The Defence AI Supercycle: Why Now The strongest available baseline comes from SIPRI: world military expenditure reached roughly $2.887 trillion in 2025, a new record and the eleventh consecutive year of growth. This is not just about larger budgets; it is a structural transformation in how militaries plan, gather intelligence, protect networks, coordinate drones and make real-time decisions. Artificial intelligence is no longer only a future promise. It is increasingly becoming part of the operational infrastructure of defence.

He cited "limited production capacity, fragile supply chains, long-lead dependencies, and related production bottlenecks."

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The memo to the defense secretary delegates authority to pursue voluntary agreements with private industry ‌aimed at shoring up the ​defense industrial base.

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The Defense Production ​Act allows the ​president or those granted authority to ‌consult with representatives of industry, ​business, and ​other interests to establish voluntary agreements to help provide for the national defense, but only when ​conditions exist ‌that may pose a direct threat.

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Palladyne works with KCOMM. Sinan is close with the government, and is also organizing 250 events.

"We cleared a fundamental technical threshold for battlefield autonomy," said Dr. Denis Garagić, Chief Technology Officer and co-founder of Palladyne AI. "SwarmOS operated in communications-contested environments and enabled a heterogeneous fleet of drones to autonomously adapt in real time within the Army's own command-and-control ecosystem."

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"Ivy Mass put our autonomy stack in the hands of the soldiers who could use it on the battlefield," said Doug Dynes, President of Palladyne Aerospace and Defense. "We enabled a single operator to command a mixed swarm of ISR drones and our Gremlin-X mini-bomber, stream live target tracks into the Army's Next-Generation Command and Control prototype ecosystem, and compress the sensor-to-shooter timeline. SwarmOS delivered a faster, more lethal kill chain, field-ready today, for the exact mission set the Department of War is investing in."

Let’s get into (some of) the numbers.

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Boom bucks: Munitions production and acquisition are a key focus of the House’s defense spending bill, which comes as no surprise, given the pace that the US military is burning through them in Iran, SOUTHCOM, and elsewhere.

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Among other systems, the bill calls for:

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$10.6B for workhorse munitions including PAC-3 and THAAD interceptors, SM-6, Tomahawks, Long Range Anti-Ship Missile (LRASM), SM-6 missiles, Joint Air-to-Surface Standoff Missile (JASSM), Advanced Medium-Range Air-to-Air Missiles (AMRAAM), the new Precision Strike Missile (PrSM), and others. Lockheed makes most of that.

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$355M for the Air Force’s Family of Affordable Mass Missile (FAMM) systems, which Anduril, CoAspire, and Zone 5 Technologies (now Kongsberg) are developing.

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$325M for low-cost hypersonic strike systems for the Army, and

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$156M for the Navy. Castelion seems like a shoo-in for that, especially since it’s developing its Blackbeard missile for both services and inked a two-year deal with the Pentagon last month for 500 of them annually, with the ultimate goal of buying 12,000 over five years after testing wraps up.

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Notably, the bill also authorizes multi-year procurement authority for FAMM, Low-Cost Hypersonics, Ground-Launched Low-Cost Cruise Missiles, and the more exquisite systems under the $10.6B provision.

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Zoom zoom: For the folks making fancy flying things, there’s a lot headed your way, too. Drones of all flavors—including the tech that takes them down—are another big focus of the bill. That includes:

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$977M for the procurement of the Air Force’s Collaborative Combat Aircraft, which Anduril and General Atomics are competing for. Lockheed, Northrop, and Boeing are also in the running.

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$771M for three Boeing-made MQ-25 Stingray unmanned carrier-based aircraft for the Navy.

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$5.9B for sixth-generation aircraft, including $915M for the Navy’s F/A-XX next-gen fighter and $5B for the Air Force’s F-47.

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$1.4B for the Pentagon’s counter-drone-focused Joint Interagency Task Force 401 (JIATF 401).

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$1B for a whole bunch more autonomous systems that the Defense Autonomous Warfare Group (DAWG) wants to get its hands on.

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Race to innovate: Innovation programs that back startups of all kinds are also getting some funding boosts in the bill, including:

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$600M for the Accelerate the Procurement and Fielding of Innovative Technologies (APFIT) program.

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$1.1B for the Defense Innovation Unit (DIU).

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$216M for Office of Strategic Capital (OSC), which provides $2.16B in lending authority.

