Jason Simpkins has introduced a new promotional campaign for his investment research service (first-year fee: $1,999, renewal terms undisclosed, 90 day refund policy). This time, he focuses on AI-integrated aviation technology and a small company making significant strides by securing multiple key contracts. In the opening email, he describes it as follows:
He provides further details in the order form:
In the main “presentation” section of the advertisement:
A small company valued at $2-3 million could potentially rise to challenge Lockheed Martin, worth $120 million, offering substantial financial gains.
The promotion focuses on the military’s increasing reliance on collaborative combat aircraft (CCAs)—unmanned aerial systems that function semi-independently alongside piloted fighter jets. Picture an F22 flown by a pilot, flanked by multiple CCAs that either act autonomously or follow ground-based commands. These drones enhance combat effectiveness by engaging threats, countering enemy aircraft, and disrupting defenses. Simpkins notes that CCAs could be far more cost-effective, ranging from one-tenth to one-third the price of a manned jet, depending on estimates. They also address the military aviator shortage and could be produced swiftly enough to respond to China’s ambitions regarding Taiwan.
According to Simpkins, the company behind Project Wingman aims to leverage this program to establish itself as a key player defense contractor. He supports this claim with the following insights:
He points to several recent contracts won by the company:
Simpkins outlines the “Project Wingman” concept:
When is this expected to take place? And what might the financial implications be? According to the promotion:
This suggests that this scenario is almost inevitable, with this small company set to lead the CCA sector.
The likelihood of a $2,000 million company leading a $40,000 million project is low. A firm of that scale likely lacks the ability to rapidly produce 1,000 drones. However, multi-company collaborations are common in defense procurement, so a lesser-known firm could contribute or expand alongside the initiative over time.
The company Simpkins refers to is Kratos Defense and Security Solutions, a frequent pick for drone-related investments in the last decade and a half. While Kratos has grown, its revenue has fluctuated due to inconsistent contract wins. Currently, its annual sales are similar to a ten years ago, with profitability swinging between $0.05 billion in strong years and losses of the same amount in weaker periods.
Analysts expect Kratos to generate $1,000 million in revenue this year, up from last year’s $1,150 million, with profit per share rising approximately 20% annually. At $21 a share, it trades slightly below its median price estimate, with a valuation around 36 times next year’s adjusted earnings—reasonable, but not a clear bargain. Even if revenue climbs to $1,400 million by 2026, this doesn’t align with the notion of Kratos securing $40,000 million in CCA contracts.
Kratos helped develop the XQ58A Valkyrie, an early fighter drone, and while the U.S. Department of Defense is advancing its CCA program, Kratos’ involvement remains uncertain. Air Force plans to spend $29,000 million over half a decade in the upcoming Gen Air Superiority program initiative, allocating about one-third to CCAs, with projected costs of $30 million per drone. The program is still in early stages, budgeting $0.570 billion for CCA development next year and expecting to select 2 or 3 contractors for the upcoming stage.
In April, Air Force shortlisted Anduril, General Atomics for the initial CCA development phase, suggesting both companies might secure development contracts by October or September. Although Kratos could be involved in a subcontracting role, its limited production capacity compared to General Atomics makes any significant role unlikely. Meanwhile, reports indicate that while the Marines has tested the Valkyrie, the government appears to have deemed it not large enough for CCA program, while Boeing’s X45 was likely considered too large. As a result, Anduril, General Atomics is positioned as the primary players in Phase 1. That said, Kratos may have another opportunity when the next round of CCA investments begins next year. While the company has not provided details, they consistently indicate an interest in participating in various drone programs.
Kratos, a smaller defense contractor, could still see future contracts emerge from the broader $29 billion CCA initiative in the coming five years. The Valkyrie might find applications in other areas, but it’s difficult to justify claims that Kratos is set to reign over the “Wingman” segment of the program. Several major defense firms have actively competed for this contract, yet Kratos has not made progress within Air Force selection process despite earlier expectations. The company focused on growth Valkyrie production facilities, seemingly in anticipation of orders that have yet to materialize. At this stage, Kratos appears to be regrouping, assessing the market, and preparing for the next round of bidding rather than securing a leading position.
It is possible that Kratos could land a surprise contract this fall, given that two finalists have been identified for the first wave of CCA funding, it seems unlikely that Kratos get to receive any major updates this year. More details regarding future Air Force investments in CCA and similar drone programs should emerge next year. Additionally, several smaller drone initiatives are expected to receive funding, which may create opportunities for Valkyrie orders from alternative sources.
For now, Kratos continues to operate steadily, with its drone business rooted in practice drones for simulation—a product line that remains in production. The company is also involved in next-generation military training, orbital technology, strategic defense, and hypersonic programs, often working acting as a parts provider or secondary contractor. While these areas have seen gradual growth, there have been fluctuations, and the anticipated expansion of CCA drone production has yet to materialize. With no substantial backlog of orders, analysts project modest sales and profit expansion. Although Kratos has potential, achieving 50X returns appears highly optimistic and would likely require large contract wins during the upcoming few years, rapid scaling, and consistent success in the long run.
The concept of a smaller, more agile defense contractor securing a greater market share in modern weapon systems is appealing. However, Anduril, a privately held firm, seems to have outpaced Kratos. Currently value at $14,000 million, Anduril recently secured $1,500 million in startup investment capital to expand manufacturing and is in a strong spot for a joint CCA agreement within General Atomics.
That is my take—but in the end, it’s your investment decision. Let me know your thoughts or inquiries within the comments below!
