AeroVironment Inc. (AVAV) just gave investors a fresh reason to pay attention to drone stocks, and to the ETFs that hold them.
Shares of the drone maker jumped more than 10% Thursday after the company reported record fiscal first-quarter revenue of $480.5 million, up 6% year over year and ahead of Wall Street estimates. Adjusted earnings came in at 59 cents per share, versus expectations of 24 cents.
More importantly, AeroVironment's Autonomous Systems business generated $346 million in revenue, accounting for roughly 72% of total sales. The company also ended the quarter with a record $1.5 billion funded backlog, up 37% year over year.
Management expects fiscal 2027 revenue of $2.125 billion to $2.225 billion, broadly in line with the $2.195 billion analyst consensus.
The Bigger Drone Spending Story
The earnings beat comes as governments are rapidly expanding spending on drones and counter-drone technology.
NATO announced in July that member countries will invest more than $40 billion in counter-drone capabilities over the next five years. The alliance also plans to train five times as many drone operators by the end of 2027.
That spending is extending beyond the drones themselves. NATO's procurement plans include systems designed to detect, identify and neutralise drones, bringing radar, sensors, electronic warfare and command-and-control technologies into the same investment theme.
The broader drone market is already a nearly $92 billion industry. Fortune Business Insights projects global drone-market revenue to reach $210.26 billion by 2034, a 9.63% CAGR from 2025.
Drone ETFs Offer a More Diversified Bet
For investors who don't want to pick individual drone stocks, the REX Drone ETF (NASDAQ:DRNZ) offers one of the most direct plays on the theme. AVAV is currently its largest holding at about 13%, alongside Ondas Inc (NASDAQ:ONDS), Next Vision Stabilized Systems and other drone manufacturers and technology providers. The expense ratio attached to the fund is 0.65%.
The Defiance Drone & Modern Warfare ETF (NYSE:JEDI) takes a broader approach. It owns 47 holdings spanning drones, AI-driven warfare, space, cybersecurity, electronic warfare and autonomous systems. AVAV accounts for about 2.84% of the fund, while drone component maker Unusual Machines Inc (NYSE:UMAC) enjoys the largest position at 13%. JEDI has a 0.69% management fee.
That distinction matters. DRNZ is closer to a pure-play drone basket, while JEDI is effectively a bet on the broader technology stack behind modern warfare.
For investors looking for less concentrated exposure, the iShares U.S. Aerospace & Defense ETF (BATS:ITA) and SPDR S&P Aerospace & Defense ETF (NYSE:XAR) provide access to established defense contractors and suppliers that could benefit as drone and counter-drone systems become part of mainstream military procurement.
AeroVironment's latest numbers suggest the drone trade is no longer just a battlefield story. With governments committing billions to autonomous systems and counter-drone defenses, the investment opportunity is increasingly becoming a defense-spending story, and ETFs could be one way to play it without betting everything on a single drone maker.
