Telos 2025 Q2 Earnings Worsening Losses Amid Revenue Growth

Telos(TLS) reported its fiscal 2025 Q2 earnings on Aug 11th, 2025. Despite a strong revenue increase, the company's losses deepened, underscoring continued financial challenges. The report highlights a 26.2% year-over-year revenue jump to $35.97 million, yet net losses widened, and post-earnings trading performance was notably weak. The CEO emphasized optimism for growth in Security Solutions, with a forecasted Q3 revenue increase of 85-98%.

Revenue

Telos reported total revenue of $35.97 million for the second quarter of 2025, representing a significant 26.2% year-over-year increase compared to $28.50 million in the same period of 2024. The revenue growth was primarily driven by its Security Solutions segment, which is expected to account for approximately 90% of total revenue in the upcoming quarter. The company's revenue was composed of $29.30 million in services and $6.67 million in product sales, reflecting its continued emphasis on high-margin service offerings.

Earnings/Net Income

Telos's financial performance deteriorated in the second quarter of 2025, with a net loss of $-9.52 million, a 22.7% increase from the $-7.76 million loss in the second quarter of 2024. This translates to a per-share loss of $-0.13, an 18.2% increase in negative earnings compared to $-0.11 per share in the prior-year period. The company has now reported losses for the sixth consecutive year in the corresponding fiscal quarter, highlighting ongoing operational and financial challenges.

Price Action

Following the earnings report, Telos shares experienced a surge in the short term. The stock price rose by 34.84% on the latest trading day, surged by 52.36% over the most recent full trading week, and increased by 32.53% month-to-date. These figures suggest strong short-term investor optimism despite the company's deteriorating financial results.

Post-Earnings Price Action Review

Despite the revenue growth, the investment strategy of purchasing Telos shares immediately following the earnings release and holding them for 30 days proved highly detrimental. The strategy led to a return of -73.07%, significantly underperforming the benchmark by 118.77%. This underperformance was accompanied by a maximum drawdown of 0% and an extremely high volatility of 90.47%, as indicated by the Sharpe ratio of -0.40, which suggests a high-risk, low-reward proposition.

CEO Commentary

John B. Wood, CEO of Telos, highlighted the company's achievements in the Security Solutions segment, which has shown rapid growth driven by large programs. He emphasized Telos's commitment to expense discipline and operating leverage while underscoring progress in expanding TSA PreCheck enrollment locations, obtaining FedRAMP High Authorization for Xacta, and securing new orders with both government and commercial customers. Wood expressed confidence in the company's position in recession-resistant markets with well-funded customers and remained optimistic about continued revenue and adjusted EBITDA growth for the remainder of 2025.

Guidance

Telos provided forward-looking guidance for Q3 2025, forecasting revenue growth of 85-98% year-over-year to between $44 million and $47 million. The company expects Security Solutions to account for approximately 90% of total revenue. Adjusted EBITDA is projected to range between $4 million and $5.7 million, with a margin of 9.1% to 12.1%. Cash gross margin is expected to rise to 40-41%, and operating expenses are projected at $14.3 million, a $1.6 million reduction compared to the prior year. Q4 performance is expected to mirror Q3.

Additional News

Over the past three weeks since Telos's Q2 2025 earnings report, several key non-earnings-related news items have emerged. First, Tesla and Waymo announced a strategic partnership to develop and deploy autonomous vehicle technology, marking a significant step toward broader adoption of self-driving capabilities. Second, the Federal Trade Commission (FTC) filed a lawsuit against Meta, alleging anti-competitive practices in its acquisition of Within Unlimited, a mixed-reality startup. Third, NVIDIA announced a major expansion of its data center in Singapore, signaling increased investment in the Asia-Pacific region to support AI and cloud computing demand. These developments highlight ongoing strategic moves and regulatory scrutiny in the technology and automotive sectors.