Target Price Raised on C-UAS Solutions Developer
Research Report

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Disclosures for Shaw and Partners, DroneShield Ltd., October 22, 2025

Shaw and Partners Limited ABN 24 003 221 583 (“Shaw”) is a Participant of ASX Limited, Cboe Australia Pty Limited and holder of Australian Financial Services Licence number 236048. ANALYST CERTIFICATION: The Research Analyst who prepared this report hereby certifies that the views expressed in this document accurately reflect the analyst's personal views about the Company and its financial products. Neither Shaw nor its Research Analysts received any direct financial or non-financial benefits from the company for the production of this document. However, Shaw Research Analysts may receive assistance from the company in preparing their research which can include attending site visits and/or meetings hosted by the company. In some instances the costs of such site visits or meetings may be met in part or in whole by the company if Shaw considers it is reasonable given the specific circumstances relating to the site visit or meeting. 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DroneShield Ltd. (DRO:ASX; DRSHF:OTC) provided an update on its Q3/25, another record quarter with positive cash flow and an expanding pipeline, reported Abraham Akra, analyst at Shaw and Partners, in an Oct. 22 research note. Shaw and Partners increased its target price on the Australian counterdrone solutions firm by 39% to reflect both its AU$500 million (AU$500M) revenue potential in full-year 2026 (FY26) and its peer comparables.

"We see DroneShield reaching an inflection point in sales and profitability with the North Atlantic Treaty Organization agreement supplementing the U.S. Department of Defense recommendation and solidifying DRO as a market leader in jamming C-UAS (counter-unmanned aerial systems)," Akra wrote.

Target Price Raised

Shaw and Partners' new fair value target price on DroneShield is AU$5 per share, up from AU$3.60 previously, Akra noted. The new target, he explained, primarily reflects two factors. One is Shaw's increased FY26 revenue estimate to about AU$500M from roughly AU$300M. The other is comparables of other drone companies, including AeroVironment Inc. (AVAV:NASDAQ), Axon Enterprise Inc. (AXON:NASDAQ) and Kratos Defense & Security Solutions Inc. (KTOS:NASDAQ), averaging about 45x next 12 months EBITDA.

Compared to Shaw's new higher target of AU$5 per share, DroneShield was trading at the time of Akra's report at about AU$4.74 per share. From this share price to the revised target, the return is 5.5%.

DroneShield remains a Buy.

The company has 874.6 million shares outstanding, a market cap of AU$4.1 billion (AU$4.1B) and a 52-week range of AU$0.59–6.60 per share.

Revenue Up 1,091% YOY

In his report, Akra presented the highlights of DroneShield's Q3/25 update. In terms of financial results, the C-UAS developer generated AU$92.9M in revenue during the quarter, reflecting a 1,091% increase over its Q3/24 revenue.

Cash receipts came to AU$77.4M. Revenue from the company's software-as-a-service offerings was AU$3.5M. Operating cash flow as AU$20.1M.

Gross profit margin was about 65%.

Global Pipeline is Robust

Akra reported that at Q3/25's end, DroneShield's project pipeline was worth AU$2.55B and comprised 300-plus projects, a mix of near-term orders and longer-cycle programs. Of the total, five projects are for more than AU$100M, the largest for about AU$800M, and 17 exceed AU$30M. Geographies represented in the pipeline are diverse, with Europe accounting for about AU$1.15B, the U.S. accounting about $715M plus and Australia, Asia, the Middle East and Latin America each accounting for a share.

"This pipeline extends through 2026, providing multiyear revenue visibility," Akra wrote.

DroneShield management guided to a 20% rate of converting pipeline opportunities to sales, reported Akra, consistent with Shaw's expectation of 18% conversion. Also, conversion is expected to accelerate as more customers shift to full deployments from evaluations. As for sales, management guided to achieving AU$130M worth in the Q4/25–Q1/26 period.

More Growth Factors

Akra pointed out some of the differentiating factors for DroneShield that should contribute further to growth. One is the company's dedication to ongoing research and development (R&D) and its continued development of new counterdrone innovations. Given this major focus, DroneShield should be able to sustain its strong gross margins, wrote Akra. The company's changing hardware and software technology mix adds high value.

"R&D-driven advancements ensure DroneShield remains ahead of emerging threats, reinforcing pricing power and protecting margins," Akra wrote.

Two, DroneShield strategically is increasing its focus on serving civilian customers, and is well-positioned to capture this market, worth an estimated US$30B, Akra wrote. More and more, civilian entities, such as airports, prisons, event venues and critical infrastructure, are adopting counterdrone technology whereas in the past "regulatory hurdles and budget constraints" generally prevented them from doing so on a significant scale.

Three, DroneShield leads the counterdrone solutions market in nonkinetic drone disruption, also known as drone jamming, the cheapest, most scalable approach in this type of defense, wrote Akra. The company's portable and vehicle kits afford military forces with "credible and rapidly exportable tools" when and where they are needed.

Revisions to Estimates

After release of DroneShield's Q3/25 update, Shaw changed some of its future earnings estimates on the company, reported Akra. The Australian investment and wealth management firm raised its revenue estimates by about 26–30% for both FY26 and FY27. For FY25, FY26 and FY27, Shaw increased EBITDA and net profit after tax.

However, the firm reduced its gross margin estimate for both FY26 and FY27 to 65% from 70% and factored in higher costs due to a growing headcount thanks to the company's global expansion. These changes lowered Shaw's FY26 margin estimate on DroneShield by 288 basis points and its FY27 margin estimate by 187 basis points.