Defense ETFs Discover a New Tool: The Algorithm
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Sep 23 2025
0mins
Should l Buy KTOS?
Source: Benzinga
Rising Interest in Defense ETFs: Defense ETFs are gaining traction due to a combination of global tensions and advancements in AI technology, particularly following the U.S.-U.K. Technology Prosperity Deal, which includes significant investments in AI for defense.
Strong Performance of Key ETFs: Notable ETFs like the STOXX Europe Aerospace & Defense ETF and the Global X Defense Tech ETF have seen substantial gains, driven by companies focusing on AI-powered defense solutions, indicating a shift in how investors view defense investments.
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Analyst Views on KTOS
Wall Street analysts forecast KTOS stock price to rise
13 Analyst Rating
11 Buy
2 Hold
0 Sell
Strong Buy
Current: 83.690
Low
80.00
Averages
108.69
High
150.00
Current: 83.690
Low
80.00
Averages
108.69
High
150.00
About KTOS
Kratos Defense & Security Solutions, Inc. is a technology, products, system and software company addressing the defense, national security, and commercial markets. It operates through two segments: Kratos Government Solutions (KGS) and Unmanned Systems (US). The KGS segment includes its microwave electronic products, space, satellite and cyber, training solutions, command, control, communication, computing, combat, intelligence surveillance and reconnaissance (C5ISR)/modular systems, turbine technologies, and defense and rocket support services operating segments. The US segment consists of its unmanned aerial, unmanned ground, unmanned seaborne and related command, control and communications system businesses. Its KGS and US segments provide products, solutions and services for mission-critical National Security programs. KGS and US customers primarily include National Security-related agencies, the DoD, intelligence agencies and classified agencies, and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Kratos Defense Stock Falls Despite New 5G NTN Contract
- Project Partnership: Sky Perfect JSAT has selected Kratos to develop the ground system for its new 5G Non-Terrestrial Network (NTN) in the Asia-Pacific region, yet despite this potentially positive news, Kratos's stock fell by 5.5%, indicating market concerns over its valuation.
- Technical Role: Kratos will provide software for the NTN ground systems, enabling communication between Earth nodes and satellites as well as high-altitude platforms like drones and blimps; however, the project is still in the R&D phase and far from commercial viability.
- Market Reaction: Although Kratos's involvement in the NTN project could lead to future revenue, the lack of specific financial details has resulted in a tepid market response, with the stock price dropping to $78.04 and a market cap of $16 billion.
- Valuation Issues: With a staggering price-to-earnings ratio of 650, investor expectations for Kratos's future profitability appear overly optimistic, leading to a stock price decline even in light of potentially favorable news, reflecting deep market concerns about its valuation.
See More
Kratos Defense to Support Sky Perfect JSAT's New Communication System
- Project Collaboration Initiated: Kratos Defense has been selected by Sky Perfect JSAT to develop the ground station system for its new 5G Non-Terrestrial Network, although the project is still in the initial validation stage and not yet close to commercialization.
- Defined Technical Role: Kratos will provide software for ground systems that facilitate communication between Earth nodes and satellites as well as high-altitude platforms like drones and blimps; however, the lack of disclosed financial details leaves the revenue potential of the project unclear.
- Negative Market Reaction: Despite the seemingly positive news, Kratos's stock fell by 5.5% following the announcement, indicating market concerns over its high valuation with a price-to-earnings ratio of 650, leading to pessimistic investor expectations regarding future earnings.
- Industry Analysis Warning: Analysts note that Kratos was not included in the Motley Fool Stock Advisor's list of top stocks, reflecting skepticism about its long-term growth potential, suggesting that investors should carefully assess its investment value.
See More
Defense Stocks Poised for Growth Amid Rising Military Spending
- Surge in Defense Spending: A rise in global military activity and national security spending is significantly increasing backlogs for defense companies, indicating a robust recovery potential for the defense sector as the market prepares for a multi-year rearmament cycle.
- Kratos' Market Edge: With 68% of its revenue coming from the U.S. government last year, Kratos disrupts the defense industry by offering low-cost high-tech hardware, and its hypersonic business is projected to double revenue to approximately $400 million by 2026, showcasing strong growth potential in the defense market.
- Rocket Lab's Transformation: Transitioning from a small launch provider to a U.S. defense contractor, Rocket Lab secured an $816 million contract last year to design and manufacture 18 satellites, enhancing its market position in defense while driving growth in its vertically integrated space systems business.
- Investment Choice Analysis: Analysts project Rocket Lab's 2028 non-GAAP EPS at $0.29, with a valuation of 264 times, while Kratos is priced at 68 times its projected EPS, indicating that both stocks are suited for aggressive growth investors, but Kratos has a slight edge due to its profitability and lower forward valuation.
