ONDS compresses OAS adjusted EBITDA profitability timeline to Q1 2027 as margins improve, but rising costs and near-term losses raise questions on execution.
Ondas Inc ONDS has accelerated its profitability timeline, now expecting its Ondas Autonomous Systems (“OAS”) segment to deliver adjusted EBITDA profitability by the first quarter of 2027 — roughly six months ahead of the earlier target. Expectations for company-wide adjusted EBITDA profitability were unchanged, with the target being the first quarter of 2028.
The key factor driving this is the company’s progress at the product level. Management noted that it achieved adjusted EBITDA profitability at the product company level in the first quarter of 2026, two quarters ahead of the initial timeline. This implies that the underlying businesses are delivering profits even amid heavy growth investments.
Additionally, the company is targeting long-term adjusted EBITDA margins of 25% to 30%, reflecting confidence in its business model. Gross margins reached roughly 49% in the first quarter of 2026, driven by a favorable sales mix and revenue scaling across the expense base. Looking forward, management is targeting levels above 50% and potentially trending toward 60% over time.
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Nonetheless, the path to profitability is not without challenges, at least in the near term.
Ondas faces rising operating costs as it invests in personnel and infrastructure capabilities to capture additional market opportunities. First-quarter operating expenses rose substantially to $67 million from $11.8 million reported in the prior-year quarter. This led to an operating loss of $42.7 million, which widened from $10.3 million year over year. Consolidated adjusted EBITDA loss was $10.9 million, up from a loss of $7.5 million in the first quarter of 2025.
Amid rising costs, management expects adjusted EBITDA losses to stay elevated in the second quarter of 2026, likely marking the peak loss period. Beyond that, ONDS expects improvement throughout the year, driven by higher revenues, gross profit and operational scale. The first-half adjusted EBITDA performance reflects expense front-loading ahead of a revenue ramp expected in the second half of 2026 and beyond, noted management.
For 2026, revenues are now expected to be at least $390 million (up from the earlier target of at least $375 million), with a backlog of $457 million.
Ondas needs to watch out for increasing competition in the autonomous and unmanned systems space. Structural tailwinds are driving demand for drones, counter-UAS and aerial security, loitering munitions, unmanned ground robotics and ISR and Surveillance systems.
Draganfly DPRO is a Canada-based company that develops innovative drone solutions and software. DPRO has 5-plus drone systems that are all NDAA-compliant. As the United States and NATO aggressively eliminate non-compliant Chinese systems from critical infrastructure, this compliance advantage becomes a moat.
First-quarter 2026 revenues came in at $2.3 million, up 49.4% year over year, driven by momentum in product sales. Gross margin shrank to 15% from 20% reported in the prior-year quarter, owing to an unfavorable sales mix and a one-time, non-cash write-down of inventory. Adjusted gross margin was 19.6% compared with 17.5% reported year over year.
Kratos Defense & Security Solutions KTOS is one of the well-known names in this space. The broader demand backdrop strongly supports sustained growth in Kratos’ drone business. At the heart of this business lies the XQ-58A Valkyrie combat collaborative aircraft, which has secured a key role in the U.S. defense ecosystem.
First-quarter 2026 revenues from the Unmanned Systems segment came in at $82.6 million, up 30.9% year over year on an organic basis, mainly driven by Valkyrie activity. The segment delivered adjusted EBITDA of $5.2 million, up from $1.7 million reported year-ago, driven by revenue mix and volume.
Shares of ONDS have lost 9.6% in the past month compared with the Wireless-National industry’s decline of 5.1%
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In terms of the forward 12-month Price/Sales ratio, ONDS is trading at 9.47, considerably higher than the industry’s multiple of 1.68.
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The Zacks Consensus Estimate for ONDS’ earnings for the current year has been revised upwards over the past 60 days.
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ONDS currently has a Zacks Rank #4 (Sell).
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