Ondas: Drones, autonomy and the future of defence technology

Tom Bailey:
Hello and welcome to today’s webinar. My name is Tom Bailey, Head of Research at HANetf.

Observers of the news will know that drones and autonomous systems have proliferated, most notably for defence purposes. Governments around the world are increasing drone spending and forming specialised drone units within their militaries. The US is potentially set to spend around $70 billion on drones, according to its 2027 defence budget request.

To better understand the rise of drones and autonomous systems, and the investment case behind the theme, I’m delighted to be joined by Eric Brock, Founder and CEO of Ondas, a leading drone specialist company.

Ondas is a holding in two of our ETFs. It is held in the Future of Defence UCITS ETF, ticker NATO, and is also one of the top holdings in our Drone UCITS ETF, which launched in March and focuses on pure-play drone companies.

Eric, thank you for joining us.

Eric Brock:
Thanks, Tom. I’m excited to be here.

At Ondas, we see this as a broad investment theme and a significant investment cycle with strong tailwinds. We are living through what is arguably one of the most significant transformations in defence and security technology since the introduction of precision-guided weapons and network-centric warfare.

Autonomy, unmanned systems and autonomous unmanned systems are moving from development cycles into deployment. Historically, humans were often the first point of contact in security and military contexts. Increasingly, autonomous systems will be the first to detect, classify, track and respond to threats. That applies across battlefields, borders, bases, public safety and critical infrastructure.

The question is no longer whether autonomy will be deployed. Autonomy at first contact is becoming table stakes. The question for investors is which companies will build the platforms, software and integrated systems that enable these capabilities.

At Ondas, we are building what we believe is infrastructure for the autonomous age. Historically, defence companies sold platforms and software companies sold applications. Today, the future is different. This generation of defence technology increasingly requires autonomous systems enabled by artificial intelligence, sensors, networks, mission software and integrated operations.

We see multi-domain autonomy as central to this. Autonomy does not exist in silos. It is not just air, ground, sea or space. These capabilities need to work together as coordinated mission systems, including counter-drone technologies.

The value is increasingly moving from hardware to data, AI and decisions. These systems need to be integrated and operational. That complexity matters, and it is likely to drive consolidation, because the current drone and autonomous systems market remains highly fragmented.

Ondas operates across defence, homeland security, public safety and critical infrastructure. We focus on four main capability areas: ISR, counter-drone technologies, strike and loitering munitions, and ground robotics.

In ISR, we provide persistent awareness. In counter-drone technologies, we protect against hostile drones across battlefields, critical infrastructure, stadiums and airports. In strike and loitering munitions, we are seeing a significant change in military economics. In ground robotics, we are putting robots ahead of soldiers, whether in the air or on the ground.

What makes Ondas different is that we are operating across domains and increasingly through integrated systems, with software as a critical component.

Tom Bailey:
That leads to my first question. We often talk about this theme as drones, but Ondas describes its focus as autonomy and autonomous systems. For investors new to the space, how should they think about the definitions?

Eric Brock:
We increasingly use the language of unmanned systems. A drone is often associated with a small quadcopter, but unmanned systems are much broader. They range from high-altitude balloons in the stratosphere to fixed-wing UAVs, ground vehicles and robotics platforms.

The command-and-control software makes these systems capable of operating autonomously and doing the useful things they are designed to do. What also matters is what makes them useful: sensors, payloads, machine learning and artificial intelligence.

For example, in counter-drone systems, sensors are essential. They may include radar, acoustics, optical and thermal sensors, radio-frequency sensors and passive RF sensors. A counter-drone platform is not useful if it cannot see the threat.

On the battlefield, drones also need to operate in contested environments where radio frequencies may be jammed and GPS may be spoofed. That means integrating other technologies, such as optical navigation, onboard compute and AI-enabled systems.

So, rather than thinking only about drones, it is more useful to think about unmanned and autonomous systems, and systems of systems.

Tom Bailey:
Drones have been around for a while. Ten or 15 years ago, in a defence context, people may have thought mainly of large fixed-wing systems such as the MQ-9 Reaper. How has the drone market developed?

Eric Brock:
The MQ-9 is still an incredibly valuable asset for the US military and allied forces. But what is changing today is the innovation curve.

The Reaper is a highly capable, high-performance system, but it is also expensive. As technology matures, the cost of producing new unmanned systems and developing new capabilities is declining. That changes the economics and introduces the concept of mass.

Militaries increasingly need the ability to deploy mass and attritable systems. This is changing the way military planners think about legacy platforms, cost, capability and volume.

Tom Bailey:
Ukraine reportedly produced millions of drones last year and is expected to produce more this year. By contrast, US production capacity is sometimes cited as much lower. What are the bottlenecks for scaling production?

Eric Brock:
The first point is to understand what type of drones are being discussed. In Ukraine, many of those systems are low-cost, attritable drones produced under wartime pressure.

The broader issue is production capacity. This is particularly significant in the West because many supply chain capabilities have been outsourced. Critical components such as electronics, chipsets and communication modules are not yet produced at scale locally.

There are now policy efforts in the US and Europe to localise these capabilities. That is essential, but it also creates challenges for companies like Ondas and our peers. If companies were willing to rely more heavily on Asian supply chains, including China, they could potentially build more today. But national security and defence industrial resilience require localised production.

That creates a major investment cycle and an urgent mission for companies in this space.

Tom Bailey:
How do the US policy pieces fit together, including potential direct funding, the drone dominance programme and the 2027 budget request?

