Kratos Defense & Security Secures Strategic Drone Manufacturing Deal with Elroy Air

Kratos Defense & Security Solutions (KTOS) surged 4.6% following the announcement of a five-year exclusive manufacturing partnership with San Francisco-based Elroy Air. The agreement focuses on producing the Chaparral, a hybrid-electric VTOL cargo drone capable of transporting 300-pound payloads over 300 miles. Production is slated to begin in 2026, with Elroy projecting high-volume output—though financial specifics remain undisclosed.

The deal underscores Kratos' positioning in autonomous military logistics, despite its lofty valuation. At a $13.6 billion market cap and sub-$15 million annual earnings, the stock trades at nearly 1,000x P/E—a premium reflecting speculative growth expectations rather than current fundamentals. For defense tech investors, the partnership validates Kratos' role in next-gen unmanned systems, but execution risks loom large given the unquantified revenue potential.