The global drone market is ablaze in 2026, with the market expected to crest $123 billion by 2034, according to Insight Partners. That’s up from $40.2 billion at the end of 2025, representing a compound annual growth rate of 13.2% over a nine-year period.
Benchmark exchange-traded funds, or ETFs, are picking up steam in response. The Rex Drone ETF (ticker: DRNZ), which holds drone-industry mainstays such as AeroVironment Inc. (AVAV) and Red Cat Holdings Inc. (RCAT), is up 16.6% by net asset value in 2026.
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Meanwhile, the AdvisorShares Drone Technology ETF (UAV), one of the largest dedicated U.S. drone ETFs and the best-known pure-play drone fund, is up 15.5% this year as of June 8.
Catalysts for Drone Stock Growth
So what’s driving drone industry growth in 2026? Market experts point to war and peace.
“The drone sector in 2026 should not be analyzed only through companies that build battlefield drones,” says Ilya Margolin, a Russia-based economist and IPO and capital markets analyst. “The more durable investment theme is the infrastructure around unmanned systems: autonomous aircraft, sensors, imaging, edge AI, geospatial software, communications and airspace-security technology. That is where investors can get exposure to the drone cycle without depending entirely on one weapons program or one conflict.”
The ongoing military fracas in the Middle East has particularly boosted demand for airspace awareness and critical infrastructure protection. “Every drone threat creates spending on detection, tracking, electronic monitoring, sensor networks and command systems,” Margolin notes. “That demand is broader than the military battlefield. It includes airports, ports, energy facilities, border security, public safety and industrial sites.”
A Shift Toward Drones in Warfare
Drones have also become the cheapest way to destroy the adversary’s most expensive things, and that’s a big deal in the military and defense realm. “Since late February, Iran has launched thousands of drones at U.S. bases and Gulf allies across the region,” says Tobias Robinson, an analyst at BrokerListings.com. “Last week the U.S. shot down Iranian missiles and drones aimed at the Strait of Hormuz and Gulf allies. Cheap drones also force the development of expensive interceptors, so governments buy both the drones and the systems that shoot them down.”
While Iran and current global conflicts are a big factor in the drone industry’s growth, the bigger force is policy. “In December the U.S. government added China’s Da-Jiang Innovations and Autel to its Covered List,” Robinson says. “This shut off new Chinese drone models from being imported into the U.S. and aims to restrict the market to domestic builders.”
Now the hard part is building drones at scale, “when you’ve traditionally relied on a now walled-off adversary to make the parts,” Robinson says.
Which drone stocks will benefit from the industry’s continuing ascent? These drone companies are a good place to start:
| DRONE STOCKS | MARKET CAPITALIZATION* | PRICE-TO-BOOK (P/B) RATIO* | QUICK RATIO** |
| AeroVironment Inc. (AVAV) | $9.2 billion | 2.2 | 4.5 |
| Ondas Inc. (ONDS) | $5.1 billion | 4.4 | 10.6 |
| Kratos Defense & Security Solutions Inc. (KTOS) | $10.9 billion | 3.2 | 5.1 |
| Rocket Lab Corp. (RKLB) | $65.7 billion | 28.8 | 4.0 |
| Red Cat Holdings Inc. (RCAT) | $1.8 billion | 6.1 | 8.3 |
| Unusual Machines Inc. (UMAC) | $1.2 billion | 3.6 | 117.1 |
| Swarmer Inc. (SWMR) | $716 million | 30.4 | 18.0 |
*As of June 9.
**A measure of a company’s short-term liquidity and ability to pay debts to creditors (greater than 1 is ideal).
AeroVironment Inc. (AVAV)
AVAV is looking to right the ship after a meandering first five months of 2026. The drone manufacturer rang the revenue bell recently with a $117 million U.S. Army contract to provide 82 P550 unmanned aircraft systems, bolstering its already robust position as one of the Pentagon’s leading drone suppliers.
The Army deal also adds to an impressive backlog of military orders tied to AVAV’s autonomous systems and battlefield drones, leading the company to steer serious cash into expansion and potentially lucrative partnerships. It has $1.1 billion worth of orders on tap in early 2026, compared to $726.6 million in late April 2025.
AeroVironment also just announced a $15 million production capacity expansion near Dayton, Ohio, that should boost the company’s output of drones, loitering munitions and other defense technologies.
Market analysts have revised their ratings on AVAV shares, with a consensus “strong buy” call and a $301 price target. That indicates a 63% rise from its $184.68 closing price on June 8.
