DroneShield’s Valuation Soars Amidst Record Backlog and Key Government Selection

The equity of counter-drone technology firm DroneShield continues its remarkable ascent, presenting investors with a story of explosive growth juxtaposed against a stretched valuation. Year-to-date, the shares have advanced approximately 43%, building upon a staggering 555% surge over the preceding twelve-month period. This momentum underscores significant market optimism while simultaneously widening the gap between the company's current financial performance and its market capitalization, raising questions about sustainability.

On an operational level, DroneShield enters the new year with unprecedented visibility. As of the beginning of 2026, the company's order backlog stands at a record AUD 97.7 million in secured revenue. Recent contract announcements solidify this robust position:

• A USD 8.2 million agreement with a Western military customer (December 2025).
• An AUD 6.2 million contract for an Asia-Pacific military client, secured through a distribution partner.
• A substantial USD 49.6 million award from a European military contract, with delivery scheduled for Q1 2026.

Beyond these firm orders, management points to a potential sales pipeline of roughly AUD 1.2 billion for the 2025/26 financial years. However, as is characteristic of the defense sector, the timing for converting these opportunities remains unpredictable.

Catalyst: Inclusion in Australian Defense Panel

A significant recent catalyst for the share price was a 7.8% jump on January 16, 2026. This move followed confirmation of DroneShield's selection for the Australian Department of Defence's LAND 156 Counter-small Unmanned Aerial Systems (C-sUAS) Services Standing Offer Panel. The stock closed at AUD 4.40 that day, pushing the company's market capitalization toward AUD 4 billion.

This panel appointment designates DroneShield as a Category 2 C-sUAS provider, creating a streamlined procurement pathway for the Defence department to acquire hardware, software, and command-and-control systems directly. The broader government initiative plans to allocate over AUD 1 billion toward counter-drone capabilities in the coming decade.

Critical details of the LAND 156 selection include:

• DroneShield is the sole specialized counter-drone provider among 23 panel participants.
• It covers a complete suite of solutions from hardware to software.
• The panel placement does not constitute a firm order or guarantee immediate revenue.
• It facilitates faster procurement processes for future defense projects.

Valuation and Volatility in Focus

The powerful rally has dramatically expanded the company's valuation multiples. With trailing twelve-month revenue of approximately AUD 100 million, the stock now trades at nearly 40 times sales.

Should investors sell immediately? Or is it worth buying DroneShield?

The share price trajectory over the past year highlights both its dynamic potential and inherent volatility:

• January 2025: AUD 0.67
• October 2025 (High): AUD 6.40
• December 2025 (Low): AUD 3.07
• January 16, 2026: AUD 4.40

This price action reflects the lumpy nature of defense contract awards and shifting sentiment toward the counter-drone sector. DroneShield's high beta coefficient indicates it is more volatile than the broader market, amplifying both upward and downward moves. In 2025, it was among the top performers within the ASX-200 index.

Technical Perspective Shows Overbought Conditions

From a chart analysis perspective, the equity appears overextended in the near term. The Relative Strength Index (RSI) resides in the mid-70s, signaling overbought conditions.

The share price trades significantly above its key moving averages:

• 20-day average: ~AUD 3.11
• 50-day average: ~AUD 2.78
• 200-day average: ~AUD 2.81

Immediate support is viewed around AUD 3.90, with a more substantial support zone near AUD 2.70. On the upside, resistance is expected to cluster between AUD 4.50 and AUD 5.00.

The critical factor for the coming months will be the conversion rate of the record backlog into recognized revenue and whether framework agreements like LAND 156 translate into concrete purchase orders. Investors are betting heavily on this execution, as evidenced by the premium valuation.