Core Thesis - Kratos Defense & Security Solutions, Inc. is transitioning from a high-concept defense innovator to a revenue-generating company, with a current share price of $76.10 and trailing and forward P/E ratios of 585.38 and 158.73 respectively [1][2] Financial Performance - In Q3 2025, total revenue increased by 26% year-over-year to $347.6 million, driven by a 36% surge in the unmanned systems segment due to Valkyrie drone production and delivery [3] - The company reported adjusted EPS of $0.14, surpassing expectations, and a GAAP net profit of $8.7 million, indicating a shift into profitability [3] Strategic Vision and Execution - The performance aligns with CEO Eric DeMarco's vision of low-cost, AI-enabled expendable combat aircraft, moving from conceptualization to actual production [4] - Free cash flow remains negative at $41 million, primarily due to $28 million in strategic capital expenditures for new factories, supporting a record backlog of $1.48 billion and a bid pipeline of $13.5 billion [4] Segment Analysis - The Government Solutions (KGS) segment is a stable cash generator, benefiting from Defense Rocket Support Systems, hypersonic test targets, and satellite control systems [5] - Long-term guidance forecasts 15–20% revenue growth for 2026 and 18–23% for 2027, supported by domestic demand and new international opportunities following MTCR export rule adjustments [5] Valuation Insights - Valuation analysis indicates a FY26 forward P/S of 6.38x and a DCF-derived intrinsic value of $70–$85 per share, suggesting the stock is reasonably priced relative to its growth potential [6] - The company is strategically positioned at the intersection of autonomous drones, hypersonic systems, and space communications, offering substantial upside if it successfully navigates these growth vectors [6]