Drone ETF Report | August 2026

Drone ETF – Key Takeaways

Drone Attacks Raise Security Concerns Across Europe – There has been a surge of suspicious drone incidents, airspace incursions, and sabotage plots across Europe in August, including a recent explosive-laden drone found at Germany’s Leipzig/Halle Airport and an explosion near a Bulgarian gas pipeline. There is also research covering over 144 suspicious drone and sabotage incidents across multiple NATO countries that indicates a systematic effort by Russia to probe European air defences, disrupt civilian aviation infrastructure, and test Western resolve. These incidents have raised intense security concerns about Russian hybrid warfare and are likely to spur even more investment in Europe on drone and counter-drone technology. The attacks highlight that Europe remains largely unprepared to fully intercept or definitively attribute low-altitude hybrid drone incursions in non-active combat zones. The EU aims to deploy a comprehensive operational anti-drone framework by 2027 as pressure mounts on NATO members to invest more in security infrastructure.[1]

US Department of Homeland Security on Drone Spending Spree – The Department of Homeland Security is investing up to $1.5 billion toward bridging its drone defence gaps with awards going to Anduril, Booz Allen, General Dynamics, and others, per procurement documents. The sought-after contract had 47 vendors vying for a piece of the massive award. DHS separated awards into two categories. Track one houses seven hardware, software and ancillary service providers, such as Fortem, D-Fend and CACI. Another seven vendors providing “comprehensive services” for counter-UAS are named under track two, including Anduril, Booz Allen and GDIT. Two tech companies landed in both tracks: Leidos and BAE Systems. DHS expects to spend as much as $1 billion on drone hardware and software, with the remaining $500 million going to comprehensive services and systems integration.[2]

US May Sacrifice Traditional Weapons to Buy More Drones – If Congress does not pass $350 billion in funding through the budget reconciliation process, the Pentagon will be forced to consider cutting expensive traditional weapon systems in order to protect drones. The 2027 defence budget has $1.15 trillion in discretionary funding with $350 billion in reconciliation. The decision to push many key modernisation measures, including munitions and drones, into the reconciliation portion has led to concerns from members of Congress that, should reconciliation fall apart, the Pentagon will have to make hard choices which equipment to fund.[3]

US Lags Ukraine in Small Combat Drones – The US acknowledges that it lags significantly behind Ukraine in small combat drone manufacturing and rapid battlefield innovation. While Ukraine is on track to produce 6-7 million small first-person-view (FPV) and strike drones annually, the U.S. military’s scaled programs have ordered a fraction of that volume, constrained by higher costs, strict domestic component mandates, and slower procurement cycles. The U.S. military is actively acquiring Ukrainian-tested counter-drone and autonomous software tech to re-equip forces facing modern drone threats. It is also looking to tap into expertise hosting its second competition round for its $1 billion Drone Dominance Program in an effort to amass 200,000 attack drones by 2027. Several Ukraine companies are vying for orders. Washington and Kyiv have also advanced cooperation agreements for joint drone production allowing select Ukrainian drone manufacturing capabilities and exports to interface with U.S. defence scaling initiatives.[4] [5]

CACI Gets $500m Counter-Drone Contract – CACI International was awarded a contract worth up to $500 million for its SkyValor system, designed to use long-range, “non-kinetic” jamming against unmanned aerial systems. CACI touts SkyValor as being able to provide early warning, long-range targeting and 24/7 automated sensing. A trailer-based system, it can target small and large drones using “automated sense and shoot algorithms” at more than 40 miles away in some cases. It also uses “low/no-collateral” tools like nets from four miles away, a type of capability military officials previously said was key to a layered defence. Under the contract, JIATF-401 said it was looking at the company’s CORIAN v3 system, a fixed-site version of SkyValor with radio frequency jamming capabilities. It also referenced BEAM, a small, “backpackable” variant.[6]

More Counter Drone Awards – Three other counter-drone awards also came in recently. Hidden Level took a $100 million contract for passive radar that detects RF-silent drones. AeroVironment contracted Teledyne FLIR to supply sensors for its US Air Force counter-UAS work. Kratos won an NNSA award for mobile counter-drone systems protecting nuclear material. The counter-UAS market is now a procurement pipeline with named vehicles, task orders, and project revenue attached. In other news, the Office of Strategic Capital signed an $820 million conditional loan commitment with Performance Drone Works, the Huntsville, Alabama manufacturer, to mass produce drone components domestically. Clearly significant money is moving to counter drones, drones, and drone components.[7]

Pentagon Launches Online Marketplace for Counter-UAS Tech – The US Defence Department launched a counter-unmanned aerial system, or C-UAS, marketplace recently designed to make it easier for military and government agencies to find and acquire vetted counter-drone technology. The marketplace was developed by the Joint Interagency Task Force 401, or JIATF 401, which heads the Defense Department’s effort to connect government agencies with companies developing counter-drone technology. Although the website is live, access is limited to only approved buyers and sellers. Eligible buyers include federal procurement officers, military commands and pre-cleared allied or partner-nation defence ministries. Vendors must apply and complete a rigorous vetting and approval process. Once approved, vendors can publish listings and respond to buyer inquiries. The marketplace is part of an effort to streamline the acquisition of drone-related technology, and is the department’s second e-commerce platform.[8]

