and facility expansion.

• Cash and equivalents at June 28, 2026: $1.44 billion, up from $560.6 million at year-end 2025.

Outlook and guidance

• Full-year 2026 organic revenue growth forecast raised to 18%–23%, with total revenue guidance of $1.75–$1.81 billion.

• Q3 2026 revenue guidance: $460–$480 million, with 19%–25% organic growth expected.

• Adjusted EBITDA margin expected to improve by ~100 basis points over 2025, with further 100 bps increase forecast for 2027.

• 35% of $2.084 billion backlog expected to be recognized as revenue in 2026, another 35% in 2027.

• Continued investment in production ramp for jet engines, hypersonic systems, and new programs, with 2026 investments of $125–$270 million.