Eric Brock:
The White House, the Pentagon and Congress recognise the need to strengthen the industrial base and bring unmanned and autonomous capabilities to warfighters at scale. There is bipartisan support for this.

The policies include both pressure to bring supply chains home and funding mechanisms to support production and demand. Reducing friction around spending helps emerging companies show demand to investors, which can support the broader investment cycle.

The Office of Strategic Capital is an example of an initiative aiming to stimulate public and private cooperation. Supply chain bottlenecks are a major issue, and I expect these efforts to be impactful.

I see these policies as supportive. They help de-risk the investment cycle, although they do not remove all risks.

Tom Bailey:
Are we seeing similar policies from other NATO members and in Europe?

Eric Brock:
Across NATO and Europe, there has been significant progress over the past 18 months in prioritising unmanned systems and localised production.

Some of the ordering activity is focused on supporting Ukraine, but part of that funding is also directed towards building local capabilities across Europe. The US has an advantage in having one Pentagon with significant purchasing authority, which can provide scale more quickly. In Europe, budgets are more fragmented, but the direction of travel is positive.

Tom Bailey:
Counter-drone systems are another major category. How do they work?

Eric Brock:
The counter-drone market is significant and has moved urgently towards deployment over the past two years. The lower sky has become more exposed than ever before.

Counter-drone systems start with detection. You cannot protect against or mitigate a threat you cannot see. Detection may involve radar, optical and thermal sensors, acoustic sensors or passive RF detection. These tools need to be tailored to the threat.

The battlefield threat is different from the threat at a stadium, airport, port, data centre or public gathering. In civil settings, you may be dealing with hobbyists, careless operators, intelligence gathering or potentially weaponised drones.

Ondas has platforms that can detect radio links and, in some cases, override a drone’s autopilot and land it safely. We also have systems such as Iron Drone, which can use nets to intercept drones. This may be relevant where a drone is not relying on a radio link and requires a kinetic but controlled response.

For battlefield threats such as loitering munitions, fully kinetic systems may be needed. But for civilian locations, the approach needs to be different and safer.

Tom Bailey:
So there is an urgent defence need, but also a civil protection need for airports, stadiums and other public areas.

Eric Brock:
Exactly. If you are protecting a stadium or airport and a weaponised drone is approaching, you may want to intercept it before it reaches the protected location. Iron Drone can use sensors to locate the threat, pursue it, deploy a net and potentially bring it down with a parachute. The goal is to neutralise the threat away from the protected site.

Tom Bailey:
How does Ondas’ customer base look geographically?

Eric Brock:
Ondas has transformed significantly over the past 12 to 24 months. The origins of some of our technology platforms were in Israel, and the Middle East has historically been important.

More recently, we have made acquisitions and built a portfolio of capabilities. In 2026, we added US-based capabilities, including World View, which is focused on high-altitude systems. We are localising some capabilities in the US to comply with requirements such as the National Defense Authorization Act.

The US is expected to be our largest market. Israel remains important, and we also have a joint venture in Germany with a local industrial company to support European localisation and production.

Tom Bailey:
You announced the acquisition of Cyberhawk this morning. Could you explain what Cyberhawk does and how regulation affects the opportunity?

Eric Brock:
Cyberhawk provides drone-based inspection and intelligence services for critical markets such as electric utilities and oil and gas.

That includes inspection of transmission networks, electric utility infrastructure, oil and gas assets, pipelines, refineries and other critical infrastructure. These assets need to be inspected because resilient infrastructure is critical for the economy and national security.

Cyberhawk is a pioneer in this area. It has deployed people and unmanned systems at scale. As autonomy, payloads, AI and machine learning mature, a single pilot may be able to cover more distance, gather more data and produce more useful intelligence.

Regulation is also improving. In the US, the FAA is working on rules around beyond-visual-line-of-sight operations. Over the next six to 12 months, we expect further progress. These changes could help companies like Cyberhawk expand their inspection capabilities.

Tom Bailey:
More broadly, drones can gather data and perform jobs that may otherwise put humans in harm’s way. Is the value increasingly in processing that data?

Eric Brock:
Yes. Developing these technologies is hard and takes capital, time and persistence. The foundational technology has been built over more than a decade and is now maturing, which is why adoption is accelerating.

The challenge now is financing and building the operating platform needed to deliver these systems safely, securely and at low cost to customers such as militaries, utilities and energy companies.

The data collection, machine learning and AI models are important. There are similarities between tactical ISR and industrial inspection. If companies can spread technology investments across defence, security and industrial markets, they may be able to create a more attractive model.

Customers are not simply asking for a drone. They need the platform, services, training, installation and sustainment around it. Industrial markets may become very large, alongside defence and security markets.

Tom Bailey:
How should investors judge progress over the next 12 months?

Eric Brock:
Revenue growth is important, but investors should also look at backlog, production, delivery and operating leverage.

This is an S-curve adoption cycle. That means growth can be rapid, but systems companies also need to build operational capacity. Ondas is focused on integrating capabilities, delivering technologies and building a broader platform.

Tom Bailey:
Investors often understand the growth story, but they also see volatility in drone-related companies. What would you say to that?

Eric Brock:
We are going to build some important companies in this sector. This is a technology adoption cycle similar in some ways to previous cycles such as personal computers, the internet and social media.

There will be volatility. That is part of early-stage technology adoption and scaling. Investors need to understand that these companies may experience large share price movements while the sector develops.

An ETF approach may help investors access the theme without relying on a single company. But investors should still understand the risks, including volatility and the possibility that not all companies in the sector will succeed.

Tom Bailey:
Thank you, Eric. That was very interesting. Thank you to everyone for joining.