DroneShield Wins US Army Acceptance as Short Sellers Dig In

DroneShield completed US acceptance of its counter-drone systems on Infantry Squad Vehicles, but first-half losses and heavy short interest weigh on shares.

DroneShield has cleared a significant operational hurdle in the United States, completing the installation and formal acceptance of its counter-drone systems aboard US military vehicles. The company confirmed that DroneSentry-X Mk2 units have been fitted to Infantry Squad Vehicles, bringing the program to initial operational capability under its existing contract with the Joint Interagency Task Force 401 (JIATF-401). A contract modification is now in the works to add three more units to the order.

For the Australian defense specialist, the milestone amounts to proof that its hardware performs under real military conditions — a credential that carries weight with prospective government buyers. The market, however, offered little applause. The stock changed hands at EUR 1.04, down 0.3% on the day, and remains 42% lower since the start of the year.

A Pipeline That Keeps Growing

The US acceptance fits a broader run of commercial wins. On September 10, DroneShield booked its first order for RfRecon, its AI-driven reconnaissance device, with delivery to an existing Western European military customer slated before the end of 2026. Days earlier, the company told investors that contracted revenue for fiscal 2026 had crossed the USD 250 million mark, reaching USD 251 million — inside its own guidance range of USD 250 million to USD 270 million.

The company is also widening its technological footprint. Last Thursday it announced a partnership with Australian specialist AIM Defence to make its DroneSentry platform compatible with the partner's Fractl high-energy laser, setting the stage for joint demonstrations and deployments with selected government and military customers. On the leadership front, Rebecca Lowde takes over as Chief Financial Officer on November 2.

Record Revenue, Red Ink Below

Those operational wins sit alongside a half-year report that laid bare the tension in the business. Revenue for the first half of fiscal 2026 hit a record AUD 125.8 million, up 74% year over year, while recurring software and services revenue climbed 229% to AUD 11.5 million, underpinned by 4,100 software-capable devices installed worldwide.

Profitability moved the other way. DroneShield posted an adjusted operating loss before interest, taxes, depreciation and amortization of AUD 12.4 million, alongside a statutory deficit of AUD 32.2 million, weighed down by a shifted product mix and one-off write-downs. Management has guided for gross margin recovery to 65% in the second half and reiterated its full-year revenue target of AUD 250 million to AUD 270 million. The balance sheet carries no debt, with AUD 180 million in cash and term deposits.

Short Sellers Take the Other Side

That gap between soaring sales and bottom-line losses has made the stock a target. As of last Tuesday, reported short positions stood at 15.46% of issued shares, making DroneShield the second most shorted name on the Australian Securities Exchange. The shares closed at EUR 1.05 in European trading on Friday, a 3.7% decline on the session.

Adding to investor caution is an ongoing review by the Australian Securities and Investments Commission into the company's market disclosures and trading activity from November 2025. DroneShield said it is cooperating with the regulator and noted it remains unclear what measures, if any, might follow.

Analysts are split on what comes next. 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 confirmed revenue guidance. Ord Minnett stayed bearish, cutting its target to AUD 1.50 from AUD 1.60 and keeping a sell recommendation. Until the promised second-half margin turnaround shows up in the figures, short sellers appear content to press their positions.