Executive Summary / Key Takeaways

• Ondas Holdings (NASDAQ:ONDS) operates a dual-engine strategy targeting critical infrastructure and defense markets with its Ondas Networks (private wireless) and Ondas Autonomous Systems (OAS) (drone and automated data) segments.
• The OAS segment is currently the primary growth driver, exhibiting significant momentum with a surge in orders, particularly from defense and homeland security customers, leading to a growing backlog and strong revenue recovery expectations for 2025.
• Ondas Networks holds significant long-term potential in the North American rail market with its standards-based wireless technology, validated by recent AAR and IEEE milestones, though revenue realization remains subject to customer deployment timelines.
• Despite promising technological differentiation and market traction, the company faces substantial financial challenges, including historical losses, ongoing cash burn, a working capital deficit, and reliance on external financing, raising substantial doubt about its ability to continue as a going concern absent further funding.
• Management forecasts total revenue of at least $25 million for 2025, with OAS contributing at least $20 million, supported by a growing backlog ($28.7 million as of June 2025 news) and an expanding pipeline, while the Ondas Networks outlook remains conservative at $5 million.

A Dual Engine Poised for Critical Markets

Ondas Holdings Inc. has evolved from its origins in private wireless networking into a technology company with a dual focus: providing mission-critical wireless connectivity through Ondas Networks and delivering advanced autonomous systems via Ondas Autonomous Systems (OAS). This strategic pivot, solidified through key acquisitions like American Robotics and Airobotics, positions Ondas to serve high-value markets including rail, energy, public safety, homeland security, and global defense. At its core, Ondas aims to provide reliable, secure, and intelligent solutions at the edge of large industrial and governmental networks, leveraging proprietary technology and aiming for industry standard adoption.

The company's history underscores a commitment to developing foundational technology. Ondas Networks' patented FullMAX Software Defined Radio (SDR) platform forms the basis of the IEEE 802.16 standard, a critical differentiator in the private wireless space. This technology is designed to upgrade legacy narrowband networks, offering significantly increased data throughput and enabling new IP-based applications essential for modern critical infrastructure operations. The recent adoption of the IEEE 802.16t (dot16t) protocol by the Association of American Railroads (AAR) for Next Generation head-of-train end-of-train (NGHE Gen4) communications in April 2025, followed by its formal ratification by IEEE in May 2025, represents a major validation of Ondas Networks' long-term strategic efforts and positions its technology as a key enabler for future rail network upgrades.

On the autonomous systems front, Ondas has rapidly built a portfolio of high-performance drone platforms. The Optimus System, a fully autonomous drone platform, and the Iron Drone Raider, an autonomous interceptor, are designed for demanding critical applications. A key technological achievement for OAS is the FAA Type Certification for the Optimus 1-EX UAV in September 2023. This certification is the highest echelon of Airworthiness Certification and significantly streamlines operational approvals, particularly enabling Beyond Visual Line of Sight (BVLOS) operations without a human operator on-site – a critical capability for scalable autonomous deployments in security and inspection roles. The Iron Drone Raider, accelerated in development partly due to urgent defense needs, is positioned as a leading platform for low kinetic counter-UAS, leveraging AI-driven software algorithms and onboard sensors for navigation and precision in complex, GPS-denied environments. Management believes these platforms offer capabilities with "essentially no competitive alternatives" in their specific high-performance niches, providing a significant technological moat.

In the competitive landscape, Ondas faces a mix of large, established players and more specialized firms. In the wireless segment, companies like Motorola Solutions (MSI) and Trimble (TRMB) offer broader industrial IoT and communication solutions, often leveraging greater scale and established ecosystems. However, Ondas Networks' adherence to the IEEE 802.16 standard and its focus on the specific requirements of mission-critical private networks, particularly in rail, provides a distinct niche. Management asserts their dot16 technology offers advantages like increased bandwidth efficiency compared to legacy systems, positioning it favorably for network upgrades. In the autonomous systems market, competitors like L3Harris Technologies (LHX) and AeroVironment (AVAV) are significant players, particularly in defense. While these larger firms possess greater scale, extensive government relationships, and potentially better-capitalized R&D, Ondas's OAS segment differentiates through its focus on fully autonomous, industrial/military-grade systems like Optimus (with its FAA Type Certification and persistent operational capability) and the specialized counter-UAS function of the Iron Drone Raider. Management highlights the dual-use nature of their platforms (serving both commercial and defense) and their ability to integrate advanced AI and operate in challenging environments as key competitive advantages. Indirect competitors, including consumer drone giant DJI and large telecommunication providers, offer alternative solutions that may be cheaper but often lack the security, reliability, and regulatory compliance required for mission-critical applications. Ondas's competitive position is thus characterized by technological specialization and regulatory achievements that create barriers to entry in its target niches, counterbalancing the scale and market reach of larger rivals.

Performance Reflecting Strategic Momentum and Persistent Challenges

Financially, Ondas's performance in the first quarter of 2025 reflects the early stages of its strategic pivot and the inherent volatility of scaling operations in specialized markets. Total revenue for the three months ended March 31, 2025, surged to $4.25 million, a dramatic increase from $0.63 million in the same period of 2024. This growth was overwhelmingly driven by the OAS segment, which saw its revenue jump from $0.31 million to $4.02 million year-over-year. This significant increase in OAS revenue was primarily attributed to product sales and associated services, including multi-drone sales, a stark contrast to the prior year period which lacked comparable sales. This highlights the impact of recent large orders, particularly from military customers secured in late 2024 and early 2025.

