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THE DRONE AGE DAWNS WITH THE PENTAGON'S RISING INVESTMENT

The Pentagon's FY26 budget has unleashed a staggering $2.6 billion toward unmanned aerial systems (UAS) and counter-drone technology — a 78% increase that's reshaping the entire military landscape.

But in this high-stakes game of technological transformation, who emerges as the winner, and who risks being left in the dust?

"The revolution in unmanned & robotic warfare has happened," say analysts at TD Cowen.

"Lethal drones have become a fixture on modern battlefields in Ukraine and the Middle East." This isn't some distant future scenario — it's happening right now, and the Pentagon is paying attention.

Secretary of Defense Pete Hegseth summed it up during a recent Senate testimony: "Massed, affordable and attritable platforms with short lifespans are changing the character of war and transforming the way our forces must fight."

Small and Mid-Cap Champions

The real winners in this drone age aren't the traditional defense giants—they're the nimble, innovative companies that have been perfecting unmanned systems while others were building conventional platforms.

Companies like AeroVironment < AVAV.O>, Leidos LDOS.N, Teledyne TDY.N, and Textron TXT.N are positioned to capitalize on this massive investment surge.

The market is taking note. AeroVironment has gained around 85% so far this year. Teledyne and Leidos have both risen around 10%. Textron has added around 5%.

Meanwhile, the broader NYSE Arca Defense Index .DFII is up around 24% YTD.

Private market leaders, like General Atomics, continue its dominance, while emerging players like Anduril, Shield AI, AEVEX Aerospace, and UVision are turning heads with cutting-edge capabilities that embody what Hegseth called "fast-moving private sector innovation."

The Platform Problem, traditional defense contractors might be feeling the heat. When the Pentagon talks about "massed, affordable and attritable platforms," that's not exactly music to the ears of companies building $100 million fighter jets or billion-dollar naval vessels.

The stark math that's keeping executives awake at night: a $500 hobby drone can potentially neutralize a million-dollar tank.

"If the true promise of unmanned systems is realized," add analysts at TD Cowen, "it should impact the numbers and types of big platforms the U.S. Army, Navy and Air Force buy."

(Rashika Singh)

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