The outlook represents a sharp expansion from approximately $200 million in hypersonics revenue in 2025. President and Chief Executive Officer Eric DeMarco said during Kratos’ second-quarter 2026 earnings call that the business “is positioned to become Kratos’s largest business.”
Kratos has recently received hypersonic system awards for Kraken One, Kraken Two and Nemesis. DeMarco also said the company had received approximately $400 million in new hypersonic and other funding, with significant additional funding expected in the second half of the year.
Management expects the revenue increase to become more visible during the second half of 2026. Chief Financial Officer Deanna Lund said hypersonics revenue was expected to increase by approximately $20 million to $25 million sequentially from the second quarter to the third quarter.
Fourth-quarter revenue is expected to run about $20 million to $30 million above the second-quarter level, Lund said. The larger operational increase is tied to Kratos’ new hypersonic system integration facility, which is now operating in Indiana.
“We have multiple production lines, integration lines,” DeMarco said. He said activity would increase through the third and fourth quarters before rising “significantly in 2027,” supported by contracts and funding already in place.
Kratos also expects to begin receiving the first of 120 previously ordered solid rocket motors during the third quarter. DeMarco identified the motor deliveries and the Indiana integration facility as core elements of the company’s expected hypersonics growth.
The company is pursuing several additional opportunities across its hypersonic and rocket systems business. Some are already in source selection, with awards expected by the end of 2026, according to DeMarco.
Management also highlighted the potential scale of the MACH-TB program. DeMarco said Defense Department budget justification documents indicated approximately $7 billion in funding for MACH-TB over five years.
Asked whether that funding profile could eventually support a hypersonics business with an annual revenue run rate above $1 billion, DeMarco responded, “Brother, yes. That’s what’s there.” He stopped short of issuing a formal forecast but said the business “could be very substantive for the next five years.”
Kratos is also preparing its solid rocket motor supply chain for higher activity. DeMarco said L3Harris Aerojet had met every milestone on time and on budget for the company’s Zeus motors, while Northrop Grumman was supporting its Oriole requirements.
Kratos is considering another order for “dozens and dozens more” motors, DeMarco said. He described both suppliers as meeting the company’s schedules while Kratos prepares for higher demand over the coming years.
The company is also moving ahead with Prometheus, its solid rocket motor initiative with Rafael. DeMarco said Kratos remained on track for the first firing in 2027, with production expected to begin in 2028.
DeMarco linked the investment push to what he sees as sustained Pentagon demand for hypersonic capabilities. “There is not only a drone, missile, and space arms race underway, but also a hypersonic arms race,” he said.
