Shares of Kratos Defense & Security Solutions (NASDAQ: KTOS) tumbled 8.81% in pre-market trading on Wednesday, following the company's third-quarter earnings report and a major acquisition announcement. Despite beating expectations for Q3, investors appear concerned about the company's fourth-quarter guidance and the financial implications of its latest acquisition.

Kratos reported impressive Q3 2025 results, with revenue reaching $347.6 million, up 26% year-over-year and surpassing analyst estimates of $322.9 million. The company's adjusted earnings per share came in at $0.14, beating the consensus estimate of $0.12. However, Kratos' fourth-quarter revenue guidance of $320 million to $330 million fell short of Wall Street's expectations of $334.55 million, potentially contributing to the stock's decline.

In a separate announcement, Kratos revealed plans to acquire Israel-based Orbit Technologies Ltd for $356.3 million, which the company intends to fund with cash. While this move aligns with Kratos' expansion strategy, investors may be concerned about the financial implications of the deal or potential integration challenges. Despite the negative market reaction, Kratos raised its full-year 2025 revenue guidance to a range of $1.32 billion to $1.33 billion and provided a preliminary 2027 revenue growth target of 18% to 23%, signaling confidence in its long-term prospects. The sharp sell-off may also be attributed to profit-taking, as Kratos shares had more than tripled year-to-date before this announcement.