Trump Wants FY27 Defense Budget of $1.5T
Research Report

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1. Unusual Machines Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$3,000 and US$6,000.
2. 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 Unusual Machines Inc. and Red Cat Holdings.
3. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Unusual Machines Inc. (UMAC:NYSEAMERICAN) and other companies in the unmanned space should benefit if U.S. President Donald Trump's US$1.5 trillion (US$1.5T) target for the fiscal year 2027 (FY27) defense budget (versus US$1T) becomes reality, reported Needham & Co. Analyst Austin Bohlig in a Jan. 8 research note.

"If enacted, we expect a growing share of incremental defense spending to be directed toward unmanned and autonomous technologies, which will significantly expand the total addressable market across the unmanned ecosystem," Bohlig wrote.

36% Return Implied

Needham has a US$20 per share (US$20/share) target price on Unusual Machines, trading at the time of the analyst's report at about US$14.68/share. The difference between the target and current prices suggests a potential return for investors of 36%.

UMAC is a Buy.

Trump's Exact Words

On Jan. 7, Trump posted this on Truth Social about the U.S.' FY27 defense budget: "After long and difficult negotiations with Senators, Congressmen, Secretaries and other Political Representatives, I have determined that, for the Good of our Country, especially in these very troubled and dangerous times, our Military Budget for the year 2027 should not be US$1 Trillion Dollars, but rather US$1.5 Trillion Dollars. This will allow us to build the 'Dream Military' that we have long been entitled to and, more importantly, that will keep us SAFE and SECURE, regardless of foe."

What Boost Would Mean

A US$1.5T defense budget would reflect a greater than 50% boost from the FY26 budget of US$900 billion (US$900B), one of the biggest year-over-year increases in modern defense budgeting and a new historical record.

"This represents a step-change in scale that should support sustained growth, broader program activity, and a more durable demand environment for unmanned-focused defense companies over the next several years," Bohlig wrote. "Unmanned and autonomous technologies are structurally positioned to capture an increasing share of incremental spending."

Bohlig pointed out that significant momentum in the unmanned sector is already underway, with the US$13B of funding already allocated to it through the One Big Beautiful Bill and the FY26 budget. Unmanned programs now receiving funding from one or both of these sources are unmanned aerial systems (UAS), counter-unmanned aerial systems (CUAS), unmanned surface vehicles (USV), unmanned underwater vehicles (UUV), unmanned ground vehicles (UGV), and loitering munitions.

As such, "the combination of existing funding and prospective budget expansion meaningfully lifts the ceiling for unmanned systems and provides durable multi-year tailwinds for the broader ecosystem," the analyst added.

Specific Beneficiaries

Trump's budget proposal, due out this spring, should shed more light on funding levels and program allocations, Bohlig noted.

Until the final FY27 defense budget is released, "we expect the entire ecosystem and specifically names under coverage, including AeroVironment Inc. (AVAV:NASDAQ), Ondas Holdings Inc. (ONDS:NASDAQ), Red Cat Holdings Inc. (RCAT:NASDAQ), UMAC, and Draganfly Inc. (DPRO:CSE; DPRO:NASDAQ; 3U8:FSE), to trade higher as hype around growing budgets increases in the coming months," the analyst added.