The Drone Market This Week: Skydio’s $3.5B America Bet, the FAA Wakes Up, and AVAV’s Bleed Continues

Each week we round up the most consequential developments in the drone sector — capital flows, contracts, regulation, and the stocks investors are watching. Here’s what moved the market this week.

Big News: Skydio Drops $3.5B on America

Skydio announced a $3.5 billion investment in US drone manufacturing over five years, including a factory five times bigger than its current space and 2,000 new jobs. Their SkyForge program — about $1 billion of the total — invites other suppliers to grow the US supply chain.

Why it matters. Around 90% of drone motor magnets come from China, and 99% of Li-ion batteries used in consumer electronics also come from China. It is a hard problem to solve. Skydio is attempting the same playbook many open hardware ecosystems use: open source the end demand specs and let an ecosystem bloom to competitively drive down costs.

Same week, Skydio raised $110M in Series F at a $4.4B valuation. The capital stack is getting fatter.

FAA Finally Moves

The FAA announced a long-delayed Notice of Proposed Rulemaking to restrict unauthorized drone operations over sensitive fixed-site facilities. It implements Section 2209 of the 2016 FAA Extension, Safety, and Security Act. This is ten years in the making.

XTEND Grabs Europe Money

XTEND — currently merging with JFB to become XTEND AI Robotics — secured an $8.25M order from a European defense customer for autonomous drone systems. The contract includes a mix of indoor operational platforms and tactical strike systems. Delivery is expected during 2026.

Stocks: AVAV Bleeds, KTOS Holds, ONDS Surges

AeroVironment (AVAV)

Hurting. Down over 40% in three months. Lost a $1.7B Space Force contract. Cut full-year revenue guidance to $1.85–1.95B from $1.95–2B. Switchblade demand is still strong, but the BlueHalo integration is messy. Post-acquisition, gross margins have compressed from 39% to 22%.

Kratos (KTOS)

Still climbing. 2025 revenue was $1.35B, up 18.5%. Q4 revenue grew 21.9% to $345.1M. Fiscal 2026 guidance is $1.595–1.675B with a book-to-bill ratio of 1.3:1. The XQ-58 Valkyrie is now a formal Program of Record under a $231.5M Marine Corps contract.

Ondas (ONDS)

Rocketing. 2025 revenue exploded 605% to $50.7M. Management raised 2026 guidance to at least $375M on the strength of drone-in-a-box and counter-UAS deployments.

XPONENTIAL Next Week

Detroit, May 11–14. The Defense Technologies Zone will showcase how uncrewed systems are being integrated into the national security arsenal. Watch for announcements.

Quick Hits

Counter-UAS components. A $5M+ order was placed this week for US-made counter-UAS interceptor components — a continued move away from foreign hardware.

Canada’s MINERVA Initiative. The 3rd Canadian Division plans to grow its drone fleet by over 1,000% by 2027.

Beijing bans consumer drone sales. An awkward moment for DJI’s home market.

DJI Lito launch. DJI launched the Lito X1 and Lito 1 — Mini series successors — but US buyers are blocked under the FCC foreign drone ban.

Avalanche drones. AVSS in Canada wrapped real-world testing of drones dropping explosives to trigger controlled avalanches.

Bottom Line

The domestic supply chain push is real. Skydio is writing big checks. AVAV stumbles while KTOS and ONDS run. The FAA is finally moving. And there’s a big trade show next week.