Key Takeaways
- Q2 2026 revenue of $28.7M beat the consensus estimate of $24.1M by 19%; gross margin expanded 220 bps to 38.4%.
- Adjusted EBITDA of $4.1M vs. $1.8M in Q2 2025 reflects operating leverage as defense contracts scale.
- Order backlog grew to $87M (from $62M a year ago), providing excellent revenue visibility through H1 2027.
- The Tentacle AUV program secured a new $14.2M contract with the Norwegian Navy for mine countermeasures.
- Management guided FY2026 revenue to $108-115M, implying 35-44% growth versus the prior year.
Kraken Robotics (TSX-V: PNG) delivered its strongest quarterly result since going public, reporting Q2 2026 revenue of $28.7 million versus $20.2 million in the same period a year ago. The result beat the analyst consensus of $24.1 million by nearly 19%, sending shares up 12% on the day of the release. The St. John’s-based underwater technology company has quietly become one of the TSX-V’s most compelling defense-adjacent stories.
The Numbers
Revenue of $28.7M (+42% YoY) was driven by shipments under the company’s landmark NATO contracts. Gross margin expanded 220 basis points to 38.4%, as the higher-margin KATFISH towed synthetic aperture sonar (SAS) product mix outpaced lower-margin services revenue. Adjusted EBITDA came in at $4.1M versus $1.8M in Q2 2025, and the company generated its second consecutive quarter of positive free cash flow ($1.3M).
| Metric | Q2 2026 | Q2 2025 | Change |
|---|---|---|---|
| Revenue | $28.7M | $20.2M | +42% |
| Gross Margin | 38.4% | 36.2% | +220 bps |
| Adj. EBITDA | $4.1M | $1.8M | +128% |
| Free Cash Flow | $1.3M | ($0.8M) | Positive |
| Backlog | $87M | $62M | +40% |
NATO Contracts: The Growth Engine
The primary driver of outperformance was the expansion of Kraken’s NATO relationships. The company’s KATFISH SAS system, which creates ultra-high-resolution imagery of the seafloor for mine detection, has now been contracted by navies in Norway, Germany, and the Netherlands. A new $14.2 million contract with the Norwegian Navy for Tentacle autonomous underwater vehicle (AUV) systems was announced alongside earnings, adding to a backlog that now stands at $87 million, up 40% year-over-year.
Tentacle AUV: The Next Growth Platform
While KATFISH has been Kraken’s flagship product, management is investing aggressively in the Tentacle AUV program. The Tentacle is an extra-large autonomous underwater vehicle designed for mine countermeasures, inspection, and payload delivery. CEO Karl Kenny described the Tentacle as “our most significant product opportunity since the original KATFISH,” noting that individual AUV contracts can range from $5 million to $30 million depending on configuration and quantity.
The Margin Trajectory
The margin expansion story at Kraken is real and durable. As defense contracts have grown as a percentage of total revenue (now approximately 68% of revenue versus 52% a year ago), the company’s product mix has shifted toward higher-margin hardware. Management guided for full-year gross margins in the 36-40% range, with services margins improving as the installed base of KATFISH systems generates recurring upgrade and maintenance revenue.
Bottom Line
Kraken Robotics is a genuine Canadian defense technology success story that the small-cap community has not yet fully valued. With an $87M backlog, a clear path to profitability, and NATO members increasing defense budgets under Article 5 commitments, the fundamental backdrop is as favorable as it has ever been. The stock trades at approximately 3.2x forward revenue — a discount to comparable defense-tech companies in the US and Europe. At current levels, the risk/reward looks attractive for investors with a 12-18 month horizon, though position sizing should reflect the liquidity constraints inherent to TSX-V names.