AIRO Group: War-Proven Drone Maker Goes Public, but Drone Segment is its Buoyancy

Executive summary

• My grain of salt before you read: The analysis below has color, as other segments, albeit with large TAMs, do not recognize revenue run rates that reflect the cash cow potential. But I think firms like AIRO - if they can work with defense startups focused on AISR, ATR, EW, APNT, and other arrows in the non-kinetic quiver - they can remain relevant and have a hub-and-spoke network model that keeps intel inbound and allows their engineers to stay in the fight that is drones. Drones have evolved to a segment that behaves like cyber with incremental improvements and a measure/counter-measure loop, production costs reduced with each cycle, and sophistication upticks - like a virus.

In 2024, AIRO Group’s revenue more than doubled to over $86 million (up 100% year‑over‑year), driven primarily by sales of its RQ‑35 “Heidrun” micro‑ISR drone.

In June 2025, the company went public on Nasdaq, and its second‑quarter results show $24.6 million of revenue (a 151% increase versus the prior‑year period) and a 61.2% gross margin.

The growth, however, is heavily concentrated in the drone segment; the training, avionics, and electric‑air‑mobility businesses remain small and are burning cash. AIRO carries $572 million of goodwill and intangible assets against total liabilities of $68 million, raising questions about balance‑sheet risk. This report examines the four business units, market context, financials, and investment considerations.

Company overview

AIRO is a diversified defence and aerospace start‑up founded by physician‑turned‑entrepreneur Dr. Chirinjeev Kathuria, who holds an MD from Brown University and an MBA from Stanford. The company operates four segments. The drone division (via subsidiary Sky‑Watch) produces small intelligence‑surveillance‑reconnaissance (ISR) aircraft such as the RQ‑35 Heidrun. The Coastal Defense unit provides close-air support and ISR training to military customers. Aspen Avionics designs certified navigation and timing systems for aircraft. Jaunt Air Mobility develops electric and hybrid VTOL aircraft.

• NRSS – I am beyond intrigued by the physician who went to Stanford for an MBA and now provides CAS, which he no doubt had no idea existed as an acronym and technical domain before his business life. He may be one of these humans whose life is a cyclone, and you, scratch your head and realize these lives happen; they can't be emulated. This is a uniquely American story.

Drone segment: battle‑tested growth driver

The RQ‑35 Heidrun gained prominence after being deployed in Ukraine’s drone war. In June 2025, Ukraine’s “Operation Spider’s Web” used 117 drones to strike Russian air bases, highlighting how inexpensive uncrewed systems can attack strategic targets. AIRO’s Heidrun has been praised for maintaining navigation under GPS‑denied conditions; the company claims none have been shot down. Demand for Heidrun and other micro‑ISR drones drove the drone segment’s revenue above $75 million in 2024. AIRO is expanding U.S. manufacturing and has introduced a medium‑lift cargo drone capable of carrying 250–500 lb over more than 200 miles. In Q2 2025 drone sales reached $22 million, up 216% year‑over‑year.

Training (Coastal Defense): big TAM, small revenue

Coastal Defense provides close‑air‑support (CAS) and ISR training using fighter jets, modified Cessnas and remote‑controlled targets. In early 2025, AIRO completed a 90‑day Naval Special Warfare training mission, flying hundreds of CAS hours and supporting exercises across multiple states. The unit holds a place on the $5.7 billion Combat Air Force/Commercial Air Service IDIQ contract and has secured more than $30 million in Naval Special Warfare awards. Despite the large addressable market, training generated just $1.1 million of revenue in Q2 2025 (up 91% YoY), suggesting near‑term growth may be constrained by contract timing and capacity.

Avionics: strategic partnership, lagging sales

Aspen Avionics develops high‑integrity navigation and display systems. In August 2025, Joby Aviation selected Aspen’s NexNav Mini GPS‑SBAS receiver to deliver precise position, velocity, and timing data to its electric air taxi’s navigation computer. The partnership validates Aspen’s technology and positions it for the emerging eVTOL market. However, avionics revenue declined in Q2 2025 as AIRO postponed R&D and commercialization investments, and the division remains a minor contributor.

