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Drones have always been a niche military asset. In recent years, however, drones have gone beyond defence and entered government and commercial sectors. 2026 is poised to be a critical year for the growth of drones as an industry. Not only will drones see a bigger role in defence, but they will also benefit from evolving technology and regulatory tailwinds.
Toward the end of World War I, both the U.S. and Great Britain began experimenting with unmanned aerial vehicles (UAVs.) Innovations in drone technology have come in fits and starts since then. During the Vietnam war, drones were deployed as decoys; following 9/11, drones became more critical to surveillance. When Russia invaded Ukraine in 2022, drones became a crucial cornerstone in Ukraine’s defence. Industrial-scale drone production in the country rose from 0.8 million units in 2023 to four million by 2025.
Precedence Research estimates that the UAV drone market in 2025 was $44.54 billion. The compound annual growth rate is estimated to be 16.77%. This means the drone market could hit $209.91 billion by 2025.
Given the invasion of Iran and growing geopolitical strife, defence is poised to be a major player in the ongoing drone story. Last year’s “Big Beautiful Bill” allocated billions for drone infrastructure. It also carved out a huge budget for increased drone spending, including:
2.1 billion for medium unmanned surface vessels;
$1.5 billion for loitering munitions;
$1.5 billion for unmanned underwater vehicles; and
$1.3 billion for counter-UAS systems.
In Europe, the European E5 LEAP programme seeks to develop low-cost air defence systems, with an aim for 2027 for project completion. NATO has targeted defence spending at 5% of GDP, which is up from 2%. The guideline puts 3.5% of those budgets towards core defence, with 1.5% for non-traditional defence that includes cybersecurity, AI, quantum computing, and autonomous technology.
In a recent webinar, Vettafi Head of Index Product Strategy Jane Edmonson and Head of BD EMEA & Asia Axel Belorde outlined drones' newly central role in global defence. "The global market is now favoring unmanned aerial systems over things like expensive fighter jet programs and missile programs,” Edmonson said. “Significant investment is flowing into things like drone swarms, surveillance, counter-drone technologies. And the other key element here is this integration of AI capabilities, which allows for advanced data collection and autonomous decision making, literally on the fly."
Fighter jets and missile systems are being replaced by UAVs. Edmonson noted that drones provide an “asymmetric payoff” compared to an expensive fighter jet. Legacy models of defence are expensive, often costing more than the assets they destroy. An F-35, for example, uses about 20% titanium and 400 kg of rare earth minerals. A destroyer demands as much as 2,600 kg. Most drones need only a few grams of rare earth elements per unit, making the production of a drone significantly more affordable.
The Arizona-based SpektreWorks builds LUCAS drones (Low-cost Unmanned Combat Attack System), which have a price tag of approximately $35,000. A Tomahawk cruise missile, meanwhile, costs between $2 and $2.5 million. Compared to a swarm of drones, traditional air defences are economically unsustainable.
With drones increasingly deployed on battlefields, the defence industry has benefited from an urgent market for counter-drone technology, or C-UAS. These defence innovations require radar, radio frequency analysers, AI-driven jamming technology, interceptor drones, and kinetic interception and threat neutralization technology.
The companies developing the multi-layered defence architectures of the future include:
Dedrone (Axon Enterprise);
DroneShield;
RTX (Raytheon);
Lockheed Martin;
Northrop Grumman;
D-Fend Solutions; and
Ondas.
These firms are working to innovate technology. Belorde has cautioned that advancements in AI cut both ways for drone technology. The same technology that makes a counter drone more effective can also be leveraged to empower hostile actors.
With the 2026 World Cup happening in the U.S. amid a moment of heightened geopolitical tensions, counter drones could see a surge in investment. The 2026 world cup is a designated Nation Special Security Event (NSSE.) Transportation hubs and stadiums could become targets for hostile actors, underscoring the importance of counter drones.
The value of the commercial drone market is surging. Currently valued at roughly $30 billion, it is expected to grow an additional $55 billion by 2030. The drone services market is also expected to see enormous growth by 2030. Currently also valued around $30 billion, drone services are expected to be worth north of $100 billion by the end of the decade.
A recent Drone Industry Global Drone Market Report noted that energy, construction, and agriculture sectors are making heavy use of commercial drones, but just about every major industry is leveraging their capabilities.
