Stifel Taps Ondas as Top Pick in Drone Sector Following Key Acquisition

Stifel analyst Jonathan Siegmann has named Ondas Inc. (NASDAQ: ONDS) his top investment pick in the unmanned systems sector, highlighting a strategic acquisition that positions the company to capitalize on growing defense industry demand for precision-strike technology.

The Strategic Acquisition

Ondas announced it will acquire GATE Technologies, an Israeli defense technology firm, in a deal that significantly expands its capabilities. The acquisition of GATE, which specializes in electronic fuzing and safe and arm devices (ESADs) for munitions, is seen by Stifel as a pivotal move.

The key terms of the deal include:

• $205 million in upfront consideration, consisting of $105 million in cash and $100 million in stock.
• Up to an additional $185 million in performance-based earn-outs tied to EBITDA targets through 2028.

GATE Technologies is projected to generate $65 million in revenue for the full year 2026, with forecasts rising to $180 million by 2028. The company's technology is already qualified for use in over 90 global weapon systems.

Analyst's Outlook

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Siegmann rated Ondas a Buy, noting that the acquisition provides a consumable, designed-in component with disclosed profitability. The analyst emphasized that ESAD components are currently in tight supply, positioning Ondas to benefit from strong market demand.

The deal's structure is also strategically sound, according to Stifel. GATE generates approximately 80% of its revenue outside the Middle East via its Poland-based, non-ITAR manufacturing affiliate. This, combined with Ondas's plans for U.S.-based production in the first half of 2027, allows the company to access multiple defense funding pools simultaneously. Siegmann views Ondas as a "differentiated player" with access to battle-proven Israeli technology.

Sector Context

The move comes amid a wave of consolidation among defense contractors looking to meet the rising demand for loitering munitions and small unmanned aerial systems (UAS). The industry is undergoing a broader shift from traditional mechanical systems to software-defined electronic architectures.

This is Ondas's 13th acquisition of an Israeli defense-tech business. The company recently reported record second-quarter 2026 revenue of $83.8 million, beating analyst estimates and prompting it to raise its full-year guidance. Ondas also recently announced a separate agreement to acquire Aran Defense Ltd. for approximately $33 million.