U.S. Military to Purchase $1.1 Billion Worth of Drones
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 21 2026
0mins
Should l Buy KTOS?
Source: Fool
- Massive Procurement: The U.S. Department of Defense has announced a $1.1 billion drone procurement plan, with the first phase involving 25 vendors competing for $150 million in orders expected within five months, indicating strong demand in the drone market.
- Competitor List Revealed: Among the 25 suppliers in Phase 1, only Kratos and Red Cat are publicly traded, highlighting the absence of major defense contractors like Boeing and Lockheed Martin, which could impact their market share.
- Contract Distribution Mechanism: Ultimately, 12 vendors will be awarded contracts, each receiving $12.5 million, with five final winners projected to secure a combined order for 150,000 drones worth $345 million by 2027, further solidifying their market positions.
- Investment Opportunities Emerge: Investors should focus on publicly traded companies Kratos and Red Cat, as their financial viability may increase with contract wins, and there is potential for non-public companies to go public through IPOs, driving further industry growth.
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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: 92.140
Low
80.00
Averages
108.69
High
150.00
Current: 92.140
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 STOCK FALLS 7.2% FOLLOWING PUBLIC OFFERING OF COMMON SHARES
- Stock Performance: Kratos shares have decreased by 7.2%.
- Market Activity: This decline follows the company's public offering of common stock.
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- Stock Price Drop: Red Cat Holdings' stock fell 11.2% by 1 p.m. ET on Friday, currently priced at $11.40 with a market cap of $1.6 billion, reflecting investor concerns about the company's outlook.
- Rival's Financing Plan: Kratos Defense & Security announced plans to expand its secondary stock offering, aiming to raise up to $1.4 billion by selling up to 16.4 million new shares, significantly enhancing its competitiveness in the military drone market.
- Increased Market Competition: The influx of cash for Kratos may allow it to outspend and out-research competitors like Red Cat, intensifying competitive pressures, particularly in the drone sector.
- Management's Financing Motivation: Given Red Cat's annual cash burn of $70 million, management may be inspired to consider a stock offering to raise funds, which could substantially dilute existing shareholders.
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- Increased Competitive Pressure: With Kratos gaining new funding, Red Cat may face heightened competitive pressure, particularly in drone research and market share battles, potentially threatening its market position.
- Cash Burn Issues: Red Cat is burning $70 million annually with no signs of slowing down, which may prompt it to consider a stock offering to raise funds, further diluting existing shareholders' stakes.
- Stock Price Volatility Risk: Following Kratos's announcement of its offering, its stock dropped 7%, which could serve as a warning for Red Cat shareholders, indicating that offerings may pressure stock prices, necessitating cautious investment considerations.
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- Increased Offering Size: Initially set to raise $1 billion, the offering could swell to $1.15 billion if underwriters exercise overallotment options, potentially raising up to $1.4 billion, indicating the company's urgent cash needs.
- Cash Flow Situation: Kratos reported a negative free cash flow of $137.4 million in 2025, with expectations of continued losses over the next two years, making the stock offering essential for maintaining necessary cash flow for growth.
- Shareholder Dilution Impact: The offering will dilute outside shareholders by 9.6%, and while investors may be displeased, this move strengthens Kratos's balance sheet, potentially eliminating the need for future stock sales.
See More
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- Offering Size Increase: Kratos Defense & Security announced last night plans to sell at least $1.2 billion in stock, which has now increased to $1.4 billion, indicating a pressing need for financing despite potential shareholder dilution.
- Stock Price Decline: Following the announcement of the offering, Kratos's stock continued to fall on Friday, dropping 7% by 11:35 a.m. ET, reflecting market concerns over the company's future cash flow situation, particularly given its ongoing negative cash flow.
- Financial Condition Analysis: Kratos reported a negative free cash flow of $137.4 million in 2025, with Wall Street expecting continued cash flow pressures over the next two years, making this stock offering a necessary move to ensure the company's operational sustainability.
- Market Reaction and Valuation: While the offering may displease investors, Kratos's stock has surged 250% over the past year, and with a current P/E ratio exceeding 700, leveraging this overvaluation to raise cash for future growth is deemed crucial.
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- Hypersonic Defense Investment: The Pentagon's $152 billion spending plan allocates $2.2 billion specifically to accelerate hypersonic defense systems and $5.6 billion for space-based interceptors, likely increasing market demand for technology firms involved in these sectors.
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- Stock Performance: Kratos shares have decreased by 7.2%.
- Market Activity: This decline follows the company's public offering of common stock.
