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Space, defense and state enterprises · United States

Kratos Defense & Security Solutions

kratosdefense.com ↗

Builds low-cost military drones, target jets, and satellite ground systems for defense.

Protection under test
Assessed 24 July 2026 · Evidence as of 24 July 2026
Something worth protecting exists and is being tested right now.
On the recordSince 24 July 2026 · Checkable from Aug 4, 2026 · Every call on the record Checkpoint: Q2 2026 earnings report, watch free cash flow and margin trend
The call

Kratos stays a well-funded defense contractor whose low-cost drone bet now sits behind Anduril and General Atomics in the next contract round.

Kratos makes unmanned combat drones, hypersonic weapons, and satellite ground systems for the U.S. military. It was hard to replace because the military locks suppliers into long-term contracts and Kratos has security clearances and proven production lines. However, Anduril and General Atomics just won the Air Force's biggest new drone contract in June 2026 while Kratos did not, and they also won control of the autonomous software that runs these drones, suggesting the real advantage shifted from making the aircraft itself to writing the software that controls it. If the Air Force picks the same winners again in the next round of this competition, Kratos shrinks from a growing company into a smaller specialist making target drones and other niche weapons instead of the cutting-edge systems the military wants to invest in.

Why
01
AI pressure: Anduril's Lattice and Shield AI's Hivemind autonomy software. Lattice and Hivemind won the CCA autonomy software pool, leaving Kratos's own drone-brain stack on the sidelines. Could AI do the core job? Only partly.
02
Bigger players: Anduril Industries and General Atomics. Anduril and General Atomics took the USAF CCA Increment 1 production contract Kratos also competed for, June 2026. Could a giant copy it? Probably.
03
What protects it. ITAR-controlled manufacturing, security clearances, and program-of-record status across hypersonics, target drones, and satellite ground systems.
What would change this call
USAF names CCA Increment 2 production and autonomy-software winners. Shows whether Kratos regains the airframe or software layer or is pushed further into niche status.
Kratos Q2 2026 earnings (Aug 4, 2026) free cash flow and margin trend. Shows whether revenue growth is converting to cash or backlog growth is masking cash burn.
Airbus/Valkyrie AI integration flight tests in Europe (late 2026). Shows whether the European UCCA production pathway is materializing as an alternate growth line.
Key numbers
  • FY2025 revenue $1.347 billion (2026-02-23)
  • Q1 2026 revenue $371.0M, up 22.6% YoY (2026-05-06)
  • FY2026 guidance revenue $1.70-$1.76 billion (2026-05-06)
Named risks
  • Excluded from USAF CCA Increment 1 production and mission-autonomy software pool. Severity: high
  • Negative trailing free cash flow of about -$124.6 million as of June 2026. Severity: medium
  • Stock fell 57% from January 2026 high amid valuation reset. Severity: medium
  • Dependence on FY2027 defense budget growth (~$1.5 trillion) materializing as projected. Severity: medium
  • Regulatory approval risk on Orbit Technologies acquisition of Israeli national-security asset. Severity: low
Rivals, as read in July 2026
RivalDirectionEvidence
Anduril Industrieslosing toWon USAF CCA Increment 1 production contract June 17, 2026 over Kratos
General Atomicslosing toWon CCA Increment 1 alongside Anduril, June 17, 2026; beat Kratos in 2023 OBSS
Shield AIlosing toSelected in USAF mission-autonomy software pool, July 13, 2026, Kratos excluded
Northrop GrummancontestingPartner on USMC MUX TACAIR CCA program with Kratos, Jan 8, 2026
Airbus Defence and SpacecontestingPartner integrating MARS AI onto Valkyrie for German Air Force, flight tests 2026
Questions people ask
Is Kratos Defense profitable in 2026?
Kratos raised FY2026 guidance to $1.70-1.76 billion revenue and $170-176 million Adjusted EBITDA as of May 6, 2026, but trailing free cash flow was reported negative at roughly -$124.6 million as of June 9, 2026, per Simply Wall St.
Did Kratos lose the CCA drone contract to Anduril?
Yes. On June 17, 2026 the US Air Force selected Anduril's FQ-44A Fury and General Atomics's FQ-42A Dark Merlin for CCA Increment 1 production, and Kratos was not selected for that flagship contract, per DefenseScoop.
Who is Kratos Defense's biggest competitor?
In combat drones, Anduril Industries and General Atomics are the closest rivals, having won the USAF CCA Increment 1 production award on June 17, 2026. Kratos still holds the separate Marine Corps CCA program with Northrop Grumman, announced January 8, 2026.
Could AI replace Kratos Defense's business?
Kratos holds ITAR-controlled manufacturing, security clearances, and program-of-record status (e.g. the $446.8 million Space Force ground-segment deal, March 17, 2026) that AI software cannot replicate, though Kratos was excluded from the USAF's mission-autonomy software pool as of July 13, 2026.
Who owns Kratos Defense Security Solutions?
Kratos is a standalone public company on NASDAQ (KTOS) with a market capitalization of about $9.27 billion as of July 24, 2026. Institutional holders include Vanguard, per a 13G/A filed March 2026, and Allspring Global Investments, holding about 0.31% as of July 20, 2026.
What is Kratos's Airbus partnership about?
Announced July 13, 2025, Kratos and Airbus are adapting the XQ-58A Valkyrie drone into a European combat drone for the German Air Force targeting combat readiness by 2029; two Valkyries began flight-test integration with Airbus's MARS AI system in March 2026 at Manching, Germany.
Timeline
  • 2026-07-23Kratos schedules Q2 2026 earnings call for August 4, 2026
  • 2026-07-20Kratos announces manufacturing partnership with Elroy Air for Chaparral cargo aircraft
  • 2026-07-15Kratos opens 167,000-sq-ft Pennsylvania manufacturing facility
  • 2026-06-17USAF picks Anduril and General Atomics for CCA Increment 1 production, not Kratos
  • 2026-05-06Kratos reports Q1 2026 revenue of $371.0 million, raises FY26 guidance
  • 2026-03-17Kratos awarded $446.8 million Space Force MEO ground-segment agreement
  • 2026-03-13Two Valkyries begin flight-test integration with Airbus MARS system in Manching, Germany
  • 2026-02-23Kratos reports FY2025 revenue of $1.347 billion, up from $1.136 billion in FY2024
  • 2026-01-08USMC selects Northrop Grumman and Kratos for MUX TACAIR CCA program
  • 2025-11-04Kratos agrees to acquire Orbit Technologies for $356.3 million
Revision history
24 July 2026
First assessed. Protection under test. The text above is fixed as of this date and is not edited afterwards.
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