DroneShield Ltd. (DRO:ASX; DRSHF:OTC) received a AU$49.6 million contract from a European military end customer for handheld counterdrone (C-UAS) systems, associated accessories, and software updates, reported Bell Potter Analyst Baxter Kirk in a Dec. 17 research note.
Bell Potter decreased its price target on the counterdrone company by 17%.
"This repeat order represents [DroneShield's] second largest contract in its history and highlights the urgent need for counter-UAS technologies in Europe," Kirk wrote.
78% Return Implied
Bell Potter lowered its target price on DroneShield primarily to reflect an increase in weighted average cost of capital to 12% from 11%, due to heightened geopolitical risk in terms of potential peace in Ukraine, Kirk explained.
"We expect a Ukraine peace deal would weigh negatively on share price sentiment in the short term but would likely see no change to our forecasts given current global defense spending rhetoric," the analyst added.
Bell Potter's new target price on DroneShield is AU$4.40 per share (AU$4.40/share), down from AU$5.30. In comparison, the Australian defense manufacturer was trading at about AU$2.47/share at the time of Kirk's report. From that price, the return to target is 78%.
DroneShield remains a Buy.
The company has a market cap of AU$2.3 billion. Its 52-week range is AU$0.59–6.60/share.
Full Delivery in Q1/26
Kirk pointed out that DroneShield has a large portion of the products needed to fulfill the contract already in stock and thus, expects to fulfill it entirely in Q1/26. The order will be distributed via an in-region reseller, from which DroneShield has received 15 contracts to date, totaling AU$86.5M.
Also, during Q1/26, the counterdrone company expects to receive cash payments per the contract.
Given this additional contract, DroneShield's active contracts should support 24% of Bell Potter's Hardware revenue forecast for calendar year 2026 of AU$271M, Kirk wrote. He added that the defense tech company typically delivers products quicker than traditional defense contractors do.
Contracts Should Flow
Bell Potter expects next year to be "an inflection point" for the global counterdrone industry as countries are well positioned to spend a lot on radiofrequency (RF) detect-and-defeat C-UAS solutions. As such, over the next three to six months, DroneShield should see material contracts flowing from its AU$2.5B potential sales pipeline as defense budgets roll over to fiscal year 2026.
In his report, Kirk included comments the U.S. Air Force (USAF) made in September 2025 about DroneShield's portable/handheld Drone Gun Mk4 and the RF Patrol Mk2. These are the only Air Force-approved products of this kind; they are the only solution that meets MAJCOM and USAF requirements, the military branch said. It also said, "As of July 2025, weekly meetings have continued to assess multiple handheld [C-UAS] solutions. However, DroneShield remains the only product with proven performance and full alignment with mission requirements." These statements bode well for DroneShield receiving additional contract awards from the USAF, noted Kirk.
Why DRO Stands Out
Kirk presented three attributes that companies must have to be successful in the RF detect-and-defeat segment and noted that DroneShield has all of them. One is strong relationships with governments, and DroneShield has these with many governments around the world. The second attribute is battlefield experience, or real-world deployment of the company's technology, and DroneShield has deployed its products in Ukraine.
Technological differentiation with respect to software is the third. "Success requires advanced artificial intelligence/machine learning algorithms and a comprehensive, constantly updated threat library of drone signatures," Kirk wrote. DroneShield differentiates itself with its large research and development (R&D) team and years of experience in Ukraine.
Bell Potter does not believe RF effectors will become a commoditized C-UAS technology, Kirk wrote. As such, companies with an R&D flywheel approach, like DroneShield, have a competitive advantage. With this approach, more R&D leads to market share gains, which leads to more R&D, etc.
When comparing the number of R&D/technical job postings of DroneShield and several of its competitors, the analyst discovered that DroneShield has the most, even more than AeroVironment Inc.'s (AVAV:NASDAQ) BlueHalo that needs a much larger team to develop other C-UAS effectors, including directed energy products.
"We believe DroneShield has the largest and fastest growing team focused on the RF detect/defeat vertical, which, in our view, serves as a positive signal that DRO will be the company to reap the rewards of the R&D flywheel," Kirk wrote.
Kirk listed some of the known C-UAS programs targeted for government spending that have not been awarded or turned into orders yet. All of them likely include procurement of RF detect/defeat, the analyst wrote, "which we expect DroneShield to be competitive in." Here is Kirk's list:
ENTITY EST. VALUE C-UAS TECH COMMENT
European Union Significant Broad European Drone Defence Initiative
U.S. DOW Significant Broad Replicator 2 initiative
U.S. DHS US$1.5B Nonkinetic 2026 FIFA World Cup; border security
Netherlands €1-2.5B Broad DRO has a strong presence there
Australian Army AU$1.3B Broad LAND 156; DRO awarded portables contract
Belgium €0.5B Broad DRO awarded AU$5M contract
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- As of the date of this article, officers, contractors, shareholders, and/or employees of Streetwise Reports LLC (including members of their household) own securities of DroneShield Ltd.
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Disclosures for Bell Potter, DroneShield Ltd., December 17, 2025
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