Defense Tech Resilience: Kratos and BWXT Post Record Backlogs in Q4
Kratos and BWXT reported strong Q4 2025 results, characterized by record-breaking backlogs and significant organic growth in specialized defense and commercial sectors. While BWXT is capitalizing on a massive surge in commercial nuclear demand, Kratos is seeing momentum in unmanned systems and space communications, signaling a robust outlook for high-tech defense contractors in 2026.
Mentioned
Key Intelligence
Key Facts
- 1BWXT total revenue rose 19% to $886 million, with commercial operations revenue up 95%.
- 2Kratos reported $345.1 million in quarterly revenue, exceeding guidance with 20% organic growth.
- 3BWXT's total backlog reached $7.3 billion, while Kratos hit a record year-end backlog of $1.573 billion.
- 4Kratos reported a record opportunity pipeline of $13.7 billion and a book-to-bill ratio of 1.3 to 1.
- 5BWXT Medical surpassed the $100 million revenue milestone in 2025.
- 6BWXT completed a $1.25 billion convertible debt offering with a 0% coupon to improve liquidity.
| Metric | ||
|---|---|---|
| Q4 Revenue | $886M | $345.1M |
| Revenue Growth (YoY) | 19% | 20% (Organic) |
| Total Backlog | $7.3B | $1.57B |
| Adj. EBITDA | $148M | $34.1M |
| 2026 CapEx Forecast | ~6% of sales | $135M - $145M |
Who's Affected
Analysis
The fourth-quarter earnings reports from Kratos Defense & Security Solutions and BWX Technologies (BWXT) underscore a pivotal moment for the mid-tier defense and energy technology sectors. Both companies have successfully navigated supply chain headwinds to post record-breaking backlogs, signaling that the demand for advanced, non-traditional defense capabilities—ranging from unmanned aerial vehicles (UAVs) to micro-nuclear reactors—is entering a phase of sustained acceleration. For investors, the narrative is shifting from simple government contracting to high-margin, specialized technology plays with significant commercial tailwinds.
BWXT’s performance was particularly striking in its Commercial Operations segment, which saw revenue nearly double with a 95% year-over-year increase. This surge was driven by a combination of organic growth in nuclear power services and the rapid scaling of BWXT Medical, which has now surpassed the $100 million revenue milestone. The company’s strategic pivot toward the commercial nuclear renaissance is paying off, as evidenced by an 85% year-over-year increase in commercial backlog. While the Government Operations segment saw a slight 1% dip due to the timing of long-lead materials for naval propulsion, the overall trajectory remains bullish. BWXT’s successful $1.25 billion convertible debt offering at a 0% coupon further demonstrates high investor confidence and provides the liquidity needed to fund capital-intensive projects like the ANTARES reactor and Project Pele.
BWXT’s successful $1.25 billion convertible debt offering at a 0% coupon further demonstrates high investor confidence and provides the liquidity needed to fund capital-intensive projects like the ANTARES reactor and Project Pele.
Kratos, meanwhile, continues to solidify its position as a leader in the attritable drone market and space communications. The company reported $345.1 million in quarterly revenue, beating its own guidance and achieving 20% organic growth. The Unmanned Systems segment, anchored by the Valkyrie program, grew 12.1% organically, but the real surprise came from the Kratos Government Solutions (KGS) division. High-growth lines such as Defense Rocket Support and Microwave Products saw organic growth rates of 47.4% and 32.4%, respectively. Kratos’s book-to-bill ratio of 1.3 to 1 is a critical metric for analysts, suggesting that the company is not just clearing its existing backlog but is aggressively capturing new market share in the rapidly evolving electronic warfare and satellite sectors.
The divergence in capital allocation strategies between the two firms reflects their different stages of growth. Kratos is leaning heavily into capital expenditures, with a 2026 forecast of up to $145 million to expand production capacity for its tactical drones and space systems. This aggressive investment is a bet on the software-defined future of warfare, where Kratos’s Epic Command and Control systems and Prometheus engines will play central roles. BWXT, conversely, is focusing on optimizing its capital structure and scaling its medical isotope production, which offers a higher-margin, recurring revenue stream that balances the cyclical nature of large-scale government nuclear projects.
Looking ahead to 2026, both companies face the challenge of managing rising subcontractor and material costs, which Kratos noted as a slight drag on its adjusted EBITDA margins. However, the sheer scale of their opportunity pipelines—$13.7 billion for Kratos and a $7.3 billion backlog for BWXT—suggests that the primary constraint will be execution rather than demand. As the Department of Defense increasingly prioritizes hypersonics, autonomous systems, and resilient energy sources, Kratos and BWXT are positioned at the intersection of national security and technological innovation. Analysts will be watching closely to see if Kratos can convert its massive pipeline into firm contracts and if BWXT can maintain its momentum in the commercial nuclear sector as global energy demands continue to rise.