Drone Maker Kratos Crushed Sales Estimates. The Stock Is Down.

Kratos reported third-quarter earnings Tuesday evening. Through Tuesday trading, shares were up 242% year to date and up 292% over the past 12 months. (Photo by I-HWA CHENG/AFP via Getty Images)

Key Points

• Kratos Defense & Security Solutions reported third-quarter earnings per share of 14 cents on sales of $347.6 million.
• The company provided 2026 sales growth guidance of 15% to 20% and 2027 sales growth guidance of 18% to 23%.
• Kratos announced the acquisition of Orbit Technologies, a satellite communication systems provider, for $356.3 million.

Military drone maker Kratos Defense & Security Solutions delivered strong third-quarter results and even gave investors a look into 2027. Shares, however, dropped shortly after results were released.

Expectations were running high.

Tuesday evening, the company announced earnings per share of 14 cents from sales of $347.6 million, up from $276 million in the third quarter of 2024. Wall Street was looking for 13 cents and $322 million, respectively, according to FactSet.

Orders were $414.1 million in the quarter, about 10% higher than sales.

Guidance for fourth-quarter sales is $320 million to $330 million. Wall Street currently projects $333 million. The company guidance is a little light of estimates, but there are 2026 and 2027 to consider.

Guidance for 2026 sales growth is 15% to 20%. Guidance for 2027 sales growth is 18% to 23%. That implies 2026 and 2027 sales of about $1.6 billion and $1.9 billion, respectively. Wall Street projects $1.6 billion and $1.8 billion, respectively.

The U.S. military is using, and will use, a lot more Kratos technology. Still, shares dropped 14% to $77.41 on Wednesday, while the S&P 500 and Dow Jones Industrial Average gained 0.4% and 0.5%, respectively.

Through Tuesday trading, Kratos’ stock was up 242% year to date.

Earnings guidance might have given investors some pause, too. Kratos expects earnings before interest, taxes, depreciation, and amortization, or Ebitda, profit margins of about 10% and 11% in 2026 and 2027, respectively. Wall Street projects about 10% and 12%, respectively. That one percentage point gap in 2027 numbers could be partly to blame for the dip.

Along with earnings, Kratos announced the acquisition of Orbit Technologies for $356.3 million. Kratos will fund the deal through cash on the balance sheet.

Orbit is a provider of “mission-critical satellite-based communication systems for mobile and unmanned aerial, seaborne, undersea and land systems, military vehicles and other systems.”

Drones need to talk to one another, and Orbit adds to Kratos’ capabilities to do just that.

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