Kratos Defense Gains Momentum on Hyperschall Contract and Analyst Support

Shares of Kratos Defense are riding a wave of positive sentiment, fueled by a significant preliminary contract and a series of upgrades from market analysts. Investors are interpreting these developments as validation of the company’s focus on scalable, cost-effective testing solutions for hypersonic technologies. The central question now is whether Kratos can convert this recent momentum into sustained, long-term growth.

Institutional Confidence and Strategic Moves

Market confidence has been bolstered by reported institutional buying activity and a notably high level of institutional ownership, estimated between 86% and 91%. This supportive backdrop comes despite a notable insider transaction: CEO Eric DeMarco sold 200,000 shares, retaining a holding of 796,237 shares following the sale.

The company’s strategic direction received a concrete boost with a Letter of Intent (LOI) from L3Harris for the purchase of 60 solid rocket motors. The order comprises 40 Zeus 1 and 20 Zeus 2 motors destined for the MACH-TB 2.0 program. Kratos management has highlighted its plan to use its own capital to pre-finance the production of these motors. This approach is designed to build inventory, positioning the company to meet anticipated U.S. Department of Defense demand more rapidly and at a lower cost.

Analyst Community Takes Notice

This operational news was swiftly followed by positive actions from several research firms. KeyBanc initiated coverage on Kratos with an “Overweight” rating, identifying the defense contractor as an early-mover in key growth areas such as collaborative combat aircraft and hypersonic systems. In a separate move, B. Riley upgraded its rating from “Neutral” to “Buy,” while Truist Securities reaffirmed its own “Buy” recommendation.

Should investors sell immediately? Or is it worth buying Kratos Defense?

The “Affordability-First” Thesis in Action

The recent contract aligns directly with Kratos’s stated “affordability-first” strategy. By utilizing proven motor technology, the company aims to facilitate more frequent and less expensive test flights. This model presents a distinct advantage over traditional, high-cost demonstration programs that often involve single, bespoke vehicles.

The company’s latest financial report underscores its growth trajectory, with revenues reaching $347.6 million, a year-over-year increase of 26.0%. The Unmanned Systems segment was a primary driver, posting organic growth of 35.8% and acting as a key catalyst for the stock’s revaluation.

In terms of market performance, the share price closed at €69.74 in the latest session. Since the beginning of the year, the stock has advanced approximately 171.26%.

• Key Contract: LOI for 60 motors (40 Zeus 1, 20 Zeus 2) for MACH-TB 2.0.
• Insider Activity: CEO sold 200,000 shares, maintaining a balance of 796,237.
• Next Catalyst: Q4 2025 earnings are scheduled for release on February 19, 2026.

Looking ahead, the sustainability of the current share price appreciation hinges on two critical near-term factors. The first is the formal conversion of the Letter of Intent into a firm, full-scale production order. The second is the adherence to the scheduled timeline for the Erinyes hypersonic test flights, which are anticipated in the first half of 2026. Management has already provided a positive signal by raising its organic revenue growth forecast for 2026 to a range of 15–20%. Should the contract be finalized and test milestones be met, the current momentum could well persist. Conversely, any delays or setbacks on these fronts could challenge the rally’s foundation.