Unusual Machines (NYSE American: UMAC) reported third-quarter 2026 revenue of $13.9 million, up 551% from the same period in 2025. The company also recorded a 17% quarter-over-quarter decrease, a gross margin of 35.4% and a net loss attributable to common shareholders of approximately $25.0 million for the three months ended September 30, 2026.
The company said it filed its Form 10-Q and issued a shareholder letter from CEO Allan Evans. Unusual Machines is expanding its U.S. manufacturing operations for NDAA-compliant drone components, including motors, batteries and additive-manufactured products.
#Revenue growth accompanied by continued investment
Revenue increased from $2.1 million in the third quarter of 2025 to approximately $13.9 million in the latest quarter. Management said the result was at the high end of its revenue targets despite the sequential decline.
The company attributed its operating activity during the quarter to spending on capital equipment, the expansion of Upgrade Energy before its acquisition closed, and the development of additive manufacturing capacity. Unusual Machines made approximately $3.0 million in equipment purchases during the period.
Gross margin was approximately 35.4%, compared with 39.4% in the year-earlier quarter. The company attributed the lower margin to the ramp-up of drone component manufacturing, a greater contribution from enterprise revenue relative to retail, and near-term costs associated with maintaining inventory for current demand.
#Net loss included investment-related charges
Unusual Machines reported a net loss attributable to common shareholders of approximately $25.0 million, or ($0.50) per share. That compared with net income of approximately $1.6 million, or $0.05 per share, in the third quarter of 2025.
The company said the latest loss was primarily affected by an unrealized loss on short-term investments of $18.4 million. Stock compensation expense was $5.5 million, while the loss from operations was approximately $8.4 million.
On a non-GAAP basis, management reported an adjusted EBITDA loss of approximately $0.7 million. The company said adjusted EBITDA should be considered alongside, rather than as a replacement for, GAAP measures.
#Inventory, receivables and workforce increased
Inventory and prepaid inventory rose from $42.4 million at the end of the second quarter to $65.9 million at the end of the third quarter. Finished goods increased from $4.4 million to $9.3 million, while accounts receivable rose from $9.3 million to $18.7 million.
Unusual Machines grew its workforce from 240 employees at the end of the second quarter to 276 employees at the end of the third quarter. Following the Upgrade Energy acquisition, total headcount reached 325 employees. The company later said it had more than 340 employees and was adding shifts and capacity across its facilities.
Upgrade Energy generated $3.32 million in third-quarter revenue. Its workforce increased from 24 to 49 employees after Unusual Machines began supporting its expansion. During the first half of 2026, Upgrade Energy had generated about $3.37 million in revenue.
#Cash position and investment portfolio
Unusual Machines had approximately $162.0 million in cash as of September 30, 2026, compared with $103.3 million as of December 31, 2025. Management said the quarter’s cash use was primarily linked to inventory purchases of $24.8 million and investments of $35 million, inclusive of a loan receivable.
The company reported working capital of approximately $342.1 million at the end of the third quarter. It said the reduction from the second quarter was driven by the unrealized loss in its investments.
The investment portfolio is concentrated in three public companies: Powerus, Xtend, and XTIA Aerospace / Drone Nerds. Unusual Machines said those holdings relate to the Drone Dominance program, counter-UAS activity and commercial markets connected with the FAA’s proposed Part 108 rule.
#Orders and government programs cited
The company cited the $1.1 billion Drone Dominance Program and about $4.5 billion in counter-drone IDIQ awards issued to 10 different vendors. It also referenced a recent $16.9 million order from Powerus.
Unusual Machines said the Drone Dominance Program had allocated budget for Phase 3 and that several Department of War programs had allocated 2026 money to continue supporting demand in 2027 without additional congressional budgetary action. The company also noted that short-term demand could be affected by the U.S. election.
#Manufacturing expansion plans
Unusual Machines said it plans to add an automated motor production line expected to support 100,000 additional motors per month once fully operational. It is also working to add 100,000 square feet in the fourth quarter and identified ready-to-go real estate as its primary scaling limit.
The company said it is expanding battery-pack production through Upgrade Energy, developing additive manufacturing and remains on track to add domestic camera manufacturing in early 2027.
Management said it will work toward a 40% margin target, although achieving that target may take longer as the company prioritizes rapid growth while managing losses. CEO Allan Evans said he believes Unusual Machines can achieve positive adjusted EBITDA in 2027 without compromising its growth plans.
That expectation is subject to risks identified by the company, including customer orders under the Drone Dominance Program, the program’s future, the effect of U.S. elections on defense spending and the broader economy, inventory becoming obsolete, manufacturing delays, labor availability, supply-chain issues and inflation. The company also cited possible technical or other issues affecting the FAA’s rulemaking process.
Unusual Machines scheduled a conference call for 4:30 p.m. ET. Participants may dial (888) 506-0062 and use access code 183155.
#Key Takeaways
- Third-quarter revenue was $13.9 million, representing 551% year-over-year growth and a 17% quarter-over-quarter decrease.
- Gross margin was 35.4%, while net loss attributable to common shareholders was approximately $25.0 million.
- The company reported an adjusted EBITDA loss of approximately $0.7 million and approximately $162.0 million in cash at September 30, 2026.
- Inventory and prepaid inventory reached $65.9 million, and headcount rose to 276 employees during the quarter.
- Expansion plans include a motor line expected to support 100,000 additional motors per month once operational and efforts to add 100,000 square feet in the fourth quarter.
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