Shares of Unusual Machines (NYSE: UMAC) surged as much as 39% in premarket trading on Thursday following a Wall Street Journal report that the Trump administration is engaged in discussions to provide funding for U.S. drone manufacturers. The talks, which include companies such as Unusual Machines and Neros Technologies, are exploring both debt and equity financing options, though no final agreement has been reached.
The news comes as the Pentagon's proposed fiscal year 2027 budget allocates more than $74 billion for drone and counter-drone technology, a figure that triples last year's allocation and represents the largest single push for the sector to date. The overall defense budget request stands at $1.5 trillion, underscoring the growing strategic importance of unmanned aerial systems (UAS) in modern warfare.
According to the Journal, the discussions involve the Pentagon's Office of Strategic Capital, which provides loans to support critical national security supply chains. The potential funding could go beyond traditional government contracts, signaling a shift toward direct financial support for drone manufacturers. The White House previously ordered agencies to increase purchases of U.S.-built drones, aiming to boost domestic production, exports, and Pentagon spending on lower-cost systems.
Unusual Machines, based in Orlando, Florida, has seen a sharp rise in its stock price amid the news. Donald Trump Jr. is listed as a shareholder and serves on the company's advisory board, adding a layer of political interest to the funding discussions. Other defense-tech stocks also moved higher, with Ondas Holdings (NASDAQ: ONDS), Red Cat Holdings (NASDAQ: RCAT), and Kratos Defense & Security Solutions (NASDAQ: KTOS) gaining between 2% and 20% in overnight trading.
Beyond Unusual Machines, the Wall Street Journal reported that Performance Drone Works and Neros Technologies are also being considered for funding. Performance Drone Works already holds a U.S. Army reconnaissance-drone contract, while Neros has backing from venture capital firm Sequoia Capital. The talks have reportedly stretched for months and involve both private-sector players and government agencies.
Unusual Machines has been aggressively expanding to meet rising demand for domestically sourced drone components. CEO Allan Evans told shareholders earlier this month that first-quarter revenue reached $8.1 million, a 296% increase year-over-year. The company's headcount grew to 141 at the end of March, up from 81 at the end of 2025. However, Evans noted that the company remains "much too small" and will continue to scale operations.
The rapid growth has put pressure on margins. Gross margin fell to 32.8% in the first quarter as the company ramped up manufacturing hiring. GAAP operating loss came to approximately $7.3 million, though investment gains helped the company post positive net income. Unusual Machines ended March with about $222.9 million in cash, following a $150 million equity financing round.
Separately, Powerus announced it has advanced to Phase II of the Pentagon's $1 billion Drone Dominance Program with its MatrixFold drone system. Powerus, which is a partner of Unusual Machines and plans to merge with Aureus Greenway, highlighted the changing nature of warfare, noting the proliferation of low-cost first-person-view drones.
Despite the optimism, the funding talks remain preliminary. Reuters could not independently verify the Wall Street Journal report, and requests for comment from the White House, Pentagon, and the companies involved were not immediately returned. A government equity stake could face additional scrutiny given Unusual Machines' ties to the Trump family, and the companies still need to demonstrate they can scale production for the military without eroding margins. Powerus has also cautioned that the Drone Dominance Program could be altered, scaled back, or even canceled, and that manufacturing shortfalls remain a risk.
