Kraken Robotics: Charting a Course to Subsea Market Dominance

ST. JOHN'S, NL – November 24, 2025 – When a company reports a 60% year-over-year revenue surge, leadership teams take notice. When that same company boosts its Adjusted EBITDA by 92%, investors sit up and listen. For Kraken Robotics, its record-breaking third quarter is not an anomaly; it is the resounding validation of a meticulously executed strategy to dominate the burgeoning subsea technology market.

The St. John’s-based firm, which specializes in advanced underwater sensors, batteries, and robotics, has skillfully positioned itself at the confluence of two powerful global currents: the sweeping modernization of naval defense and the unceasing demand for precision in offshore energy. The impressive Q3 2025 financial results, with revenue climbing to $31.3 million, offer a clear look into a leadership team that is not just riding a wave, but actively shaping its direction.

Deconstructing a Record Quarter

Beneath the headline numbers lies a story of strategic execution and improving financial health. The 81% increase in gross profit to $18.6 million is particularly telling, with gross margins expanding from 52% to a robust 59%. This is not simply a function of selling more; it's a function of selling a more profitable mix. The company’s leadership has successfully shifted its revenue composition toward higher-margin products and services, a key indicator of sustainable profitability.

The growth engine is firing on two distinct but complementary cylinders. Product revenue, which includes the company’s signature synthetic aperture sonar (SAS) and SeaPower™ subsea batteries, grew by an impressive 46% to $18.3 million. This reflects deep entrenchment in the defense supply chain, where these components are critical for the next generation of uncrewed underwater vehicles (UUVs).

Simultaneously, service revenue posted an explosive 85% increase to $13.0 million. This remarkable growth is the result of a dual strategy: strong organic demand for its sub-bottom imaging services and the highly successful integration of a key acquisition, 3D at Depth Inc., which the company brought into the fold earlier in the year.

A Strategic Acquisition Powers Service Growth

The acquisition of 3D at Depth, which closed in the spring of 2025 for approximately $17 million in cash, is proving to be a textbook example of effective M&A. Specializing in subsea LiDAR (Light Detection and Ranging) services, 3D at Depth brought not only a new high-margin revenue stream but also a mature, 15-year-old business with a strong presence in the U.S. Gulf of Mexico and established relationships with energy majors.

The impact on Kraken's service division was immediate and profound, serving as the primary catalyst for its 85% revenue jump. More importantly, it expanded Kraken's technological toolkit, adding a best-in-class deep-water optical imaging solution that complements its existing acoustic and sonar capabilities. This allows the company to offer a more comprehensive suite of subsea intelligence solutions, whether clients want to purchase equipment, rent it, or hire Kraken to perform the service—a flexible model CEO Greg Reid highlighted as a key to meeting customer needs.

This move signals a clear understanding from management that in the complex world of subsea operations, providing a full-stack solution from sensors to services creates a powerful competitive moat and a valuable feedback loop for future research and development.

Riding the Wave of Global Naval Modernization

In his comments, CEO Greg Reid noted that "request for proposal (RFP) activity for defense programs is accelerating." This is not mere corporate optimism. The global subsea systems market is projected to grow from roughly $21 billion in 2025 to nearly $35 billion by 2033, and a significant portion of that growth is driven by defense spending. Navies worldwide are shifting towards smaller, more agile, and often uncrewed platforms to act as "non-expensive force multipliers."

Kraken is a primary beneficiary of this trend. Its record shipments of synthetic aperture sonar and SeaPower™ batteries are directly tied to the burgeoning UUV market. As these underwater drones become larger and more sophisticated, their need for high-resolution sensors and reliable, high-density power sources grows exponentially. Kraken has established itself as a go-to supplier for these critical components, embedding its technology within the platforms of major defense contractors.

The company’s success also validates another trend Reid pointed to: the greater use of commercial off-the-shelf (COTS) solutions in defense procurement. By developing industry-leading commercial technology that meets the rigorous demands of military applications, Kraken can navigate procurement cycles more efficiently than traditional defense-only firms, providing a significant competitive advantage.

Fortifying the Future: A Balance Sheet Built for Growth

Perhaps the most telling signal of Kraken's future direction lies not in its income statement, but in its balance sheet and capital expenditure plans. The company is not resting on its laurels. Following a successful $115 million bought deal financing in July, Kraken’s cash reserves swelled to $126.6 million, providing the financial firepower to invest heavily in future capacity.

Management has increased its 2025 capex guidance to a range of $20.0 million to $21.0 million, a significant jump from the previous $13.0 million to $17.0 million. This capital is being deployed with surgical precision. A large portion is dedicated to a new 60,000-square-foot battery manufacturing facility in Nova Scotia, Canada. Once fully operational, this facility is expected to triple the company’s battery production capacity, enabling nearly $200 million in annual subsea battery revenue and creating over 200 advanced manufacturing jobs.

This decisive investment ensures Kraken can meet the accelerating demand from the defense sector without creating production bottlenecks. It is a forward-looking move that prepares the company not for this quarter's demand, but for the demand it anticipates over the next several years. By combining record performance with aggressive, strategic reinvestment, Kraken’s leadership is sending a clear message to the market. With a fortified balance sheet and a clear strategy for both organic and inorganic expansion, Kraken Robotics is not just reporting a record quarter; it is signaling its intent to define the future of underwater intelligence and security.