Palladyne's Hits Software Milestone Ahead of U.S. Army Deliveries — Market Talk

The headlines about unidentified drone sightings in New Jersey spreading across multiple states continue with no explanation as to the origin or purpose of these anomalies. It has brought a lot of attention to the topic of drones, whether used for hobbies, delivery, inspection, military, or filming. This has piqued interest among investors, as evidenced by the surge in volume and prices of drone-affiliated stocks. Here are two stocks gaining from the increasing media attention on drones.

Red Cat: Vertically Integrated Drone Products and Services

Drone technology company Red Cat Holdings Inc. provides robotic drone hardware and software for military and commercial operations. The company operates through two wholly owned subsidiaries: Teal Drones and FlightWave Aerospace.

Teal specializes in military drones used for short-range reconnaissance (SRR). It was awarded production selection for the U.S. Army Short Range Reconnaissance Program. FlightWave produces and sells the Edge 130 Enterprise 130 vertical take-off and landing (VTOL) tricopter for commercial and military use. With a two-hour flight tight, its autopilot technology enables entire missions to be planned and executed with just a few swipes.

With a market capitalization of $861.7 million, Red Cat stock is up 1,121.5% year-to-date (YTD) as of Dec. 20, 2024.

Red Cat Stock: Driven by Hope-ium and Wild Forecasts?

For its fiscal second quarter of 2025, Red Cat lost $9.1 million on $1.535 million in revenue. YTD losses were $16.8 million on revenue of $4.3 million. Red Cat completed its acquisition of Flightwave Aerospace. The company also secured a $1 million contract for Edge 130 Blue drones from the United States Army Communications Electronics Command (CECOM). It also secured a tactical funding increase contract from the U.S. Air Force for FlightWave. The company broke ground on building a new manufacturing facility to enhance production capacity to fulfill existing contracts and scale future sales.

For the calendar full year 2025, Red Cat forecasts $80 million to $120 million in sales. This is driven by the Army’s SRR t2 contract, which could add up to $79 million in revenue and $50-$55 million in other project revenues.

Partnering with Palantir

Red Cat announced a partnership with Palantir Technologies Inc. to outfit its drones with Palantir’s Visual Navigation (VNav) software, which uses AI and satellite imagery to navigate drones with precision without GPS.

“The visual navigation that Palantir has is unlike any other. There are 40 companies out there trying to do this right now, but they have access to real-time capabilities in the satellite images. So, if you're on a battlefield and three of the buildings disappear and the road disappears, most visual navigation will not work anymore. We can get real-time updates to that mapping that you're comparing the visual, what the camera sees to what the map you have on board, the Black Widow," CEO Jeff Thompson said.

Ambarella: AI-powered SoCs for Drones

Semiconductor company Ambarella Inc. develops system-on-a-chip (SoC) designs that enable high-definition (HD) video compression and image processing. Their SoCs enable drones to capture high-quality 4K, 6K, and 8K video. AI and computer vision algorithms help drones see and understand their environment, which helps them to detect better and avoid obstacles, track subjects, and fly autonomously. Their chips accelerate deep learning inference in drones. Ambarella’s chips are used in consumer, commercial, and security drones. The company does compete with some heavy hitters in the computer and technology sector, like NVIDIA Co. Jetson AI platforms, QUALCOMM Inc. , and Intel Co. .

FQ3 Results Driven by Edge AI Demand for Inference Processors

For its fiscal third quarter of 2025, Ambarella posted EPS of 11 cents, beating consensus estimates by 8 cents. Revenues rose 63.4% year-over-year to $82.65 million, beating $79.01 million consensus analyst estimates. The surge was due to AI inference processors, which drove revenues by 30% sequentially. The company raised FQ4 revenue guidance to a range of $76-80 million, crushing the $69.13 million consensus estimates.

“Company-specific factors are more than offsetting broad market weakness, and we are reporting 30% sequential revenue growth in fiscal Q3, above the high-end of our guidance range, with strength led again by our customers' new products, especially those incorporating our higher priced AI inference processors," CEO Fermi Wang said.

Wang also said that Edge AI now accounts for 70% of total revenue, a record high, and is expected to drive growth in Internet of Things (IoT) and Auto markets through 2025 and 2026.