The global defense landscape is evolving with a focus on autonomous systems, drone swarms, and AI-integrated networks. Modern warfare prioritizes speed, data dominance, and scalable systems. Governments are reallocating budgets to support these technologies, creating opportunities for specialized defense companies. Investors are seeing momentum in drone and defense stocks, with mid- and small-cap players driving growth.

AeroVironment (NASDAQ: AVAV) is a key player in tactical unmanned aircraft systems, with a market cap of $19.6 billion. The company’s revenue soared over 150% YOY, reaching $472.5 million. Despite a high valuation, investors are confident in AeroVironment’s growth prospects, as evidenced by a record $3.5 billion in contract awards and raised revenue guidance for fiscal 2026.

Kratos Defense & Security Solutions (NASDAQ: KTOS) is a top performer in the defense sector, focusing on unmanned aircraft, satellite communications, missile defense, and hypersonics. The stock has surged over 72% YTD and 280% over the past year. Analysts caution on valuation but recognize the potential for high-margin revenue growth.

Velo3D (NASDAQ: VELO) provides advanced metal additive manufacturing systems critical for producing complex parts in drones and defense systems. The stock has climbed nearly 57% YTD, driven by partnerships with the U.S. Army and SpaceX. As demand for intricate components grows, Velo3D stands at the forefront of innovation in aerospace manufacturing.

Sidus Space (NASDAQ: SIDU) focuses on low-Earth orbit satellites for defense and commercial clients, with a market cap of $219 million. The stock surged over 250% following its selection for the Missile Defense Agency’s SHIELD program. With high execution risk, Sidus remains a speculative bet with significant growth potential if it secures task orders.

Ondas Holdings (NASDAQ: ONDS) specializes in autonomous systems and private wireless networks for defense applications. The stock has seen a 25% YTD increase and a 450% rise over the past year. With accelerating revenue growth, an expanding backlog, and raised revenue targets, Ondas is transitioning from a speculative breakout to a fundamentally strong investment option.

Read more at Nasdaq: 5 Drone and Defense Stocks Catching Major Momentum in 2026