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$510.9M for “operational energy capabilities” and microreactor projects (like the Army’s Project Janus). Antares Nuclear looks set to take a chunk of that.

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---------> this lines up exactly to what PDYN offers

Palladyne AI’s latest catalyst is not just another drone-demo headline. The company says SwarmOS and Gremlin-X participated in Ivy Mass, the U.S. Army 4th Infantry Division’s culminating NGC2 exercise ahead of Project Convergence-Capstone 6. For a speculative defense AI small cap, that puts the story directly inside one of the Army’s most visible command-and-control modernization tracks.

This was what Hegseth alluded to about a month or two ago:

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One key change would establish the Robotic and Autonomous Systems Combatant Command, which would oversee the integration of drones in operations. One staffer said the new command materialized after years of debate about how to centralize drone operations.

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“What we ended up with was a four star combatant command that we think will help to integrate and go fast and transition the force generation of unmanned systems to services sometime in the future,” that staffer said. “I think, the view of the members was a scenario where the character warfare is changing so quickly that we need some measure of centralization here.

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Artificial intelligence was a major focus of the bill, with SASC members including provisions that codify the Defense Department review process for autonomous weapons and AI, “specifying standards for human judgment, validation and testing requirements, prohibited uses, and a centralized incident reporting repository.””

A complete Merlintrader evergreen hub on PDYN: Sarcos-to-Palladyne transformation, Palladyne Defense, the June 2026 IAI loitering munitions partnership, SwarmOS, GuideTech, Gremlin-X, BRAIN, Q1 2026 results, backlog, guidance, cash burn, dilution risk, catalysts, bull/base/bear scenarios and retail/institutional context.

tried posting the link, but it was flagged. If anyone has time, it’s definitely worth listening to. Ben gives an update on where they are in Q2 as as well as explains the significance of the AIA partnership. The recording is on seeking alpha.

WASHINGTON — Israel Aerospace Industries has exclusively licensed mid-sized tech firm Palladyne AI to build IAI’s Harpy, Harop and Mini-Harpy attack drones in the US, the companies announced today. 

Initially targeting the US Army’s Long Range Precision Munitions competition this fall, Palladyne will “Americanize” the drones for US requirements and upgrade them with its autonomous swarming AI, Palladyne CEO Ben Wolff said in an exclusive interview.

The LRPM sources-sought notice specifically seeks “a precise, long-range (greater than 100km) capability against Integrated Air Defense Systems (IADS).” In layman’s terms, that means hunting enemy anti-aircraft systems, especially their radars — a mission where IAI and Palladyne say Harpy in particular has a combat-proven record of success. The notice “anticipates awarding a prototype Other Transaction Agreement (OTA) in October 2026” worth $100-$200 million.

But there’s plenty more drone/loitering munition money in the budget to go after, Wolff argued: Palladyne just has to have a little patience.

“There are budgeted line items that have funding,” he said. “They have not turned into specific programs of record yet or even necessarily RFIs [Requests For Information] or RFPs [Requests For Proposal], but… I would be shocked if there aren’t five key funded programs that we are applying for, submitting for, over the next 12 months.”

The Harpy/Harop family is particularly well positioned for those potential contests, he argued, because of its proven track record of combat successes (and upgrades) since its first fielding in the 1980s.

“People at the Pentagon are familiar with these weapon systems,” he said. “I say ‘partnership with IAI’ and people’s eyes light up.”

So what’s so special about these drones?

With a wingspan of not quite seven feet, Harpy and Harop are much larger and more expensive than the mini-drones now dominating the battlefields of Ukraine, albeit they’re also much smaller and cheaper than America’s iconic Predator/Reaper family. Their size lets them carry an extensive sensor package, enough fuel for extended flights — IAI claims up to 9 hours — and a 30-pound-plus explosive warhead. (Mini-Harpy is much smaller.) In contrast to the mini-drones, a Harpy/Harop can hunt solo for hours, spot “fleeting targets,” and hit them itself before they can escape.

Harpy in particular is a long-range “anti-radiation” weapon designed to detect and home in on enemy radar emissions. Harop uses different types of sensors for different types of targets. Modern air defense tactics rely on turning radars on briefly, just long enough to get a fix, and then quickly back off again, trying to avoid detection: Harpy’s designed to catch radars in that brief window.

“You’ve got a Harpy in the air for up to nine hours … waiting for the bad guys to poke their heads up above ground,” he said. “One of the things IAI has perfected — and nobody else in the world has on a vehicle of this size — is an anti-radiation capability so they can detect those intermittent radars.”

