Earnings

Kratos CEO Calls 2027 Outlook 'Extremely Conservative,' Says Internal Forecast Is Far Higher

Kratos guided to $2.1 billion to $2.2 billion in 2027 revenue, but its CEO said the internal forecast rolls up considerably higher.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

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Kratos CEO Calls 2027 Outlook 'Extremely Conservative,' Says Internal Forecast Is Far Higher

Kratos Defense, which makes drones, hypersonic vehicles, jet engines and satellite ground software for defense customers, set a first 2027 outlook of $2.1 billion to $2.2 billion in revenue, and CEO Eric DeMarco said on the company's third-quarter earnings call Thursday that it is deliberately low. The internal forecast "currently rolls up considerably higher," he said, and he pinned the caution on budget politics in Washington.

A guide held down by Washington

The initial 2027 outlook also calls for adjusted EBITDA of $230 million to $240 million. DeMarco said that implies revenue growth of about 18% to 22% over the raised 2026 guidance range.

He cited a continuing resolution (a stopgap funding measure), a lame-duck Congress, a new Congress seating in January, divided party leadership and supply chain strain. If a funding appropriation lands early next year, he expects the first quarter of 2027 to be the lightest for revenue and EBITDA, with the third and fourth quarters substantially greater.

A Barclays analyst asked what the guide holds for Valkyrie, Kratos' jet-powered combat drone. DeMarco said the company is "starting to include Valkyrie in the guide," which he called "extremely conservative," so Valkyrie could be additive if results approach the internal forecast. He also said Kratos recently received a low-rate initial production contract for Valkyrie, but customer restrictions bar him from giving details.

Reconciliation bill as upside

Asked whether Kratos needs a reconciliation spending bill, DeMarco said it does not, provided the $1.15 trillion 2027 defense authorization sees no material changes. His "tummy tells me" that a bill north of $150 billion to $200 billion on top of that could be important upside, he said, if an appropriation also arrives by March 31.

Engines, hypersonics and the cash crossover

Kratos is placing orders to build 3,000 turbojet engines in Michigan in 2027, DeMarco said. About 1,500 should ship that year, mostly in the third and fourth quarters, and the rest in 2028.

He said hypersonics is on track for about $700 million of revenue in 2027, with roughly $600 million in funding already received. Third-quarter revenue was $471.8 million, with organic growth of 23.2%, and adjusted EBITDA was $50.9 million.

DeMarco said he expects Kratos to be cash flow positive by 2029, and that the company is fully capitalized with no capital raises coming for the foreseeable future.

Kratos reports fourth-quarter results in February, when DeMarco said management should have more to say on possible Valkyrie production in Taiwan.

Sources

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