Ondas Holdings (ONDS), which has developed a drone platform that utilizes a great deal of AI, appears to have very advanced technology. Additionally, the demand for the firm’s main products could be very strong over the longer term.
But one of the factors which makes ONDS stock somewhat of a high-risk investment at this point is that it just entered the defense sector, which seems to be its main area of focus, in 2024. And the company does not appear to have identified its major customers in the defense sector.
Given these points and with the fairly high current valuation of ONDS stock, it might make sense for investors to take a wait-and-see approach, keeping an eye out for more clarity on the company’s direction and how its technology proves itself in real-world military use.
Very Promising Technology and Products
Ondas’ two main autonomous drone platforms, the Iron Drone Raider and the Optimus, are both “end-to-end autonomous systems that include embedded AI, integrated software, command and control infrastructure and seamless operational workflows,” Ondas CEO Eric Brock said during the company’s Investor Day which was held on July 9.
Brock indicated that AI is incorporated into every part of the firm’s drone platforms, “supporting autonomous decision-making.” He also suggested that the company’s systems can navigate and “adapt” to the environment “under high pressure at high speeds,” while being ready 24 hours per day, seven days per week to protect facilities and/or people.
Iron Drone Raider is a counter drone system. In February, Ondas reported that industry analysts expect the counter drone market to be worth $14.9 billion by 2032, up from just $1.6 billion in 2023. With many militaries greatly increasing the extent to which they use drones and Washington’s investments in counter drone infrastructure “surging,” as Brock pointed out, it’s logical to expect the counter-drone market to expand very rapidly in upcoming years.
Meanwhile, Optimus is an Intelligence, Surveillance, and Reconnaissance (ISR) drone. According to one research firm, the global military drone market is expected to jump from $6.14 billion in 2023 to $88 billion by 2030.
Further, the Big Beautiful Bill which recently became law “includes over $4.2 billion for drones and counter drone capabilities, nearly $1.7 billion for autonomy and ISR,” Brock noted.
Ondas Is Just Starting Out in the Defense Market
In a November 2024 statement, Brock noted that his company had first entered “military markets” in 2024. Before last year, the company appeared to have primarily been engaged in providing control systems and upgrading networks for railroads, along with providing drones for use in data collection and security within cities.
Since Ondas only generated $15.7 million of revenue in all of 2023, these businesses were apparently not very lucrative.
Also importantly, although OAS, the company’s unit which manufactures Iron Drone Raider and Optimus, obtained orders of about $14.4 million “in the defense market” in the third quarter of last year, Ondas did not name any of the entities that made those orders, referring to them with general titles like ” a major government military customer” or “a leading defense customer.” Further, it appears that most if not all of these orders are first-time deals between Ondas and its customers.
Without knowing the identity of Ondas’ customers, it’s difficult to determine the extent to which the company can sell more drones to them in the future. For example, if the “major government military customer” is a medium-sized country without a huge security threats, like Canada or Australia, Ondas may not receive follow-up orders from the country in the near-to-medium term. Similarly, if the “leading defense customer” is starting to develop its own AI-powered anti-drone systems, it may not need many offerings in the future.
Finally, because ONDS is only beginning to enter the defense sector, its products, still need to be validated to a meaningful extent for military use.
Valuation and the Bottom Line on ONDS Stock
With shares currently trading at 8.15 times analysts’ average estimates for the company’s 2026 sales, it might be wise for investors to see how the story unfolds.
*This article is intended to be informational only; it is not financial advice.