Electric air mobility: long‑cycle bet

Through its Jaunt Air Mobility subsidiary, AIRO is developing hybrid and electric VTOL aircraft using Slowed‑Rotor Compound technology with a certification target 2027. Jaunt reports a backlog of more than 300 orders and unveiled a cargo drone with a 250–500 lb payload and 200‑plus‑mile range. The company expanded into Quebec’s YMX International Aerocity to accelerate production. These projects could open new markets but require substantial capital, regulatory approvals, and infrastructure buildout; they have not yet generated material revenue.

Financial performance & balance‑sheet risk

AIRO’s Q2 2025 results illustrate both rapid growth and structural challenges. Total revenue of $24.6 million increased 151% year‑over‑year, and gross margin improved to 61.2%. Drone revenue accounted for roughly 90% of the total, and training accounted for roughly 5%. The company reported a net income of $5.9 million, primarily due to a $15.6 million non‑cash gain on extinguishing non-debt and other fair‑value adjustments; excluding these, AIRO would have recorded a sizable loss. AIRO’s balance sheet shows $572 million in goodwill and intangible assets, reflecting past acquisitions, against total liabilities of $68 million. Cash and restricted cash at quarter‑end were $40.5 million. The heavy intangible asset base creates potential for impairment charges if revenue targets are unmet.

Market & competitive landscape

The conflict in Ukraine has catalyzed demand for small, affordable ISR drones and has spurred U.S. and allied procurement programs. AIRO’s Heidrun competes with products from AeroVironment, DJI, and a proliferation of commercial “first‑person‑view” drones. For context, AeroVironment generated $821 million in fiscal 2025, dwarfing AIRO’s 2024 revenue. This underscores both the market opportunity and the scale of incumbent competitors. AIRO must continue to enhance autonomy and counter‑UAS survivability to maintain differentiation as the market commoditizes.

• NRSS—AeroVironment ($AVAV) is in a league of its own at this point in its journey, combined with the potential short-term war in the South China Sea. AIRO is not a "new" company by a long shot. But, it is not in the AISR, CAS, or kinetic game with the breadth & depth of AiroVironment - a firm Wall Street doesn't understand and does not undervalue. But, it is the most impactful new technology product supplier in the latest modern military product era post-Ukraine. it

Strengths & catalysts

• Battle‑proven drone technology: The Heidrun’s GPS‑denied performance and combat track record underpin AIRO’s credibility and revenue growth.
• Large defense spending tailwinds: NATO members are increasing defense budgets, and the U.S. sees affordable drones as central to future conflict.
• Contract pipeline: Coastal Defense’s place on the $5.7 billion CAF‑CAS IDIQ contract and other NSW awards provide potential upside.
• eVTOL partnerships: Aspen’s deal with Joby and Jaunt’s order book creates optionality in emerging markets.

Risks & challenges

• Concentration in one product line: The drone segment accounts for most revenue; failure of the Heidrun to remain competitive would materially impact results.
• Commoditization of drones: Ukraine’s success with improvised FPV drones shows that low‑cost systems can be effective, potentially eroding pricing.
• Limited scale in training and avionics: The training and avionics businesses are subscale and may not grow quickly enough to justify AIRO’s valuation.
• Capital‑intensive eVTOL projects: Jaunt’s aircraft programs require significant funding and regulatory approvals, delaying returns.
• Balance‑sheet risk: Large goodwill and intangible assets could lead to impairments if projections fall short.

Review

AIRO Group’s IPO success and revenue surge are real, but they hinge almost entirely on the RQ‑35 Heidrun drone. The training, avionics, and electric‑air‑mobility divisions offer intriguing optionality yet contribute little revenue today. Investors and policymakers should view AIRO as a promising niche defence player riding a wartime drone boom rather than a diversified aerospace powerhouse. Maintaining a technological edge, executing on contract opportunities, and prudently managing capital will determine whether AIRO evolves into a lasting enterprise or remains a product‑driven boom‑and‑bust story.