The US defense budget is in a structural uptrend. Even with all the political theatrics over deficits, Congress keeps pouring more money into munitions, drones, electronic warfare, and space — what I call Next-Gen Defense. That’s where Red Cat Holdings Inc. (RCAT) comes in, advises Sean Brodrick, editor at Weiss Ratings Daily.
The FY 2025 DoD request came in around $850 billion, and FY 2026 is ramping toward roughly $961.6 billion. When Washington opens the spigots like this — especially in next-gen systems — small, focused suppliers can see their revenue hockey-stick in a hurry.
RCAT is a US-based drone and unmanned systems company positioned squarely in the sweet spot of Army short-range reconnaissance demand and the Pentagon’s Blue UAS initiative.
It delivers American-made unmanned systems through Teal Drones and FlightWave. Its bread and butter is small unmanned aircraft systems for short-range reconnaissance and ISR — the drones infantry squads actually carry and use. The company is also moving into unmanned surface vehicles for maritime missions.
The strategic advantage? Red Cat builds inside the Blue UAS ecosystem — the DoD’s vetted list of secure, cyber-trusted drones that can be purchased without special waivers. Teal’s Golden Eagle and Teal 2 already have Blue approval; the newer Black Widow and FlightWave Edge 130 are in the review pipeline.
The Teal 2 is the flagship: rugged, secure, night-optimized, thermal-imaging ISR power. The Golden Eagle continues to sell into government channels. But the needle-mover is Black Widow, Red Cat’s short-range reconnaissance platform selected by the US Army and now ramping into volume production.
Q3 2025 was a breakout. Revenue surged 646% year-over-year to about $9.65 million, nearly tripling sequentially. Profitability dipped — a 16-cent loss versus a projected nine-cent loss — but for the right reasons: aggressive investment in production and engineering to meet demand.
Management expects FY25 revenue in the mid-$30 million range with the potential to more than double in FY26. Forecasts call for a 2025–2026 revenue CAGR north of 90%. Red Cat enters 2026 with a stronger order book and clear line-of-sight to sustained scale.
Bottom line? RCAT is a small-cap drone name with real torque: growing Army SRR demand, Blue UAS tailwinds, US manufacturing, and AI-enabled autonomy. It’s volatile — no doubt — but the upside is asymmetric. For investors who can handle the bumps, Red Cat looks like a high-octane way to play the drone and robotics megatrend.
Recommended Action: Buy RCAT.