Ondas Inc. (ONDS)
Ondas’ shares continue to inch upward in the past month, largely on bullish sentiment over revenue growth and demand for the company’s autonomous drone solutions. Revenues surged 605% in full-year 2025, at the high end of guidance. Backlog also picked up in the latest quarter, with debt reduction further polishing Ondas’ quarterly results.
At the end of last year, company CEO Eric Brock said Ondas’ strong numbers were validation that it is doing what company leaders said it would do. “Starting with 2025, we delivered strong performance across both our core business and our strategic initiatives,” Brock said. “We generated over $50 million in revenue, well ahead of our earlier targets, and exited the year with a significantly expanded backlog, reflecting growing customer demand and market adoption. At the same time, we are raising our 2026 revenue outlook to at least $375 million, representing a substantial step-up from prior expectations.”
As a result, industry analysts are climbing on the ONDS bandwagon, and maybe investors should, too. A consensus call from seven Wall Street technology analysts pegged a price target of $20 per share, nearly double the June 8 closing price of $10.30.
Kratos Defense & Security Solutions Inc. (KTOS)
Kratos, a relatively recent addition to the S&P SmallCap 600 Index, has suffered the same fate as its drone-industry peers, with its share price down 24% year to date. Yet, Kratos actually has a lot going for it. The San Diego-based company provides mission-critical products, services and solutions for U.S. national security priorities and is the top provider of unmanned aerial target drone systems to the U.S. Air Force, Navy, Army and key U.S. defense partners. That’s a big deal, considering the U.S. Department of Defense plans to spend a big chunk of its 2026 funding on areas where Kratos excels in the unmanned aircraft systems market.
The company also reported a $2 billion order backlog, which should provide plenty of cash flow for the rest of 2026. A cornerstone is Kratos’ $447 million deal with the U.S. Space Force to design, integrate and operate the ground management architecture for its Resilient Missile Warning and Tracking (MWT) program in Medium Earth Orbit.
Wall Street analysts are on board with a Kratos turnaround story, setting a $103 consensus price target, indicating about a 77.5% gain in the next year.
Rocket Lab Corp. (RKLB)
Long Beach, California-based Rocket Lab has taken a step back over the past month, with its share price down 3%. Its investors are barely breaking a sweat, though, as the stock remains up 63% year to date and 319% over the past full year. Concerns arose among shareholders after four key C-suite leaders sold over $18 million in company shares, all on May 28, just after SpaceX announced its high-profile plan to take the company public at a sky-high $1.75 trillion valuation.
Analysts have noted that Rocket Lab is one of the few legitimate alternatives to SpaceX in launch systems, particularly in terms of affordability, in the AI data center and telecom markets, where business is brisk in 2026. Rocket Lab’s stock skyrocketed 34% within 24 hours of the SpaceX report.
After the SpaceX IPO happens, as soon as this week, many investors may mull over alternative exposure to the commercial space industry as SpaceX shares get more expensive or difficult to accumulate. That’s where Rocket Lab could step in, as a true “space economy” pure play. Rocket Lab offers many of the same services as SpaceX, including launch services, satellites, space systems, defense-related space contracts and emerging deep-space missions.
In that scenario, where trillions of dollars should eventually be in play, Rocket Lab already serves as a “mini-SpaceX” proxy. Stifel Nicolaus analyst Erik Rasmussen seems to think so, holding his “buy” rating on RKLB with a $132 price target in early June. Shares closed at $113.65 on June 8.
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Red Cat Holdings Inc. (RCAT)
This San Juan, Puerto Rico-based drone services company has been trading erratically of late. What’s the story with Red Cat? For starters, there’s no large-scale, specific downbeat news to report, like poor earnings or a dearth of contracts — none of that applies here, save for a pause in the U.S.-Iran conflict, as the operation relied heavily on one-way unmanned attack drones to take out Iran’s nuclear arsenal, with Red Cat playing a role. Company executives have offloaded a large amount of shares over the past year, however, which could have stirred concerns among investors.
The company’s financials are holding up well in mid-2026. Red Cat recently reported first-quarter 2026 revenue growth of 849% year over year, reaching approximately $15.5 million. Gross margins also turned positive after being deeply negative a year earlier. Those are the figures growth-minded investors typically look for in emerging defense technology companies.
