War increasingly likely? This supplier is improving drones: AeroVironment, NEO Battery Materials and Kratos Defense

Drone supply chains: AeroVironment and Co. need batteries

Companies that manufacture or develop drones have recently been celebrated on the stock market. However, the supply chains for drone components are by no means stable. Battery technology in particular still comes predominantly from China. Since drones depend on the interplay of performance, weight, and reliability, there is still a lot of room for improvement in many of the batteries currently used. In addition, companies such as AeroVironment are manufacturing increasingly complex drones. This important supplier to the US military relies on advanced reconnaissance drones as well as kamikaze drones and autonomous systems for land and sea. AeroVironment has been experiencing a boom for several quarters and is also benefiting from the fact that Chinese drones are largely taboo in the West for security reasons and that major defense and aerospace companies such as Lockheed and Boeing are focusing on large unmanned aircraft.

NEO Battery Materials: High-performance batteries celebrate commercial breakthrough – Will more orders follow?

While companies such as AeroVironment and Kratos represent the drone boom in the defense sector, NEO Battery Materials specifically addresses the other part of the equation: the supply of batteries optimized for use in drones. The Canadian company has recognized that powerful batteries are currently the limiting factor for drones. NEO focuses on the development and production of silicon-based anode materials for lithium-ion batteries. This technology promises significantly higher energy densities and faster charging times than conventional graphite anodes. Specifically, NEO has developed a patented material called NBMSiDE®—a type of hybrid anode in which silicon is specifically introduced into the anode without drastically shortening its service life. With its own cost-effective manufacturing process, battery cells are expected to run longer and charge ultra-fast. These improved key data are crucial in military applications: longer runtimes translate into greater operational range, while shorter charging times enhance safety for personnel in the field.

Since most advanced energy cells today come from China, NEO Battery Materials is positioning itself as an end-to-end supplier for Western drone supply chains. The Company successfully tested prototypes of its anodes last year and recently achieved its first commercial breakthrough. In early October 2025, the Company announced the signing of a multi-year purchase and development agreement with a North American battery manufacturer specializing in drone and defense applications. As part of this deal, the customer has committed to purchasing 50 tons of NEO's silicon anode material over four years. At the same time, both parties plan to jointly develop customized lithium-ion and lithium-polymer cells for unmanned systems and optimize them in field tests. The focus is on higher energy density, higher energy throughput during charging and discharging, and high safety standards. With this agreement, NEO Battery Materials has proven two things: first, the anode material appears to be suitable for demanding use in drones, and second, the Company's development team appears to be a good partner for driving innovation forward. NEO itself is also likely to benefit from the feedback of its new cooperation partner. On Thursday, NEO also announced that it had secured a property for battery production in South Korea.

Kratos Defense shows the way: Agile to a billion-dollar pipeline

The success of Kratos Defense highlights the enormous potential for agile defense tech companies. Although the Company relies on government subsidies, Kratos impresses with its innovation and speed. Examples include the Wingman drones, which are designed to accompany fighter jets, and the successes in the development of cost-effective hypersonic weapons. With its innovations, Kratos has managed to build up a huge deal pipeline. In June of this year, it was a whopping USD 13 billion, many times its current revenue. Subsidies are also flowing freely in North America for drone companies and their suppliers. NEO Battery Materials could therefore follow in the footsteps of US company Group14 Technologies, which received a USD 200 million grant from the US Department of Energy to build a factory for silicon anode material in the US. Canada is also supporting domestic companies in this sector.

NEO Battery Materials: Drones "Made in North America" as a selling point

As a full-service provider of high-quality drone batteries, NEO Battery Materials is compatible with established drone companies such as AeroVironment and Kratos Defense. These companies currently have large order backlogs and can make good use of customized batteries from North America for use in drones. Future generations of reconnaissance drones or loitering munitions could be equipped with NEO's silicon anodes to extend flight times or increase power output, for example. This would give them a critical competitive advantage – longer operating times with the same drone size can be crucial in military applications. A drone manufacturer that uses batteries "Made in North America" could also have advantages in tenders or political decisions. NEO Battery Materials' stock has been volatile and moving sideways over the past six months, with a market capitalization of only around EUR 50 million. Given the Company's prospects and its latest order, the stock could be one of the promising latecomers in the drone boom on the stock market.