In the webinar, Belorde discussed the Swiss company Cerity as a prime example of drones generating tangible operational value for the companies that deploy them. Verity’s drones weigh under two pounds and can take inventory with 99.9% accuracy, saving roughly $500,000 in working capital per site. They are estimated to shrink by $300,000.
Belorde also noted that companies like Gecko Robotics offer drones that can handle facility inspections for nuclear plants, chemical facilities, and offshare platforms. These inspections enable predictive maintenance and save companies millions in avoided downtime and repair costs.
Another industry that has embraced the power of the drone is entertainment. Drone shots have become a staple of film and television production, while the drone light show market is expected to reach a valuation of $6.52 billion by 2032. Some of this demand is driven by the need for an environmentally friendly alternative to fireworks.
All around the globe, governments are altering regulations in an attempt to harness the innovation of drones. In the United States, the FAA is finalizing part 108 rules to enable routine beyond visual line-of-sight flights. New regulations are set to increase airspace visibility for large-scale commercial drone activity, and night and over-people flight approvals are expanding the urban use of drones. A ban of Chinese-made commercial drones is also setting the stage for domestic manufacturing to see major tailwinds.
Europe is developing the U-space drone traffic system and the EU Drone Strategy 2.0. These will build digital infrastructure and policy frameworks for commercial drone use. China, meanwhile is reforming its low-altitude airspace rules, while the U.K.’s Future of Flight Action Plan seeks to integrate drones and eVTOL aircraft into transport networks.
The Vettafi Drone Index (DRONES) tracks the price movements of a portfolio of global companies with exposure to drones and UAVs. The index contains companies that are engaged in drone/UAV manufacturing and enabling technologies. To be eligible for the index, constituents must have a minimum thematic exposure as follows:
Constituent business operations must derive more than 20% of their revenues from drones/UAVs or enabling technologies.
Constituents must be a defense company with a division/program for R&D of drones/UAVs.
For more information about the VettaFi Drone Index (DRONES), click here.
Drones and UAVs are poised to be an essential part of the future. In 2026, tailwinds from innovations and evolution in defence thinking, advancements in the commercial sector, and the onset of more friendly regulations around the world are setting the stage for massive growth for the drone industry. As defence budgets increase and AI enhances drone capabilities by the day, investors are looking at a multi-decade growth story.
As Belorde noted, “You cannot afford to lose the automation race.”
Drones have always been a niche military asset. In recent years, however, drones have gone beyond defence and entered government and commercial sectors. 2026 is poised to be a critical year for the growth of drones as an industry. Not only will drones see a bigger role in defence, but they will also benefit from evolving technology and regulatory tailwinds.
Toward the end of World War I, both the U.S. and Great Britain began experimenting with unmanned aerial vehicles (UAVs.) Innovations in drone technology have come in fits and starts since then. During the Vietnam war, drones were deployed as decoys; following 9/11, drones became more critical to surveillance. When Russia invaded Ukraine in 2022, drones became a crucial cornerstone in Ukraine’s defence. Industrial-scale drone production in the country rose from 0.8 million units in 2023 to four million by 2025.
Precedence Research estimates that the UAV drone market in 2025 was $44.54 billion. The compound annual growth rate is estimated to be 16.77%. This means the drone market could hit $209.91 billion by 2025.
Given the invasion of Iran and growing geopolitical strife, defence is poised to be a major player in the ongoing drone story. Last year’s “Big Beautiful Bill” allocated billions for drone infrastructure. It also carved out a huge budget for increased drone spending, including:
2.1 billion for medium unmanned surface vessels;
$1.5 billion for loitering munitions;
$1.5 billion for unmanned underwater vehicles; and
$1.3 billion for counter-UAS systems.
In Europe, the European E5 LEAP programme seeks to develop low-cost air defence systems, with an aim for 2027 for project completion. NATO has targeted defence spending at 5% of GDP, which is up from 2%. The guideline puts 3.5% of those budgets towards core defence, with 1.5% for non-traditional defence that includes cybersecurity, AI, quantum computing, and autonomous technology.
In a recent webinar, Vettafi Head of Index Product Strategy Jane Edmonson and Head of BD EMEA & Asia Axel Belorde outlined drones' newly central role in global defence. "The global market is now favoring unmanned aerial systems over things like expensive fighter jet programs and missile programs,” Edmonson said. “Significant investment is flowing into things like drone swarms, surveillance, counter-drone technologies. And the other key element here is this integration of AI capabilities, which allows for advanced data collection and autonomous decision making, literally on the fly."
