During the August 2026 military exercises in Germany, US troops used drones from Neros Technologies. Last month, the Pentagon appeared somewhat resigned, as most drone startups competing for a $300 million contract failed to meet a strict requirement: no drone could contain Chinese-made parts or materials. Despite the competition already underway, defense officials added an unannounced participant to the fray: Perennial Autonomy, a low-profile drone startup founded by former Google CEO Eric Schmidt.

This decision proved prescient. The Pentagon announced last week that the Menlo Park, California-based company was one of the primary winners in this contest, which included 19 participants. The nine startups that made the final cut will split Defense Department orders totaling 60,000 drones, with an average unit price of $5,000.

Some of these companies are not new to government contracts. In May of this year, Perennial Autonomy had already secured a $500 million deal from the Pentagon. Additionally, another winner in this competition, Neros Technologies, received an order from the US Army in July for 10,000 drones at $2,000 apiece.

This competition marks the latest phase of the Pentagon's "Drone Dominance" initiative. Through this program, the US government aims to develop battery-powered combat drones suited for next-generation warfare while establishing a domestic supply chain where all components are manufactured locally. Contestants had to prove their products could withstand jamming and other electronic attacks in combat zones, while also demonstrating the ability to mass-produce drones at low cost and scale.

Perennial Autonomy and Neros stood out on both fronts. Neros, headquartered in Torrance, California, out-produced all other rivals during the contest. Perennial Autonomy, meanwhile, manufactures its drones in Germany.

The origins of Perennial Autonomy trace back to 2023, one year after Russia's invasion of Ukraine, when Schmidt visited the country. He recognized that drones were among the most urgent equipment needs for Ukraine's defense and articulated this view in articles published in The Wall Street Journal and Foreign Affairs. The former Google CEO recruited a team of engineers from Apple, SpaceX, and Google, including Damon Vander Linde, a former Google executive who accompanied Schmidt on the 2023 Ukraine trip; Mark Stonich, who participated in that same visit and previously served as Google's vice president of global sourcing, now vice president of operations and supply chain at Perennial Autonomy; and Hendrik Dahlkamp, a former AI researcher at Apple, among other senior leaders.

Since its founding, Perennial Autonomy has achieved mass production of two drone models: the "Hornet," a medium-range loitering munition, and the "Merops," an interceptor drone designed to counter the Iranian-made "Shahed" drones that Russia has deployed extensively on Ukrainian battlefields. The competition featured two categories, and Perennial Autonomy secured first place in the Deep Strike category, which required drones to fly roughly nine miles before hitting targets, with some tests conducted at night and navigation signals jammed during flight.

Neros, co-founded three years ago by two former drone racing pilots with the initial goal of building drones for Ukraine, was the only entrant to place in both categories. It took first in the Close Quarters Battle category, which required drones to operate in enclosed spaces like buildings where GPS signals may fail, and ranked third in the Deep Strike category.

Perennial Autonomy declined to comment; Neros did not respond to email inquiries.

The Trump family is also deeply involved in the Drone Dominance competition. Donald Trump Jr., the current president's eldest son, is an investor in Unusual Machines, a prominent drone parts and battery manufacturer based in Torrance, California. According to investment bank Needham, four of the nine winning companies source components from Unusual Machines, including Perennial Autonomy and Neros.

As a core component supplier, Unusual Machines has attracted significant capital market interest. Its stock has risen 71% this year, spiking 5% following the announcement of the competition results before pulling back. In May, reports that the Pentagon was considering an equity stake in the company sent shares soaring. Those reports also mentioned the possibility of a Pentagon investment in Neros, but the US government ultimately did not make equity investments in either company.

The Israeli drone firm Xtend AI Robotics, another competitor in the contest, is also a Unusual Machines customer, with investments from both the company and Eric Trump, the president's second son. Xtend AI Robotics finished third in the Close Quarters Battle category.

Unusual Machines continues to expand its drone component product line. In May, it acquired Upgrade Energy, a drone battery supplier, for $52 million. Upgrade Energy sources battery cells from manufacturers such as Taiwan's Molicel and California's Amprius, then repackages them into rugged battery packs designed to withstand flight impacts in combat. The Molicel P50B cells used in aviation applications incorporate silicon-based anode material produced by Group14 Technologies, a Washington state startup.

While the electric vehicle market has cooled and left the broader battery industry in a downturn, the drone boom is injecting new vitality into battery makers. Alex Kosyakov, CEO of lithium-metal battery firm Natrion, said he hopes his batteries can enter the next phase of the Drone Dominance program, noting that military requirements demand batteries be packaged into high-strength packs. During drone flight, he explained, the batteries "must endure enormous G-forces."

Drone startups purchase batteries from multiple suppliers but typically keep the actual installed battery models confidential due to concerns about competitors gaining a technological edge. Several battery company CEOs noted that, at this stage, many drone manufacturers do not even inform their battery suppliers which specific model is being used. When asked whether Group14 batteries are currently deployed in the winning drones, CEO Rick Luebbe replied: "Possibly."