Drone Stocks Soar As Pentagon Considers Funding, Including a Trump-Linked Name

Key Points

• A Wall Street Journal report on the Pentagon's $1.1 billion Drone Dominance program sent drone-related stocks broadly higher across multiple sectors.
• Unusual Machines surged 57% after being named as a potential funding recipient, with shares up more than 100% year-to-date and 900% since its 2024 IPO.
• Kratos Defense and Axon Enterprise also gained 13.8% and 12.3%, respectively, reflecting investor interest in autonomous defense and counter-drone technologies.

Drone stocks just caught a bid after investors reacted to a Wall Street Journal report that the Trump administration is in talks to fund multiple U.S. drone companies tied to the Pentagon’s “Drone Dominance” initiative.

The report tied those talks to the Pentagon’s $1.1 billion Drone Dominance program, which is designed to accelerate the fielding of low-cost, one-way attack drones. Official program materials describe a goal of fielding hundreds of thousands of weaponized drones by 2027, while the Journal reported a 300,000-drone target.

The news sent many drone stocks flying higher as the government signaled demand for drones and a potential willingness to help finance the projects. Unusual Machines (NYSE AMERICAN: UMAC) was the only publicly traded company directly named in the report, but the rally quickly spread to other drone-adjacent stocks. Companies with exposure to drone components, autonomous defense systems, and counter-drone technology also moved higher, like Kratos Defense & Security Solutions NASDAQ: KTOS and Axon Enterprise NASDAQ: AXON.

Unusual Machines: Trump-Linked Component Maker Pops More Than 50%

Unusual Machines stock surged by a whopping 57% in one day after being identified as one of the companies under consideration for the potential funding.

Notably, President Trump’s son, Donald Trump Jr., is a member of Unusual Machine's board of advisors and a shareholder in the small drone component manufacturer. In 2024, shares soared more than 80% the two days following the company's announcement of Donald Trump Jr.’s involvement.

Overall, Unusual Machines shares are now up more than 900% since going public in 2024 and up more than 100% year-to-date (YTD).

Unusual Machines' Q1 2026 earnings report was mixed. Sales of $8.1 million were drastically higher than the $5.5 million analysts expected, resulting in revenue growth of 296% year-over-year (YOY) and the firm’s eighth quarter in a row of record sales. However, the company missed on adjusted earnings per share (EPS) by a wide margin. Its EPS of 21 cents was 15 cents below the analyst estimate.

The company had over $220 million in cash on hand at the end of the first quarter, giving it ample financing runway considering its cash burn of $38 million over the last 12 months. However, an injection of government capital could allow the firm to scale its operations significantly faster.

The analyst consensus price target of $22.33 implies a drop of more than 20%. However, analysts may raise their targets following the company's inclusion in the report. At the same time, it's possible analysts will wait for more information on potential government funding before altering their targets.

Kratos: Autonomous Fighter Jet's Stock Spikes

Kratos was not named in the report, but it saw a clear sympathy move, gaining 13.8% as investors looked for broader exposure to the unmanned aerial systems market.

Kratos is not known for traditional “small” drones. bit for developing autonomous fighter jets, including its Valkyrie and Mako systems. Target drones are also a significant part of their business, which customers use to learn how to fight against autonomous targets.

Kratos took the stock market by storm in 2025, rising by 187%. This made Kratos one of the best-performing defense stocks of the year, eclipsing the 174% return of Rocket Lab NASDAQ: RKLB.

However, Kratos shares have come way down in 2026, dropping approximately 50% from its all-time high.

Much of the drop appears tied to the stock getting ahead of itself rather than a clear deterioration in the business. Kratos has handily beaten estimates in its last three earnings reports, but the stock still dropped substantially after each report. Valuation was a major part of the pressure. In mid-January, shares traded at a forward price-to-earnings (P/E) ratio near 183x—a level that is difficult for most stocks to maintain.

While Kratos’s main focus is not on the small units the Drone Dominance initiative emphasizes, the report signals strong government interest in the overall UAS industry. In 2025, 68% of Kratos's revenue came from contracts for which the U.S. government was the final customer.

Axon: Gains 10% as Counter-Drone Demand Gets a Fresh Catalyst

Axon Enterprise NASDAQ: AXON—best known for its TASER devices, police body cameras, and key software products used by law enforcement—is consistently expanding its offerings, including drones. But it operates on the other side of the equation: providing counter-drones.

Axon was also not named in the report, but the stock rose 12.3% as investors looked beyond drone manufacturers to companies that could benefit from rising demand for drone detection and defense systems.

Axon acquired its Dedrone business in 2024 and saw massive growth from the product in its latest quarter. Counter-drone sales increased by approximately 300% YOY, while bookings rose even faster at 500% YOY. Notably, the Pentagon recently awarded a three-year contract with a $500 million ceiling to counter-drone company Perennial Autonomy, demonstrating interest in counter-drone systems.

Despite this surge, Axon Enterprise shares have faced significant pressure over the past 52 weeks, down over 45% from their high. Like Kratos, valuation was a concern, with Axon trading at a forward P/E ratio as high as 131x in 2025. The large sell-offs seen across the software industry due to fears of artificial intelligence disruption have also affected the stock.

This comes even though hardware continues to make up the majority of the company’s sales. Last quarter, hardware accounted for 56% of sales, up from 44% for software and services, and both segments posted very strong YOY growth of over 30%.