Key Takeaways:
Kratos Defense & Security Solutions (NASDAQ: KTOS) will increase production of its Valkyrie drone five-fold after reporting a 35 percent jump in net income for 2025.
"The Marine Corps isn't the only high-profile customer, either. The Air Force and multiple foreign military customers have also committed to it, and Kratos is ramping up production to meet demand," CEO Eric DeMarco announced regarding the plan.
The defense contractor's full-year results showed strong growth, though the company did not provide a comparison to consensus estimates. Management issued 2026 revenue guidance of $1.6 billion to $1.7 billion before announcing a major new contract.
The stock has fallen over 14 percent in the last 30 days, though it retains a one-year gain of over 79 percent. The production ramp-up, from eight to 40 Valkyries per year by 2027, is backed by a $231.5 million Marine Corps contract and a new $446.8 million Space Force award.
Recent conflicts have highlighted the value of affordable, scalable unmanned aerial systems, a core part of Kratos' strategy. In April, the company completed initial flights of its Mk1 Firejet, a tactical drone with a price point under $500,000. This positions Kratos to compete for Department of Defense contracts focused on mass-producible attack drones.
The growth is not limited to unmanned aircraft. The $446.8 million contract awarded by the Space Force's Space Systems Command on April 8 is for missile warning and tracking systems, diversifying the company's revenue streams beyond its drone business, which includes partners like Northrop Grumman.
Despite a recent pullback in share price to $61.66, some analysts see significant upside, with one widely followed fair value estimate placing the stock at $117.35. This view is based on projections of revenue reaching $2.5 billion by 2029 as Kratos scales production and its first-to-market advantage in certain drone categories translates into higher-margin international orders.
The planned production increase and new contracts suggest Kratos is moving from a development-heavy phase to one of realized, large-scale revenue. Investors will watch the company's ability to convert its growing backlog into sustained free cash flow when it reports first-quarter 2026 results.
This article is for informational purposes only and does not constitute investment advice.
