Kratos Q2 2026 Earnings Beat Raises Guidance

Kratos Defense & Security Solutions (KTOS) reported a double beat in its Q2 2026 earnings on Aug. 4, 2026, with revenue and adjusted EBITDA surpassing expectations. Management highlighted accelerating demand across hypersonics, space, and unmanned systems, prompting analysts to upgrade the stock and raise targets.

Quarter Results and Guidance

Kratos said in a press release that Q2 revenue reached $458.8 million, up 30.5% year over year, with consolidated organic revenue growth of 19.1%. Adjusted EBITDA was $38.2 million, and adjusted non-GAAP earnings per share were $0.21. On a GAAP basis, the company reported net income of $4.4 million and EPS of $0.02, alongside an operating loss of $1.6 million. The consolidated book-to-bill ratio stood at 1.1 to 1.0.

The company raised its full-year 2026 revenue guidance to a range of $1.75 billion to $1.81 billion and tightened adjusted EBITDA guidance to $173 million–$176 million. It also issued initial Q3 guidance with revenue between $460 million and $480 million and adjusted EBITDA of $40 million to $45 million. External sources cited updated full-year operating and free cash flow ranges.

The Q2 revenue exceeded prior guidance by about $48.8 million and topped Street estimates by roughly 11%–12%. Adjusted EPS beat consensus by approximately $0.06 to $0.08 per share. Following the results, Piper Sandler upgraded Kratos to Overweight with a $75 target, Cantor Fitzgerald maintained an Overweight rating while lowering its target to $100, and other firms raised or reaffirmed their targets. The new full-year sales range sits above a FactSet consensus near $1.74 billion.

Through the first half of 2026, Kratos reported revenue of $829.8 million, following $371.0 million in Q1.

Demand Drivers and Cash Flow

On the earnings call, management emphasized accelerating demand in hypersonics, jet-engine work, space systems, counter-unmanned aircraft systems (counter-UAS), and tactical unmanned aircraft. The Kratos Government Solutions (KGS) segment grew organically by 22%, while unmanned systems grew 8.1%. Management raised full-year organic revenue growth guidance to 19%–23%, attributing the revision to these program ramps.

Gross profit for the quarter was $100.1 million, with a gross margin of 21.8%, up from $73.8 million and 21.0% in the year-ago quarter. Adjusted EBITDA margin was about 8.3%, with a net margin near 2.1% and a modest return on equity.

Secondary analysis indicates Q2 operating cash flow was roughly negative $11.0 million, with capital expenditures of about $17.2 million. Estimated "true" free cash flow was near negative $28.2 million, while reported free cash flow after netting Valkyrie asset sales was approximately negative $18.9 million. Bookings for the quarter totaled about $492.2 million, consistent with the book-to-bill ratio. Management described the cash use as ongoing investment to support production ramps and expects momentum to continue through the second half of 2026 and into 2027.

Analysts responded with rating and target changes: Piper Sandler upgraded Kratos to Overweight with a $75 price target, Cantor Fitzgerald maintained Overweight but lowered its target to $100, and other firms raised or reiterated targets after the earnings release.

Management framed the results and guidance raise as evidence of sustained momentum supporting multi-year revenue and margin goals.

Management said it had "raised full-year organic revenue growth guidance to 19%–23%," highlighting accelerating hypersonics and engine ramp and reiterating confidence in multi-year margin expansion despite foreign-exchange headwinds and ongoing investment. [source:3]