This article looks at the 10 best military drone stocks to buy now. We also discuss recent trends in the unmanned aerial vehicle (UAV) industry.

Modern warfare is rapidly evolving from being the sole domain of soldiers, tanks, and fighters. Swarms of UAVs, guided by artificial intelligence, now fill the skies and can strike enemy targets with pinpoint accuracy. This revolution in warfare has blurred the lines between man and machine, resulting in a need for reassessment of military capabilities.

READ ALSO: 10 Countries with the Most Military Drones in the World and Goldman Sachs Defense Stocks: Top 12 Stock Picks.

The demand for drones has surged over the last few years, with countries actively using UAVs for intelligence, reconnaissance, surveillance, and target operations. These aerial vehicles offer a bird’s eye view of the battlefield, making it difficult for targets to move and hide from the conflict zone.

Drones were a prominent feature of the conflict in the Nagorno-Karabakh region between Azerbaijan and Armenia in 2020. They have been clouding the skies across several towns and cities during the Russia-Ukraine war, which defense experts see as the arrival of a new threat in the aerial defense space.

The US has been operating drones for about a century, having first deployed them during World War II and more recently during the wars in Afghanistan and Iraq. In 2023, the Department of Defense (DoD) announced Replicator, an initiative to build ‘attritable autonomous systems’ in mass over the next 18-24 months. Moreover, the Air Force is developing drone wingmen to fly alongside its fighter and bomber jets under the Collaborative Combat Aircraft (CCA) program. The first two CCA fighters were unveiled in March this year.

However, defense experts view the proliferation of UAVs as a security threat, with American troops increasingly coming under attack from non-state actors in the Middle East. Policymakers in Washington also worry about China getting a leaf out of the Kremlin’s book (Ukraine war) and launching similar strikes against US interests in the Pacific.

Much work is going into guarding countries against the threats posed by UAVs. In October 2024, the DoD awarded a $250 million contract to Anduril Industries to counter drone attacks against American forces. Under the contract, the US will receive 500 recoverable Roadrunner interceptors, which are reusable drones that can intercept incoming drones or land back on the ground if they are not engaged.

With that said, let’s head over to the list of the best drone stocks to buy.

Methodology

We sampled stocks from ETFs with exposure to military drones and our previous articles on the subject. Both pure-play military drone makers and defense contractors with drone programs were included in our pool. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 1,000 prominent hedge funds as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

10 Best Military Drone Stocks to Buy Now:

10. Elbit Systems Ltd. (NASDAQ:ESLT)

Number of Hedge Fund Holders: 15

Elbit Systems Ltd. (NASDAQ:ESLT) is an Israel-based defense technology company that develops a portfolio of airborne, land, and naval systems and products, primarily for defense and homeland security. The company offers a comprehensive range of military drones, from the man-portable Skylark LEX to the multi-mission Hermes-900.

In November last year, Elbit Systems Ltd. (NASDAQ:ESLT) received contracts worth $335 million to supply defense systems to a European country. The contract, which is to be performed over three years and six months, will include PULS rocket launchers and rockets, and Hermes 900 unmanned aircraft systems that are equipped with advanced payloads.

The Hermes 900 is Elbit Systems Ltd. (NASDAQ:ESLT)’s largest UAV. It is designed to perform various security missions like area dominance, persistent surveillance, intelligence, reconnaissance, and target acquisition operations across land and maritime domains. It is operated by over 20 customers worldwide.

Elbit Systems Ltd. (NASDAQ:ESLT) also boasts expertise in counter-UAS solutions. In January this year, the company clinched a $60 million award from a NATO European country for its multi-layered Counter Unmanned Aerial Systems (C-UAS). It is one of the best drone stocks to buy, with 15 hedge funds holding a stake in the company, as of Q4 2024, according to Insider Monkey.

On March 18, Elbit Systems Ltd. (NASDAQ:ESLT) declared consolidated financial results for the fourth quarter of FY24. Revenue was reported at $1.93 billion, improving from $1.63 billion during the prior year’s period. Non-GAAP diluted EPS was logged at $2.66, beating estimates of $1.95 per share and up 71% year-over-year.

9. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)

Number of Hedge Fund Holders: 21

Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields products and platforms for national security needs. It is involved in various technological areas, such as unmanned systems, C5ISR, satellite communications, warfighter training, and combat systems.

In March this year, the Naval Air Systems Command awarded Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) an additional $59.3 million for 70 BQM-177A Subsonic Aerial Target (SSAT) by exercising the contract option for FRP Lot 6. Combined with the base award and exercise of FRP Lot 5, the total value of the contract has exceeded $175 million.

Earlier in the year, in January, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) announced a $34 million contract modification to a previously awarded contract from the Marine Corps. Under the agreement, the company will support the XQ-58A Unmanned Aerial Systems mission systems for the Marine Air-Ground Task Force Unmanned Aerial System Expeditionary (MUX) Tactical Aircraft (TACAIR).

On February 26, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) reported impressive results for the fiscal year 2024, with a 9.1% organic growth in revenue. GAAP net income for the full year was reported at $16.3 million, compared to a net loss of $8.9 million in 2023. Adjusted EPS was logged at $0.49, growing 17% year-over-year.

Full-year revenue for the Unmanned Systems business totalled $270.5 million, reflecting a 25.1% organic increase from fiscal 2023. The company anticipates continued growth for the segment, with the potential to even exceed forecasts if tactical drone opportunities are realized. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is one of the best drone stocks to buy now.