Red Cat’s Revenue Outlook Just Got Nearly Halved — So What Went Wrong?

• Red Cat stated that the contract it received from the U.S. Army's short-range reconnaissance program, which has now been expanded to $35 million, took a considerable amount of time to finalize.
• The company blamed delays in finalizing Trump’s signature tax and funding bill for the cut in its forecast.
• Despite the delays, this year, RedCat executives expressed confidence about securing several more contracts in the near future.

Red Cat Holdings (RCAT) stock fell nearly 14% in premarket trading on Friday after the firm slashed its annual revenue outlook, plagued by delays in product shipments.

The drone maker slashed its annual revenue forecast to $34.5 million to $37.5 million, down from a previous forecast of $80 million to $120 million. The company also projected fourth-quarter revenue to be between $20 million and $23 million, which is below analysts’ expectations.

US Government Contract Delay Weighs

Red Cat said that the contract it received from the U.S. Army's short-range reconnaissance program, which has now been expanded to $35 million, took a long time to finalize. “The government budget was not signed until July 4, and we're still receiving changes to the Black Widow (drone) as late as the last week in July,” said CEO Jeff Thompson on a call with analysts. “The unanticipated delays shifted our expected revenue recognition by about six to seven weeks.”

The company received a limited-rate initial production (LRIP) contract for the surveillance drones as the U.S. Army steps up drone deployments, with the Trump administration loosening several restrictions on unmanned aircraft systems. The company hopes to secure the full-rate production order by the end of the year, but the federal government shutdown could impact this timeline.

RedCat Remains Bullish About Long-term Demand

Despite the delays, this year, RedCat executives expressed confidence about securing several more contracts in the near future. “Defense spending on autonomous systems is accelerating globally, driven by evolving geopolitical dynamics and the proven effectiveness of drone technology in modern conflicts,” said Chief Financial Officer Christian Ericson.

“The emphasis on domestic manufacturing and supply chain security creates substantial competitive advantages for Red Cat, while our international expansion through NATO approval opens up significant new market opportunities.”

The U.S. Army Secretary Daniel Driscoll said last week that the Pentagon aims to buy at least a million drones over the next two to three years and could buy between half a million and up to millions of drones annually in the subsequent years.

Thompson remained optimistic about the firm’s ability to recover revenue. “Demand has grown significantly in the last 3 months, with the Army alone looking for millions of drones,” he said. The company also said it expects to scale up drone output to 1,000 units a month by early 2026, and its unmanned boat manufacturing is building up, with first deliveries expected in the second quarter of 2026.

What Are Stocktwits Users Saying?

Retail sentiment on Stocktwits about Red Cat moved to ‘bullish’ from ‘bearish’ a day ago.

“Be patient, it will come. The government shutdown is over.  This is a reason why revenue recognition falls short. Best opportunity to load!” one user wrote.

“Had high expectations and that’s on me. This has reacted the same as previous earnings, so I will not panic over the AH price action. Long-term player, long-term winner,” another user said.

RedCat stock has fallen over 40% this year.

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