ONDS Stock: Ondas’ “System-of-Systems” Pivot

When we covered Ondas [ONDS] back in January, we noted that 2026 was likely to be the “Year of Drones”, with elevated geopolitical tensions and increased investment in unmanned vehicles, supported by artificial intelligence (AI) systems, creating the perfect storm. 

Now, halfway through the year, it turns out there’s much more to 2026 – and Ondas – than drones.  

A slew of recent acquisitions has boosted the West Palm Beach, Florida-based company’s portfolio, positioning it as a diversified defence technology platform with a reach well beyond drone (and anti-drone) solutions. Thanks to both aggressive M&A and growing demand for AI-backed defence technology, Ondas reported record Q1 earnings in May and raised its full-year revenue target yet again, suggesting a clear runway for a firm that has historically struggled to maintain profitability. 

With the so-called ‘AI military complex’ increasingly in the spotlight, we take a look at what the latest acquisitions mean for Ondas’ reach and balance sheet, plus why the stock remains a popular target for short-sellers. 

Ondas’ shopping spree

The US administration’s highly publicised usage of AI in the planning and execution of several military actions has given rise to the idea of the ‘AI military complex’, composed of defence primes, large tech firms, AI model providers and the so-called neo-primes such as Palantir [PLTR] and Anduril spearheading the AI transformation of global militaries. Just as workplaces are becoming increasingly automated, modern warfare is coming to rely heavily on unmanned systems – in May, the Wall Street Journal reported that drones have largely taken over tasks that historically required specialised soldiers, such as snipers. 

Several key moves in recent months suggest that Ondas is looking to leverage its expertise in this now essential technology to play a greater role in the emerging AI military ecosystem. 

First, in early April, Ondas completed its acquisition of World View, an aptly named provider of high-altitude intelligence, surveillance and reconnaissance services. The deal was positioned as a step in Ondas’ evolution beyond a drone-focused robots-as-a-service provider to “a multi-domain, systems-of-systems platform”.

Later that month, Ondas completed its $175m merger with US defence contractor Mistral (not to be confused with the French AI model provider), giving it direct access to prime-contractor opportunities and Mistral’s $264m contracted backlog.

Then, in May, Ondas completed acquisition of Israeli defence software firm Omnisys; management noted that its AI battlefield decision-making software was expected to contribute about $100m in revenue across 2026 and 2027. The next month, it announced its ongoing acquisition of drone-based industrial intelligence company Cyberhawk, expected to close in Q3 2026.

But that’s not all. In July, Ondas made its largest purchase yet, acquiring defence platform DZYNE Technologies in a cash-and-stock transaction valued at $875.8m. While the deal significantly boosted Ondas’ scale and revenue figures – DZYNE is expected to generate revenue of $191m in 2026 and $300m in 2027 – it included the sale of about 85m Ondas shares, raising dilution fears among existing investors. 

This aggressive acquisition spree was largely funded by a January offering that raised around $959.2m, and has already allowed Ondas to debut products suggestive of its broader ambitions. On 10 June, Ondas launched its LADOS system, a unified control-and-command platform that connects sensors, drones and robotics systems into a single operating environment for autonomous defence missions. 

Q1 2026 earnings, reported in April, hint at what Ondas stands to gain financially from its significantly expanded portfolio. It logged a record $50.1m in revenue, a 10-fold increase year-on-year, and exceeding company guidance by 25%. Pro forma backlog reached $457m, up from $68.3m at the end of 2025 thanks to its M&A gains, and the company had $1.48bn in cash, cash equivalents and investments as of 31 March. However, adjusted EBITDA dipped to a loss of $10.9m, compared to a loss of $7.5m a year ago, and cash used in operating activities ballooned from $6.7m in Q1 2025 to $51.3m.

Following the DZYNE acquisition, Ondas raised its revenue target for the year to $525m from the $390m announced during the Q1 earnings release – already an increase from the prior target of $375m – representing an increase of 670%. It logged $70m in new orders in the four weeks up to 22 July, suggesting that demand for its solutions continues to grow.

