DroneShield Ltd. (DRO:ASX; DRSHF:OTC) delivered a record H1/25, a significant turnaround from its net loss in H1/24, reported Abraham Akra, senior analyst at Shaw and Partners, in an Aug. 28 research note.
"The H2/25 outlook remains strong," Akra wrote. "We see DRO reaching an inflection point in sales and profitability with the North Atlantic Treaty Organization agreement supplementing the U.S. Department of Defense recommendation and solidifying DroneShield as a market leader in jamming counter unmanned aircraft systems."
12.5% Upside Implied
Shaw and Partners reiterated its AU$3.60 per share target price on the Australian counterdrone solutions firm, trading at about AU$3.20 at the time of Akra's report, the analyst noted. From this price, the return to target is 12.5%.
DroneShield remains a Buy.
Earnings Highlights
Akra presented the key points about DroneShield's H1/25 financial results. They were notable for record profitability and a revenue inflection point. Revenue was up 210% year over year (YOY) at AU$72.3 million (AU$72.3M). After-tax net profit was AU$2.1M. Gross profit margin was about 71%. H1/25 EBITDA came in at AU$5.2M versus AU$4.9M in the previous half-year. H1/25 cash receipts totaled AU$60.7M, 185% higher YOY.
These results reflect significant improvement since H1/24, when the company reported a net loss of AU$4.8M.
The defense firm ended H1/25 cashed up to fund its scaling efforts, noted Akra. As of June 30, it had AU$204M in cash and term deposits, about AU$270M in sellable inventory and no debt. Increasing revenue and strong margins support the AU$2M rise in fixed operational cash costs to AU$6.5M per month in Q2/25 from AU$6.5M per month in Q1/25.
Manufacturing Expansion
DroneShield continues working toward its manufacturing expansion goal of reaching AU$2.4 billion (AU$2.4B) per year by 2026, up from AU$500M, to be able to meet global demand for its products. A new 3,000-square-meter manufacturing facility is being built in Sydney, and the company is securing manufacturing partners in the U.S. and the European Union.
By August, the defense company's staff count was up to 373, including 285 engineers to support quarterly artificial intelligence software upgrades.
"These systems underpin the delivery of next-gen hardware, increased software-as-a-service (SaaS) attach rates and repeat revenue across the product life cycle," noted Akra.
DroneShield grew its pipeline to AU$2.34B spanning 310 projects, noted Akra. Of these, 13 have a value greater than AU$30M, and 52 are for more than AU$5M. Europe accounts for the greatest volume in this pipeline with near-term award potential.
Contract Opportunities
Akra reported that DroneShield was not chosen for Australia's LAND 156 System Integration Partner, a contract for AU$45.9M to deliver a modular, sovereign counter small unmanned aircraft systems capability for Groups 1 and 2 threats. The award went to Leidos Australia.
Regardless, the analyst added, "We remain constructive on DRO's participation in later tranches and complementary layers." One potential opportunity for the company, for instance, is the Australian government's AU$1.3B allocation for counterdrone acquisitions via the Integrated Investment Program.
Looking Ahead
For this year, DroneShield expects revenue of AU$176.3M, more than three times last year's revenue of AU$57.5M, Akra reported. Also, it anticipates delivering most open orders in H2/25.
When DroneShield converts additional projects in its pipeline into orders, the effect could be a boost to its share price. Increases in SaaS revenues due to new hardware launches next year could be catalysts, too.
Shaw and Partners now expects 0–3% higher revenue between 2025 and 2027. Its new after-tax net profit projections are 2.6% higher, 7.9% higher and 5.6% lower for 2025, 2026 and 2027, respectively. EBITDA is expected to remain static. These changed estimates, the analyst indicated, are based on interest on revised yield assumptions.
More Stock Data
DroneShield's market cap is AU$2.8B. Its 52-week range is AU$0.59–4.23 per share.
Major shareholders are Fidelity Management & Research Co. with 8.1%, Regal Funds Management Pty Ltd. with 5.4%, State Street Global Advisors (Australia) with 4.1%, The Vanguard Group Inc. with 3.3% and Epirus Inc. with 2.1%.
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