How Is KTOS Capitalizing on Rising Global Demand for Unmanned Systems?

Kratos Defense & Security Solutions, Inc. KTOS continues to benefit from the rapid expansion of its unmanned systems portfolio, driven by strong revenue momentum and a steady rise in defense contracts. The company’s strategy centers on delivering high-performance, cost-effective drones designed for training, target, and tactical missions — an approach that has strengthened its competitive position in the fast-growing unmanned systems market.

In the third quarter of 2025, Kratos Defense’s unmanned systems segment delivered a standout performance, with revenues surging 35.8% year over year. Operating income of the unmanned systems segment witnessed an increase of 575% to $2.7 million, underscoring the improving profitability of this business as scale and efficiency continue to build.

Kratos is the primary unmanned aerial target drone system provider for the U.S. Air Force, Navy, Army and allied foreign defense agencies. As a result, the company has recently secured multiple contracts and engaged in strategic collaborations involving its target drones, which should significantly boost its footprint in the global unmanned aerial systems (UAS) space.

KTOS is also investing heavily in next-generation platforms, including advanced target drones, such as the Thanatos and Apollo. It is also developing a fifth-generation jet drone, which positions it well for future tactical and strike missions. Combined with its ongoing advancements in hypersonic technology and its emphasis on rapid, cost-effective development cycles, these initiatives align closely with evolving U.S. national security priorities and demand trends.

KTOS’ close collaboration with customers helps it quickly adapt its systems to evolving mission needs, strengthening its relevance and supporting long-term growth.

Key Defense Leaders Expanding in Unmanned Systems

Major defense companies benefiting from the increasing demand for unmanned systems are discussed below:

Northrop Grumman NOC is a key innovator in high-end unmanned aircraft designed for intelligence, surveillance, and military operations. Its UAV advancements play a crucial role in enhancing situational awareness and ensuring mission adaptability across multiple defense environments.

Lockheed Martin LMT remains a leading force in the unmanned systems space, producing both aerial and underwater unmanned vehicles through its Rotary & Mission Systems division. Its technologies support a wide range of defense missions as well as deep-ocean research and surveillance.

KTOS Stock’s Earnings Estimates

The Zacks Consensus Estimate for 2025 and 2026 EPS indicates an increase of 4.08% and 38.95%, respectively, year over year.

KTOS Stock Trades at a Discount

In terms of valuation, KTOS’ forward 12-month price-to-sales (P/S) is 7.58X, a discount to the industry’s average of 8.86X.

KTOS Stock’s Price Performance

In the past six months, KTOS’ shares have risen 100.3% compared with the industry’s 5.8% growth.

KTOS’ Zacks Rank

The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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