Red Cat NASDAQ: RCAT reported record fiscal first-quarter 2026 revenue and outlined a sharply expanded opportunity pipeline tied to U.S. and allied demand for unmanned aerial and surface systems, according to management on the company’s earnings call.
Chief Executive Jeffrey Thompson said the company generated quarterly revenue of $15.5 million, up 849% from the same period last year, despite the impact of a federal government shutdown late last year. CFO Christian Morrison said the increase was primarily driven by continued drone deliveries under the U.S. Army Short-Range Reconnaissance program, deliveries of Black Widow drones to a European NATO ally and deliveries of FlightWave Edge 130 drones.
Management framed the quarter against what it described as a major increase in defense funding for drones, counter-drone systems and unmanned surface vessels. Thompson said recent Department of Defense funding developments and fiscal 2027 budget plans create “great tailwinds” for the company, particularly for U.S.-made unmanned systems.
Revenue Jumps as Margins Turn Positive
Morrison said first-quarter revenue rose to $15.5 million from $1.6 million in the prior-year period. Gross margin improved to 12.7%, compared with a negative gross margin in the first quarter of 2025. He said the improvement reflected manufacturing efficiencies, better cost management and the operational leverage of higher production volumes.
Operating expenses increased to $29.3 million, reflecting investments in personnel and infrastructure to support expected growth. Research and development expenses rose to $8.0 million as the company continued investing in next-generation platforms. Capital expenditures totaled $6.8 million, primarily for manufacturing equipment and facility improvements at the Blue Ops unmanned surface vessel division in Georgia, as well as other companywide infrastructure.
Red Cat ended the quarter with $131.9 million in cash and net working capital of $190.6 million. Morrison said inventory and prepaid inventory totaled $62.7 million, which he described as a strategic build to secure critical components and support accelerated delivery requirements.
The company said its short- to medium-term annual revenue target is $150 million to $180 million. Morrison said Red Cat expects gross margins to approach 30% as revenue scales. In response to an analyst question, Thompson said management is “very comfortable” with that target, citing a large opportunity pipeline for the Teal Black Widow platform.
Black Widow Pipeline Includes Army, Allies and Ukraine
Thompson said the Black Widow drone is currently operating in three theaters and has attracted interest because of what he described as combat-proven performance. He cited electronic warfare performance, GPS-denied capabilities, flight time of more than 52 minutes and a range of more than 10 kilometers.
Management said the Black Widow pipeline includes the U.S. Army, Marines, Air Force, Drone Dominance initiatives, Ukraine, Japan, the Philippines and Taiwan. Thompson said Red Cat currently has the supply chain and inventory to build $220 million worth of Black Widows and could increase capacity if needed.
Thompson also said the Ukraine opportunity could involve more than 100,000 Black Widows, though he noted management is being cautious about including Ukraine fully in its opportunity pipeline until upcoming in-theater testing is completed. COO Christian Ericson said Black Widow units integrated with SignLink, Ukraine’s satellite-free positioning network for GPS-denied environments, are expected to be delivered to Ukraine at the beginning of June for validation testing.
Ericson also said the Black Widow became the first Group 1 UAS device to successfully integrate with Anduril’s Lattice platform. During the Q&A session, Thompson said he believes Lattice integration is becoming important for Army work, paraphrasing a message he said the company received that systems not integrated into Lattice could face challenges working with the Army.
Drone Dominance and Sensor-Shooter Demand
Thompson discussed Red Cat’s preparations for Gauntlet II in August and its work with the Drone Dominance Program. He said first-person-view drones, or “shooters,” require intelligence, surveillance and reconnaissance drones to identify targets and complete what he called the sensor-shooter kill chain.
He said Red Cat is integrating Black Widow targeting into its FANG platform and other FPV partners. Thompson estimated that a program involving 350,000 FPV drones could require 10,000 to 17,000 ISR drones such as Black Widow, depending on the sensor-to-shooter ratio.
In response to an analyst question, Thompson explained that in Ukraine, ISR drones are often used to locate targets and direct FPV drones toward them. He said Red Cat is working to integrate that targeting electronically for Drone Dominance applications.
Blue Ops USV Factory Begins Production
Thompson said the company’s Valdosta, Georgia, factory for unmanned surface vessels is operational and has begun 3D printing 5-meter boats. He said Red Cat expects approximately 145 fiberglass hulls and about 100 3D-printed boats this year, representing what he described as potential USV sales of about $150 million if sold.
In the Q&A session, Thompson provided additional detail, saying the 3D-printed boats could represent about $40 million in sales and the fiberglass boats about $90 million if all are sold this year. He said the company is constrained by molds and tooling for boat production but expects to expand production capacity over time.
Thompson said the Variant 7 USV has received attention, including because of a machine-gun payload made by partner ACS. He said the company’s team was in the Arabian Peninsula by invitation and that Red Cat had also been invited to INDOPACOM. The company also plans to participate in an RFP for 1,300 USVs in Taiwan, which Thompson said is expected to be awarded in the first quarter of next year.
Asked about the longer-term USV opportunity, Thompson said Blue Ops could potentially surpass Red Cat’s UAV business next year, while emphasizing that the market is still developing and that demand is coming from both the U.S. and allies.
FlightWave, Swarming and Acquisitions
Thompson said Red Cat expects to deliver initial demo TRICHON drones in the coming weeks and is targeting about $40 million in FlightWave production in the second half of 2026. He said the company is updating the market on FlightWave in coming months and believes the platform could be competitive in future programs.
Ericson highlighted Red Cat’s acquisition of Apium Swarm Robotics, saying the technology enables multiple drones to operate autonomously as a unified system for coordinated surveillance, area coverage and synchronized data collection. Thompson said revenue from Apium and the pending Quais Technologies acquisition is not included in the company’s target revenue.
Management said operating expenses are expected to rise in the second half of the year. Morrison told analysts that quarterly operating expenses could increase by about 15% to 20% in the back half of 2026 as the company continues scaling.
Thompson closed the call by thanking employees across Red Cat’s factories and said the company is receiving field feedback from teams working with warfighters in multiple theaters. “The factory is the weapon,” he said.
About Red Cat NASDAQ: RCAT
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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