Why Kratos Defense Stock Just Dropped

By Rich Smith – Feb 24, 2026 at 11:02AM ESTKey PointsKratos beat on top and bottom lines last night.Kratos's profits, however, look weak, and the drones company continued to burn cash.NASDAQ: KTOSKratos Defense & Security SolutionsMarket Cap$15BToday's Changeangle-down(-2.49%) $2.26Current Price$88.42Price as of February 25, 2026 at 3:58 PM ETAt 730 times earnings, it's hard to call Kratos stock a "buy."Kratos Defense & Security (KTOS 2.49%) stock tumbled 7.5% through 10:05 a.m. ET Tuesday after despite beating on both sales and earnings last night. Heading into Kratos's Q4 report, analysts forecast Kratos would earn $0.017 per share on sales of $327.6 million. In fact, Kratos earned $0.18 per share and reported quarterly sales of $345.1 million. Image source: Getty Images. Kratos Q4 earnings Despite beating forecasts, Kratos's Q4 performance was "mixed." Sales grew nicely, up 22% year over year. GAAP profits, however, were flat against Q4 2024. (Kratos's "$0.18" profit was a non-GAAP number; actual earnings calculated under generally accepted accounting principles were only $0.03.) What's more, revenue from drone sales -- Kratos being primarily known as a maker of drones for the military -- grew only 12%. Most of the growth came from the Kratos Government Solutions business, "KGS," which focuses on defensive rockets, microwave products, and "space, training and cyber." Free cash flow ran negative for the quarter, and negative $137.4 million (or negative $125.4 million, according to Kratos) for the year. ExpandNASDAQ: KTOSKratos Defense & Security SolutionsToday's Change(-2.49%) $-2.26Current Price$88.42Key Data PointsMarket Cap$15BDay's Range$88.36 - $93.1752wk Range$24.61 - $134.00Volume98KAvg Vol3.2MGross Margin22.14% Is Kratos stock a buy? Was there good news in the report, too? Yes, there was. Quarterly sales growth overall was strong, and KGS segment growth was robust. Full-year sales growth wasn't much worse at 17%. Management also highlighted a 1.1 book-to-bill ratio for the year, which strengthened to 1.3 in the final quarter, lending confidence to its guidance for growing sales -- anywhere from $1.6 billion to $1.7 billion in 2026. That works out to about 21% growth, which would be better than Kratos enjoyed in 2025. Ultimately, though, I just can't recommend buying a stock that costs 730 times earnings. Kratos stock remains a sell for me.Read NextFeb 21, 2026 •By Rich SmithPentagon Names Its Drone Dominance Winners.

You Can Own 2 of Them.Feb 18, 2026 •By Rich SmithWhy Kratos Defense Stock Just PoppedFeb 10, 2026 •By Rich SmithWhy Did Kratos Stock Drop Today?Feb 3, 2026 •By Rich SmithWhy Kratos Stock Wins a ReprieveFeb 2, 2026 •By Rich SmithWhy Kratos Stock Keeps Going DownJan 28, 2026 •By Rich SmithWhy Did Kratos Defense Stock Drop on Wednesday?About the AuthorRich Smith is a contributing Motley Fool defense and stock market analyst covering publicly traded and emerging companies in defense, space, aerospace, and other sectors. Prior to The Motley Fool, Rich practiced international corporate law for Clifford Chance in Russia, and for the Russian-Ukrainian Legal Group in Moscow, Kyiv, and Washington, D.C. He holds a bachelor’s degree in international relations from the College of William & Mary, a law degree from the University of Baltimore, and a language certification from the International Institute of Russian Language & Culture in Tver, Russian Federation. The Globe and Mail once featured him as “one of the best stock pickers since 2009.”TMFDittyX@RichSmithFoolStocks MentionedKratos Defense & Security SolutionsNASDAQ: KTOS$88.42 (2.49%) $2.26*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.