DroneShield Ltd (ASX: DRO) has quickly become one of the most closely watched growth shares on the ASX.
The company is operating in a market where demand is growing rapidly, and I think its position has strengthened considerably over the past few years.
Here are three big reasons I would consider buying DroneShield shares now.
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A strong position in counter-drone technology
My first reason is DroneShield's position in the counter-drone market.
The company has developed products across handheld detection and defeat, vehicle-mounted systems, fixed-site protection, and command-and-control software. DroneShield says this breadth helps differentiate it from competitors that tend to specialise in individual parts of the counter-drone market.
I think that becomes more valuable as customers look for layered protection rather than a single piece of equipment.
DroneShield is also already working with military, government, and security customers around the world. Its technology has been deployed in the field, giving the company experience and customer relationships that newer competitors would need time to build.
The counter-drone industry will almost certainly become more competitive as defence spending increases. But I believe DroneShield has established itself early enough to have a genuine opportunity to remain one of the important players.
Demand is turning into revenue
The second reason is that the growth story is already showing up in the numbers.
DroneShield expects first-half revenue of $125.8 million, representing growth of 74% compared with the same period last year. More importantly for me, it had already secured $206 million of committed FY26 revenue by 28 July. That is equivalent to 95% of the revenue generated across the whole of FY25.
I like this because it shows that rising concern about drone threats is translating into actual customer orders.
Management now expects FY26 revenue of between $250 million and $270 million.
There will still be some lumpiness because defence contracts can be large and their timing difficult to predict. Even so, I think the growing base of committed revenue gives DroneShield a stronger foundation than it had when the investment case depended more heavily on future opportunities.
It is building for a much larger business
DroneShield also appears to be preparing well for the next stage of growth.
The company moved production into a new 3,000-square-metre Sydney facility this year, a major increase from its previous 400-square-metre site. It has also started manufacturing in Europe and expects US assembly capability to come online during the second half of 2026.
I think that capacity is important. Winning large contracts means much less if the company cannot manufacture and deliver products quickly enough to meet customer demand.
DroneShield is investing heavily in technology at the same time. Its next-generation hardware launches are expected to begin during the second half of 2026 and continue through 2027, while software subscriptions could gradually add more recurring revenue to the business.
That combination of manufacturing scale and continued product development could help DroneShield compete for much larger programs over time, in my opinion.
Foolish takeaway
DroneShield shares are certainly not cheap at around $2.18.
According to CommSec, consensus earnings per share estimates stand at just 0.1 cents in FY26, 0.6 cents in FY27, and 1.8 cents in FY28. Even using the FY28 forecast, the shares trade on a price-to-earnings ratio of roughly 121 times earnings.
That makes this a high-risk investment where execution will need to be exceptional.
But I think DroneShield's market position, rapidly growing demand, and expanding manufacturing capability give it a significant long-term opportunity.
I would still buy the shares, although the valuation and risks mean I would keep the position relatively small.