See More
Growth Potential of Kratos and Rocket Lab in Defense Sector
- Market Positioning of Kratos: Kratos focuses on unmanned systems and missile defense, with approximately 68% of its revenue coming from the U.S. government last year, indicating a strong reliance on defense contracts, and it is expected to enhance its market competitiveness through partnerships with Northrop Grumman.
- Major Contract Awarded: Kratos secured a $1.45 billion contract for the MACH-TB 2.0 program, the largest in its history, which is projected to double its revenue to approximately $400 million by 2026, marking a significant expansion in its hypersonic technology business.
- Transformation of Rocket Lab: Rocket Lab has transitioned from a commercial launch company to a defense contractor, winning an $816 million contract last year to design and manufacture 18 satellites for the Space Development Agency, showcasing its rapid growth potential in the defense market.
- Profitability Comparison: Analysts project Rocket Lab's 2028 EPS to be $0.29, valuing it at 264 times that estimate, while Kratos is priced at 68 times its projected EPS of $1.34, indicating that Kratos offers more attractive profitability and valuation, making it suitable for growth-seeking investors.
See More
Kratos Defense Stock Drops 5% Amid Red Cat Earnings Report
- Stock Price Reaction: Kratos Defense (KTOS) shares fell 5% on Thursday morning, primarily influenced by Red Cat Holdings (RCAT) earnings report, indicating market sensitivity to sector-related news despite no direct negative news from Kratos.
- Red Cat Earnings Impact: Red Cat reported a Q4 loss of $0.17 per share, exceeding analyst expectations of $0.14, and while it achieved nearly 2000% sales growth, significant net losses may dampen investor confidence in Kratos.
- Kratos Performance Comparison: Kratos has averaged a 12.5% annual sales growth over the past five years, accelerating to 21.9% last quarter, although it burned $137 million in cash over the last year, more than Red Cat's cash burn, highlighting its aggressive growth strategy.
- Positive Profit Outlook: Unlike Red Cat, Kratos has been profitable with $22 million earnings over the past 12 months and is expected to double its profits by 2025, showcasing its competitive edge and more robust financial health in the defense sector.
See More
Rocket Lab Signs Largest Launch Contract in History
- Record Contract Size: Rocket Lab has signed a $190 million contract with the U.S. Department of Defense for 20 hypersonic test flights, marking the largest launch agreement in the company's history and further solidifying its market position in defense.
- Increased Launch Backlog: This contract pushes Rocket Lab's total backlog of launches to over 70, elevating the total backlog across launch and space systems to more than $2 billion, indicating strong demand and growth potential in the rapidly expanding aerospace market.
- Significant Technical Advantage: Rocket Lab's HASTE launch vehicle has successfully completed multiple launches at speeds exceeding Mach 5, maintaining a 100% mission success rate, showcasing its leadership and reliability in hypersonic flight testing.
- Strong Market Demand: In Q1 2026, Rocket Lab has sold 28 new launch missions, nearly matching the total sales for the entire year of 2025, reflecting its preferred status as the small launch vehicle of choice for commercial, civil, and defense missions.
See More
Kratos Defense Stock Falls Despite New 5G NTN Contract
- Project Partnership: Sky Perfect JSAT has selected Kratos to develop the ground system for its new 5G Non-Terrestrial Network (NTN) in the Asia-Pacific region, yet despite this potentially positive news, Kratos's stock fell by 5.5%, indicating market concerns over its valuation.
- Technical Role: Kratos will provide software for the NTN ground systems, enabling communication between Earth nodes and satellites as well as high-altitude platforms like drones and blimps; however, the project is still in the R&D phase and far from commercial viability.
- Market Reaction: Although Kratos's involvement in the NTN project could lead to future revenue, the lack of specific financial details has resulted in a tepid market response, with the stock price dropping to $78.04 and a market cap of $16 billion.
- Valuation Issues: With a staggering price-to-earnings ratio of 650, investor expectations for Kratos's future profitability appear overly optimistic, leading to a stock price decline even in light of potentially favorable news, reflecting deep market concerns about its valuation.
See More
Kratos Defense to Support Sky Perfect JSAT's New Communication System
- Project Collaboration Initiated: Kratos Defense has been selected by Sky Perfect JSAT to develop the ground station system for its new 5G Non-Terrestrial Network, although the project is still in the initial validation stage and not yet close to commercialization.
- Defined Technical Role: Kratos will provide software for ground systems that facilitate communication between Earth nodes and satellites as well as high-altitude platforms like drones and blimps; however, the lack of disclosed financial details leaves the revenue potential of the project unclear.
