Drones & Unmanned Aerial Systems (UAS) - Market Report

Overview

“Any country that can’t manufacture its own drones will be a vassal state.”

– Naval Ravikant, April 7, 2025

Drones and unmanned aerial systems (UAS) will define the next 50 years of warfare. What began a few decades ago as tools militaries used to facilitate surveillance and intelligence-gathering are now critical technologies providing real-time support on the frontlines and executing entire missions from start to finish. The startups building in the space, the platforms deploying in battlefields around the world, and the investment dollars flowing into defense tech are creating new markets, shaping the contours of global strategic competition, and forcing reforms to outdated defense acquisitions processes.

Today, significant shifts in the speed, barriers, and cost to develop smart, cutting-edge, and lethal platforms have transformed the drone and UAS market. The most effective drones no longer require billions of dollars in R&D—that only the largest defense primes could underwrite or win via contracts—nor do they depend on large, monolithic hardware systems that require significant CapEx and physical space to test. Insurgents in the space are building and testing near-battlefield-ready platforms in months instead of years, and newer modular systems are making it possible to iterate and scale quickly. Additionally, conflict zones around the world, such as in Syria, Ukraine, Russia, and Azerbaijan, among others, have provided the staging ground to deploy and test new systems. Being “battle-tested” is no longer a distinction for primes.

Enabling this new speed and scale velocity is a key focus on software: hardware alone no longer drives the drone game. In today’s drone market, there has been a fundamental shift from hardware-centric to software-first architectures. Companies like Shield AI and Anduril Industries are building platforms where flight dynamics, mission planning, and real-time decision-making are managed through AI-driven software stacks. This transformation has accelerated the pace of innovation and enabled unprecedented operational flexibility.

Market

The drone and UAS market sits at the intersection of AI, software-enabled platforms, autonomous systems, and modular hardware designs that are redefining the economics of intelligence-gathering, logistics, and kinetic operations.

The market encompasses everything from smaller systems that cost a few hundred to a few thousand dollars, serve key reconnaissance functions, and drive kinetic operations, to larger, more expensive systems that are more durable, carry larger and heavier munitions, and stay in the air longer. With new advancements in the cost and speed to iterate existing and develop new technologies, however, the gap between these systems is closing, and smaller systems are becoming just as, if not more, effective than larger ones.

The global drone and UAS market will reach approximately $40 billion in 2025 and is expected to grow to just under $100 billion by 2030. The bulk of the market size and growth potential are tied to defense applications such as intelligence, surveillance, and reconnaissance (ISR) systems, loitering munitions, counter-UAS systems, and the software enabling them. Other applications, though representing a smaller segment of the market, include commercial drone technologies used in logistics, construction, agriculture, emergency/disaster response, and border security, among others, as well as a smaller consumer market.

These categories can be broken down as follows:

Defense applications

• Intelligence, surveillance, and reconnaissance (ISR) systems

• Loitering munitions

• Swarming and operational autonomy

• Military logistics

• Counter-UAS systems

Commercial applications

• Logistics (last-mile delivery in consumer and complex environments)

• Construction management

• Agriculture, precision farming, and land surveying

• Emergency/disaster response

• Border security

Consumer applications

• Photography/videography

• Hobbyists

Growth Drivers

At a macro level, drone and UAS market growth is primarily driven by three factors: geopolitical necessity, tech advancement, and regulatory reform. Companies solving for present and emerging geopolitical challenges, leveraging new tech at the software-hardware intersection, and taking advantage of new regulatory realities are in the front seat of this growth.

Geopolitical necessity: Drones and UAS have proven to be essential technologies that have shaped or are actively shaping battlefield outcomes in Russia, Ukraine, Syria, and Azerbaijan. Ukraine, for example, produced over 2 million drones in 2024, has set a 4.5 million drone production target for 2025, and is currently producing over 200,000 drones per month as well as deploying tens of thousands of drones on a monthly basis. Put simply: drones and UAS are the new face of contemporary warfare.

The core geopolitical challenges—that many of the best companies in the market are presently at the forefront of—are threefold:

1) Barriers and access: The barriers to develop these technologies, which are increasingly software-first and require comparatively less sophisticated hardware to be lethal, are dramatically lower than before, which renders them more accessible and easier to produce and deploy.

2) Cost asymmetry: Militaries still largely rely on missile defense systems that are extraordinarily costly to repel drones and UAS. While more cost-effective jammers and counter-UAS systems are now being tested and deployed on battlefields, they have yet to fill the gaps.

3) Manufacturing: The competitive edge in producing drones and UAS—quintessentially dual-use technologies—lies with countries that have the least expensive and most efficient manufacturing capacity.

Tech advancement: New drone and UAS systems are being developed at the speed of AI. Hardware alone is no longer the differentiator. The most successful companies in the market, while still developing hardware platforms that optimize for speed, durability, maneuverability, and modularity, are differentiating through software to achieve full autonomy, improve targeting, and solve for jamming and GPS-denied navigation and power, range, and longevity constraints. Software being a key driver means rapid iteration, and new systems becoming obsolete more quickly. In fact, in Ukraine, drone units are reporting that their newest systems become obsolete in a matter of months on the battlefield due to the speed of development.