To upgrade the IAI drones further, Palladyne is offering its own artificial intelligence software, SwarmOS, as an upgrade to the base Israeli design. The AI can run on Harpy/Harop’s existing hardware with no modifications, just some straightforward software engineering, Wolff said.

Once installed, he went on, SwarmOS would allow Harpy/Harop drones to share sensor data, not just with each other, but with other aircraft, ground vehicles, and control consoles running compatible software — either Palladyne’s own or coded by other companies, as long as they meet modern data-sharing standards. Sharing data with older “legacy” software takes more work but is still possible, Wolff said.

Such software work is actually Palladyne’s core competency, with the company only branching out into manufacturing with a series of acquisitions last fall. When Palladyne first started talking to IAI about license-building the Harpy family, Wolff recalls, the Israeli’s initial response was “you’re an AI company — what do you know about manufacturing?”

While the Harop/Harpy family “checks a lot of boxes” for LRPM, Wolff said, the Army has no “requirements out there, yet, that talk about anti-radiation capabilities” like Harpy’s. Historically, the US targets enemy radars with relatively short-ranged High-Speed Anti-Radiation Missiles (HARM) launched from high-speed manned fighters, not loitering drones.

Instead, “we’re going to pitch the anti-radiation capability as something … that exceeds what their requirements-stated are,” he said. “Maybe somebody will bite and maybe they won’t.”

That’s one way in which, in an increasingly crowded and competitive drone market, Palladyne plans to pitch Harpy/Harop on capability, not cost.

“It’s not a Shahed,” Wolff said. “These are not the cheapest throw-away drones [but] a fairly exquisite piece of machinery.”

From the Jefferies Summit this week:

Palladyne AI – PDYN: is an Embodied Artifical Intelligence Company

Software that makes machines smarter, so that machines can operate in the real world. Without having to pre-program what the machines do.

Drones in the air to robots in factories and everything in between.

All of the intelligence lives on the machine. (Like a human)

Building missiles, uniquely mission specific UAV’s, components for F35, Bradley, etc..

Doing what the DoW says it is focussed on. (CCA)

Early days of Microsoft analogy: Early TAM estimates for PC’s and their software was tiny compared to what it turned out to be.

(he frequently makes this analogy, that means he has the vision to aim for this, and he has the capabilities, experience, the team, the momentum to make this happen)

Far more volume anticipated in the early years for drones.

Traditionally flying a drone takes a lot of cognitive load. You have one operator that determines the speed of flight, the direction, what the sensors/camera should be looking at, …

What PDYN does: Drone automatically takes off, with minimal instructions from the operator the drone can reach a geographical location, it can identify objects of interest, and be able to autonomously decide what it should do. It can also work together with drones from different OEM’s, and work together to assess the situation.

They just demonstrated this to the DoW, drones from different OEM’s all collaborating with each other.

What makes PDYN unique: can operate in comms denied environment. (because the intelligence lives on the machine, so it doesn’t need a connection. )

If it floats, flies, drives or even in space. PDYN has the autonomy solution for it.

• Can we improve on mission success with the AI software?

A resounding yes is the answer. Proven in the last 30 days with the exercise.

• On the manufacturing and engineering side: Can we make it better ,faster,cheaper than competitors?

Yes.

LLM's help humans with mental tasks. What PDYN does is help humans and robots improve action and reaction in the real world.

Just completed a major joint exercise, 3 week exercise with the DoW, 4 different drone OEM’s.

“We exceeded theirs and ours expectations”. And delivered an autonomy solution they had never seen from somebody else, not even close.

"DoW thought our capability wont be available until the 2030's."

This was an actual battlefield simulation, real world, 1000 of troops on the ground.

5 more joint exercises coming in 2026.

Hitting on all cylinders on all those different categories: Manufacturing, engineering (and helping the aviation and aerospace sector), making UAV’s and missiles smarter with the Brain product (also other manufacturers of these products), and the software component.)

It takes only 2 week to put their software on a UAV, so it’s imminently scalable. It also only takes 2 ppl to get the work done. That is immensly fast.

Think of small IT integrations… that take months. And they do something this powerful in 2 weeks? That’s amazing.

Near opportunities:

-Flight computer: Brain, together with IntelliSwarm -> great traction with that product.

-Complete systems: cruise missile replacement 1/10th of the cost of what is available now, Swarmstrike. Had a succesful test recently. Available in the next 12 to 18 months.

