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

Executive summary

• Achieved 20% organic revenue growth in Q4 2025, with total revenues of $345.1M, surpassing guidance and setting records in backlog ($1.573B) and opportunity pipeline ($13.7B).

• Full year 2025 revenues were $1.347B, up 16.6% organically; net income for Q4 was $5.9M (GAAP EPS $0.03), and for the year $22.0M (GAAP EPS $0.13); adjusted EPS for Q4 was $0.18 and for the year $0.55.

• 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 not paying dividends or buying back stock.

Financial highlights

• Q4 2025 revenue was $345.1M, exceeding the $320M-$330M guidance, with 20% organic growth over Q4 2024; full year operating income was $25.6M.

• Adjusted EBITDA for Q4 2025 was $34.1M (9.9% margin), above guidance; full year adjusted EBITDA was $119.9M (8.9% margin).

• Q4 cash flow from operations was $12.1M; full year cash flow used in operations was $(42.1)M, reflecting working capital investments.

• Free cash flow used in operations for Q4 2025 was $0.1M after $24.2M in capex, offset by $12M from Valkyrie sales; full year free cash flow used was $(125.4)M after $95.3M in capex.

• Consolidated DSOs increased to 121 days due to revenue growth and delayed government payments.

Outlook and guidance

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

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

• 2026 capital expenditures forecasted at $135M–$145M, with significant investments in hypersonics, unmanned systems, and facility expansions.

• Guidance includes Nomad acquisition but excludes pending Orbit Technologies acquisition.

• Second half of 2026 expected to deliver higher revenue and EBITDA than the first half due to contract timing and ramping programs.