Ondas is expected to report Q2 2026 earnings in mid-August. 

ONDS hits turbulence

A quick glance at the performance chart for ONDS stock will give you some idea of the volatility investors have had to contend with. The stock saw its first spikes shortly after it debuted on the Nasdaq via a reverse merger in 2020, rising to the early teens before gradually slumping over the next few years. ONDS shares traded at or below the $1.00 mark for much of 2023-25, before a sharp rally in the second half of 2025 saw it regain historic highs, briefly passing the $14.00 mark in the wake of Q1 earnings before beginning another extended slide. 

As of the 27 July close, ONDS was trading at $8.02, down 17.83% in the year to date but up a whopping 276.53% in the past 12 months. 

All systems go: ONDS vs LHX vs RCAT 

Fellow Florida-based firm L3Harris [LHX] might offer investors an idea of what Ondas hopes to achieve, as a large defence tech name with exposure to space, surveillance and communications, as well as more conventional missile technologies. Typical of a heavyweight in the sector, it dwarfs Ondas in terms of market cap but has much lower growth projections. It is scheduled to report Q2 2026 earnings on 29 July, with analysts expecting EPS of $2.81 on revenue of $5.82bn. In Q1, orders of $7.8bn pushed L3Harris’ backlog to a new record of $40.7bn, a massive sum in comparison to the $457m Ondas logged in the same quarter. 

Red Cat [RCAT], meanwhile, is useful as an exemplar of an unscaled, pure-play drone company. It develops and manufactures a range of AI-supported unmanned vehicles for defence and commercial applications and also looks set to grow considerably over the next year – though not at the dizzy rate forecast for Ondas. In its Q1 2026 earnings, reported in May, it logged revenue of $15.5m, up 849% on a quarter-on-quarter basis; it also achieved gross profit of $1.97m, compared to a loss in the year-ago quarter. However, loss per share of $0.22 fell short of the consensus estimate of $0.13 loss per share, and net loss totalled $26.55m.

Here is how the three stocks compare in terms of fundamentals.

Source: Yahoo Finance

ONDS stock: The investment case

The bull case for Ondas

Armed with a significantly broadened portfolio, new revenue streams and sustained demand, Ondas is expected to see sky-high growth in 2026. The Mistral and DZYNE deals in particular are likely to prove consequential for Ondas’ future, as it now has considerably greater scale on both the hardware and software fronts and direct access to defence prime contracts. 

Even if growth levels off in the medium term, the company could emerge as a diversified defence player with resilient client relationships and reliable profitability. 

Wall Street is largely bullish regarding Ondas’ pivot from drone systems to AI-powered ‘system-of-systems’ service provision. Of the eight analysts surveyed by Yahoo Finance in July, two rated ONDS a ‘strong buy’ and six rated it a ‘buy’, with the average price target of $19.81 representing a 147.01% increase from the 27 July close. 

The bear case for Ondas

For a stock popular among retail investors, ONDS has its fair share of nonbelievers. In late June, Seeking Alpha published a short interest heatmap ranking ONDS as the eighth-most-shorted stock, with short interest at 31.74%. There are concerns that M&A is both artificially inflating the company’s fundamentals and diluting its shares; nearly 85m new shares were introduced by the DZYNE deal, about half of which are set to be freed from lock-up by year-end. This sudden increase of shares could see ONDS stock lose value even if the company continues to outperform over the next few quarters. A sharp rise in cash burn is another warning sign, especially since Ondas has yet to secure reliable profitability. Execution risk is another key concern, especially in the run-up to Q2 earnings – management has already raised the annual revenue target twice this year, putting expectations so high that anything short of a significant beat could see shares plummet.

Conclusion

Aggressive M&A activity in the first half of the year has helped Ondas transform its portfolio and balance sheet, logging an ever increasing backlog for what it intends to be a diversified, vertically integrated defence platform. Nonetheless, ONDS remains a popular target for short-sellers betting that dilution and high expectations could mean that even record-breaking results over the next few quarters may not translate into a meaningful share price increase. 

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