A month has gone by since the last earnings report for Kratos (KTOS). Shares have added about 11.2% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Kratos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.
Kratos Defense Q1 Earnings and Revenues Surpass Estimates
Kratos Defense & Security Solutions, Inc. reported first-quarter 2026 adjusted earnings of 16 cents per share, which beat the Zacks Consensus Estimate of 13 cents by 26.3%. The bottom line also increased 33.3% from the year-ago quarter’s 12 cents.
Kratos Defense reported GAAP earnings of 7 cents per share compared with 3 cents in the year-ago quarter.
KTOS’ Total Revenues
Total revenues were $371 million, which outpaced the Zacks Consensus Estimate of $344 million by 7.7%. The figure also rose 22.6% from $302.6 million recorded in the year-ago quarter.
Operational Update of Kratos Defense
Kratos Defense’s selling, general and administrative expenses increased 19.9% year over year. Research and development expenses rose 7% compared with the prior-year quarter. Depreciation expenses climbed 46.2% year over year.
Expenses related to the amortization of intangible assets rose 176.2% from the year-ago figure.
The company reported operating income of $4.7 million, which decreased from the year-ago quarter’s $6.6 million.
It posted a consolidated book-to-bill ratio of 1.6 to 1, with bookings worth $605.2 million.
The total backlog at the end of the first quarter of 2026 was $1.635 billion compared with $1.212 billion at the end of the fourth quarter of 2025.
KTOS’ Segmental Performance
Unmanned Systems: Revenues from this segment totaled $82.6 million compared with $63.1 million in the year-ago quarter. The increase was primarily driven by Valkyrie-related activity.
Kratos Government Solutions: Revenues from this segment amounted to $288.4 million compared with $239.5 million in the year-ago quarter. This increase was due to organic revenue growth across its Defense and Rocket Support business, Turbine Technologies and Microwave Products businesses, with organic revenue growth rates of 45.8%, 20.3% and 12.3%, respectively, year over year.
Financial Details of KTOS
As of March 29, 2026, cash and cash equivalents totaled $1.46 billion, up from $0.56 billion as of Dec. 28, 2025.
The company reported other current liabilities of $24.4 million as of March 29, 2026 compared with $9 million recorded as of Dec. 28, 2025.
The net cash used in operating activities amounted to $27.4 million during the first three months of 2026 compared with $29.2 million in the same period of 2025.
Kratos Defense’s Guidance
KTOS projects second-quarter 2026 revenues to be in the range of $400-$410 million. The Zacks Consensus Estimate for revenues is pegged at $401.3 million, which is at the lower end of the company’s guided range.
KTOS now expects 2026 revenues to be in the $1.7-$1.76 million range compared with the previous range of $1,595-$1,675 billion. The Zacks Consensus Estimate for revenues is pegged at $1.68 billion, lower than the company’s guided range.
Kratos Defense now expects operating cash flows to be in the range of $60-$70 million and free cash flow use to be in the band of $85-$105 million for 2026.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -44% due to these changes.
VGM Scores
At this time, Kratos has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a score of F on the value side, putting it in the bottom 20% quintile for value investors.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Kratos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Kratos Defense & Security Solutions, Inc. (KTOS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).