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Can Ondas Convert Its $835M Backlog Into Sustainable Growth?
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Key Takeaways
Ondas' backlog surged 36% sequentially to $835M in Q3 2026, fueled by acquisitions and new contract wins.
ONDS targets at least $1.1B in 2027, backed by over 40% organic growth.
Ondas' gross margin fell to 21.8% from 25.8%, while acquisition integration and backlog conversion pose risks.
Ondas Inc. (ONDS - Free Report) exited the third quarter of 2026 with a backlog of approximately $835 million, up 36% sequentially and more than 12-fold from the fourth quarter of 2025. The company secured $214 million in new orders during the quarter, bringing orders for the first nine months of 2026 to $507 million.
The order momentum, buoyed by acquisitions and organic contract wins, provides greater revenue visibility as the company scales its autonomous defense and security businesses.
The expanding backlog includes contracts across aerial security ($191 million), ISR & Persistent Intelligence ($166 million), precision strike ($358 million) and autonomous ground systems ($120 million). Management emphasized that the backlog comprises customer orders and awarded programs rather than unfunded pipeline opportunities.
On the earnings call, management highlighted that it expects volume shipments under Mistral's U.S. Army Lethal Unmanned Strike indefinite-delivery/indefinite-quantity (“IDIQ”) contract to support near-term revenues. This IDIQ has a maximum potential contract value of $982 million. The company also anticipates beginning volume deliveries under its $140 million combat engineering vehicles program in the fourth quarter.
Ondas secured counter-drone contracts in Europe and Asia in November and received a purchase order under its Digital Bat tactical attack drone platform. Expanding manufacturing capacity, including the planned acquisition of ULTRA airframe manufacturer Stemme, should help accelerate deliveries.
Ondas Holdings Inc. Price, Consensus and EPS Surprise
These developments are expected to support fourth-quarter revenue guidance of more than $250 million and at least $550 million for 2026. Ondas also introduced a 2027 revenue target of at least $1.1 billion, excluding additional acquisitions and incorporating organic growth exceeding 40%.
However, challenges remain. Though management expects 2026 revenues to ramp significantly, much of this depends on the timely integration of multiple acquisitions and the conversion of backlog into revenues. The company itself is investing heavily, with profitability still some time away.
Third-quarter gross margin contracted to 21.8% from 43.1% in the preceding quarter and 25.8% in the year-ago period. The sequential decline reflected higher amortization of capitalized IP, acquired inventory step-ups related to purchase accounting and inefficiencies inn the early stages in ramping large programs.
Increasing backlog bolsters revenue visibility and underscores solid demand. Yet, with execution risks high, the upcoming quarters will be critical in determining whether this backlog translates into growth.
Stiff competition in the drone and autonomous systems space is an added concern. Other drone and defense technology companies, including Draganfly (DPRO - Free Report) and Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) , are also pursuing opportunities arising from expanding demand for autonomous military systems.
Mapping the Competitive Terrain
Draganfly reported third-quarter 2026 revenues of approximately $2.05 million, down 5% year over year, primarily due to lower service revenues. Product sales remained nearly flat at $1.61 million. Gross margin declined to 6.3% from 19.5%, reflecting a one-time non-cash inventory write-down of $366,609. Excluding the write-down, adjusted gross margin would have been 24.2% from 21.5% in the year-ago period.
Draganfly’s recent commercial progress has strengthened its growth prospects in the military drone market. In September, the company announced a five-year contract with the Government of Canada to supply low-cost tactical ISR unmanned aircraft systems to the Canadian Armed Forces. DPRO added that the agreement includes an initial firm commitment for 100 systems, along with associated ground control stations, support equipment, payloads, data links, documentation, spare parts and training. More importantly, the contract provides options for the Canadian Armed Forces to acquire up to 4,900 additional systems, bringing the potential total to 5,000 units.
Kratos Defense generated third-quarter 2026 revenues of $471.8 million, up 35.7% year over year, driven by strength in its government solutions business. Organic revenues increased 23.2%, while bookings reached $1.04 billion, taking backlog to approximately $2.6 billion. KTOS tightened its 2026 revenue guidance to $1.78-$1.81 billion and introduced a 2027 revenue forecast of $2.1-$2.2 billion.
However, Unmanned Systems segment revenues declined to $74.6 million from $87.2 million, reflecting tougher comparisons as significant Valkyrie deliveries recorded in the prior-year quarter. Segment backlog declined sequentially to $357.4 million from $374.6 million.
ONDS’ Price Performance, Valuation and Estimates
ONDS’ shares have lost 13.4% in the past month compared with the the Wireless-National industry’s decline of 5.8%
Image Source: Zacks Investment Research
ONDS is trading at a 12-month forward price/sales ratio of 3.17X, lower than the industry’s multiple of 6.1X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ONDS’ earnings for the current year has been unchanged over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
Can Ondas Convert Its $835M Backlog Into Sustainable Growth?
