DroneShield's Contract Wins Clash With a 15% Short Interest

DroneShield reports USD 251M contracted 2026 revenue and new US Army orders, but a first-half EBITDA loss and 15.46% short interest weigh on shares.

DroneShield has spent September doing what defense contractors are supposed to do: delivering hardware. On September 15, the Australian counter-drone specialist confirmed it had finished installing and formally accepting its DroneSentry-X Mk2 systems onto US Infantry Squad Vehicles, fulfilling part of an existing order with the US Joint Interagency Task Force 401. The contract has since been modified to add three more units to the fleet, deepening the company's foothold with the US military — one of the key markets for mobile counter-drone equipment.

That operational milestone lands alongside a firmer revenue picture. As of September 8, DroneShield reported contracted revenue of USD 251 million for full-year 2026, up from USD 240 million on August 21. The stock has climbed 3.4% since that earlier update. The figure sits comfortably inside management's own 2026 guidance range of USD 250 million to USD 270 million, with a further USD 46 million already locked in for 2027 and beyond.

Europe is contributing too. On September 10, the company booked its first order for RfRecon, its newly launched AI-driven reconnaissance device, from a Western European military customer, with delivery scheduled before the end of 2026.

A Record Top Line, a Bruised Bottom Line

The order book tells only half the story. Three weeks ago, DroneShield posted first-half 2026 results showing record revenue of AUD 125.8 million, a 74% jump year over year. Recurring software and services revenue surged 229% to AUD 11.5 million, underpinned by 4,100 software-capable devices installed worldwide.

Profitability moved in the opposite direction. The half-year brought an adjusted EBITDA loss of AUD 12.4 million and a statutory shortfall of AUD 32.2 million, dragged down by a changed product mix and one-off write-downs. Management has guided to a gross margin recovery to 65% in the second half while reiterating its full-year 2026 revenue target of AUD 250 million to AUD 270 million. The balance sheet carries no debt, backed by AUD 180 million in cash and term deposits.

Short Sellers Take the Other Side

The gap between booming sales and red ink has not gone unnoticed. As of last Tuesday, short interest in DroneShield stood at 15.46% of issued shares, making it the second-most-shorted stock on the ASX. The shares closed Friday's European session at EUR 1.05, down 3.7% on the day and 42% since the start of the year. The stock trades below its 50-day average of EUR 1.18.

Adding to the caution is an ongoing ASIC investigation into DroneShield's November 2025 market disclosures and trading activity. The company says it is cooperating and that it remains unclear what action, if any, might follow.

Analysts are split. Bell Potter reaffirmed a buy rating in late August after the half-year numbers, trimming its 12-month price target to AUD 2.40 from AUD 2.50 on the back of the reiterated revenue guidance. Ord Minnett stayed bearish, cutting its target to AUD 1.50 from AUD 1.60 and keeping a sell rating. Until the promised second-half margin turnaround is proven, short sellers appear content to press their positions.

New CFO, New Scrutiny

To fund its expansion and international delivery obligations, DroneShield is also reshaping its leadership. Rebecca Lowde takes over as Chief Financial Officer on November 2. She brings more than three decades of international finance experience, including prior CFO roles at Afterpay and MYOB.

For now, the market's focus rests on execution: whether delivery deadlines are met and whether margins on the large contracts hold up. The hardware is shipping. The profit has yet to follow.