Key Points
The Pentagon is spending billions on drones, and Red Cat could benefit from it.
The Air Force in particular wants $338.8 billion next year.
Red Cat Holdings (NASDAQ: RCAT) stock jumped 6.4% through 12:10 p.m. ET Wednesday, two weeks ahead of its Q2 2026 earnings report and one day after the Air Force announced a 37.6% increase in its funding request for fiscal 2027.
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The Air Force is getting bigger
The U.S. Air Force (USAF) announced yesterday it's requesting $338.8 billion. $71.1 billion of this is earmarked for the U.S. Space Force (USSF), but the bulk $267.7 billion would go to USAF itself.
Granted, most of the money will go to companies other than Red Cat. $3.9 billion will go toward buying KC-46A aerial refueling tankers from Boeing(NYSE: BA), for example, and $7.4 billion will be spent on F-35 stealth fighters from Lockheed Martin(NYSE: LMT).
As regards drones, $2.7 billion will fund developing Collaborative Combat Aircraft -- drones larger than those Red Cat builds, designed to operate in tandem with piloted fighter jets.
But as AP reports, smaller drones aren't left out of the picture -- far from it. Across the Pentagon, the military may spend as much as $74 billion on drones and drone defense systems, reports the Associated Press.
What does it mean for Red Cat stock?
If Red Cat can claim even a sliver of that money next year, it could do wonders for the stock, which made only $41 million in sales last year. And sales are already exploding.
When Red Cat reports earnings next month, analysts forecast revenue growth of 952% to $18.8 million. This won't be enough to turn Red Cat profitable. Wall Street doesn't see that happening before 2029 at the earliest.
But so long as the Pentagon keeps spending, and revenues keep rising, it could be enough to keep investors happy with Red Cat.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