See More
Red Cat Holdings Stock Plummets 11.2% Amid Rival's Cash Raise
- Stock Price Drop: Red Cat Holdings' stock fell 11.2% by 1 p.m. ET on Friday, currently priced at $11.40 with a market cap of $1.6 billion, reflecting investor concerns about the company's outlook.
- Rival's Financing Plan: Kratos Defense & Security announced plans to expand its secondary stock offering, aiming to raise up to $1.4 billion by selling up to 16.4 million new shares, significantly enhancing its competitiveness in the military drone market.
- Increased Market Competition: The influx of cash for Kratos may allow it to outspend and out-research competitors like Red Cat, intensifying competitive pressures, particularly in the drone sector.
- Management's Financing Motivation: Given Red Cat's annual cash burn of $70 million, management may be inspired to consider a stock offering to raise funds, which could substantially dilute existing shareholders.
See More
Kratos Defense's Stock Offering May Impact Red Cat Holdings
- Capital Raising Plan: Kratos Defense plans to raise up to $1.4 billion by offering up to 16.4 million new shares, significantly enhancing its competitive position in the military drone market.
- Increased Competitive Pressure: With Kratos gaining new funding, Red Cat may face heightened competitive pressure, particularly in drone research and market share battles, potentially threatening its market position.
- Cash Burn Issues: Red Cat is burning $70 million annually with no signs of slowing down, which may prompt it to consider a stock offering to raise funds, further diluting existing shareholders' stakes.
- Stock Price Volatility Risk: Following Kratos's announcement of its offering, its stock dropped 7%, which could serve as a warning for Red Cat shareholders, indicating that offerings may pressure stock prices, necessitating cautious investment considerations.
See More
Kratos Plans to Raise $1.2 Billion Through Stock Offering
- Stock Offering Announcement: Kratos Defense & Security revealed plans to sell at least $1.2 billion in new stock, causing its stock price to drop another 7% on Friday, reflecting market concerns over dilution.
- Increased Offering Size: Initially set to raise $1 billion, the offering could swell to $1.15 billion if underwriters exercise overallotment options, potentially raising up to $1.4 billion, indicating the company's urgent cash needs.
- Cash Flow Situation: Kratos reported a negative free cash flow of $137.4 million in 2025, with expectations of continued losses over the next two years, making the stock offering essential for maintaining necessary cash flow for growth.
- Shareholder Dilution Impact: The offering will dilute outside shareholders by 9.6%, and while investors may be displeased, this move strengthens Kratos's balance sheet, potentially eliminating the need for future stock sales.
See More
Kratos Plans to Raise $1.4 Billion in Stock Offering
- Offering Size Increase: Kratos Defense & Security announced last night plans to sell at least $1.2 billion in stock, which has now increased to $1.4 billion, indicating a pressing need for financing despite potential shareholder dilution.
- Stock Price Decline: Following the announcement of the offering, Kratos's stock continued to fall on Friday, dropping 7% by 11:35 a.m. ET, reflecting market concerns over the company's future cash flow situation, particularly given its ongoing negative cash flow.
- Financial Condition Analysis: Kratos reported a negative free cash flow of $137.4 million in 2025, with Wall Street expecting continued cash flow pressures over the next two years, making this stock offering a necessary move to ensure the company's operational sustainability.
- Market Reaction and Valuation: While the offering may displease investors, Kratos's stock has surged 250% over the past year, and with a current P/E ratio exceeding 700, leveraging this overvaluation to raise cash for future growth is deemed crucial.
See More
Congress Approves $839 Billion Defense Budget
- Defense Budget Increase: Congress approved an $839 billion defense budget for fiscal 2026, which is $8 billion more than requested by the Department of Defense, indicating a strong focus on space and missile defense that is expected to drive growth for related companies.
- Hypersonic Defense Investment: The Pentagon's $152 billion spending plan allocates $2.2 billion specifically to accelerate hypersonic defense systems and $5.6 billion for space-based interceptors, likely increasing market demand for technology firms involved in these sectors.
- Starfighters Expansion Plans: Starfighters Space is expanding operations at Midland International Air & Space Port, with plans to double the number of F-104 aircraft and GE J-79 engines within 18 months, enhancing mission flexibility and responsiveness across the U.S. Southwest.
- STARLAUNCH 1 Project Progress: Starfighters' STARLAUNCH 1 program has moved to Critical Design Review, following successful wind tunnel tests demonstrating clean separation at Mach 0.85 and Mach 1.3, further solidifying its position in the high-performance test platform market.
See More
