Kratos Awarded $61.1 Million Navy Contract Modification for Full-Rate Production of 70 BQM-177A Subsonic Aerial Targets and Equipment

Rhea-AI Summary

Kratos (NASDAQ: KTOS) received a $61,068,139 modification to a firm-fixed-price Navy contract for full-rate production Lot Seven of 70 BQM-177A subsonic aerial targets, plus 70 RATO kits and technical data. Total contract value at maximum quantity is $238,798,157. Work is expected to complete in August 2028, with ~50% of work in Sacramento, CA. Kratos said it is investing in capital production improvements to boost capacity or efficiency.

Positive

• $61,068,139 contract modification for 70 BQM-177A units
• Maximum $238,798,157 total contract value at 70 aircraft
• Contract work completion expected by August 2028
• Company is investing in capital production improvements to improve capacity or efficiency

Negative

• Final option exercised at maximum negotiated quantity—limits near-term incremental upside under this contract
• Workload concentrated with 50% of work in Sacramento, California

Key Figures

Navy contract modification: $61,068,139 BQM-177A targets: 70 units RATO attachment kits: 70 kits +5 more

8 metrics

Navy contract modification $61,068,139 Modification to previously awarded firm-fixed-price contract N0001923C0021

BQM-177A targets 70 units Full-rate production Lot Seven BQM-177A subsonic aerial targets

RATO attachment kits 70 kits Rocket-Assisted Takeoff attachment kits procured with the targets

Total contract value $238,798,157 Total value after exercise of final option at max 70-aircraft quantity

Sacramento work share 50% Portion of contract work expected in Sacramento, California

Dallas work share 20% Portion of contract work expected in Dallas, Texas

Other locations work share 11% Work at various other U.S. locations

Contract completion August 2028 Expected completion date for the Navy contract

Market Reality Check

Price: $90.68 Vol: Volume 5,979,237 vs 20-da...

high vol

$90.68 Last Close

Volume Volume 5,979,237 vs 20-day average 3,531,813 (relative volume 1.69x) ahead of this Navy award news. high

Technical Shares at 90.68 are trading above the 200-day MA of 72.24, indicating a pre-news uptrend despite the latest -3.85% move.

Peers on Argus

KTOS fell 3.85% while key peers were mixed to positive: DRS +10.13%, AVAV +3.98%...

2 Up

KTOS fell 3.85% while key peers were mixed to positive: DRS +10.13%, AVAV +3.98%, HII +2.78%, TXT +0.25%, ERJ -0.54%. Momentum names in the space like RKLB and BWXT also screened higher, pointing to stock-specific rather than sector-wide pressure for KTOS.

Historical Context

5 past events · Latest: Feb 23 (Positive)

Pattern 5 events

Date	Event	Sentiment	Move	Catalyst
Feb 23	Earnings results	Positive	-1.8%	Q4 and full-year 2025 results with higher 2026 guidance and backlog.
Feb 23	Defense contract win	Positive	-1.8%	USAF award for GEK1500 engine preliminary design for CCAs and UAS.
Feb 20	SRM campus investment	Positive	-4.2%	Groundbreaking of 600-acre SRM campus with up to $175M capital.
Feb 18	Hypersonic testing award	Positive	+5.7%	Contract to support hypersonic thermal protection system test and evaluation.
Feb 17	Satellite ground deal	Positive	+3.3%	Multi-million dollar ground system contract for OmanSat-1 with Airbus.

Pattern Detected

Recent positive contracts and earnings often saw mixed-to-negative next-day moves, with 3 divergences versus 2 alignments between upbeat news and price reaction.

Recent Company History

Over February 2026, Kratos reported strong Q4/FY 2025 results and raised guidance, added multiple defense and space contracts, and advanced hypersonics and solid rocket motor initiatives. Earnings on Feb 23 and a USAF engine award coincided with a -1.84% move, and the Prometheus Energetics SRM campus news saw a -4.16% reaction. By contrast, a hypersonic materials contract on Feb 18 and an Airbus ground system deal on Feb 17 led to gains, showing inconsistent trading responses to positive news.

Market Pulse Summary

This announcement adds a $61,068,139 Navy contract modification, bringing the BQM-177A program’s tot...

Analysis

This announcement adds a $61,068,139 Navy contract modification, bringing the BQM-177A program’s total to $238,798,157 at the maximum quantity of 70 aircraft. It reinforces Kratos’ role in aerial target systems and extends funded work through August 2028. In context of recent contract wins and record backlog, investors may watch follow-on production awards, execution on schedule and budget, and how these wins translate into margins and cash flow over time.

Key Terms

firm-fixed-price contract, rocket-assisted takeoff (RATO), subsonic

3 terms

firm-fixed-price contract financial

"awarded a $61,068,139 modification to a previously awarded firm-fixed-price contract"

A firm-fixed-price contract is an agreement where a buyer and a seller agree on one nonchanging price for goods or services, so the seller is paid that amount regardless of its actual costs. Think of hiring a contractor to build a deck for a set fee: the contractor bears the risk if materials or labor cost more than expected, while the buyer gets price certainty. For investors, these contracts mean predictable revenue but higher exposure of the seller’s profit margin to cost overruns and efficiency, affecting earnings stability and cash flow forecasts.

rocket-assisted takeoff (RATO) technical

"70 Rocket-Assisted Takeoff (RATO) attachment kits and associated technical"

Rocket-assisted takeoff (RATO) is the use of small rocket motors attached to an aircraft to give it an extra burst of thrust during takeoff, helping heavy or short-runway planes lift off more quickly. For investors, RATO signals a specialized aerospace capability that can affect manufacturing costs, regulatory approval, military or emergency-use contracts, and product differentiation—similar to a temporary booster that enables a vehicle to perform in tougher conditions.

subsonic technical

"The BQM-177A is a subsonic, surface-launched aerial target designed"

Subsonic describes objects or vehicles moving slower than the speed of sound in air (roughly 343 meters per second at sea level); think of it as staying below the “sound barrier” so no shock waves or sonic booms form. Investors care because subsonic designs typically mean different engineering needs, lower fuel and certification costs, and different noise and regulatory profiles than supersonic alternatives—factors that affect product pricing, operating expenses and market demand.

