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The geopolitical shift spurred by the Trump administration's stance on Ukraine has led to a greater focus on European customers for Australian counterdrone and military defence technology company Droneshield (ASX: DRO), which for the past two financial years generated 70 per cent of its revenue from the US Government.
Recently reporting its highest-ever revenue quarter at $33.5 million, DroneShield has witnessed a significant surge in sales in Europe and Asia, while its CEO Oleg Vornik notes that outside of military applications there has been substantial interest and momentum with airports and drone as first responder (DFR) programs.
In the March quarter the company hired a seasoned ex-Smiths Detection sales executive based in Sydney to run DroneShield's global airport strategy.
Speaking at today's annual general meeting (AGM), Vornik said the Ukraine war continues to demonstrate the potential of drones and counterdrone systems on the battlefield, coupled with significant non-military use cases for the intelligence community, airports, prisons, border security, stadiums, and other facilities.
"With the new US administration spurring Europe to reboot its defence procurement, Europe represents the largest demand driver at present, following the recently announced €800 billion ($1.4 billion) ReArm Europe plan," he said.
"DroneShield already has an on the ground sales team in Denmark, supported by a network of distributors throughout Europe and existing material sales that we have previously announced to the market, and in the process of setting up its first manufacturing facility outside of Australia, in Europe."
He pointed to a "significant ramp up" in Asia as well, especially from countries neighbouring China with multiple governments commencing "counterdrone programs against the threat of small Chinese drones conducting surveillance of sensitive areas, harassment and potential attacks".
"DroneShield has received a $32 million contract on 14 April 2025, following from the $11.8 million contract from the same customer on 29 January 2025," Vornik said.
Despite the new US Government's changed stance on Ukraine, Vornik highlights its record US$1 trillion ($1.5 trillion) defence budget, with drones and counterdrone as priority areas.
Vornik said that tariffs on shipments to the US from Australia, where DroneShield manufactures its products, are "anticipated to be substantially passed through, reflecting the highly differentiated nature of its solutions".
"Historically the largest market for DroneShield, this year in percentage terms will be more balanced, as European and Asian segments surge significantly," he said.
"The current tariffs on Chinese imports into the US are expected to create significant interference within the US supply chain for our competitors, at least short term.
"The US business is led by a seasoned ex-military veteran team, experienced in scaling US Government sales and the associated steps towards larger purchases."
DroneShield also estimates a pipeline of $2.34 billion, which is up 351 per cent on the first quarter of 2024, and its mass production capabilities have reached $500 million across supply chain, inventory and deployment aspects. The group enlarged its Sydney facility in January and has been scaling up outsourced manufacturing.
"Rapid order fulfilments not only enable the company to recognise revenues and receive cash receipts faster, but also increase the likelihood of the customers placing repeat and larger purchase orders with DroneShield," the CEO said.
The company is also spending around $50 on research and development to strengthen its offering. Some 217 of its total staff of more than 300 are engineers.
"On the technology front, the Company continues to significantly invest into the next generation of its offerings, in what has become a rapid “cat and mouse” game between drone manufacturers and counterdrone system makers like DroneShield," Vornik said.
"As described in the last 4C quarterly, DroneShield believes that radiofrequency will remain the core sensor and effector mechanism as drone technology evolves.
"Where the customer has “detect all drones no matter what they could be” requirements and a sufficient budget, DroneShield acts as an integrator, adding third party sensors and effectors into a single system package."
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