In the wake of Palladyne AI’s (PDYN) mid-year update, issued on August 6, the company and its stock are likely to perform very well over the longer term.
However, with the firm noting that it will take longer than previously expected to sell its products to companies and failing to provide much new information about deals with the Pentagon, the risks posed by PDYN stock have meaningfully increased.
In light of this information, only risk-tolerant growth investors should buy PDYN at this point.
PDYN Still Sounds Bullish on Its Longer-Term Outlook
As I noted in a previous column, drones equipped with the company’s systems “have shown the ability to ‘autonomously (cooperate) with each other’ and provide ‘information’ to each other.” Further, the Pentagon has used the company’s autonomous robots for “media blasting” and “sanding,” and in June, the agency allocated additional funds to enable further testing of the company’s software, indicating that the department is pleased with the product’s performance so far.
In addition to the Pentagon’s interest, PDYN indicated in its mid-year update that many companies could consider purchasing its software. Specifically, the firm reported “that in the medium and long term, reshoring of manufacturing creates a substantially larger market opportunity for our products.”
According to Palladyne, it’s also poised to be boosted by increased use of drones by “municipalities and private security firms,” along with higher spending on “AI and autonomous systems” by the Pentagon. Regarding the latter point, PDYN noted that the FY2025 National Defense Authorization Act includes significant new funds for “AI and autonomous systems.”
Other Encouraging Signs for Palladyne and PDYN Stock
Symbotic (SYM) has been providing AI-driven “autonomous industrial robots” for a number of years, and the company’s revenue and stock price have risen tremendously since 2023. Specifically, its revenue surged from $600 million in its fiscal 2022 to $2.2 billion in the 12 months that ended in June 2025. And its stock price soared from $11.35 in December 2022 to $46.23 as of the market close on August 22. This data bodes well for Palladyne’s ability to succeed in the industrial space.
Finally, Palladyne reported in conjunction with its mid-year update that it is “seeing a number of interesting and attractive possibilities to expand our business through strategic relationships, joint ventures, and potential acquisition opportunities.”
Why the Risk Posed by PDYN Has Risen
Previously, I believed that Palladyne would begin obtaining orders from companies for its software in Q2, when it had said that the product would become available for firms. I had also thought that its revenue from such customers would surge dramatically in both the second half of this year and in 2026.
Also importantly, I had thought that the firm would sign major new deals with the Pentagon in Q2 or Q3, highlighting the Defense Department’s continued confidence in its products.
But in reality, it appears that neither of those scenarios has materialized. In fact, implicitly blaming “The intensifying tariff and foreign policy landscape,” the company did not announce any orders from commercial entities, and in an SEC disclosure it stated that it only expects to start generating revenue from commercial entities this year, while it anticipates that its sales to other firms will increase only “modestly throughout 2026.”
And other than the company’s announcement in June that it had received an undisclosed amount of new appropriations from the Air Force for additional testing of its system, there were no disclosures of positive developments from the Pentagon.
The Bottom Line on PDYN
While I still believe that Palladyne has tremendous potential, I also think there’s a small chance that it has suffered a setback that has contributed to its slower-than-expected progression.
Therefore, I recommend that risk-tolerant growth investors hold relatively small amounts of its shares for now.
*This article is intended to be informational only; it is not financial advice.