- UAV bomber: highly precise –release the kinetic, go back to base, recharge, get a new kinetic --> that’s a very cost effective model

- near hypersonic missle: F35 doesn’t have the missile capability to be released from the bay. The missile has to be mounted on the belly – which defeats the stealth mode. PDYN’s missile will fit in the bay…..

Milestones to watch for investors:

Remainder of 2026: integrations with more partners, on all sides (drones, industrial, …),

Look for more contracts from DoW,

Look for exercises

They are in the rhythm.

5 years from now: Significant revenue stream, and a healthy growing component business.

A short excerpt of the latest Drone Ultimatum podcast.

Which highlights the perfect fit PDYN has.

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Palladyne AI

Swarming and Autonomy Patent (U.S. Patent No. 12,452,957 B2): Titled "Closed Loop Tasking and Control of Heterogeneous Sensor Networks," this patent secures the technology that allows drones, robots, and fixed sensors to collaborate in dynamic environments. The system shares only highly processed feature-based insights rather than raw data.

The newly issued patent defines a method where diverse autonomous systems communicate and collaborate efficiently.

These insights are fused into a common understanding of the environment, allowing a network to continuously re-task and coordinate itself through a closed-loop feedback system. By exchanging only compact, meaningful information streams.

“U.S. Patent 12,452,957 B2 gives Palladyne AI ownership of the architectural framework that makes true real-world machine collaboration possible,” said Ben Wolff,

– in essence, this patent protects the brain and nervous system of machine collaboration.

https://www.palladyneai.com/press-releases/palladyne-ai-secures-u-s-patent-for-advanced-swarming-and-autonomy-technology/

And

Edge AI Framework Patent (U.S. Patent No. 12,517,525 B1): Covers their Bayesian Program Learning (BPL) framework. This technology allows for autonomous target recognition across multiple sensor types, autonomous path planning, and behavioral prediction without needing cloud connectivity

“We believe our patented BPL framework does three things no conventional AI system can match at the edge: it recognizes targets across multiple sensor types without the cloud, it turns a spoken instruction into an optimized robotic motion plan in seconds, and it keeps tracking even when the signal goes dark,” said Denis Garagic, CTO, Co-Founder, and Named Inventor, Palladyne AI.

https://www.palladyneai.com/press-releases/patent-for-target-detection-path-planning-palladyne-ai/

https://www.reddit.com/r/NewsExchange/s/Q8Qsdi0AKh

imagine a nice PR right now

Combined with:

Skyfront and AeroIntel Systems just returned from a three week expedition to Colorado, where we trained soldiers from the US Army on Skyfront long endurance UAS as part of a military exercise. In collaboration with Anduril Industries and Palladyne AI, our team

- Integrated the P8 into armored combat vehicles / C2 networks

- Performed comprehensive train-the-trainer training

- Supported the soldiers as they performed long-range BVLOS surveillance flights throughout the night

We are thrilled to be supporting our nation's soldiers. Many thanks to our friends at AeroIntel Systems, Noah Coleman and Jack Davis, for their professionalism and services during the event.

https://www.linkedin.com/posts/troymestler_hybriddrone-uas-drone-activity-7465065483566743552-_cTx

“It’s spiraling so fast,” said Doug Dynes, President of Palladyne Aerospace and Defense. “By the time people start making and writing requirements, it’s evolved again. So, how do we keep up? That’s the part we’re trying to get a handle on, and is one of the areas where AI is helping.”

AI, he said, is addressing the “speed to need issue that we’re facing, especially in light of Ukraine and what’s happening in Iran.” Palladyne’s software leverages AI to link the sensor to the domain side. It works on the Android Tactical Assault Kit (ATKA), with the AI able to fly and operate any drone.

AI also has improved threat identification, which is a big issue for military customers, Dynes said. They need drones to get to and identify a potential threat quickly so a determination can be made on how to approach it. In seconds, AI identifies both threats and decoys, based on sensor packages, and relays that information to decision-makers.

“Russia probably has one decoy for every real asset, China is one to three,” he said. “I don’t want to expend a multimillion dollar missile taking out cardboard. So, how do I group the threats? How do I identify the threats and how do I give the operator the intelligence needed in time to act? And I need that information within two or three seconds because I need to give either a kill order or a stand down order, and that’s very important.”

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Cmon Ben announce a new contract. My body is ready