Fighter jets and missile systems are being replaced by UAVs. Edmonson noted that drones provide an “asymmetric payoff” compared to an expensive fighter jet. Legacy models of defence are expensive, often costing more than the assets they destroy. An F-35, for example, uses about 20% titanium and 400 kg of rare earth minerals. A destroyer demands as much as 2,600 kg. Most drones need only a few grams of rare earth elements per unit, making the production of a drone significantly more affordable.
The Arizona-based SpektreWorks builds LUCAS drones (Low-cost Unmanned Combat Attack System), which have a price tag of approximately $35,000. A Tomahawk cruise missile, meanwhile, costs between $2 and $2.5 million. Compared to a swarm of drones, traditional air defences are economically unsustainable.
With drones increasingly deployed on battlefields, the defence industry has benefited from an urgent market for counter-drone technology, or C-UAS. These defence innovations require radar, radio frequency analysers, AI-driven jamming technology, interceptor drones, and kinetic interception and threat neutralization technology.
The companies developing the multi-layered defence architectures of the future include:
Dedrone (Axon Enterprise);
DroneShield;
RTX (Raytheon);
Lockheed Martin;
Northrop Grumman;
D-Fend Solutions; and
Ondas.
These firms are working to innovate technology. Belorde has cautioned that advancements in AI cut both ways for drone technology. The same technology that makes a counter drone more effective can also be leveraged to empower hostile actors.
With the 2026 World Cup happening in the U.S. amid a moment of heightened geopolitical tensions, counter drones could see a surge in investment. The 2026 world cup is a designated Nation Special Security Event (NSSE.) Transportation hubs and stadiums could become targets for hostile actors, underscoring the importance of counter drones.
The value of the commercial drone market is surging. Currently valued at roughly $30 billion, it is expected to grow an additional $55 billion by 2030. The drone services market is also expected to see enormous growth by 2030. Currently also valued around $30 billion, drone services are expected to be worth north of $100 billion by the end of the decade.
A recent Drone Industry Global Drone Market Report noted that energy, construction, and agriculture sectors are making heavy use of commercial drones, but just about every major industry is leveraging their capabilities.
In the webinar, Belorde discussed the Swiss company Cerity as a prime example of drones generating tangible operational value for the companies that deploy them. Verity’s drones weigh under two pounds and can take inventory with 99.9% accuracy, saving roughly $500,000 in working capital per site. They are estimated to shrink by $300,000.
Belorde also noted that companies like Gecko Robotics offer drones that can handle facility inspections for nuclear plants, chemical facilities, and offshare platforms. These inspections enable predictive maintenance and save companies millions in avoided downtime and repair costs.
Another industry that has embraced the power of the drone is entertainment. Drone shots have become a staple of film and television production, while the drone light show market is expected to reach a valuation of $6.52 billion by 2032. Some of this demand is driven by the need for an environmentally friendly alternative to fireworks.
All around the globe, governments are altering regulations in an attempt to harness the innovation of drones. In the United States, the FAA is finalizing part 108 rules to enable routine beyond visual line-of-sight flights. New regulations are set to increase airspace visibility for large-scale commercial drone activity, and night and over-people flight approvals are expanding the urban use of drones. A ban of Chinese-made commercial drones is also setting the stage for domestic manufacturing to see major tailwinds.
Europe is developing the U-space drone traffic system and the EU Drone Strategy 2.0. These will build digital infrastructure and policy frameworks for commercial drone use. China, meanwhile is reforming its low-altitude airspace rules, while the U.K.’s Future of Flight Action Plan seeks to integrate drones and eVTOL aircraft into transport networks.
The Vettafi Drone Index (DRONES) tracks the price movements of a portfolio of global companies with exposure to drones and UAVs. The index contains companies that are engaged in drone/UAV manufacturing and enabling technologies. To be eligible for the index, constituents must have a minimum thematic exposure as follows:
Constituent business operations must derive more than 20% of their revenues from drones/UAVs or enabling technologies.
Constituents must be a defense company with a division/program for R&D of drones/UAVs.
For more information about the VettaFi Drone Index (DRONES), click here.
Drones and UAVs are poised to be an essential part of the future. In 2026, tailwinds from innovations and evolution in defence thinking, advancements in the commercial sector, and the onset of more friendly regulations around the world are setting the stage for massive growth for the drone industry. As defence budgets increase and AI enhances drone capabilities by the day, investors are looking at a multi-decade growth story.
As Belorde noted, “You cannot afford to lose the automation race.”