Following impressive Q1 results, Red Cat’s management has also outlined a path toward annual revenue of $150 million to $180 million while targeting roughly 30% gross margins as production rises, giving RCAT another bullish sheen. The company also made news recently with its new deal with AI drone software firm Safe Pro Group to add AI threat-detection capabilities to Red Cat’s drones, with formal testing set for this summer.
On May 20, the company announced an all-stock acquisition of Quaze Technologies for $21 million. Quaze is expected to supply Red Cat with a platform-agnostic wireless power system to fuel its drones, giving RCAT a big boost in the rising global autonomous systems market.
Analysts have pegged Red Cat as a “buy” with a $22 price target, implying a 76.6% upside from its June 8 closing price of $12.46.
Unusual Machines Inc. (UMAC)
This Orlando, Florida-based drone solutions company with a focus on first-person view (FPV) technology made big news in late May after media reports that the Trump administration included it in a list of drone companies in line to be funded by the U.S. government. Donald Trump Jr. is on the company’s advisory board.
Unusual Machines, which specializes in flight controllers and FPV video goggles and is expanding into battery and motor production for drones, should be a big beneficiary of Uncle Sam’s largesse, as the company is in line with federal drone-parts certification requirements.
The Pentagon funding news was enough to boost UMAC stock over 80% for the past month, although the company’s share price slid by 5% in a wild ride over the past week as shareholders indulged in some profit-taking. Analysts have thrown their weight behind the stock, with Roth Capital’s Craig Irwin reinforcing his “buy” call with a $40 price target (shares just closed at $25.85 on June 8).
Swarmer Inc. (SWMR)
Swarmer, which went public on March 17, is trading around $59 per share, up 118% over the past month. That’s no mean feat considering the company’s share price declined by 25% from April to May, following an upbeat IPO that saw SWMR shares rise from $5 to $31 on day one.
Now the company has found its form, as Swarmer has a $33 million backlog and targets $20 million in 2026 revenue. It just announced that its subsidiary, Swarmer Estonia OÜ, has inked a contract with Meta Bureau valued at $2.9 million. The deal calls for over 16,000 software licenses intended for use on the latter’s SkyKnight quadcopter bombers and other unmanned aerial vehicles, and it should provide a young company some much-needed ballast in the drone defense sector.
Are Drone Stocks Being Overlooked Right Now?
It’s difficult to argue that drone stocks are being ignored by investors lately, now that military drones are among the most widely deployed real-world applications of AI. Yet, like many emerging, but relatively young technologies, the drone industry needs time to grow.
“It’s hard to say whether drone stocks are being overlooked,” Robinson says. “The total market cap of the sector, in terms of pure-play names, is around $25 billion. Some investors might look at that figure and think, similar to the $100 billion value attached to quantum computing, that the $25 billion figure is high relative to current cash flow since these companies mostly lose money, but not that high relative to future potential.”
Semiconductors have offered about a 20x return over the past 10 years, so there’s always the asymmetric appeal of a rising technology like drones. “Of course, there are also many badly underperforming tech bets over that time … such as 3D printing, solar, fuel-cell/hydrogen, SPAC EV companies and metaverse/VR,” Robinson says.
In the end, for artificial intelligence to have impact in the physical world and not just code, text, images and other media, it’ll need a body, and “a drone is one expression of that,” Robinson says.
Investors may also look at drone stocks as exciting but uneven. “Many sector companies are smaller, less mature, highly volatile and exposed to lumpy government contracts, regulatory delays, supply-chain constraints and rapid technology change,” says Bill Birmingham, managing director at Rex Shares, a technology trading tools company. “That is exactly why we think the category is better approached through a diversified thematic (fund) basket rather than trying to pick a single winner.”
Are drone companies overlooked in the AI frenzy? In some ways, yes, Birmingham notes. “Investors have focused heavily on AI data centers and mega-cap tech, but drones could also be called a form of physical AI: autonomy, sensors, edge computing, robotics and real-world data collection. This is a highly Darwinian environment where many business models are being tested both in terms of their ability to maintain their technological or strategic advantage, but also in their ability to execute on backlogs.”
It’s also one thing to win at the demo level, but quite another to deliver 50,000 or 100,000 defect-free units on time and on budget. “That said, there are some amazing technologies being developed in this race, which investors should be looking at more closely,” Birmingham says. “Drones are a global business, and the U.S. is just entering the race in a meaningful way. We are still very early in this theme.”
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7 Best Drone Stocks for 2026 originally appeared on usnews.com
Update 06/09/26: This story was published at an earlier date and has been updated with new information.
