Al Root

Drone technology company Kratos Defense & Security Solutions reported better-than-expected fourth-quarter earnings and gave 2026 financial guidance that essentially matched Wall Street's expectations and implied sales growth of close to 20%.

The drone business is strong right now. Shares, however, dipped initially after results were announced. There are a couple of reasons for that, including high investor expectations.

Monday evening, Kratos announced fourth-quarter earnings per share of 18 cents from sales of $345.10 million. Wall Street was looking for earnings per share of 16 cents from sales of $327 million. A year ago, Kratos reported earnings per share of 13 cents from sales of $283.10 million.

Orders were about 10% higher than sales in the quarter.

For 2026, Kratos management expects adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, of about $162 million from sales of $1.64 billion. Wall Street currently projects Ebitda of $162 million from sales of $1.60 billion, up 20% year over year.

For the first quarter of 2026, Kratos expects Ebitda of about $28 million from sales of $340 million. Analysts currently project Ebitda of $33 million from sales of $348 million.

The full-year numbers look as expected, but investors don't like to wait for business to pick up later in the year. Kratos stock was down 4.3% in premarket trading at $90.30, while S&P 500 and Dow Jones Industrial Average futures were up 0.1% and 0.2%, respectively.

"Our reaction [to guidance] was positive," wrote Stifel analyst Jonathan Siegmann. "We have lower conviction in our individual quarterly estimates, so we are not terribly troubled by shifting some first-half revenue" to the second half of the year. He also doesn't think Kratos' full-year guidance includes benefits from Orbit Technologies, which is about to be acquired.

Seigmann rates Kratos stock Buy and has a $134 price target for shares.

Another reason the stock fell after earnings was the starting point. A lot of good news is reflected in Kratos' shares, with investors seeing growth in unmanned military systems for years to come. Coming into the week, Kratos' stock was up 280% over the past 12 months, leaving shares trading for about 124 times estimated 2026 earnings, according to FactSet.

Shares might finish lower on Tuesday, but that doesn't mean things aren't booming in the drone business.

Write to Al Root at allen.root@dowjones.com

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February 24, 2026 08:13 ET (13:13 GMT)

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