- Negative Market Reaction: Despite the seemingly positive news, Kratos's stock fell by 5.5% following the announcement, indicating market concerns over its high valuation with a price-to-earnings ratio of 650, leading to pessimistic investor expectations regarding future earnings.
- Industry Analysis Warning: Analysts note that Kratos was not included in the Motley Fool Stock Advisor's list of top stocks, reflecting skepticism about its long-term growth potential, suggesting that investors should carefully assess its investment value.
See More
Defense Stocks Poised for Growth Amid Rising Military Spending
- Surge in Defense Spending: A rise in global military activity and national security spending is significantly increasing backlogs for defense companies, indicating a robust recovery potential for the defense sector as the market prepares for a multi-year rearmament cycle.
- Kratos' Market Edge: With 68% of its revenue coming from the U.S. government last year, Kratos disrupts the defense industry by offering low-cost high-tech hardware, and its hypersonic business is projected to double revenue to approximately $400 million by 2026, showcasing strong growth potential in the defense market.
- Rocket Lab's Transformation: Transitioning from a small launch provider to a U.S. defense contractor, Rocket Lab secured an $816 million contract last year to design and manufacture 18 satellites, enhancing its market position in defense while driving growth in its vertically integrated space systems business.
- Investment Choice Analysis: Analysts project Rocket Lab's 2028 non-GAAP EPS at $0.29, with a valuation of 264 times, while Kratos is priced at 68 times its projected EPS, indicating that both stocks are suited for aggressive growth investors, but Kratos has a slight edge due to its profitability and lower forward valuation.
See More
Growth Potential of Kratos and Rocket Lab in Defense Sector
- Market Positioning of Kratos: Kratos focuses on unmanned systems and missile defense, with approximately 68% of its revenue coming from the U.S. government last year, indicating a strong reliance on defense contracts, and it is expected to enhance its market competitiveness through partnerships with Northrop Grumman.
- Major Contract Awarded: Kratos secured a $1.45 billion contract for the MACH-TB 2.0 program, the largest in its history, which is projected to double its revenue to approximately $400 million by 2026, marking a significant expansion in its hypersonic technology business.
- Transformation of Rocket Lab: Rocket Lab has transitioned from a commercial launch company to a defense contractor, winning an $816 million contract last year to design and manufacture 18 satellites for the Space Development Agency, showcasing its rapid growth potential in the defense market.
- Profitability Comparison: Analysts project Rocket Lab's 2028 EPS to be $0.29, valuing it at 264 times that estimate, while Kratos is priced at 68 times its projected EPS of $1.34, indicating that Kratos offers more attractive profitability and valuation, making it suitable for growth-seeking investors.
See More
Kratos Defense Stock Drops 5% Amid Red Cat Earnings Report
- Stock Price Reaction: Kratos Defense (KTOS) shares fell 5% on Thursday morning, primarily influenced by Red Cat Holdings (RCAT) earnings report, indicating market sensitivity to sector-related news despite no direct negative news from Kratos.
- Red Cat Earnings Impact: Red Cat reported a Q4 loss of $0.17 per share, exceeding analyst expectations of $0.14, and while it achieved nearly 2000% sales growth, significant net losses may dampen investor confidence in Kratos.
- Kratos Performance Comparison: Kratos has averaged a 12.5% annual sales growth over the past five years, accelerating to 21.9% last quarter, although it burned $137 million in cash over the last year, more than Red Cat's cash burn, highlighting its aggressive growth strategy.
- Positive Profit Outlook: Unlike Red Cat, Kratos has been profitable with $22 million earnings over the past 12 months and is expected to double its profits by 2025, showcasing its competitive edge and more robust financial health in the defense sector.
See More
Rocket Lab Signs Largest Launch Contract in History
- Record Contract Size: Rocket Lab has signed a $190 million contract with the U.S. Department of Defense for 20 hypersonic test flights, marking the largest launch agreement in the company's history and further solidifying its market position in defense.
- Increased Launch Backlog: This contract pushes Rocket Lab's total backlog of launches to over 70, elevating the total backlog across launch and space systems to more than $2 billion, indicating strong demand and growth potential in the rapidly expanding aerospace market.
- Significant Technical Advantage: Rocket Lab's HASTE launch vehicle has successfully completed multiple launches at speeds exceeding Mach 5, maintaining a 100% mission success rate, showcasing its leadership and reliability in hypersonic flight testing.
- Strong Market Demand: In Q1 2026, Rocket Lab has sold 28 new launch missions, nearly matching the total sales for the entire year of 2025, reflecting its preferred status as the small launch vehicle of choice for commercial, civil, and defense missions.
See More
