Investors have been chasing artificial intelligence and electric vehicles, but drone technologies have been advancing more quietly. Applications for drones include AI-powered navigation, defense contracts, emergency response technologies and logistics automation, among others.
According to a 2025 report from brokerage Raymond James, a Trump administration initiative has placed new emphasis on integrating unmanned aircraft systems into the Federal Aviation Administration’s National Airspace System dashboard, with related funding expected to increase.
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Military usage is also on the upswing.
“Roughly every 20 years, new technologies arise that change the nature of warfare. Drones are the latest innovation, and the war between Russia and Ukraine is the laboratory highlighting their importance for future conflicts around the world,” says Scott Sacknoff, president and index manager at Spade Defense Index.
Spade is a Bethesda, Maryland, company that measures performance of companies involved in the development, manufacturing and operations of U.S. defense, security and aerospace industries. The Invesco Aerospace & Defense exchange-traded fund (PPA) tracks the Spade Defense Index.
Drone Companies Flying High
Sacknoff notes that large-cap firms such as Boeing Co. (BA), Lockheed Martin Corp. (LMT), Northrop Grumman Corp. (NOC) and L3Harris Technologies Inc. (LHX) have long been part of the Spade Defense Index.
He also points out that companies such as AeroVironment Inc. (AVAV) and Kratos have grown from small-cap to mid-cap status. Kratos has returned 175.9% year to date, while AeroVironment has returned 76.6%, despite both shedding more than 20% over the past month amid market turmoil.
“Two new recent additions to the Invesco defense ETF are involved with drones: Redwire Corp. (RDW), which acquired Edge Autonomy, and Airo Group Holdings Inc. (AIRO), which specializes in drones and avionics,” Sacknoff says.
Enterprise Skies Getting Crowded
Global market research firm Future Market Insights forecasts that enterprise drone management solutions will expand at a compound annual growth rate of 17.7% over the next decade, from $2.1 billion to $10.7 billion.
According to FMI researchers, “As drones are increasingly being used in industries, greater numbers also need to be integrated into sophisticated management solutions.”
Investors have other ways of accessing drone stocks in addition to PPA, the Invesco drone ETF. For example, the Defiance Drone & Modern Warfare ETF (JEDI) launched on Sept. 26. It’s still a very small exchange-traded fund, with just $24 million in assets under management, and has exhibited volatile trade since its debut. Top holdings include Rocket Lab Corp. (RKLB), Palantir Technologies Inc. (PLTR) and AeroVironment Inc. (AVAV).
For those interested in using single stocks, or who want to know how particular holdings can shape a fund’s performance, here are seven companies growing their operations in the drone space:
— Boeing Co. (BA)
— Lockheed Martin Corp. (LMT)
— Northrop Grumman Corp. (NOC)
— AeroVironment Inc. (AVAV)
— Joby Aviation Inc. (JOBY)
— Kratos Defense & Security Solutions Inc. (KTOS)
— L3Harris Technologies Inc. (LHX)
Boeing Co. (BA)
The aerospace giant dubs its strategy to develop an integrated network of autonomous and intelligent systems spanning the ocean floor to space’s orbit “from seabed to space.”
“It’s reasonable to assume that the company uses lessons learned in one domain and applies them to others,” says Micah Walter-Range, co-developer of the index behind the Procure Space ETF (UFO). He’s currently the founder of Space Investment Services and president of Caelus Partners in Raleigh, North Carolina.
“One of the most advanced autonomous vehicles in the world is the company’s X-37B, a spaceplane that flies classified missions for the Department of Defense and is the predecessor to some of the systems that will be developed for missile defense as part of Golden Dome,” he adds.
Boeing shares are up 14.4% year to date, but it’s been a turbulent ride in the past three months.
Analysts rate the stock a consensus “overweight” with a 12-month price target of $247.57, according to FactSet data. BA shares closed at $202.54 on Dec. 3.
Lockheed Martin Corp. (LMT)
Lockheed shares experienced a strong rally in early August, but they lag year to date, at a loss of 5.3%. “Sentiment around that stock just isn’t as high as it is for other peers, as many see little upside to 2025 expectations,” says David Wagner, head of equity and portfolio manager at Aptus Capital Advisors in Fairhope, Alabama.
But when Lockheed reported earnings on Oct. 21, it beat analyst expectations on both the top and bottom lines. And despite some challenges, Wagner sees positive trends for the company. He says its missile and fire control businesses are growing at a double-digit rate with a huge backlog.
“We see limitations to growth as simply about capacity,” he says. “Demand is extraordinarily high for all missile and missile defense products, coming from the U.S. budget, international budget and eventually the Golden Dome.”
