Kratos Defense & Security Solutions Reports 17.1% Revenue Growth to $351.5 Million in Q2 2025

Kratos Defense & Security Solutions, Inc. reported a total revenue of $351.5 million for the three months ended June 29, 2025, marking a 17.1% increase from $300.1 million in the same period last year. The company's service revenues rose to $134.9 million, up 26.7% from $106.5 million, while product sales increased by 11.9% to $216.6 million from $193.6 million. For the six-month period, total revenues reached $654.1 million, a 13.3% increase compared to $577.3 million in the prior year. However, net income for the quarter decreased to $2.9 million from $7.9 million, reflecting a decline in gross profit margins, which fell to 21.0% from 25.7% year-over-year.

The financial performance was influenced by several factors, including increased costs associated with labor and materials, which contributed to a rise in total costs to $277.7 million for the quarter, up from $222.9 million. The company also experienced a significant increase in selling, general, and administrative expenses, which rose to $59.9 million from $54.5 million, primarily due to higher revenue volume and headcount. Despite these challenges, Kratos reported a backlog of approximately $1.4 billion as of June 29, 2025, indicating a strong pipeline for future revenue recognition.

Strategically, Kratos has made notable acquisitions, including the purchase of assets from Norden Millimeter, Inc., which contributed $5.9 million in revenue during the quarter. The company also completed the acquisition of Sierra Technical Services, Inc. in late 2023, further expanding its capabilities in aerial target drone design. Additionally, Kratos announced a joint venture with RAFAEL Advanced Defense Systems to establish Prometheus Energetics, a U.S.-based supplier of solid rocket motors, which is expected to begin production in 2027.

Operationally, Kratos has seen a geographic expansion in its customer base, with revenues from international customers accounting for approximately 17% of total revenue for the quarter. The company continues to focus on enhancing its product offerings, particularly in unmanned systems and defense technologies, to address the evolving needs of national security. As of June 29, 2025, Kratos had cash and cash equivalents of $783.6 million, a significant increase from $329.3 million at the end of the previous fiscal year, providing a strong liquidity position to support ongoing operations and strategic initiatives.

Looking ahead, Kratos anticipates continued growth driven by its robust backlog and strategic investments in technology and infrastructure. The company expects to recognize approximately 36% of its remaining performance obligations as revenue in fiscal year 2025, with additional contributions anticipated in subsequent years. However, management remains cautious about potential risks, including changes in government spending, supply chain disruptions, and labor shortages, which could impact future performance.