The long-running war between Russia and Ukraine escalated fiercely last week when Ukraine launched its largest-ever drone assault against Russia, directly targeting the capital city of Moscow and its critical infrastructure. Over 200 Ukrainian drones penetrated deep into Russian territory, disabling a major oil refinery and forcing Moscow airports to suspend operations.
This unprecedented wave of aerial warfare, once again reflecting a fundamental shift in modern military strategy, has placed a sharp global spotlight on drone manufacturers, particularly those directly involved in these active hostilities, and the exchange-traded funds (ETFs) that hold them.
To understand how this strategy of using powerful, lethal drones these days is impacting the financial markets, investors must look closely at the specific companies enabling these drone deployments and analyze the overall outlook for the uncrewed systems industry.
Companies Arming the Unmanned Frontlines
Several key publicly traded companies are already experiencing surging demand and appear well positioned for sustained growth, thanks to their direct involvement or close technological partnerships with Ukraine. These stocks are:
Red Cat Holdings RCAT: This Puerto Rican drone manufacturer is a strategic partner of Spetstechnoexport (STE), a state-owned enterprise under Ukraine’s Ministry of Defense that serves as a key integrator of Ukraine’s defense technology ecosystem. It is actively co-developing small First-Person View (FPV) strike drones and autonomous swarming software built directly from real-time combat telemetry.
Redwire Corporation RDW: Its Penguin family of UAS has been specifically designated for Ukraine, used as a major component of Ukraine’s defense against Russia since 2022. As of June 2026, Redwire delivered more than 200 combat-proven Penguin UAS to the Ukraine Armed Forces.
AeroVironment AVAV: This company is a key supplier of unmanned aerial systems (UASs) and loitering munitions to Ukraine. AVAV’s Switchblade and Puma drone systems have been widely utilized by Ukrainian forces for tactical reconnaissance and precision strikes. During the third quarter of fiscal 2026, AVAV won a contract worth $874 million from the US Army for its UAS and counter-UAS product lines to support foreign military sales demand. Ukraine, still being a U.S. ally, should benefit from this contract in terms of procuring these UAS and counter-UAS from AVAV.
Ondas Holdings ONDS: This autonomous systems provider announced in December 2025 its intent to invest up to $11 million in Drone Fight Group, a Ukrainian developer of advanced unmanned aerial systems, to support battle-tested Ukrainian defense technologies. To expand its production capacity globally, particularly in Europe, ONDS has formed a joint venture with an initial focus on Germany and Ukraine that combines Ondas Autonomous Systems’ counter-UAS and ISR technologies with Heidelberg’s industrial scale and European production footprint.
Outlook for the Drone Industry
The explosive events in Moscow reflect only a part of a broader shift in global military strategy. As next-generation drones eliminate the risk of friendly casualties while inflicting devastating damage on the enemy, widespread geopolitical instability is driving massive global demand.
Even companies not directly active in Eastern Europe are seeing historic tailwinds due to rising friction in the Indo-Pacific and the Middle East. For example, DroneShield Limited, an Australian defense technology company specializing in counter-drone systems, is seeing solid demand lately for its counter-drone, radio-frequency jamming guns as militaries worldwide scramble to protect their airspace from cheap, weaponized consumer drones.
With countries racing to build massive, autonomous uncrewed fleets, the economics of warfare have permanently tilted toward high-impact drone swarms. Consequently, the growth prospects of the drone industry are immensely bright for the next few years. Valued at $47.4 billion, by the end of 2025, the global military drone market is projected to grow to $98.2 billion by 2033 at an 8.9% CAGR, as per GrandView Research.
Drone ETFs in Spotlight
Considering the growth prospects offered by the global military drone market, the spotlight is on the following drone ETFs:
Defiance Drone and Modern Warfare ETF JEDI
This fund, with net assets worth $163.2 million, offers exposure to 45 publicly traded companies from developed markets that generate significant revenue from the drone and modern warfare industry. RDW holds the first position in this fund, with 12.26% weightage, while ONDS holds the third position, with 7.14% weightage. RCAT holds the seventh spot in this fund, with 4.83% weightage.
The fund charges 69 basis points (bps) as fees. JEDI traded at a volume of 0.28 million shares in the last trading session.
REX Drone ETF DRNZ
This fund, with net assets worth $107.8 million, offers exposure to 51 companies that derive at least 50% of their revenues from drones and UAV or enabling technologies. ONDS holds the first position in this fund, with 13.35% weightage, while AVAV holds the second position, with 12.69% weightage. DroneShield holds the fifth position in this fund, with 5.60% weightage, while RCAT holds the seventh position, with 5.05% weightage
The fund charges 65 bps as fees. DRNZ traded at a volume of 0.17 million shares in the last trading session.
Defiance 2X Daily Long Pure Drone and Aerial Automation ETF DRNL
This fund, with net assets worth $0.67 million, offers exposure to 14 companies directly involved in drone manufacturing, drone software and avionics, aerial automation, autonomous flight systems, and electric vertical take-off and landing (eVTOL) technologies. Joby Aviation holds the first position in this fund, with 20.71% weightage. ONDS holds the eighth position in this fund, with 17.10% weightage, while RCAT holds the 10th position, with 16.82% weightage.
The fund charges 131 bps as fees. DRNL traded at a volume of 0.03 million shares in the last trading session.
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AeroVironment, Inc. (AVAV): Free Stock Analysis Report
Ondas Holdings Inc. (ONDS): Free Stock Analysis Report
Red Cat Holdings, Inc. (RCAT): Free Stock Analysis Report
Redwire Corporation (RDW): Free Stock Analysis Report
Defiance Drone and Modern Warfare ETF (JEDI): ETF Research Reports
REX Drone ETF (DRNZ): ETF Research Reports
Defiance 2X Daily Long Pure Drone and Aerial Automation ETF (DRNL): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).