DroneShield Ltd (ASX: DRO) shares are starting the week in the red.
In morning trade, the counter-drone technology company's shares are down 3.5% to $4.31.
Why are DroneShield shares falling?
This high-flying ASX stock is falling on Monday after it released its fourth quarter and full year update for FY 2025.
According to the release, DroneShield reported revenue of $51.3 million, which was a 94% increase on the prior corresponding period. This was the second highest revenue quarter to date.
This brought its total revenue for FY 2025 to $216.5 million, which is an increase of 277% on last year's revenue of $57.5 million. It was also ahead of Bell Potter's estimate of $210 million.
DroneShield's customer cash receipts were strong during the three months. The company received cash of $63.5 million, which was up 142% on the same period last year. This was also the second highest cash receipt quarter to date.
In light of this strong finish to the year, the company's cash receipts for FY 2025 came to a total of $201.56 million.
SaaS growth
Also growing strongly were DroneShield's software-as-a-service (SaaS) revenues, which increased 475% to $4.6 million.
The good news is that management expects this metric to continue growing in 2026. It notes that all new products now carry one or multiple SaaS, which is critical due to the changes in drone technology.
In addition, it highlights that it is expecting the civilian sector to reach up to 50% of revenue over the next five years, and subscription products will be a central part.
Outlook
The outlook for FY 2026 appears positive with DroneShield revealing significant committed revenues.
Its committed revenues for 2026 currently stand at $95.6 million, which is almost half of what it recorded last year. Interestingly, management highlights that it had negligible committed revenues at the start of 2025. So, it is starting the year significantly ahead of how it started the last one.
It also has a massive sales pipeline to try and convert into deals. As of January 2026, DroneShield's sales pipeline was $2.09 billion. This includes 66 projects in Europe valued at $1.3 billion, 127 projects in the United States worth $303 million, and 28 projects with a value of $272 million in Asia.
And DroneShield will be well-placed to capture this growing demand with its manufacturing expansion plans. It intends to grow its manufacturing capability from the current $500m per annum to $2.4 billion per annum production capacity by the end of 2026.
Looking further into the future, DroneShield may need even greater capacity. It highlights that the "Civilian market is a US$28bn TAM opportunity – Safer Skies Act as well as DHS Program Executive Office for Unmanned Aircraft Systems and Counter-Unmanned Aircraft Systems are expected to start driving adoption in the US."
Why are its shares falling?
Today's decline could be due to broad weakness from US defence stocks overnight overshadowing the company's strong performance.
In addition, with DroneShield's cash receipts reaching $201.56 million. in 2025, it triggered the vesting of over 9.2 million options for employees.
