--- title: "The vote repriced the war: drone-and-missile stocks fell double digits, and Kratos reports tomorrow" description: "Democrats took both chambers of Congress on a war-shaped vote, and the drone-and-missile complex led a broad defense selloff while the Dow rose 1,569 points. Kratos, the test case, reports third-quarter results on Thursday with rising revenue and a cash problem." publisher: "The Inference" section: "Robotics & Defense" published: 2026-11-04T22:29:09.478Z modified: 2026-11-04T22:29:09.478Z canonical: https://theinference.org/article/the-vote-repriced-the-war-drone-and-missile-stocks-fell-double-digits-and-kratos-reports-tomorrow language: en keywords: "Defense, Stocks, Earnings, Drones, Elections" --- # The vote repriced the war: drone-and-missile stocks fell double digits, and Kratos reports tomorrow > Democrats took both chambers of Congress on a war-shaped vote, and the drone-and-missile complex led a broad defense selloff while the Dow rose 1,569 points. Kratos, the test case, reports third-quarter results on Thursday with rising revenue and a cash problem. ## The war was on the ballot, and it lost Exit polls reported by NBC News found 74% of voters called the Iran war a crucial or major factor in their vote for Congress, and on Tuesday [Democrats took the House and the Senate](https://www.marketwatch.com/story/defense-stocks-fall-after-democrats-midterm-gains-trigger-worries-of-tighter-u-s-military-spending-23d87330) [1][2]. President Trump told the Wall Street Journal "Iran was a piece of it," but named the resulting surge in oil prices, not the war, as the primary liability [1]. The same session sent the Dow up 1,569 points, its best day since April 2025, and crude oil down nearly 8% [2][3]. Defense went the other way. ## The war-buildup supply chain fell hardest On Wednesday's mid-session quote board, Karman Holdings, which builds shrouds for [Lockheed Martin](https://theinference.org/markets/companies/lockheed-martin)'s THAAD missile-defense interceptors, fell 17.8%; [Kratos Defense](https://theinference.org/markets/companies/kratos-defense), maker of the Valkyrie jet drone and hypersonic systems, fell 12.1%; Mercury Systems fell 11.4% [4]. Karman's loss narrowed to about 13.5% near the close, and Lockheed fell 4.3% [2][5]. The names priced for a war buildup fell roughly two to four times as hard as the primes. Karman is down 54% this year including Wednesday, a month after signing [a $218 million, seven-year THAAD agreement](https://www.marketscreener.com/news/karman-space-defense-awarded-218-million-long-term-agreement-to-support-thaad-production-ce785cd8d88cf524) with Lockheed [5]. ![A THAAD interceptor launches from a battery on Wake Island during a 2015 flight test](https://storage.googleapis.com/theinference-public/img/6fbd49d949ac3c23.jpg) *A THAAD interceptor launches during a 2015 flight test. Karman, the hardest-falling war-stock on Wednesday, makes shrouds for the Lockheed Martin system and signed a $218 million, seven-year supply agreement in October. (Ben Listerman, Missile Defense Agency)* *Chart: **The war-buildup names fell hardest the day after the vote** Bar chart of intraday percentage declines for five defense stocks on November 4, 2026: Karman, Kratos, Mercury Systems, Curtiss-Wright and L3Harris.* *Intraday quote board at 1:31 p.m. ET, November 4, 2026, percent change. Source: Investor's Business Daily via Yahoo Finance. [4]* ## Two funds, one stock, opposite trades Kratos is where the disagreement is sharpest. [Cathie Wood](https://theinference.org/markets/people/cathie-wood)'s [ARK Invest](https://theinference.org/markets/companies/ark-invest) added 34% to its stake in the June quarter, holding 4.67 million shares worth $233 million at quarter-end, and [kept buying in October: 209,379 shares on October 7 alone](https://finance.yahoo.com/markets/stocks/articles/cathie-wood-ark-invest-adds-065452210.html) [6][7]. Jericho Capital, a $12 billion fund, sold all 2.65 million of its shares between March and June [6]. The tape has sided with the seller: Kratos closed Tuesday at $40.99, down 43% from its March quarter-end [6]. ## The growth is real; the cash is not The business keeps outgrowing the balance sheet. [Second-quarter revenue rose 30.5% to $458.8 million](https://markets.financialcontent.com/prnews.pressrelease/article/gnwcq-2026-8-4-kratos-reports-second-quarter-2026-financial-results), full-year guidance went up to $1.75 to $1.81 billion, and the company is tooling up to build 3,000 cruise-missile jet engines next year and about 40 Valkyries annually by 2028 [8]. The catch is the funding: 2026 free cash flow is guided to a loss of $85 to $105 million, covered partly with newly sold stock [6][8]. *Chart: **Kratos compounds revenue while the cash keeps going out** Line chart of Kratos quarterly revenue and free cash flow in millions of dollars, 12 quarters from Q3 2023 to Q2 2026, with revenue rising to 458.8 and free cash flow negative in nine of twelve quarters.