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Just For You Karman Tanks 14%: Opportunity or Warning for This Defense DarlingBy Leo Miller. Publication Date: 3/27/2026. 
Key Points - Defense stock Karman took the market by storm in 2025, with the company growing to a market capitalization of above $10 billion.
- After a 14% post-earnings drop, is there a clear road to recovery ahead?
- A long-term continuation of defense spending increases underpins the stock's valuation.
- Special Report: Have $500? Invest in Elon's AI Masterplan
In 2025, Karman (NYSE: KRMN) was one of the market's standout performers. Shares finished the year near $73, soaring more than 300% from their IPO price of $22. The new year has been more mixed: the stock is up over 15% in 2026 but sits about 25% below its January all-time high. The reaction to Karman's latest earnings report intensified the pullback, with shares plunging nearly 14% in a single day. Gold surged from $2,063 in January 2024 to an all-time high of $5,595 in January 2026 - but 'Canadian Gold' left ordinary gold, silver, the NASDAQ, and the S-P 500 in the dust. Known as 'the Warren Buffett of Canada,' one of the world's most connected investors is loading up on this asset. Find out what Canadian Gold is and why it has outperformed since inception. Click here to discover what Canadian Gold is and why it outperforms Karman supplies mission-critical components for fast-growing defense technologies. The company delivered some of the industry's strongest revenue growth in 2025 and reported notably healthy margins. Against this backdrop, is Karman an opportunity or a warning? Let's examine the company's latest report. Karman Posts Top-End Growth with Strength Across Segments In fiscal Q4 2025, Karman reported revenue of $134.5 million, up just over 47% year over year and modestly ahead of estimates. For the full year, revenue rose nearly 37% to $471.5 million. Among more than 20 U.S. aerospace and defense companies with market caps above $10 billion, Karman's full-year growth was the second highest—behind only Rocket Lab (NASDAQ: RKLB), which grew 38%. All of Karman's segments showed strong expansion in the quarter: - Q4 Hypersonics & Strategic Missile Defense growth: +41.8%
- Q4 Space and Launch growth: +24.6%
- Q4 Tactical Missiles & Integrated Defense growth: +77.0%
The company reported a full-year gross margin of 40% and an operating margin of 15.5%, placing it in the top five and top 10, respectively, among the peer group. Karman's operating margin stands in stark contrast to Rocket Lab's -38% in 2025. Adjusted earnings per share (EPS) rose sharply, from $0.03 to $0.11 in Q4. Full-year adjusted EPS climbed from $0.13 in 2024 to $0.37 in 2025. The $0.11 Q4 result met expectations. Karman also favors adjusted EBITDA margin as a profitability metric: it increased 230 basis points year over year in Q4 to 31.2% and finished 2025 at 30.8%, up 10 basis points from the prior year. Robust Long-Term Defense Spending Is Vital to KRMN's Outlook There's no doubt Karman delivered exceptional results—industry-leading growth and margins that outpace many much larger companies. Yet the stock trades at a forward price-to-earnings ratio of roughly 130x, implying the market expects multiple years of strong growth and further margin expansion. Demand across key defense verticals clearly benefits the company, but the key question is duration: how many years can this elevated demand persist? Karman's $800 million backlog—about 1.7 times 2025 revenue—gives solid near-term visibility but does not guarantee multi-year growth beyond the near term. Karman has demonstrated competitive products, reflected in its growth and healthy margins. Still, a bullish stance at current prices depends on a favorable, long-term view of defense spending. Karman Touts "Generational" Demand Increase as Conflicts Wage Karman is forecasting an even stronger 2026, guiding to midpoint revenue growth of 53%. The company expects adjusted EBITDA margin to moderate to roughly 29.5%, largely due to recent acquisitions. Management says it is experiencing a "generational" rise in demand across missiles, interceptors, hypersonics, unmanned aerial systems, maritime defense, and space and launch, adding that "this is a demand environment that we expect to persist through the end of the decade and beyond." The firm also sees potential growth from programs like the Golden Dome. Global tensions reinforce that thesis. Conflicts in Ukraine and the Middle East, plus heightened focus on China-Taiwan contingencies, have increased defense spending urgency. The White House is seeking $200 billion in additional funding related to Iran, which—if approved—would represent roughly a 24% increase versus the Pentagon's previously approved $838.7 billion annual budget. European NATO members are also moving to significantly raise defense spending as a share of GDP, and that rearmament remains in relatively early stages—factors that favor Karman's markets. These dynamics support Karman's growth outlook, but valuation remains a risk. The stock's sharp post-earnings drop—despite solid results and guidance—underscores investor sensitivity to expectations. Analysts remain broadly bullish. The MarketBeat consensus price target near $117 implies more than 30% upside. Two price targets updated after the earnings release average about $126, suggesting potential upside of over 40% from current levels. | 
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