Today’s drones and UAS leverage software-hardware platforms that combine cutting-edge AI and computer vision with LIDAR, multispectral sensors, and on-board compute power, on top of their propulsion/power systems and payloads.

Regulatory reform: In April and June 2025 President Trump signed two batches of executive orders 1) outlining reforms to federal defense procurement and contract processes and 2) removing regulatory barriers for producing and testing drone technology, respectively. Among the key reforms are guidelines to “eliminate any unnecessary supplemental regulations and promote expedited and streamlined acquisitions.” The latter batch of EOs will “accelerate domestic drone innovation, secure supply chains, reduce reliance on adversarial nations, repeal regulations that stalled supersonic flight, and assert U.S. leadership in emerging aviation sectors.”

Investment Landscape

The U.S. government, governments around the world, and major VC players are ramping up their investments in defense tech, specifically in the drone and UAS market, to catch up with these trends. According to McKinsey & Company, the U.S. “committed more than $150 billion to research, development, testing, and evaluation (RDT&E) in fiscal year 2024 to support agencies such as the US Defense Innovation Unit (DIU) and the Office of Strategic Capital (OSC), marking a 55 percent expansion of defense funding during the past five years.” Additionally, global VC investments in defense-related companies [jumped] by 33 percent year-over-year to $31 billion in 2024. Investments span defense-dedicated and dual-use technologies with both defense and commercial applications.”

Drone and UAS companies captured some of the most high-profile VC investment rounds of 2024. The larger players in the space closed rounds in the hundreds of millions into the billions of dollars, while more recent entrants to the market closed impressive rounds on shorter-than-normal timelines. The winners in 2024 and thus far in 2025 are systems that combine software and small, modular hardware systems to edge out longer R&D cycles.

Some of the most notable companies and rounds of the last year, big and small, are below:

Shield AI: Shield AI raised a $240 million “F-1 strategic funding round,” at a $5.3 billion valuation, making it the second-largest startup in the market. The company is best known for Hivemind Enterprise, its software platform for mission autonomy that enables a full suite of autonomous capabilities.

Neros: Neros raised a $35 million Series A in May 2025, following a $10.9 million seed round last year. Neros’ platforms, specifically its first-person view drones (FPVs), are small and comparatively inexpensive and can be manufactured at rapid scale.

Firestorm: A few months after announcing its $12.5 million seed round last year, Firestorm won a $100 million contract from the U.S. Air Force to scale its 3D-printed, low-cost, open-architecture 55-pound Tempest drone.

Theseus: Theseus made a splash in 2024 when its founders announced on X:

We designed, 3d printed, and built a <$500 drone with that [sic] calculates GPS coordinates without a signal using a camera + google maps. in 24h.

The company raised a $4.3 million seed round in April 2025. Though small, the company represents the key shift happening in the market towards small, modular, software-enabled systems that solve for challenges like GPS-denied navigation.

Anduril Industries: Anduril, the highest-profile name in the space, closed a $2.5 billion Series G investment at a $30.5 billion valuation in June 2025, on the heels of a $1.5 billion Series F round at a $14 billion valuation in 2024. Anduril is the only startup in the space to cross the $1 billion revenue mark.

Recommendations

While major players like Anduril and Shield AI have clear advantages and significant market share, even dubbed “neo-primes,” there has arguably never been a better moment to build in the space. The following recommendations can help guide VCs as they consider deploying capital to existing players as well as new entrants to the market.

1) Prioritize software-first companies: While hardware remains critical—drones, after all, are only as good as their hardware—software remains the best competitive advantage. Companies building new software solutions, particularly enabling full autonomous capability, are moving the fastest and at the lowest cost.

2) Anticipate key challenges: At the moment, the biggest problems companies are working on solving include developing fully autonomous systems and last-mile solutions that are capable of navigating in jammed, GPS-denied, and communications-denied environments, maneuvering in complex urban and natural terrain that would otherwise require human intervention, and making real-time, intelligent battlefield decisions, especially under duress. While these are some of the most pressing hurdles now, companies anticipating the next set of challenges will have the edge.

3) Full software platforms are ideal, but not the only way: Platforms like Shield AI’s Hivemind that provide a full autonomy stack are leading the way, but smaller companies that solve a specific problem well, such as Theseus’ virtual positioning system (VPS) that enables 2D map navigation in GPS-denied environments, are also smart plays.

4) Modularity is critical in hardware: The edge in hardware lies in companies that a) build systems that piece together the key components of a drone—sensors, compute power, and payloads—while maintaining efficiency and b) solve for power, range, and longevity issues. Companies like Firestorm building platforms with swappable payloads, 3D-printable components, or plug-and-play architecture will have the edge, as they are the best suited for rapid iteration and configuration.

5) Bonus: Manufacturing is back? Keep an eye on companies like Firestorm and Mach Industries that are not only building cutting-edge drones and UAS, but creating end-to-end manufacturing processes that can be replicated in the field.