Red Cat (NASDAQ:RCAT) Issues Quarterly Earnings Results

Key Points

• Red Cat missed quarterly earnings expectations: The company reported an adjusted loss of $0.26 per share versus the consensus estimate of a $0.21 loss, while negative net margin and return on equity persisted.
• Revenue and gross margins improved significantly: Second-quarter revenue increased 520% year over year to $20.2 million, and gross margin rose to 16.1%. Management maintained its $150 million–$180 million 2026 revenue target, citing defense demand and an anticipated second-half shipment ramp.
• Losses and execution risks remain: Operating expenses reached approximately $41.9 million, and the company continues to operate at a loss despite positive gross profit. Management is targeting roughly 30% gross margins and division-level profitability by late 2026, but contract awards and delivery timing remain uncertain.

Red Cat (NASDAQ:RCAT - Get Free Report) released its earnings results on Thursday. The company reported ($0.26) earnings per share (EPS) for the quarter, missing analysts' consensus estimates of ($0.21) by ($0.05), Zacks reports. Red Cat had a negative return on equity of 35.86% and a negative net margin of 138.36%.

Here are the key takeaways from Red Cat's conference call:

• Record revenue and improving margins: Q2 revenue rose 520% year over year to $20.2 million, while gross margin improved to 16.1% from 11.6% a year ago and 12.7% in Q1. Management attributed the gains to higher production volumes, overhead absorption, and manufacturing efficiencies.
• Management maintained its $150 million–$180 million 2026 revenue target and expressed confidence in a substantial second-half ramp, citing approximately $50 million–$80 million of potentially shippable drone inventory, expanding defense demand, and expected contract activity in August and September.
• Red Cat reported increasing customer diversification: Army revenue represented roughly 50% of first-half sales versus 73% in 2025, while Japan and NSPA Europe became important customers. The company also cited international activity across Japan, Korea, Taiwan, the Middle East, and Ukraine.
• Product and manufacturing expansion continued: production capacity reached approximately 270,000 square feet, Blue Ops moved its Variant 7 maritime platform into mass production, and the company advanced Black Widow, Hellcat, APM swarm autonomy, and Quaze wireless charging technologies.
• Operating expenses increased to approximately $41.9 million, including $14.2 million of R&D spending, and the company continued to operate at a loss despite positive gross profit. Management is targeting approximately 30% gross margin and division-level profitability by late 2026, but acknowledged that contract awards and delivery timing remain uncertain.

Red Cat Trading Up 0.1%

NASDAQ RCAT traded up $0.01 on Thursday, reaching $8.67. The company's stock had a trading volume of 9,886,140 shares, compared to its average volume of 7,752,057. The firm has a market cap of $1.06 billion, a PE ratio of -12.39 and a beta of 1.31. The business has a 50-day moving average price of $9.99 and a 200 day moving average price of $11.85. Red Cat has a 52 week low of $5.77 and a 52 week high of $18.78.

Insider Buying and Selling

In other Red Cat news, Director Paul Funk II sold 165,028 shares of Red Cat stock in a transaction on Thursday, June 11th. The stock was sold at an average price of $11.50, for a total transaction of $1,897,822.00. The sale was disclosed in a legal filing with the Securities & Exchange Commission, which is available through this hyperlink. 12.50% of the stock is currently owned by corporate insiders.

Institutional Trading of Red Cat

A number of hedge funds and other institutional investors have recently made changes to their positions in RCAT. Advisory Services Network LLC increased its stake in Red Cat by 5.3% in the 3rd quarter. Advisory Services Network LLC now owns 30,200 shares of the company's stock valued at $313,000 after buying an additional 1,507 shares during the last quarter. IFP Advisors Inc boosted its stake in shares of Red Cat by 181.1% during the 3rd quarter. IFP Advisors Inc now owns 2,670 shares of the company's stock worth $28,000 after acquiring an additional 1,720 shares during the period. Russell Investments Group Ltd. boosted its holdings in shares of Red Cat by 35.3% during the 4th quarter. Russell Investments Group Ltd. now owns 9,936 shares of the company's stock worth $79,000 after buying an additional 2,591 shares during the period. Bank of Montreal Can boosted its holdings in shares of Red Cat by 21.5% during the 4th quarter. Bank of Montreal Can now owns 15,008 shares of the company's stock worth $119,000 after buying an additional 2,656 shares during the period. Finally, Bank of America Corp DE grew its stake in Red Cat by 407.0% in the 4th quarter. Bank of America Corp DE now owns 3,397 shares of the company's stock valued at $44,000 after buying an additional 2,727 shares during the last quarter. 37.97% of the stock is currently owned by institutional investors and hedge funds.

Wall Street Analyst Weigh In

A number of equities analysts recently commented on RCAT shares. Weiss Ratings restated a "sell (d-)" rating on shares of Red Cat in a report on Friday, July 17th. HC Wainwright began coverage on shares of Red Cat in a research report on Wednesday, May 27th. They issued a "buy" rating and a $20.00 target price for the company. Clear Str upgraded shares of Red Cat to a "strong-buy" rating in a research note on Wednesday, April 29th. Wall Street Zen downgraded shares of Red Cat from a "sell" rating to a "strong sell" rating in a report on Saturday, July 18th. Finally, Roth Capital started coverage on shares of Red Cat in a report on Monday, June 1st. They issued a "buy" rating and a $25.00 price objective for the company. Two equities research analysts have rated the stock with a Strong Buy rating, four have given a Buy rating and one has given a Sell rating to the company. According to MarketBeat.com, the company presently has an average rating of "Buy" and an average price target of $21.40.

Red Cat Company Profile

Red Cat Holdings, Inc NASDAQ: RCAT is a technology holding company that develops and delivers advanced robotics, autonomy, and sensing solutions for defense, national security, public safety and commercial customers. Headquartered in American Fork, Utah, the company brings together a portfolio of specialized operating businesses focused on unmanned aerial systems (UAS), mission management software, precision mapping sensors and engineering services.

Through its UAS segment, Red Cat designs and manufactures small to medium-sized fixed-wing and vertical-takeoff drones that support intelligence, surveillance and reconnaissance (ISR) missions.

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