TLDR
- The global drone market is projected to reach $250 billion by 2035, up from $40 billion in 2025
- Barclays calls the shift “Physical AI” — defense contractors are effectively becoming tech companies
- Needham & Company named six drone stocks poised to benefit from an “unmanned supercycle”
- Companies highlighted include AeroVironment, Red Cat, Ondas, Draganfly, Amprius, and Unusual Machines
- Future growth will depend on AI spending, energy supply, and access to critical minerals
The global drone market has doubled in size over the last five years and analysts say it is just getting started. A new report from Barclays puts the market at over $40 billion in 2025, up from roughly $20 billion in 2020, with projections reaching $250 billion by 2035.
The bank describes the shift as “Physical AI” — the integration of artificial intelligence into unmanned aerial vehicles. This is changing what defense companies actually do. Rather than building hardware, they are increasingly building software, compute systems, and autonomous decision-making tools.
Barclays analysts say this makes drone makers look more like tech companies than traditional defense contractors. The costs are front-loaded into AI systems, and future scaling will depend on data centers, energy availability, and critical minerals.
Individual drone units can cost less than $50,000, but building systems capable of deploying autonomous swarms at scale requires major capital investment. That is where analysts see the real market opportunity forming.
Drone technology is now seen as the second biggest growth engine in the tech sector, behind only autonomous vehicles.
Stocks Needham Is Watching
Brokerage Needham & Company released its own report naming six companies it believes are well positioned in what it calls an accelerating “unmanned supercycle.”
AeroVironment is one of the most established names in defense drones. The company makes small tactical drones, loitering munitions, and autonomous systems used by U.S. and allied military forces. Needham expects strong demand for battlefield intelligence and strike drones to keep the company at the center of the market.
Red Cat focuses on military-grade drones built for intelligence, surveillance, and reconnaissance. The company has been expanding production as defense agencies increase procurement. Needham sees upside if large military programs move from testing into full deployment.
Ondas operates across both drone technology and wireless networking. Its platforms are used for infrastructure monitoring, security, and counter-drone work. Needham points to rising global demand for counter-UAS systems as a key growth driver.
Draganfly makes drones for defense, security, and public safety. The company is expanding manufacturing and targeting North American government contracts. Needham believes it could benefit from the push toward domestic drone suppliers.
Amprius takes a different approach. It produces high-performance lithium-ion batteries using silicon anode technology, which offers greater energy density than standard batteries. For drones, this means longer flight times. As unmanned systems grow in use, Needham sees continued demand for advanced battery solutions.
Unusual Machines sits within the supply chain rather than making finished drones. It supplies components used in drone manufacturing. As governments push for domestic sourcing in defense programs, Needham believes the company could benefit across multiple platforms.
What’s Driving the Growth
Barclays analysts point to three constraints that will shape how fast the drone market grows: AI capital expenditure, energy availability, and critical minerals.
The power requirements for AI data centers are large. So is the demand for specialized components. These factors could determine how quickly autonomous drone systems scale over the next decade.
Governments around the world are increasing defense spending and prioritizing autonomous systems. That demand is flowing directly to the companies Needham highlighted.
Red Cat and AeroVironment sit at the more established end of the market, while companies like Amprius and Unusual Machines represent the supporting infrastructure that makes drone deployment possible.
Needham’s report did not assign specific price targets in the published summary, but the broker sees the current environment as a structural growth moment for the unmanned systems sector.
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