Unusual Machines NYSEAMERICAN: UMAC reported sharply higher first-quarter 2026 revenue and said it is continuing to expand capacity to meet demand from the U.S. drone market, particularly from defense-related customers.
Chief Executive Officer Allan Evans said the drone components company generated approximately $8.1 million in operating revenue in the quarter, up 296% from the first quarter of 2025 and 65% from the fourth quarter of 2025. He said the company also generated $10.3 million in net profit for the quarter, adding that Unusual Machines would still have been profitable excluding unrealized gains.
“The Q1 results just start to show the dramatic growth that we’re at the early stages of,” Evans said. “Every single business indicator that we’re seeing is pointing to growth.”
The company said first-quarter gross margin was 32.8%, down modestly from recent levels as Unusual Machines expanded its workforce and production shifts. Chief Financial Officer Brian Hoff said the revenue mix was approximately 90% enterprise and 10% retail, with “a healthy mix of customers and product and little significant concentration.”
Hiring and production expansion weigh on costs
Unusual Machines said headcount rose from 81 employees to 141 during the first quarter, and management said the company was nearing 200 employees at the time of the call. Hoff said the company added a third shift to its motor line and a second shift to its assembly line as it sought to increase manufacturing output.
Operating expenses increased to $9.9 million in the quarter. Hoff said those expenses reflected growth investments, including general and administrative infrastructure, headcount, systems and process build-out. He added that the figure included approximately $4 million of non-cash expenses and about $1.7 million of other non-recurring expenses.
Evans said the company’s operating activities were not yet independently profitable, describing an operating cash loss of about $1.5 million to $1.6 million after subtracting equity compensation. However, he said the business as a whole was profitable because of gains and other income.
Asked by ROTH Capital Partners analyst Craig Irwin about margins, Evans said first-quarter margins exceeded internal expectations, but he cautioned that margins could fluctuate as the company prioritizes capacity and customer needs.
“If we can even hold here, and we can hold our material margins where we sort of like them so that we know that we have the room to hit our gross margin targets in the long run, I would feel really good about it,” Evans said. He added that the company would accept some margin pressure if needed to ensure product quality.
Capital raise strengthens balance sheet
Management highlighted the company’s March public offering, in which Unusual Machines raised $150 million at $17 per share. Hoff said the offering netted about $139 million after expenses and left the company with approximately $223 million in cash.
Hoff said short-term investments stood at more than $60 million, while inventory, including raw materials, finished goods and deposits paid, totaled approximately $27.4 million. He said inventory is expected to continue increasing in the second and third quarters as the company purchases materials to meet demand and manage supply chain risks.
Total working capital was approximately $320 million, according to management. Evans said the company placed more than $75 million in raw material orders in April to support production of motors and other products.
Evans described capacity planning as a central focus for management. In response to Irwin, he said raw materials have the longest lead times, with first deliveries at least four months out and material completeness potentially taking about six months. Facilities and capital equipment may require three to four months, while hiring typically comes one to two months before production begins, he said.
Upgrade Energy deal expands battery strategy
Unusual Machines also discussed its agreement to purchase Upgrade Energy for approximately $52 million, structured as a mix of cash and stock, with half paid upfront and the balance tied to earnouts. Evans said the acquisition is intended to accelerate the company’s move into batteries and broaden its role in drone powertrains.
Evans said Upgrade Energy generated just over $6 million in unaudited revenue in 2025 from its former facility in El Segundo, California, and recently moved into an 18,000-square-foot facility in Torrance, California. He said the acquisition would give Unusual Machines ownership of the powertrain from batteries to motor controllers and motors.
In response to Needham & Company analyst Austin Bohlig, Evans said the acquisition should improve margins on batteries that Unusual Machines had previously distributed, targeting approximately 40% gross margin. He said combining the companies should also allow faster battery capacity growth because Unusual Machines has the balance sheet to support forward-looking inventory purchases.
Management points to defense and future delivery markets
Evans said demand remains “severely supply constrained” and that he expects demand to outstrip supply through 2026 and deep into 2027. He cited the “Department of War” as the primary driver of growth and referenced the Drone Dominance Gauntlet program, which he said remains on track and includes a commitment to buy 60,000 more drones in the second half of 2026.
Evans also pointed to proposed increases in defense-related budgets, including a proposed increase for the Defense Autonomous Warfare Group, or DAWG, which he described as a drone-focused procurement budget. He said counter-drone programs are also emerging as an addressable market, citing an initial order from Powerus, a company in which Unusual Machines has invested.
Beyond defense, Evans said the company is preparing for potential FAA rulemaking that could enable broader commercial drone delivery in 2027. He said the company expects a framework commonly referred to as Part 108 to open new activities such as drone delivery in the mid-to-late 2027 timeframe.
Evans said delivery drones could require far more batteries per aircraft than defense drones. He estimated delivery drones may need about 10 batteries per drone, with batteries lasting about 500 cycles, creating what he described as a recurring hardware opportunity.
Asked by JonesTrading analyst Josh Sullivan whether revenue should grow sequentially, Evans said the company has never had a quarter in which revenue went backward since going public and said he did not see a reason that would change, while acknowledging potential hiccups.
“The market’s growing,” Evans said. “With the way that I see demand, I think if we don’t see consistent growth ... it’s a pretty big fumble on our end if we don’t manage to achieve that.”
About Unusual Machines NYSEAMERICAN: UMAC
Unusual Machines, Inc designs, manufactures, and sells ultra-low latency video goggles for drone pilots. It operates a drone-focused e-commerce marketplace. The company serves drone pilots, hobbyists, and recreational services. The company was formerly known as AerocarveUS Corporation and changed its name to Unusual Machines, Inc in July 2022. Unusual Machines, Inc was incorporated in 2019 and is based in Orlando, Florida.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider Unusual Machines, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Unusual Machines wasn't on the list.
While Unusual Machines currently has a Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Click the link to see MarketBeat's list of seven best retirement stocks and why they should be in your portfolio.
Get This Free Report