AI-generated analysis. Not financial advice.

SAN DIEGO, Feb. 25, 2026 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS), a leader in defense, national security and global markets, announced today that it has been awarded a $61,068,139 modification to a previously awarded firm-fixed-price contract (N0001923C0021) by the U.S. Navy. This contract modification exercises options to procure full-rate production Lot Seven for 70 of the BQM-177A Subsonic Aerial Targets, along with 70 Rocket-Assisted Takeoff (RATO) attachment kits and associated technical and administrative data. The systems will support weapons system test and evaluation and fleet training requirements for the U.S. Navy.

“Achieving full-rate production of the BQM-177A reflects the Navy’s continued confidence in Kratos’ ability to deliver reliable, high-performance aerial target systems at scale,” said Steve Fendley, President of Kratos Unmanned Systems Division. “This award underscores our commitment to providing affordable, mission-relevant unmanned systems that directly support Navy training, test, and evaluation requirements while maintaining production readiness for future demand. As with all previous awards or modifications, the exercise of this final option is at the maximum negotiated production quantity of seventy aircraft resulting in a total contract value of $238,798,157. In anticipation of further full rate production contracts, Kratos is continuing to invest in capital production improvements that will further improve either our capacity or efficiency.”

The BQM-177A is a subsonic, surface-launched aerial target designed to support realistic threat representation for advanced weapons testing and fleet training operations.

Work under the contract is expected to be performed in the following locations (with the expected share of the work): Sacramento, California (50%); Dallas, Texas (20%); Fort Walton Beach, Florida (5%); Blacksburg, Virginia (4%); Santa Ana, California (2%); Newton, Kansas (2%); Concord, California (2%); Milwaukie, Oregon (2%); Chatsworth, California (2%); and various other locations within the continental United States (11%). The contract is expected to be completed in August 2028.

About Kratos Defense & Security Solutions
Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS) is a technology, products, system and software company addressing the defense, national security, and commercial markets. Kratos makes true internally funded research, development, capital and other investments, to rapidly develop, produce and field solutions that address our customers’ mission critical needs and requirements. At Kratos, affordability is a technology, and we seek to utilize proven, leading edge approaches and technology, not unproven bleeding edge approaches or technology, with Kratos’ approach designed to reduce cost, schedule and risk, enabling us to be first to market with cost effective solutions. We believe that Kratos is known as an innovative disruptive change agent in the industry, a company that is an expert in designing products and systems up front for successful rapid, large quantity, low-cost future manufacturing which is a value add competitive differentiator for our large traditional prime system integrator partners and also to our government and commercial customers. Kratos intends to pursue program and contract opportunities as the prime or lead contractor when we believe that our probability of win (PWin) is high and any investment required by Kratos is within our capital resource comfort level. We intend to partner and team with a large, traditional system integrator when our assessment of PWin is greater or required investment is beyond Kratos’ comfort level. Kratos’ primary business areas include virtualized ground systems for satellites and space vehicles including software for command & control (C2) and telemetry, tracking and control (TT&C), jet powered unmanned aerial drone systems, advanced vehicles and rocket systems, propulsion systems for drones, missiles, loitering munitions, supersonic systems, space craft and launch systems, C5ISR and microwave electronic products for missile, radar, missile defense, space, satellite, counter UAS, directed energy, communication and other systems, and virtual & augmented reality training systems for the warfighter. For more information, visit www.KratosDefense.com.

Notice Regarding Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of the management of Kratos and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and Kratos undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Kratos believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Kratos in general, see the risk disclosures in the Annual Report on Form 10-K of Kratos for the year ended December 28, 2025, and in subsequent reports on Forms 10-Q and 8-K and other filings made with the SEC by Kratos.

Press Contact:
Claire Cantrell
claire.cantrell@kratosdefense.com

Investor Information:
877-934-4687
investor@kratosdefense.com

FAQ

What did Kratos (KTOS) announce on February 25, 2026 regarding the Navy contract?

Kratos announced a $61,068,139 modification to a Navy contract for Lot Seven production of 70 BQM-177A targets. According to the company, the award includes 70 RATO kits, technical data, and contributes to a maximum contract value of $238,798,157.

How many BQM-177A aerial targets will KTOS deliver under the Lot Seven award?

Kratos will deliver 70 BQM-177A subsonic aerial targets under Lot Seven. According to the company, the Lot Seven award also includes 70 Rocket-Assisted Takeoff (RATO) attachment kits and associated data.

What is the total contract value tied to the maximum negotiated quantity for KTOS's BQM-177A program?

The total contract value at the maximum negotiated quantity is $238,798,157. According to the company, the exercised final option for 70 aircraft results in this aggregate contract value for the program.

When is the KTOS Navy contract work expected to be completed and where will work be performed?

Work under the contract is expected to be completed in August 2028. According to the company, locations include Sacramento (50%), Dallas (20%), and multiple other U.S. sites, with remaining shares across several states.

What did Kratos say about production capacity after the Lot Seven award (KTOS)?

Kratos said it is continuing to invest in capital production improvements to enhance capacity or efficiency. According to the company, these investments are in anticipation of further full-rate production contracts and future demand.