How is "Year of the Drone" Shaping Up for Investors?

28 July 2025

The Droning Company has published myriad articles this year about aerial combat and the emergence of cheap, consumer drones as viable warriors that can wreak havoc on larger foes. As the "Davids" of combat drones appear to be beating down the Goliaths, many countries have awakened to a new reality and are seeking sleeker, less expensive, and more strategic UAVs for their fleets.

The United State military has certainly opened its eyes.

President Trump is putting the Pentagon on notice to accelerate drone production, and Secretary of Defense Pete Hegseth is rallying to produce "small lethal drones that the modern battlefield requires." In fact, Hegseth proposes that "every squad in the U.S. Army be equipped with small, one-way attack [ ie.—kamikaze and/or FPV ] drones" by the end of the government's fiscal 2026 on September 30. That's about 14 months away.

BreakingDefense.com reported Hegseth is currently focusing on Group 1 and Group 2 drones that weigh approximately 55 pounds, and the Pentagon soon will be expecting bids from manufacturers that can build these drones for less than $2,000 each. The goal is to acquire 10,000 small drones over the next 12 months.

So, what does this mean for investors?

First, don't necessarily expect that the old guard will win these contracts.

Second, the U.S. purchase of 10,000 small drones could tap out at $20 million initially—not exactly the usual bountiful military contract. (Although, the U.S. Army may quickly discover it needs more than 10,000 drones to accomplish combat missions—a fact that would expand purchases significantly.)

Obviously, "usual suspect" drone tech firms such as AeroVironment and Kratos Defense and Technology will be looking to jump into the payday—if they can produce and deliver precisely what the Army's new drone strategy requires, and at the right price.

But while AeroVironment enjoyed a 50 percent stock surge since June 2025, the company's FPV drone, the Switchblade, can reportedly cost between $50,000 to $170,000 each.

It's even worse over at Kratos, as its XQ-58A Valkyrie drones can cost more than $4 million apiece.

Even up-and-coming drone companies, such as Palantir, which offers its Red Cat's Edge 130 drone at $43,000, are proposing cost factors in excess of what the Army appears to want to pay—especially as the brief is for small, expendable drones.

Is the smart money, so to speak, on companies like AeroVironment and Kratos?

It seems those manufacturers are already far behind the race to produce the type of drones Hegseth wants.

As a result, it appears to be anyone's game as to who the U.S. Army will rely upon to make its reliable and inexpensive FPV drone force.

Rather than reviewing historical contract awards, investors should probably look at drone companies who are already close to delivering what the U.S. Army is asking for.