Drone Stock Earnings – Recent Q2 2026 earnings reports for major drone and unmanned system companies show surging revenue growth driven by defence contracts, though many smaller firms are still posting widening net losses. Key players like Red Cat Holdings reported massive 527% year-over-year revenue growth despite a slight headline earnings miss,[9] while Kratos and Unusual Machines saw positive price momentum following strong guidance updates and defence sector demand.  Here are a few earnings highlights:

Kratos Defense & Security Solutions reported second-quarter earnings of 21 cents a share on sales of $458.8 million, beating expectations. Kratos raised its full-year sales guidance to a range of $1.75 billion to $1.81 billion, up from its prior forecast. Bookings for the quarter were $492.2 million, higher than sales. For the full year, Kratos expects sales of $1.75 billion to $1.81 billion. Prior guidance was a range of $1.7 billion to $1.76 billion. Wall Street was projecting just over $1.7 billion in sales. But with a lofty 53X multiple, Kratos remains pricey relative to other defence names, but its projected growth rate over the next three years is 30%.[10]

Red Cat Holdings (RCAT): Reported Q2 2026 revenue of $20.2 million (up 527% YoY) with a net loss of -$0.26 per share, reaffirming full-year targets of $150M–$180M.[11]

Draganfly (DPRO): Posted record Q2 2026 revenue of CAD 2.66 million (up 26% YoY), though losses widened amid expanding product and defence pipeline investments.[12]

Unusual Machines (UMAC): Climbed following its Q2 report alongside increased market focus on NDAA-compliant domestic drone manufacturers.[13]

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Macro Outlook – More spending on drones

As part of the 2027 $1.5 trillion US military budget, the US is requesting $53.6 billion just for drones. The funds will be used to boost production and procurement of drones, train drone operators, build out a logistics network for sustaining drone deployments, and expand counter-drone systems to defend more US military sites. The funding request is budgeted under the Defense Autonomous Warfare Group (DAWG). Another $20.6 billion is earmarked to purchase one-way attack drones and drone aircraft developed through the US Air Force’s Collaborative Combat Aircraft program, which is building drone prototypes capable of teaming up with human-piloted fighter jets. Part of this funding would also go toward defensive systems for countering small drones and the US Navy’s Boeing MQ-25 drone designed to perform midair refuelling of carrier-borne fighter aircraft to extend their strike ranges.  But the US is not the only nation spending on drone warfare. NATO announced at its recent summit it is committing $40 billion to drone technology. Adding to NATO’s urgency, there has been a surge of suspicious drone incidents, airspace incursions, and sabotage plots across Europe in August, including a recent explosive-laden drone found at Germany’s Leipzig/Halle Airport and an explosion near a Bulgarian gas pipeline. These incidents have raised intense security concerns about Russian hybrid warfare and are likely to spur even more investment in Europe on drone and counter-drone technology.[14] [15]

[1] https://www.aljazeera.com/news/2026/8/11/new-level-of-danger-drone-incidents-scare-europe-amid-russia-ukraine-war

[2] https://fedscoop.com/dhs-drone-defense-counter-uas-contracts/

[3] https://breakingdefense.com/2026/06/pentagon-may-sacrifice-traditional-weapons-to-buy-more-drones-if-reconciliation-fails-cto/

[4] https://www.stripes.com/theaters/europe/2026-08-10/ukraine-battle-lab-drones-lessons-22507613.html

[5] https://thehill.com/policy/international/5990471-zelensky-says-us-ukraine-moving-forward-on-joint-drone-production/

[6] https://defensescoop.com/2026/07/31/pentagon-counter-drone-task-force-500m-contract-caci-skyvalor/

[7] https://finance.yahoo.com/technology/articles/huntsville-drone-company-receives-820m-130133117.html

[8] https://www.defensenews.com/news/pentagon-congress/2026/08/10/pentagon-launches-online-marketplace-for-counter-uas-technology/

[9] https://www.tradingview.com/news/tradingview:78533f771e1c1:0-red-cat-holdings-reports-q2-2026-revenue-of-20-2m-gross-margin-16-1/

[10] https://www.barrons.com/articles/kratos-earnings-stock-price-fbf5d874

[11] https://finance.yahoo.com/markets/stocks/articles/red-cat-holdings-rcat-stock-180533351.html

[12] https://seekingalpha.com/news/4630829-draganfly-stock-drops-after-q2-earnings-big-pipeline-bigger-losses

[13] https://finance.yahoo.com/markets/stocks/articles/unusual-machines-umac-stock-climbing-182034267.html

[14] https://arstechnica.com/ai/2026/04/pentagon-wants-54b-for-drones-more-than-most-nations-military-budgets/

[15] https://www.aljazeera.com/news/2026/8/11/new-level-of-danger-drone-incidents-scare-europe-amid-russia-ukraine-war

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