Drones Free From US Defense Budget Cuts

1. Unusual Machines Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000. 
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of DroneShield Ltd., Unusual Machines Inc., and Red Cat Holdings Inc.
3. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Recently, the Pentagon tasked U.S. senior military leaders with cutting the defense budget by 8% per fiscal year between 2026 and 2030, Reuters reported on Feb. 19.

This would amount to about US$300 billion (US$300B), which has been reportedly earmarked for spending on President Donald Trump's national defense priorities, according to Military Times. It quoted Acting Deputy Secretary of Defense Robert Salesses from a related memo, "Through our budgets, the Department of Defense (DOD) will once again resource warfighting and cease unnecessary spending that set our military back under the previous administration."

Slashes are to be made selectively rather than across the board, according to both sources. Accordingly, numerous categories are to remain untouched, including autonomous weapons and missile defense.

This is great news for drone and counterdrone manufacturers and suppliers based in or tied to the U.S. through contracts, partnerships, and/or government registrations. Here's a look at three such companies, all publicly traded:

DroneShield 

Australia-based DroneShield Ltd. (DRO:ASX; DRSHF:OTC) provides counterdrone, or C-UAS, solutions to customers globally, with a focus on radiofrequency sensing, artificial intelligence and machine learning, sensor fusion, electronic warfare, rapid prototyping, and MIL-SPEC manufacturing.

Most recently, the company released its full-year 2024 annual report. An encouraging takeaway from it, Shaw and Partners Analyst Abraham Akra noted on Feb. 25, was that "DroneShield's full-year 2025 revenue visibility has improved to AU$52 million (AU$52M) in February 2025 compared to AU$45M in January 2025."

Last year's highlights, Akra pointed out, included the company bolstering its sales pipeline to AU$1.2B and landing several deals: a AU$9.7M Latin American contract, an AU$8.2M NATO award and a total of AU$11.8M in Asia-Pacific agreements.

The analyst maintained his Buy rating on DroneShield and his target price, implying a 12.5% uplift.

"We see DRO reaching an inflection point in sales and profitability with the NATO agreement supplementing the U.S. DOD recommendation and solidifying DRO as a market leader in jamming C-UAS," commented Akra.

In mid-February Independent Investor Chase Barlow estimated DroneShield's worth at US$1.60 per share and wrote that the company stood to benefit from the increasing military and commercial use of C-UAS solutions.

"In my view, the integration with Epirus (hard kill-directed energy laser technology platform), as well as the offering of a full product suite for C-UAS customers, serves as a key differentiator for DroneShield," he added. "One can look to the recent NATO Framework agreement, US$11.8 Asia-Pacific contract, and upcoming Land156 contract in Australia as key opportunities for DroneShield to gain market share."

Two other analysts who recently recommended DroneShield as a Buy are Bell Potter Securities' Daniel Laing and Eunice's Antonio Mansell. The latter described the anti-drone solutions firm, in a January note, as "focused, agile and ready to scale" and "positioned to meet the growing counter-UAS technology needs due to their dedication to innovation, expansion and strategic partnerships."

Recent filings reveal that Vanguard Group has become a substantial shareholder in the company, holding a 5.47% stake. Regal Funds Management has 5.69%.

This development adds to the company's strategic investors, which currently hold over 11% of the company's stock. 

5.68% is with management and insiders, according to the company's most recent investor presentation. 

Structurally, DroneShield has 872.12M outstanding shares and 782.40M free float traded shares.

Its market cap is reported as AU$550 million. Its 52-week range is AU$0.5850−2.72 per share.

Unusual Machines

Unusual Machines Inc. (UMAC:NYSEAMERICAN) manufactures and sells drones and drone components from its Orlando, Fla. headquarters and in doing so, aims to reduce the U.S.' reliance on foreign supply chains.

Just last week, Unusual Machines announced that its Fat Shark Aura first-person view (FPV) camera was added to the DOD's Defense Innovation Unit's Blue UAS Framework. It is the only camera of its kind, built especially for FPV uses, on the Blue UAS approved list.

Litchfield Hills Research initiated coverage on Unusual Machines on Feb. 19 with a Buy rating and a price target suggesting a 122% potential return. The target, Litchfield explained, "assumes the market will accord the shares twice the valuation of comps as its components strategy should allow for faster growth." This referenced strategy of UMAC is to manufacture drone components for itself and other drone makers, a market potentially worth US$3B.

"Using conservative assumptions, we believe the company can get to US$150M in components revenue," Litchfield wrote. "Revenue should increase from US$5.7M in 2024 to US$47.5M in 2026."

ThinkEquity Analyst Dr. Ashok Kumar also has a Buy rating on Unusual Machines. In his Dec. 9 research report, he lauded the company for its evolution into defense-focused drone manufacturing.

About 11.1% of the company is owned by management and insiders, UMAC said. The rest, 88.9%, is retail.

Unusual Machines has 15.12 million outstanding shares and 13.08 million free float traded shares. Its market cap is US$173.45 million. Its 52-week high and low share prices are US$23.62 and US$0.98 per share, respectively.

Red Cat

Red Cat Holdings Inc. (RCAT:NASDAQ) is a drone technology company integrating robotic hardware and software into its products intended for military, government, and commercial operations.

Coming up soon for the Puerto Rico-based firm is an Investor and Analyst Day, 11 am to 1 pm EST on Feb. 27 at New York City's Nasdaq MarketSite. At the event, members of Red Cat's leadership team, including CEO Jeff Thompson and Chief Revenue Officer Geoffrey Hitchcock, will make presentations. Also, Palantir Technologies Inc.'s Head of USG Research and Development, Robert Imig, will talk about the next steps for its strategic partnership with Red Cat.

Technical Analyst Clive Maund wrote on Feb. 23 that Red Cat's stock was "extremely overbought relative to the 200-day moving average." He presented its chart as an example of what a classic head-and-shoulders pattern looks like and explained that such a formation indicates a trend reversal is likely to happen. On Feb. 21, the "neckline" of the pattern was breached, noted Maund, and since, Red Cat's share price has continued its descent, falling another 15%.  

Earlier this year, a MarketBeat article explained why Red Cat's stock had climbed so much last year. The reasons included the company having joined forces with Palantir and having landed several contracts to supply drones for military use. These included the U.S. Army having chosen Red Cat as the Short-Range Reconnaissance Program of Record, meaning that in each of the next five years, the drone company must deliver about 1,200 drones to the Army for it to meet its acquisition goal.

"The deal puts significant legitimacy behind Red Cat," wrote Contributing Author Leo Miller.

For mid-2025 revenue, he noted, the company has guided to US$100M, more than six times the amount it generated during the prior 12 months.

According to Refinitiv, management and insiders own just over 19% of Red Cat, including CEO Thompson, who holds 15.45%.

Institutional investors own about 14%. The Vanguard Group Inc. has 2.87%, AWM Investment Co. owns 2.25%, and Pelion Venture Partners has 1.12%.

The rest is in retail.

The drone company has 85.62M outstanding shares and 69.15M free float traded shares. Its market cap is US$598.04M. Over the past 52 weeks, its stock has traded between US$0.69 and US$15.27 per share.