**Telos: A Turnaround Story Gaining Momentum—Is This the Time to Buy?**

Telos Corporation's Q2 2025 results have sparked a wave of optimism among investors, and for good reason. The company's narrowing adjusted net loss of $0.03 per share, coupled with a 26% year-over-year revenue surge to $36.0 million, signals a strategic shift that's hard to ignore. While the adjusted net loss persists, the underlying metrics—positive adjusted EBITDA of $0.4 million, a 44.4% incremental EBITDA margin, and a resumption of share repurchases—paint a picture of a company in motion. Let's break down what this means for Telos's operational turnaround and its Q3 outlook.

The Strategic Shift: Security Solutions as the Engine

Telos's Security Solutions segment delivered an 82% year-over-year revenue growth in Q2, a stark contrast to the 67% decline in its Secure Networks division. This divergence isn't accidental—it's a calculated pivot toward high-growth areas of the cybersecurity market. The company's ability to leverage its core competencies in mission-critical security solutions is paying off, with clients increasingly prioritizing digital resilience in an era of escalating cyber threats.

The 44.4% incremental adjusted EBITDA margin in Q2 is a testament to disciplined expense management and strong operating leverage. For context, Telos's gross margin metrics (GAAP at 33.2%, cash at 38.4%) may not scream efficiency, but they're in line with the capital-light nature of its services. The key takeaway here is that Telos is generating cash flow at a faster rate than its expenses are rising, a critical step toward profitability.

Q3 Outlook: A Bullish Bet on Execution

Telos's Q3 guidance is nothing short of aggressive. The company is projecting revenue between $44 million and $47 million and adjusted EBITDA between $4.0 million and $5.7 million. Compare this to a $4.1 million loss in Q3 2024, and you're looking at a potential 190% improvement in EBITDA. This isn't just a rebound—it's a reversal of fortune.

The share repurchase program, which saw $4.0 million deployed to buy back 1.5 million shares at $2.69 apiece, further underscores management's confidence. At these prices, Telos is essentially giving investors a discount to repurchase its own stock, a move that should boost earnings per share and shareholder value over time.

Risks and Realities

No turnaround story is without its caveats. The Secure Networks segment's decline highlights Telos's vulnerability to market shifts. Additionally, while the Security Solutions segment is thriving, it's still a relatively small part of the overall cybersecurity landscape. Investors should monitor whether Telos can scale this segment without sacrificing margins.

Another red flag: institutional investors like Pinnacle Associates Ltd. and D. E. Shaw & Co. have trimmed their stakes in recent quarters. While this isn't a death knell, it suggests some skepticism about Telos's ability to sustain its momentum.

The Cramer-Style Verdict

Telos is a classic “work in progress” stock. The narrowing adjusted net loss and accelerating revenue growth are encouraging, but profitability remains a work in progress. For investors with a medium-term horizon, the Q3 guidance offers a compelling case to buy into the turnaround. The company's focus on high-margin security solutions, combined with its cash flow discipline, positions it to capitalize on the cybersecurity boom.

However, this isn't a no-risk bet. The Secure Networks drag and mixed gross margins mean Telos still needs to prove it can execute consistently. If the Q3 results hit the high end of guidance, this could be the catalyst to push the stock beyond its current $2.50 median price target.

Final Call: For those who can stomach the volatility, Telos offers a high-conviction play on the cybersecurity sector. Buy a small position now, and consider adding to it if Q3 delivers the promised turnaround. This is a stock that's learning to walk before it runs—but if it keeps moving in the right direction, the rewards could be substantial.

Investment advice: Consider a cautious buy for long-term investors who believe in the cybersecurity tailwinds and Telos's strategic pivot. Set a stop-loss at $2.00 to protect against a relapse into underperformance.