Autonomous defense technology is thriving, regardless of what the stock market implies.

On Monday, Red Cat announced plans to buy Steyr Motors for EUR39 ($43.73) per share. The deal values Steyr, which is expected to generate 2027 sales of roughly $100 million, at about $250 million. Red Cat's market value is about $720 million. It is expected to generate 2027 sales of about $215 million.

Red Cat makes drones and drone technology for military applications. Steyr makes engines for marine applications, among other products. Steyr would provide Red Cat with propulsion for its autonomous military applications.

Investors like the idea. Red Cat stock was up 4.24% in morning trading at $4.92, while S&P 500 futures were up 0.4%. Steyr stock was up more than 21% in overseas trading at EUR36.72 a share.

Coming into Monday trading, Red Cat stock was down about 40% year to date and off almost 60% since the Iran war started in late February. Defense tech valuation multiples have collapsed in the past few months for a few reasons, including higher interest rates, government deficits, and fears that U.S. military spending is peaking.

Red Cat isn't profitable yet and is trading at about 3.5 times expected sales over the coming 12 months. At the start of the year, shares fetched almost 15 times expected sales.

The valuation decline came despite rising sales estimates. Red Cat is expected to generate about $215 million in 2027 sales. At the start of 2026, that estimate was about $180 million.

Red Cat isn't using stock to fund the deal -- which might not be a good idea given the current share price. It plans to pay in cash. Red Cat ended the second quarter with more than $325 million on its balance sheet.