* *Quarterly, USD millions, from SEC filings, fiscal quarters as labeled. Source: Kratos SEC filings. [11]* ## 2006, or a real demand cut The bull answer is precedent. After Democrats swept both chambers in 2006, defense stocks dipped about 2% and recovered as military budgets kept rising; Wolfe Research analyst Myles Walton calls this selloff "potentially short-lived" and points to the fiscal 2027 budget, which a lame-duck Republican Congress could still pass [3]. Trump has asked for $1.5 trillion for that year [2]. [Wells Fargo](https://theinference.org/markets/companies/wells-fargo) instead expects war-power restrictions and "minimal real spending increases" [1]. The war has not paused for the ballot: the Strait of Hormuz remains effectively closed, and [U.S. strikes hit Iran's Qeshm Island on Monday](https://www.investors.com/news/defense-stocks-midterm-elections-iran-war-trump-israel-budget-outlook-lockheed-martin-rtx/) [1]. The market spent Wednesday discounting a war that is still being fought. ## Three numbers will settle the trade Nothing has been cut yet; the fiscal 2027 bills have not been written [8][9][10]. Kratos reports after the close on Thursday, with management [guiding third-quarter revenue to $460 to $480 million](https://markets.financialcontent.com/stocks/article/stockstory-2026-11-4-kratos-ktos-reports-q3-everything-you-need-to-know-ahead-of-earnings) and Wall Street modeling 36% growth [8][9][10]. Three lines settle it: whether the guidance survives a Democratic Congress, whether the cash burn widens, and whether another share sale arrives. Karman reports the same day [5]. [The September-quarter 13F filings, the fund holdings reports due by November 16](https://finance.yahoo.com/markets/stocks/articles/cathie-wood-bought-kratos-12-152525852.html), will show whether Wood kept buying as the stock fell [6]. ## Takeaway War-buildup names fell two to four times as hard as the primes after Democrats took both chambers; Kratos' Thursday report, with 30% revenue growth and a guided cash burn, tests whether the trade survives the politics. ## Sources 1. [Investor's Business Daily, "Defense Stocks Tumble After Midterm Rebuke Of Iran War," 4 November 2026](https://www.investors.com/news/defense-stocks-midterm-elections-iran-war-trump-israel-budget-outlook-lockheed-martin-rtx/) 2. [MarketWatch, "Defense Stocks Fall After Democrats' Midterm Gains Trigger Worries of Tighter U.S. Military Spending," 4 November 2026](https://www.marketwatch.com/story/defense-stocks-fall-after-democrats-midterm-gains-trigger-worries-of-tighter-u-s-military-spending-23d87330) 3. [CNBC, "Defense stocks slide on fear Democrats will curb spending. One analyst says it's a buying opportunity," 4 November 2026](https://www.cnbc.com/2026/11/04/defense-stocks-slide-on-fear-democrats-will-curb-spending-one-analyst-say-its-a-buying-opportunity.html) 4. [Investor's Business Daily via Yahoo Finance, "Defense Stocks Tumble After Midterm Rebuke Of Iran War" (intraday quote board), 4 November 2026](https://finance.yahoo.com/m/53ded892-f11b-327b-9c54-be8129c7bb63/defense-stocks-tumble-after.html) 5. [MarketScreener carrying Business Wire, "Karman Space & Defense Awarded $218 Million Long-Term Agreement to Support THAAD Production," 20 October 2026](https://www.marketscreener.com/news/karman-space-defense-awarded-218-million-long-term-agreement-to-support-thaad-production-ce785cd8d88cf524) 6. [TIKR via Yahoo Finance, "Cathie Wood Bought Kratos. A $12 Billion Fund Sold All of It. Who's Right?," 4 November 2026](https://finance.yahoo.com/markets/stocks/articles/cathie-wood-bought-kratos-12-152525852.html) 7. [StockTwits via Yahoo Finance, "Cathie Wood's ARK Invest Adds Kratos Defense, AeroVironment Stocks As Pentagon Bets On Drones," 8 October 2026](https://finance.yahoo.com/markets/stocks/articles/cathie-wood-ark-invest-adds-065452210.html) 8. [Kratos Defense & Security Solutions via GlobeNewswire, "Kratos Reports Second Quarter 2026 Financial Results," 4 August 2026](https://markets.financialcontent.com/prnews.pressrelease/article/gnwcq-2026-8-4-kratos-reports-second-quarter-2026-financial-results) 9. [Kratos Defense & Security Solutions via GlobeNewswire, "Kratos Schedules Third Quarter 2026 Earnings Conference Call for Thursday, November 5th," 26 October 2026](https://finance.yahoo.com/markets/stocks/articles/kratos-defense-security-solutions-schedules-120000404.html) 10. [StockStory via FinancialContent, "Kratos (KTOS) reports Q3: everything you need to know ahead of earnings," 3 November 2026](https://markets.financialcontent.com/stocks/article/stockstory-2026-11-4-kratos-ktos-reports-q3-everything-you-need-to-know-ahead-of-earnings) 11. [Kratos Defense & Security Solutions, quarterly figures from its SEC filings, retrieved 4 November 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001069258) --- The vote repriced the war: drone-and-missile stocks fell double digits, and Kratos reports tomorrow — The Inference. Canonical: https://theinference.org/article/the-vote-repriced-the-war-drone-and-missile-stocks-fell-double-digits-and-kratos-reports-tomorrow