This article first appeared on GuruFocus .
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Revenue:Record first-half revenue, up 74% on the prior corresponding period.
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Committed Revenue:Reached $240 million, up from $206 million in a trading update a few weeks prior, surpassing the record $216 million achieved in FY2025.
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Revenue Guidance:Reaffirmed FY2026 revenue guidance of $250 million to $270 million, representing a 15% to 25% increase on the prior record year.
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Gross Margin:Slightly down at 65%, impacted by product sales mix and a one-off product impairment; the company expects to return to this level in the second half.
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Recurring Revenue:Reached 9.2% of revenue for the first half, nearly three times the level of the prior year; subscriptions represented 9% of revenue, up from 5% in FY2025.
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Cash Position:$180 million in cash and term deposits, with no debt.
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Expenses:Deliberate investment period with increased employee benefits, sales and marketing, corporate and professional costs, and business systems costs, including ERP implementation.
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Devices in Field:Over 4,000 software-enabled units deployed globally, with over 6,200 hardware devices in the field.
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Regional Revenue:Europe and UK contributed 52% of revenue; US revenue grew to 17% of total revenue, up from 14% in the prior period.
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Segment Revenue:Non-military segment contributed 15% of revenue, up from a negligible amount a year ago.
Release Date: August 26, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record committed revenue of $240 million, surpassing the full-year 2025 total and up from $206 million just weeks prior.
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Revenue grew 74% year-over-year in H1 2026, with recurring revenue nearly tripling to 9.2% of total revenue.
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Strong balance sheet with $180 million in cash and term deposits, no debt, and strategic inventory investments in long-lead items.
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Next-generation RF Recon platform launched, featuring ultra-wideband technology and AI-driven detection, with first sales expected in H2 2026.
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Diversification into non-military markets (15% of revenue) and geographic expansion, including new Amsterdam HQ and US growth.
Negative Points
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Gross margin declined to 65% due to product mix and a one-time inventory impairment, though expected to recover.
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Underlying EBITDA impacted by significant investments in ERP systems, new production facility, and headcount growth.
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Operating expenses increased substantially, with headcount rising to 537 from 332 a year ago, pressuring near-term profitability.
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ASIC investigation remains ongoing, with no clear timeline for resolution, creating regulatory uncertainty.
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No dividend planned as cash is prioritized for growth investments, and the company faces potential delays in large European opportunity (COBS-ANGEL-Nokia).
Q & A Highlights
Q: What is the current status of the committed revenue and FY26 guidance? A: CEO Angus Bean reported that committed revenue has reached $240 million, a substantial increase from the $206 million trading update provided just weeks prior. This figure already surpasses the record $216 million total revenue achieved in FY25. The company has reaffirmed its FY26 revenue guidance of $250 million to $270 million, representing a 15% to 25% increase year-over-year. This provides strong visibility for the remainder of the year, with over four months still to run.
Q: Can you provide more detail on the major European opportunity and the down-selection process? A: CEO Angus Bean explained that the company is part of a consortium with Anduril, COBS, and Nokia for a significant European program under the RE-ARM 2030 initiative. Down-selection is expected in the second half of 2026, which would confirm the consortium's place in a smaller group to fully engage with the country's Department of Defence. While this remains the largest program in DroneShield's pipeline, the company emphasized it is not dependent on this single opportunity due to its global diversification. The company will reduce commentary on this matter to protect sovereign and commercial sensitivities.
Q: What is the timeline for the first sales of the next-generation RF Recon platform? A: CEO Angus Bean stated that unlike historical product launches which took 12-18 months to generate first sales, the company anticipates making its first RF Recon sales in the second half of 2026. The product has already been deployed at a major international defense exercise by a core customer who provided input on requirements. The RF Recon features ultra-wideband technology capable of scanning from 100 MHz to 7.125 GHz continuously, underpinned by the new RFAI v3 model that can detect drones it has never seen before.
Q: What caused the gross margin decline to below the 65% target, and can it recover? A: CEO Angus Bean attributed the margin decline to two factors: a product sales mix that included a significant amount of lower-margin interoperable third-party solutions, and a one-off product impairment related to the ERP implementation and warehouse move. The impairment was primarily for raw materials, not finished products. Management expressed strong confidence in returning to the mid-60s gross margin in the second half through new product sales and the absence of the one-off impairment.
Q: How is the company addressing the increase in operating expenses and what is the path to profitability? A: Head of IR and Strategy Joshua Bolot explained that the H1 2026 expense increase was a deliberate investment period to build the operating platform for future growth. Employee headcount grew to 537 from 332 a year prior, reflecting necessary senior hires and capability building. The company maintains its steady-state normalized cost base of approximately $170 million between gross profit and underlying EBITDA. Management emphasized that operating leverage will bring profitability back as revenue grows, noting that an additional $50 million in revenue at 65% gross margin would deliver $32.5 million in gross profit more quickly to the bottom line.
Q: What is the status of the ASIC investigation and the settlement with a key management personnel member? A: Joshua Bolot stated the company is cooperating fully with the ASIC investigation, but as it is ongoing, it is not appropriate to comment on timelines or potential outcomes. Regarding the settlement payment noted in the accounts, he clarified it is a confidential private matter that does not relate to termination, misconduct, or impropriety, and is not a matter of remuneration or employee benefit. The company cannot explore the matter further due to confidentiality.
Q: How significant is the non-military market, and what is driving its growth? A: Joshua Bolot highlighted that non-military segments, including commercial activities, now represent 15% of revenue, up from a negligible amount a year ago. This growth is driven by drone incidents at airports, critical infrastructure, prisons, public safety venues, and major events. The Kansas City Police Department and FIFA World Cup sites serve as key case studies. The company positions itself as the only scaled operator able to provide products from the battlefield through to civilian applications, supported by the Safer Skies Act which opens up counter-drone access to 17,500 local and state law enforcement agencies in the US.
Q: What are the company's competitive moats and how does it protect its intellectual property? A: CEO Angus Bean outlined three key moats: first, over 6,200 hardware devices in the field providing unmatched experience in building complex hardware at scale; second, AI-driven software built on 10 years of proprietary threat data that cannot be scraped from the web; and third, brand trust from deployments in safety-critical operations across nearly 50 countries. On IP protection, the company deliberately does not patent its technology, as patenting is counterproductive in the defense industry. Instead, all IP is protected as trade secrets with internal walls restricting access, supported by a DISP security rating that was raised in the first half.
Q: What is the company's approach to dividends and capital allocation? A: Joshua Bolot stated that the near-term priority is investing in growth, production capacity, product development, systems, and people to capture the rapidly growing global market opportunity. While returning to operating profitability is a near-term goal, the company does not foresee a dividend plan based on current results. Cash is being deployed into inventory and R&D, particularly for long-lead items like chips, memory, and software-defined radios needed for next-generation products. The company maintains a strong balance sheet with $180 million in cash and term deposits and no debt.
Q: What are the key trends expected in the counter-drone industry over the next five years? A: CEO Angus Bean predicted three major trends: an increase in software-defined technologies that can manipulate signals on the fly, which is why the company built RFAI v3 to detect and capture these changing signals; an increase in autonomy in drone systems, though radio links will still be required for surveillance and intelligence; and increased proliferation of drone technology, which is becoming more capable, cost-effective, and scalable than traditional military platforms. He noted that it is becoming significantly cheaper to wage conflict and disrupt critical infrastructure, which underpins the growing demand for DroneShield's solutions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
