Why Is Kratos (KTOS) Down 14.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Kratos (KTOS). Shares have lost about 14.6% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Kratos due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.

Kratos Defense Q4 Earnings and Revenues Surpass Estimates

Kratos Defense & Security Solutions, Inc.’s reported fourth-quarter 2025 adjusted earnings of 18 cents per share, which beat the Zacks Consensus Estimate of 14 cents by 28.6%. The bottom line also increased 38.5% from the year-ago quarter’s 13 cents.

Kratos Defense reported GAAP earnings of 3 cents per share, which came in line with the year-ago quarter.

The company reported 2025 adjusted earnings of 55 cents per share, which were higher than the year-ago figure of 49 cents.

KTOS’ Total Revenues

Total revenues were $345.1 million, which outpaced the Zacks Consensus Estimate of $328 million by 5.1%. The figure also rose 21.9% from $283.1 million recorded in the year-ago quarter.

The company reported total revenues of $1.35 billion in 2025, which were higher than $1.14 billion in 2024.

Operational Update of Kratos Defense

Kratos Defense’s selling, general and administrative expenses increased 19% year over year. Research and development expenses decreased 7.5% compared with the prior-year quarter. Depreciation expenses climbed 68% year over year.

Expenses related to the amortization of intangible assets rose 9.5% from the year-ago figure.

The company reported operating income of $8.2 million, which increased from the year-ago quarter’s $3 million.

It posted a consolidated book-to-bill ratio of 1.3 to 1, with bookings worth $438.3 million.

The total backlog at the end of the fourth quarter was $1.212 billion compared with $1.178 billion at the end of the third quarter of 2025.

KTOS’ Segmental Performance

Unmanned Systems: Revenues from this segment totaled $68.5 million compared with $61.1 million in the year-ago quarter.

Kratos Government Solutions: Revenues from this segment amounted to $276.6 million compared with $222 million in the year-ago quarter. The most notable growth in this segment was in the company’s Defense and Rocket Support business, Microwave Products business and Space, Training and Cyber businesses, with organic revenue growth rates of 47.4%, 32.4% and 22.7%, respectively, compared with the fourth quarter of 2024.

Financial Details of KTOS

As of Dec. 28, 2025, cash and cash equivalents totaled $560.6 million, up from $329.3 million as of Dec. 29, 2024.

The company reported no long-term debt as of Dec. 28, 2025 compared with $174.6 million recorded as of Dec. 29, 2024.

The net cash used in operating activities amounted to $42.1 million during 2025 against $49.7 million net cash provided at the end of 2024.

Kratos Defense’s Guidance

KTOS projects first-quarter 2026 revenues to be in the range of $335-$345 million. The Zacks Consensus Estimate for revenues is pegged at $348.5 million, higher than the company’s guided range.

KTOS expects 2026 revenues to be in the $1.595-$1.675 million range. The Zacks Consensus Estimate for revenues is pegged at $1.6 billion, which is at the lower end of the company’s guided range.

Kratos Defense expects operating cash flows to be in the range of $50-$60 million and free cash flow use to be in the band of $85-$95 million for 2026.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -17.84% due to these changes.

VGM Scores

Currently, Kratos has a average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade 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 D. 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. Notably, 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).

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