Is the Pentagon’s demand signal for drones working? It depends on who you ask.

WASHINGTON — As the Pentagon rushes to ramp up aerial drone production, industry and military officials tell Breaking Defense they are divided over whether the department’s approach can generate the sustained demand needed to build a lasting domestic drone industry.

“There’s a lot of positive signaling, but we need to see the whites of the eyes: We need to see sustained, normalized demand,” James Slider, CEO of Performance Drone Works, recently told Breaking Defense.

“So what does that look like?” Slider added. “If you win an award and then you’re providing 1,000 drones a month for a year, that’s a very healthy demand for us.”

The Pentagon has created multiple funding avenues and acquisition competitions to encourage companies to develop drones and expand production, without necessarily guaranteeing the longer-term orders needed to justify those investments. The strategy is intended to build up domestic manufacturing capacity, but industry leaders say uncertainty over future purchases could undermine that goal. 

As the largest single source of demand for small drones, the Army is deliberately trying to push companies to invest in domestic production, even as some manufacturers question whether that demand will be enough to sustain their businesses. 

Jon Strzelec, advanced manufacturing lead for small drones at Army Materiel Command, said the military recognizes that companies are reluctant to invest without more certainty about future orders. Therefore, the department is trying to “artificially induce” demand signals for industry at large.

“We’re trying to force a supply chain to stand up within the country, and so there’s a lot of companies that say, there’s just not enough demand for me to invest in that,” he recently told Breaking Defense.

Whether that signal can be boosted strongly enough to convince cautious industry officials may determine the fate of the Pentagon’s drone push — and billions of dollars in proposed defense spending.

An ‘Artificial’ Push 

The push to acquire small, cheap aerial drones is not brand new. Under the Biden administration, the Pentagon launched its Replicator initiative to rapidly acquire and field thousands of inexpensive, attritable drones to prepare for a potential military contingency with China.

Over the past year and a half, however, that effort has accelerated. The Pentagon is now pursuing new acquisition programs, reorganizing how it manages autonomous warfare initiatives and seeking billions of dollars for drone purchases.

In mid-2025, Defense Secretary Pete Hegseth kicked off the broader push when he issued the Drone Dominance memo, laying out plans to boost unmanned aerial systems production, cut red tape associated with troops’ use of those aerial weapons, and equip every Army squad with small, one-way attack drones by the end of fiscal 2026.

The Pentagon has since reshuffled its autonomy leadership, with Hegseth seeking congressional approval for a four-star Autonomous Warfare Command, or AUTOWARCOM. Meanwhile, the Biden-era Replicator initiative was repackaged as the Defense Autonomous Warfare Group (DAWG) and later absorbed into Task Force Autonomous Warfare.

The Pentagon has outlined plans to spend nearly $55 billion on the initiative in its FY27 budget. But the bulk of that funding was requested through a reconciliation package, leaving its future uncertain as lawmakers weigh whether to approve the money and the department considers whether to retool its base budget request.

One of the clearest examples of the department’s approach is its Drone Dominance program, a gauntlet-style competition billed as a way to give companies repeated opportunities to win smaller deals that will collectively amount to $1 billion over two years. An online leaderboard tracks competitors in each gauntlet, including the number of drones ordered and each company’s reported delivery status.

“They’re artificially creating a demand signal to push the American industry to start manufacturing this stuff in the United States,” Strzelec said.

Under Gauntlet 1, the Pentagon has selected 11 companies to deliver 30,000 small drones through a combination of initial and “bonus” orders. At the lower end of the ordering scale, the department ordered 1,520 drones from Farage Precision while toward the top, Neros has received orders for 4,960.

For Gauntlet 2, the department divided drones into two categories — those best suited for deep strike and those better aligned for close-quarters combat. It has tapped five companies in both categories and awarded deals covering 30,000 drones in each.

But Drone Dominance awards do not guarantee future orders, leaving companies without a commitment to sustain production beyond their initial contracts.

That uncertainty reflects a broader challenge in the Pentagon’s acquisition strategy, as repeated competitions can give the military opportunities to select new technologies and encourage companies to improve their systems. But without predictable follow-on orders, the same approach can make it harder for manufacturers to justify long-term investments needed to scale — a conflict not lost on defense officials.

Andrew Evans, director of the Strategy & Transformation Office inside the Army’s Deputy Chief of Staff for Intelligence (G-2), called it an “ultimate economic challenge” for the department as it tries to leverage existing American manufacturing capacity while ensuring production lines remain open even when demand falls.

“The challenge that our senior leaders are having to contend with is, how do you incentivize industry to build if your ordering period is so episodic?” he said during a recent interview with Breaking Defense. 

Strategic Gamble 

Whether companies are buying into the demand signal the Pentagon is hoping to provide remains up in the air, according to multiple interviews and comments made this month from industry leaders. Some described strong demand across government, while others questioned whether that demand would translate into sustained orders.

In an interview with Breaking Defense on Oct. 13, Skydio Chief Revenue Officer Callan Carpenter said that from his perspective, the administration’s demand signal to industry is clear. 

“The demand signals are very strong, and it’s not just DOW [the Department of War] either,” Carpenter said, referring to the Trump administration’s alternate name for the Defense Department. “It’s [Department of Homeland Security], it’s other parts of the civilian federal government, and we’re selling products into all of those segments,” 

Other industry leaders offered differing opinions, noting challenges with smaller buys, a never-ending cycle of competitions and annual funds that are not yet approved by Congress or reflected in projected outyear spending requests. 

John Burer, CEO for the American Center for Manufacturing & Innovation industry group, explained that companies need confidence that they will win contracts and produce drones at scale before committing to major capital expenditures.

“If I were a manufacturer of drone systems, I wouldn’t be investing ahead of a very large amount of money or a consistent demand signal,” he told Breaking Defense. “It’s great to do a bake off and to test some of these things and prove out that they can work, but then scaling production needs a different mindset, and it’s a cost focus oftentimes.”

Chad Chasteen, senior director and team leader of Army business development at AV, said that while the service’s preference for frequently running competitions affords more opportunities for companies to win a contract, the approach also comes with drawbacks.

“The Army system of continuous competition and not sticking with a solution for more than a year or two creates all kinds of havoc in the supply chain,” he said Oct. 13 during a panel at the AUSA conference. He added that successive competitions also need to be followed by a similar number of awards.

“There is no supply without demand,” he said. “Continuous competition doesn’t mean you make industry fill out continuous requests for white papers. There has to be continuous awards, continuous orders to create that.”

Performance Drone Works’ Slider voiced similar concerns about the Pentagon’s long-term demand signal, saying he did not expect much more private equity flow into the sector without stronger commitments.

For Slider, part of the uncertainty stems from the proposed $55 billion DAWG funding package, which remains stalled in Congress. However, if Pentagon leaders and lawmakers find a way to fund the initiative at those levels, even in a base request, that would be a big green flag. 

“Seeing the DAWG money flow down would be very encouraging for us,” Slider said. “Depending on who you talk to, it’s definitely coming or definitely not coming.”

Michael Marrow contributed to this reporting.