Karman Holdings: Assessing the Stratospheric Valuation in a Hypersonic Growth Story

The defense and aerospace sector has long been a magnet for investors seeking growth amid geopolitical uncertainty and technological innovation. Karman Holdings, a key player in hypersonics, missile defense, and space systems, has captured significant attention in 2025 with a valuation that appears to defy conventional metrics. Its enterprise value-to-EBITDA (EV/EBITDA) multiple of 86x dwarfs the sector average of 21.58x, raising critical questions: Is this valuation a justified bet on the future of defense technology, or is it a precarious overreach?

Financial Performance: A Foundation of Growth

Karman's 2025 financial results underscore its meteoric rise. In Q3 2025, the company reported revenue of $121.8 million, a 41.7% year-over-year increase, driven by robust performance across all three business segments: Hypersonics and Strategic Missile Defense, Space and Launch, and Tactical Missiles. Non-GAAP adjusted EBITDA surged to $37.7 million, up 34.4% YoY, while funded backlog expanded to $758.2 million-a 30.8% increase from Q4 2024. These figures have enabled Karman to narrow its 2025 revenue guidance to $461–463 million and EBITDA guidance to $142–143 million, with preliminary 2026 growth expectations of 20–25%.

Such performance is not an anomaly. Q2 2025 revenue hit $115.1 million (+35.3% YoY), and Q1 revenue reached $100.1 million (+20.6% YoY). The company's ability to consistently outperform expectations has fueled investor optimism, particularly as it leverages its merchant supplier model to secure pricing power and customer lock-in.

Valuation Realism: A High-Stakes Bet

Karman's 86x EV/EBITDA multiple is starkly at odds with the defense sector's average of 21.58x. For context, Q3 2025 saw a 9.7% appreciation in EBITDA multiples for the broader aerospace/defense sector, but even the most optimistic scenarios rarely justify Karman's premium. This disconnect is partly explained by the company's unique positioning in hypersonics-a technology area with immense strategic value but limited near-term commercial applications.

However, the valuation also reflects Karman's operational strengths. Its diversified customer base (80+ customers across 130 programs) and strategic acquisitions, such as Five Axis Industries and MTI, have expanded its capabilities in advanced composites and propulsion systems. Additionally, a $1.2 billion secondary equity offering and upsized Term Loan B have addressed leverage concerns, providing capital for growth while mitigating immediate financial risks.

Defense-Sector Tailwinds: A Tailwind or a Headwind?

The defense sector's tailwinds in 2025 are undeniable. Government spending on hypersonic technology and missile defense has surged, with Karman's expertise in these areas aligning perfectly with global security priorities. The company's funded backlog of $758.2 million-a 30.8% increase from Q4 2024-further underscores its ability to capitalize on these trends.

Yet, the sector's profitability metrics tell a more nuanced story. Q2 2025 EBITDA margins for the aerospace/defense sector averaged 7.41%, with operating margins at 6.4%, indicating rising costs and operational pressures. While Karman's EBITDA margins (31% in Q3 2025) outperform these averages, sustaining such margins amid inflationary pressures and supply chain bottlenecks will be critical.

Risks and Realism

Karman's valuation hinges on flawless execution. A 86x multiple demands not only continued revenue growth but also the successful scaling of hypersonic technologies into commercial markets-a long-term bet with uncertain payoffs. Moreover, the company's reliance on government contracts exposes it to policy shifts and budgetary constraints, which could disrupt its growth trajectory.

Comparatively, peers in the "Military & Defense" subsector trade at EV/EBITDA multiples ranging from 10.6x to 14.7x, reflecting a more conservative valuation approach. Karman's premium suggests investors are pricing in a "blue-ocean" scenario where its technological edge and market positioning justify a premium, but this also amplifies downside risk if execution falters.

Conclusion: A High-Altitude Gamble

Karman Holdings' valuation is a paradox: it is both a testament to the company's operational prowess and a reflection of speculative optimism. While its financial performance and strategic positioning in hypersonics and missile defense are compelling, the 86x EV/EBITDA multiple demands a level of certainty that few defense firms can deliver. For investors, the key question is whether Karman can maintain its growth trajectory and operational discipline to justify such a lofty valuation-or if the market is overreaching in its bet on the future of aerospace.

In the end, Karman's story is a microcosm of the defense sector's broader dynamics: a blend of innovation, geopolitical urgency, and the ever-present tension between ambition and realism.