Key Takeaways
Ondas Inc. (ONDS - Free Report) exited the third quarter of 2026 with a backlog of approximately $835 million, up 36% sequentially and more than 12-fold from the fourth quarter of 2025. The company secured $214 million in new orders during the quarter, bringing orders for the first nine months of 2026 to $507 million.
The order momentum, buoyed by acquisitions and organic contract wins, provides greater revenue visibility as the company scales its autonomous defense and security businesses.
The expanding backlog includes contracts across aerial security ($191 million), ISR & Persistent Intelligence ($166 million), precision strike ($358 million) and autonomous ground systems ($120 million). Management emphasized that the backlog comprises customer orders and awarded programs rather than unfunded pipeline opportunities.
On the earnings call, management highlighted that it expects volume shipments under Mistral's U.S. Army Lethal Unmanned Strike indefinite-delivery/indefinite-quantity (“IDIQ”) contract to support near-term revenues. This IDIQ has a maximum potential contract value of $982 million. The company also anticipates beginning volume deliveries under its $140 million combat engineering vehicles program in the fourth quarter.
Ondas secured counter-drone contracts in Europe and Asia in November and received a purchase order under its Digital Bat tactical attack drone platform. Expanding manufacturing capacity, including the planned acquisition of ULTRA airframe manufacturer Stemme, should help accelerate deliveries.
Ondas Holdings Inc. Price, Consensus and EPS Surprise
Ondas Holdings Inc. price-consensus-eps-surprise-chart | Ondas Holdings Inc. Quote
These developments are expected to support fourth-quarter revenue guidance of more than $250 million and at least $550 million for 2026. Ondas also introduced a 2027 revenue target of at least $1.1 billion, excluding additional acquisitions and incorporating organic growth exceeding 40%.
However, challenges remain. Though management expects 2026 revenues to ramp significantly, much of this depends on the timely integration of multiple acquisitions and the conversion of backlog into revenues. The company itself is investing heavily, with profitability still some time away.
Third-quarter gross margin contracted to 21.8% from 43.1% in the preceding quarter and 25.8% in the year-ago period. The sequential decline reflected higher amortization of capitalized IP, acquired inventory step-ups related to purchase accounting and inefficiencies inn the early stages in ramping large programs.
Increasing backlog bolsters revenue visibility and underscores solid demand. Yet, with execution risks high, the upcoming quarters will be critical in determining whether this backlog translates into growth.
Stiff competition in the drone and autonomous systems space is an added concern. Other drone and defense technology companies, including Draganfly (DPRO - Free Report) and Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) , are also pursuing opportunities arising from expanding demand for autonomous military systems.
Mapping the Competitive Terrain
Draganfly reported third-quarter 2026 revenues of approximately $2.05 million, down 5% year over year, primarily due to lower service revenues. Product sales remained nearly flat at $1.61 million. Gross margin declined to 6.3% from 19.5%, reflecting a one-time non-cash inventory write-down of $366,609. Excluding the write-down, adjusted gross margin would have been 24.2% from 21.5% in the year-ago period.
Draganfly’s recent commercial progress has strengthened its growth prospects in the military drone market. In September, the company announced a five-year contract with the Government of Canada to supply low-cost tactical ISR unmanned aircraft systems to the Canadian Armed Forces. DPRO added that the agreement includes an initial firm commitment for 100 systems, along with associated ground control stations, support equipment, payloads, data links, documentation, spare parts and training. More importantly, the contract provides options for the Canadian Armed Forces to acquire up to 4,900 additional systems, bringing the potential total to 5,000 units.
Kratos Defense generated third-quarter 2026 revenues of $471.8 million, up 35.7% year over year, driven by strength in its government solutions business. Organic revenues increased 23.2%, while bookings reached $1.04 billion, taking backlog to approximately $2.6 billion. KTOS tightened its 2026 revenue guidance to $1.78-$1.81 billion and introduced a 2027 revenue forecast of $2.1-$2.2 billion.
However, Unmanned Systems segment revenues declined to $74.6 million from $87.2 million, reflecting tougher comparisons as significant Valkyrie deliveries recorded in the prior-year quarter. Segment backlog declined sequentially to $357.4 million from $374.6 million.
ONDS’ Price Performance, Valuation and Estimates
ONDS’ shares have lost 13.4% in the past month compared with the the Wireless-National industry’s decline of 5.8%
Image Source: Zacks Investment Research
ONDS is trading at a 12-month forward price/sales ratio of 3.17X, lower than the industry’s multiple of 6.1X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ONDS’ earnings for the current year has been unchanged over the past 60 days.
Image Source: Zacks Investment Research
ONDS currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.