Red Cat (NASDAQ:RCAT – Get Free Report) issued its earnings results on Thursday. The company reported ($0.26) EPS for the quarter, missing the consensus estimate of ($0.21) by ($0.05), Zacks reports. The firm had revenue of $20.20 million during the quarter, compared to analyst estimates of $22.65 million. Red Cat had a negative net margin of 136.26% and a negative return on equity of 39.64%.
Here are the key takeaways from Red Cat’s conference call:
- Record revenue and improving margins: Q2 revenue rose 520% year over year to $20.2 million, while gross margin improved to 16.1% from 11.6% a year ago and 12.7% in Q1. Management attributed the gains to higher production volumes, overhead absorption, and manufacturing efficiencies.
- Management maintained its $150 million–$180 million 2026 revenue target and expressed confidence in a substantial second-half ramp, citing approximately $50 million–$80 million of potentially shippable drone inventory, expanding defense demand, and expected contract activity in August and September.
- Red Cat reported increasing customer diversification: Army revenue represented roughly 50% of first-half sales versus 73% in 2025, while Japan and NSPA Europe became important customers. The company also cited international activity across Japan, Korea, Taiwan, the Middle East, and Ukraine.
- Product and manufacturing expansion continued: production capacity reached approximately 270,000 square feet, Blue Ops moved its Variant 7 maritime platform into mass production, and the company advanced Black Widow, Hellcat, APM swarm autonomy, and Quaze wireless charging technologies.
- Operating expenses increased to approximately $41.9 million, including $14.2 million of R&D spending, and the company continued to operate at a loss despite positive gross profit. Management is targeting approximately 30% gross margin and division-level profitability by late 2026, but acknowledged that contract awards and delivery timing remain uncertain.
Red Cat Price Performance
Red Cat stock traded up $0.54 during trading hours on Friday, reaching $9.21. The company had a trading volume of 10,232,080 shares, compared to its average volume of 7,984,091. Red Cat has a 12-month low of $5.77 and a 12-month high of $18.78. The company has a 50-day moving average price of $9.89 and a 200 day moving average price of $11.83. The firm has a market cap of $1.13 billion, a price-to-earnings ratio of -11.37 and a beta of 1.31.
Red Cat News Roundup
- Positive Sentiment: HC Wainwright reaffirmed its Buy rating and maintained a $20 price target, implying substantial upside from the recent share price. The endorsement suggests the firm remains confident in Red Cat’s growth prospects. Benzinga article
- Positive Sentiment: Red Cat reported 527% year-over-year revenue growth for the second quarter. Gross margin rose 39% from the prior-year quarter and increased 27% sequentially, indicating improving operating performance and demand for its drone products. Business Insider article
- Neutral Sentiment: Management guided for fiscal 2026 revenue of $150 million to $180 million, broadly surrounding the $155.4 million analyst consensus. The range signals continued expansion but does not clearly represent a major forecast upgrade.
- Neutral Sentiment: Needham lowered its price target from $20 to $15 while retaining a Buy rating. The target reduction reflects more cautious valuation assumptions, though the firm still sees meaningful upside. The Fly article
- Negative Sentiment: Second-quarter results fell short of expectations: Red Cat reported an adjusted loss of $0.26 per share versus the expected $0.21 loss, while revenue of $20.2 million missed the $22.65 million consensus. The company remains deeply unprofitable, which could pressure the stock despite its growth rate. Zacks article
Insider Activity
In other news, Director Paul Funk II sold 165,028 shares of the firm’s stock in a transaction that occurred on Thursday, June 11th. The shares were sold at an average price of $11.50, for a total value of $1,897,822.00. The sale was disclosed in a legal filing with the SEC, which is accessible through this link. Corporate insiders own 12.50% of the company’s stock.
Hedge Funds Weigh In On Red Cat
Several hedge funds and other institutional investors have recently modified their holdings of RCAT. IFP Advisors Inc increased its position in Red Cat by 181.1% during the 3rd quarter. IFP Advisors Inc now owns 2,670 shares of the company’s stock valued at $28,000 after purchasing an additional 1,720 shares during the period. California State Teachers Retirement System bought a new stake in shares of Red Cat during the 2nd quarter valued at about $34,000. Bank of America Corp DE increased its position in shares of Red Cat by 407.0% during the fourth quarter. Bank of America Corp DE now owns 3,397 shares of the company’s stock valued at $44,000 after buying an additional 2,727 shares during the period. Newbridge Financial Services Group Inc. raised its stake in Red Cat by 233.3% in the third quarter. Newbridge Financial Services Group Inc. now owns 5,000 shares of the company’s stock worth $52,000 after buying an additional 3,500 shares in the last quarter. Finally, BNP Paribas Financial Markets raised its stake in Red Cat by 1,537.2% in the second quarter. BNP Paribas Financial Markets now owns 7,220 shares of the company’s stock worth $53,000 after buying an additional 6,779 shares in the last quarter. 37.97% of the stock is owned by institutional investors.
Analyst Upgrades and Downgrades
Several research firms recently issued reports on RCAT. LADENBURG THALM/SH SH raised shares of Red Cat to a “strong-buy” rating in a research report on Wednesday, May 6th. Clear Str raised Red Cat to a “strong-buy” rating in a report on Wednesday, April 29th. Wall Street Zen lowered shares of Red Cat from a “sell” rating to a “strong sell” rating in a research report on Saturday, July 18th. Weiss Ratings restated a “sell (d-)” rating on shares of Red Cat in a report on Friday, July 17th. Finally, Needham & Company LLC reduced their target price on shares of Red Cat from $20.00 to $15.00 and set a “buy” rating for the company in a research report on Friday. Two equities research analysts have rated the stock with a Strong Buy rating, four have assigned a Buy rating and one has issued a Sell rating to the stock. According to data from MarketBeat.com, the company presently has an average rating of “Buy” and an average target price of $20.40.
Check Out Our Latest Analysis on Red Cat
About Red Cat
Red Cat Holdings, Inc (NASDAQ: RCAT) is a technology holding company that develops and delivers advanced robotics, autonomy, and sensing solutions for defense, national security, public safety and commercial customers. Headquartered in American Fork, Utah, the company brings together a portfolio of specialized operating businesses focused on unmanned aerial systems (UAS), mission management software, precision mapping sensors and engineering services.
Through its UAS segment, Red Cat designs and manufactures small to medium-sized fixed-wing and vertical-takeoff drones that support intelligence, surveillance and reconnaissance (ISR) missions.
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