DRNZ Spotlight: NextVision

A 125-gram camera made in Ra’anana, Israel has quietly become one of the most valuable positions in the drone index. Clear evidence that the money in this sector is moving to the payload.

Most investors looking at a drone ETF expect to find drone makers. DRNZ’s second-largest holding doesn’t make a single aircraft. NextVision Stabilized Systems (TASE: NXSN) makes the camera bolted underneath one. At roughly 12.8% of the fund, it sits just behind AeroVironment and ahead of Ondas, DroneShield and Red Cat.

The Numbers Behind the Position

The numbers explain why. In the first quarter of 2026, NextVision posted revenue of $67.4 million, up 86% year over year, with gross margin at 67.2% and net margin at 56.8%. On May 11 the company raised its full-year 2026 revenue target to roughly $315 million, up from a previous target of $275 million, a 15% increase to guidance that would represent 87% growth over 2025. Behind that sits an order backlog of about $2.09 billion.

For context on the trajectory: revenue was about $52 million in 2023, roughly $110 million in 2024, and approximately $168 million in 2025, itself a raise from an earlier $160 million target and more than 46% growth. A company with 60.8% profit margins and a three-year total shareholder return north of 18x has emerged, and it did it by selling a component that is critical to the drones stack.

NextVision is a case study in how a drone company can concentrate profit outside the airframe.

What a 125-Gram Camera Actually Does

NextVision develops and manufactures stabilized day- and night-vision imaging systems for ground and aerial platforms, aimed specifically at micro and mini UAVs. Its flagship, the DragonEye2, weighs 125 grams. Into that package it fits a high-definition visible sensor and a 640×480 thermal sensor, with continuous zoom up to ×40 on the visible channel and ×4 on thermal, inside a housing measuring roughly 57×50×76 mm.

Why Weight Is the Spec That Matters

The specification that matters isn’t the zoom. It’s the weight. On a micro-UAV, every gram of payload is a gram not spent on battery, and therefore on endurance and range. A dual EO/IR turret light enough to leave meaningful payload capacity behind it is a different product from one that consumes the aircraft’s entire budget. NextVision’s stated design philosophy is explicitly built around low size, weight, power and price (SwaP), with extended observation range, and it holds a patented image-stabilization engine underneath.

A Default Component in More Than 40 Countries

The result is a component that has become close to a default. NextVision payloads are used by more than 250 manufacturers and integrators across over 40 countries, spanning inspection, border control and military operations. Its direct customers are drone makers rather than end users: Elbit Systems, UVision Air, Israel Aerospace Industries and Aeronautics among them, which then sell complete systems to the IDF and to militaries and security agencies worldwide. A meaningful share of sales comes from repeat customers who bought small quantities first and returned for more advanced systems later.

The demand story is forged in conflict. Lightweight stabilized cameras, including cooled variants that enable long-range observation from small platforms, have featured prominently in Ukraine and in the theaters where Israel has operated, and that visibility has driven recognition of their importance on the modern battlefield.

Geography, Order Cadence, and Capacity

What’s changed more recently is geography. North America now leads NextVision’s growth, both through expansion of large-scale projects with existing customers and through new customer additions. That’s a meaningful rotation for a company where U.S. sales were 26% of total revenue as recently as the first nine months of 2025.

The order cadence tells the same story. The company ended 2025 with orders totaling $223 million. In January 2026 it disclosed a $60 million order from an existing customer, to be delivered through the end of 2029, behind a $77 million deal in December, bringing cumulative new orders that early in the year to $87 million. More recently it announced a $12.4 million camera and accessories order from an unrelated customer, alongside a follow-on equity offering of ILS 574.8 million.

Management is spending that money on capacity. Production has gone from over 2,000 units per month at the start of 2025 to a planned 4,000+ by year-end, with a stated goal of exceeding 5,000 units per month by the end of 2026. Headcount is scaling with it: from 92 employees at the beginning of 2024 to a projected 167 by the end of 2026, weighted toward production and operations. Management expects gross margins to hold in a 65% to 72% range even as it scales with larger strategic customers, and plans two to three new products annually. R&D, notably, runs at only about 3.3% of revenue.

The Airframe Is Commoditizing. The Payload Is Not.

Step back from NextVision specifically and the strategic picture is what makes this holding worth attention.

This is the reason anyone flies the drone at all is to see something. Once a drone maker has designed a specific turret into a platform and qualified it, swapping it out means re-engineering the aircraft. That is why repeat purchasing shows up so strongly in NextVision’s mix, and why a $2.09 billion backlog against roughly $315 million of annual revenue is plausible rather than fanciful.

Arms Dealer to the Arms Dealers

There’s a structural point here for the whole sector. NextVision sells to Elbit, IAI, Aeronautics and 250-plus other integrators. It does not need to win the airframe war; it needs the airframe war to continue. Whoever wins a given drone program, the aircraft still needs eyes. That is a materially different risk profile from betting on a single platform manufacturer, and it is the same “arms dealer to the arms dealers” logic that makes semiconductor equipment attractive relative to chip designers.

How the Index Sees It

It also explains the index construction. DRNZ’s stated methodology allocates 80% of the fund to pure plays (companies with at least 50% drone-related revenue, capped at 15% each) with the remainder to diversified names. NextVision, deriving essentially all of its business from imaging systems for unmanned platforms, qualifies as about as pure a play as the category permits, and it sits near the cap.

The Valuation Question

The valuation is the obvious issue. As of July 20, 2026, NextVision carried a market cap around ILS 21.7 billion on trailing twelve-month revenue of roughly $200 million. It has a trailing P/E above 62 and a price-to-sales ratio above 38. At earlier points in its run the stock traded at a forward P/E in the 41x to 52x range against an average of roughly 20x for electronics companies in the region.

The stock has been volatile in kind. Shares have traded in a 52-week range of roughly ILS 11,810 to ILS 40,940, and even a quarter with 86% revenue growth was met with a 5% single-day decline. At one recent point the 90-day return was down nearly 24% while the one-year total return remained near 149%. Past performance is not indicative of future results.

The Operational Risks

The operational risks are more interesting than the valuation debate.

Execution on capacity. Doubling production capacity twice inside two years is exactly the moment execution becomes challenged. Management itself has flagged supply chain and headcount as key issues, and converting a $2.09 billion backlog on schedule requires that expansion to land.

Customer concentration. Selling to a handful of large defense integrators produces large orders and repeat business, but it means a small number of decisions drive a large share of revenue, and the four-year delivery schedule on that $60 million order shows how gradually these convert.

Conflict-driven demand. A business whose growth accelerated alongside active theaters in Ukraine and the Middle East carries the same structural exposure the entire defense complex does. The broader drone sector already pulled back once this year on cease-fire headlines.

Thin R&D. Roughly 3.3% of revenue going to R&D is efficient in a demand boom and thin if a competitor lands a genuine technical leap.

The Bigger Thesis

NextVision is the cleanest expression in DRNZ of a thesis that runs through the whole drone economy: the aircraft is becoming a commodity, and the value is migrating to the layers above and below it. That is the sensor that does the mission, and the software that orchestrates it. Ondas is chasing the orchestration layer. NextVision already owns a large share of the payload layer, at margins that suggest the position is defended.

For a fund whose top ten holdings represent roughly 66% of assets, that concentration is the point. DRNZ investors own a lot of a company most of them have never heard of, whose product weighs less than a deck of cards, and which is currently growing faster than nearly anything else in the portfolio.

$DRNZ, the REX Drone ETF, seeks to track the VettaFi Drone Index, providing exposure across the full drone ecosystem: combat, surveillance, logistics, commercial, and counter-drone.