Northrop Grumman Corp. (NOC)
This company’s shares have rallied 19.8% in 2025, though they shaved 4.4% in the past three months.
Walter-Range says Northrop Grumman’s MQ-4C Triton unmanned aircraft system (UAS) is capable of operating at altitudes above 50,000 feet, for more than 24 hours, with a range of 7,400 nautical miles.
He also notes that the company’s Global Hawk is one of the best-known such systems in the world, boasting more than 320,000 flight hours, including missions in support of military operations.
“Neither of these systems would be able to achieve those metrics without navigation and communication links provided via space,” he says. “Northrop Grumman will also likely benefit from its space experience when it comes to developing hypersonic drones and weapons.”
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AeroVironment Inc. (AVAV)
Analysts’ consensus rating on Arlington, Virginia-based AeroVironment is a “buy,” with an average 12-month price target of $400.27. AVAV shares closed at a price of $271.78 on Dec. 3.
“AVAV has dominated the small UAS contracts with the government,” Wagner says, adding that the company has provided the Pentagon with small UAS vehicles via several successful program contracts.
“The Raven is arguably the most successful small UAS of all time, having seen extensive use in Iraq and Afghanistan,” Wagner says. “Several government agencies use the Raven, and the Army is set to award a new multi-year contract for a family of small UAS systems, which most likely should continue to support a mix of the AVAV product base.”
Wagner adds that the company has benefited from the most recent increase in U.S. defense spending and aid to Ukraine.
“Recent acquisitions have pushed the company into the medium UAS (MUAS) market, and the recent acquisition of BlueHalo has expanded the combined company’s product portfolio and defense market exposure,” Wagner says.
Joby Aviation Inc. (JOBY)
For investors who want to add a riskier stock, Joby Aviation may fit the bill. With a market cap of $13.8 billion as of Dec. 3, this is on the lower end of the large-cap categorization.
However, much like smaller stocks, it tends to trade in a choppy fashion; its beta is 2.55, which means it’s 155% more volatile than the broader market’s own volatility.
The Santa Cruz, California, company develops all-electric vertical take-off and landing systems, designed for environments where a long runway isn’t practical. It markets its products as commercial air taxis.
Its aircraft have a target range of up to 100 miles using a single charge. It’s marketing its products for both military and enterprise use, and it is still a relatively new company, having gone public in November 2020.
Joby is still operating in the red, as it’s essentially pre-revenue, other than a small amount of money trickling in from performing customer-directed flights and on-base operations for various Defense Department agencies.
Joby recently closed an underwritten offering of 35.1 million new shares of common stock at $16.85 per share, bringing in about $591 million in proceeds. The company says it intends to use the money “to fund its certification and manufacturing efforts, prepare for commercial operations and for general working capital and other general corporate purposes.”
Kratos Defense & Security Solutions Inc. (KTOS)
Like many of its defense-industry peers, Kratos was on an uptrend until recent months. Still, it’s up 175.9% year to date as of Dec. 3. The stock has produced an astounding 10-year annualized return of 32.9%.
“KTOS is the leading manufacturer and the sole supplier of jet-powered, sub-scale target drones to all branches of the U.S. military,” Wagner says.
Company revenue has been growing in recent quarters. Its Unmanned Systems segment is the company’s largest line of business, with revenue surpassing its Government Solutions business.
“The DoD is investing heavily to remain on the cutting edge and sustain air dominance as combat mission sets evolve to utilize high technologies,” Wagner says, adding that Kratos is pursuing this potential market opportunity, vying to position itself as the industry leader in tactical combat drones.
L3Harris Technologies Inc. (LHX)
Revenue at this aerospace and defense contractor has been slowing; growth is down to the single digits after its double-digit expansion in 2024. L3Harris produces sensors and imaging systems for satellites and aerial platforms.
“The company has formed multiple partnerships with AI-centric tech firms, such as Shield AI, that increase the capabilities of autonomous systems and will likely fuse data inputs from air and space to create a comprehensive real-time picture of the battlefield,” Walter-Range says.
Earlier this year, the company rolled out software that lets one operator control thousands of unmanned vehicles, such as drones or robots, across air, sea or land. It’s designed to be effective even if the devices come from different manufacturers.
Analysts’ consensus rating on the stock is “overweight” with a price target of $336.21. LHX shares closed at $277.74 on Dec. 3.
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7 Drone Stocks to Buy for 2026 originally appeared on usnews.com
Update 12/04/25: This story was published at an earlier date and has been updated with new information.
