Kratos Defense & Security Solutions Reports $302.6 Million Revenue in Q1 2025, Up 9.2%

Kratos Defense & Security Solutions, Inc. reported a total revenue of $302.6 million for the first quarter of 2025, marking an increase of 9.2% from $277.2 million in the same period last year. The growth was driven by a $29.5 million rise in product sales, which reached $200.2 million, while service revenues decreased by $4.1 million to $102.4 million. The company’s gross profit for the quarter was $73.6 million, resulting in a gross margin of 24.3%, down from 25.6% in the prior year, primarily due to increased labor and material costs.

In terms of profitability, Kratos reported a net income of $4.5 million, significantly higher than the $1.3 million recorded in the first quarter of 2024. This improvement was attributed to a decrease in interest expenses and an increase in interest income, alongside a more favorable tax provision, which dropped to $0.9 million from $2.7 million year-over-year. The company’s basic and diluted earnings per share were both $0.03, compared to $0.01 in the previous year.

Strategically, Kratos completed the acquisition of certain assets from Norden Millimeter, Inc. on February 4, 2025, which contributed $4.8 million in revenue during the quarter. The company also reported a backlog of approximately $1.5 billion as of March 30, 2025, an increase from $1.3 billion a year earlier, indicating strong future revenue potential. The funded backlog was $1.17 billion, with expectations to recognize about 48% of this backlog as revenue in fiscal year 2025.

Operationally, Kratos has seen a slight increase in its workforce, with employee headcount rising to support its expanding operations. The company’s cash and cash equivalents decreased to $263.7 million from $329.3 million at the end of the previous fiscal year, reflecting ongoing investments in capital expenditures, which totaled $22.6 million for the quarter. The company’s long-term debt also decreased to $182.5 million, down from $185.0 million, as it continues to manage its financial obligations effectively.

Looking ahead, Kratos remains optimistic about its growth trajectory, driven by anticipated increases in defense spending and a strong pipeline of opportunities. However, the company acknowledges potential risks, including budgetary pressures and supply chain disruptions, which could impact its operations and financial performance. The management is focused on leveraging its technological capabilities and strategic partnerships to navigate these challenges and capitalize on market opportunities.