Oppenheimer’s $400 Billion Drone Market Forecast Bets Big on Defense, Names Ondas as Top Pick

I’ve been covering drone industry investment cycles for years, and every few months a new Wall Street note lands with a number big enough to make you do a double take. This one cleared that bar. Oppenheimer just put a $400 billion price tag on the global drone market within a decade, and the thesis behind it connects military drone procurement to commercial AI deployment in a way that most analyst notes don’t bother to do.

Here’s what you need to know:

• The forecast: Oppenheimer projects the global drone total addressable market will grow from $45 billion to $400 billion, split evenly between lower-skies (drones, ground robots, sea systems) and upper-skies (satellites).
• The top pick: Analyst Timothy Horan named Ondas Holdings (NASDAQ: ONDS) as his top drone platform stock, with a consensus price target suggesting 75.9% upside.
• The bigger argument: Drones are the first large-scale deployment of Physical AI, and whoever controls drone swarm technology controls the next generation of warfare and commercial autonomy.
• The source: CNBC reported on the Oppenheimer note, published Thursday, February 26.

Oppenheimer frames drones as the leading edge of Physical AI

The Oppenheimer note argues that the entire drone, robotics, and autonomous systems market will be rebuilt around unmanned platforms that operate remotely or autonomously using AI or pre-programmed technology. The firm positions drones as the fastest-growing category within Physical AI, the same umbrella that includes autonomous vehicles like Waymo and commercial robotics.

The analysts were direct about the stakes: “Whoever wins the drone swarm arms race will win the war.” They argue this requires new mobile edge computing, networking, and blockchain technology, which they describe as a natural evolution from cloud computing that will eventually be commercialized for civilian use.

Ukraine’s war with Russia is the proving ground for this thesis. Oppenheimer cited “swarms of drones/robots/ships that are 1/10th the cost of and often more efficient than legacy military equipment” as evidence that future conflicts will be machine-to-machine. That tracks with what we’ve reported extensively: Ukraine now produces over 1.3 million drones annually, and former florists are building combat drones that destroy Russian armor daily.

Global military spending on defense currently sits at roughly $3 trillion, a 50% increase over the past five years. Oppenheimer expects that figure to double in the next decade. The House authorized $900.6 billion for the Department of Defense in fiscal 2026.

Ondas gets the top pick, and the reasoning is specific

Horan named Ondas his top drone platform stock, calling the company “positioned to dominate the lower-skies market integrated with ground robots, where there will only be a few platform companies with high ROI.” Ondas shares are up 7.1% in 2026. Of the eight analysts covering the stock, three rate it a strong buy and five have a buy rating, per LSEG. The consensus price target suggests 75.9% upside.

The pick is notable because Ondas has been on an aggressive acquisition spree that we’ve been tracking closely. In August 2025, the company invested in Norway’s Rift Dynamics and secured exclusive U.S. distribution for the Wåsp FPV+ attritable drone. In November, Ondas acquired Sentrycs, an Israeli counter-drone company with cyber-based detection deployed in over 25 countries. In December, the company invested up to $11 million in Ukrainian combat drone maker Drone Fight Group, a bet on bringing battle-tested technology to American shores. Most recently, Ondas has been circling Rafael’s Aeronautics drone subsidiary in Israel.

Ondas also secured a prime contract on behalf of a major government entity for a next-generation autonomous drone system for continuous border protection, announced December 3, according to CNBC. The company’s market value has surged to roughly $5 billion after nearly $2 billion in capital raises in 2025. A year before that, it was fighting Nasdaq delisting risk.

Satellite plays round out the drone observability thesis

Horan also picked BlackSky Technology and Iridium Communications as complementary investments in what he called the “drone observability” market, the ability to detect, monitor, and manage drones in real time.

Iridium provides secure satellite connectivity between drones and operators, which becomes an essential function as unmanned systems increasingly operate beyond visual line of sight (BVLOS). The company’s shares are up 29% in 2026, outperforming the broader market. With the FAA’s proposed Part 108 BVLOS rules working their way through the regulatory process, satellite-based command and control links will become even more relevant for long-range drone operations.

BlackSky provides real-time satellite imagery for drone observability, and its shares are up 6.6% year to date. The combination of satellite imaging and connectivity creates a surveillance layer that military and commercial operators will need as drone fleets scale into the millions.

The $400 billion figure requires context

Oppenheimer’s projection of a nearly ninefold market expansion in a decade is aggressive but not without support. The spending pipeline we’ve been tracking tells a consistent story. The Pentagon is spending billions on counter-drone procurement alone, more than 50% higher than a decade ago. The U.S. Army plans to buy at least 1 million drones in the next two to three years. Ukraine has invested $43 billion in its domestic defense industry with a significant drone focus. Germany awarded $950 million in drone contracts despite test failures. The UK committed $6.5 billion to military drones and laser defenses.

The spending is real and accelerating. But Oppenheimer’s $400 billion figure includes hardware, services, AI, and software across air, land, sea, and satellite domains. That is a broad definition of “drone market” that extends well beyond what most people think of when they hear the word drone.

DroneXL’s Take

Oppenheimer’s $400 billion number will get the headlines. What matters more is the thesis behind it: drones as the gateway drug for Physical AI. That framing is correct, and I’ve been watching it play out in real time.

The Ondas pick makes sense on paper. The company has assembled a portfolio that spans FPV strike drones (Drone Fight Group), autonomous security platforms (Optimus), counter-drone systems (Sentrycs and Iron Drone Raider), and now possibly Rafael’s Aeronautics subsidiary. That is an attempt to build a full-spectrum “systems of systems” architecture, the kind of integrated platform that defense procurement officials say they want.

But here’s the uncomfortable truth that Wall Street research notes tend to skip. We’ve documented extensively how venture capital and private equity money flowing into the drone defense sector doesn’t always translate into products that work. The Replicator program’s billion-dollar failure proved that. Germany awarded Stark $317 million despite its drones missing every target in testing. Ondas’s rapid growth from near-delisting to $5 billion valuation in roughly a year invites both admiration and scrutiny.

The satellite picks are the quieter, possibly smarter play. As BVLOS operations scale globally, the connectivity and observability layers that Iridium and BlackSky provide become the infrastructure everyone needs regardless of which drone manufacturer wins any given contract. Within six months, expect “drone observability” to become its own analyst category as military procurement shifts toward integrated airspace management and counter-drone detection networks grow beyond niche defense budgets.

The real question Oppenheimer’s note doesn’t answer: how much of that $400 billion will flow to companies that build things that actually work in combat, and how much will fund the next Replicator?

Editorial Note: AI tools were used to assist with research and archive retrieval for this article. All reporting, analysis, and editorial perspectives are by Haye Kesteloo.