Gross profit also saw a substantial improvement, rising to $1.49 million in Q1 2025 from a loss of $0.39 million in Q1 2024, resulting in a gross margin of 35%. This margin improvement was directly linked to the increased proportion of higher-margin product sales from OAS compared to the lower-margin service and development revenue in the prior year. However, overall operating expenses increased to $11.80 million in Q1 2025, up from $8.73 million in Q1 2024. This rise was driven by investments in human resources (including stock-based compensation and taxable fringe benefits at OAS), increased professional fees (legal and accounting), and higher sales and marketing costs aimed at capitalizing on the growing pipeline. As a result, the operating loss widened slightly to $10.31 million from $9.13 million.

The net loss for Q1 2025 was $14.14 million, compared to $9.88 million in Q1 2024. This larger loss was significantly impacted by a substantial increase in total other expense, net, rising to $3.83 million from $0.75 million. This increase was primarily due to higher interest expense and the amortization of debt discount and issuance costs associated with convertible and secured notes issued in 2024 and early 2025.

The company's liquidity remains a critical area of focus. As of March 31, 2025, Ondas held cash and restricted cash of $25.41 million but had a working capital deficit of $7.02 million. Net cash used in operating activities for the quarter was $6.66 million. While cash utilization is expected to improve in 2025 due to anticipated revenue growth and operating leverage at OAS, the company has historically funded operations through debt and equity. The conversion of convertible notes has been a significant factor in managing debt, with the outstanding balance on convertible notes reduced to $20.6 million as of May 15, 2025, partly through the issuance of common shares. However, the conversion price on these notes has been sensitive to the stock price, resulting in the issuance of a substantial number of shares at an average price of approximately $0.68 year-to-date May 2025.

The company explicitly states that there is substantial doubt about its ability to continue as a going concern for one year from May 15, 2025, absent further funding, highlighting the ongoing need for capital to support its growth plan and working capital requirements.

Outlook and the Path Forward

Management's outlook for 2025 is centered on accelerated growth, primarily fueled by the OAS segment. The company has reaffirmed its full-year revenue goal of at least $25 million, with a significant portion, at least $20 million, expected to be generated by OAS. This guidance is supported by a growing backlog, which stood at $16.8 million as of Q1 2025 and further increased to $28.7 million as of June 2025 news, including a $14.3 million Optimus order from a defense customer. Management views this forecast as conservative, given the large addressable markets and expanding pipeline.

The confidence in OAS stems from recent successes, including securing multiple multi-million dollar orders for both Iron Drone and Optimus from defense and governmental entities for critical applications like border security and urban public safety (UAE's Drone Box program). The company has already met its initial goal of adding two new military or homeland security customers in 2025 and has increased this goal to four or more for the full year. Key assumptions for achieving the OAS outlook include the successful fulfillment of the current backlog, the conversion of the expanding pipeline into new orders, and the expansion of existing customer programs. The strategic partnerships with Palantir (PLTR) (for operational scaling and potential AI integration) and Volatus Aerospace (for border surveillance) are expected to support this growth.

For the Ondas Networks segment, the outlook remains more conservative, with an expectation of just $5 million in revenue for 2025. This reflects the continued uncertainty surrounding the timing of large-scale commercial deployments by Class 1 railroads, despite the significant technical validation provided by the AAR's adoption of dot16t and IEEE ratification. While smaller deployments and development programs continue (e.g., Metra system upgrade, Amtrak PTC radio deliveries expected early Q3 2025), the major revenue inflection point for this segment is contingent on the railroads moving forward with broader network build-outs. Management believes this build-out is "inevitable" but acknowledges the lack of tangible large orders currently in hand.

Looking beyond 2025, management expects revenue growth to be sustained or even accelerated into 2026, driven by the expanding customer base and program growth at OAS and the anticipated eventual large-scale adoption in the rail market. The company is actively investing in scaling its operational capabilities, including advancing U.S.-based manufacturing plans for OAS, to support this projected growth.

Risks and Critical Considerations

Despite the optimistic outlook for growth, particularly at OAS, investors must weigh significant risks. The most prominent is the substantial doubt about the company's ability to continue as a going concern, stemming from historical losses, ongoing cash burn, and the need for continuous external financing. While recent funding efforts have improved liquidity, the ability to secure additional funds on commercially acceptable terms when needed is not assured. The reliance on convertible debt with VWAP-based conversion features also poses a risk of significant dilution if the stock price remains low.

Operational risks include the potential for delays in fulfilling the growing backlog, challenges in scaling production and field services to meet increasing demand, and the inherent complexities of deploying and maintaining sophisticated autonomous systems in demanding environments. The ongoing conflict in Israel, where Airobotics' main offices are located, continues to pose a potential risk of disruption to operations, supply chain, and anticipated milestones, although management has stated it has not had a materially adverse enduring impact thus far.

For the Ondas Networks segment, the primary risk remains the extended timelines and uncertainty surrounding large-scale deployment decisions by Class 1 railroads. Despite technical validation and stated commitments by industry bodies like the AAR, the timing and magnitude of significant orders are not guaranteed, potentially delaying the revenue inflection point for this segment.

Furthermore, the company faces risks related to customer concentration, with a small number of customers accounting for a substantial portion of revenue and receivables. Changes in U.S. trade policy, including potential tariffs or import restrictions, could also impact costs and supply chain efficiency. The competitive landscape is dynamic, and while Ondas believes its technology is differentiated, larger competitors with greater resources could pose challenges.

Conclusion

Ondas Holdings presents a compelling, albeit high-risk, investment narrative centered on its dual-engine approach to critical markets. The OAS segment is currently driving significant momentum, with technological leadership, regulatory achievements like FAA Type Certification, and recent large orders from defense and homeland security customers translating into tangible revenue growth and a robust outlook for 2025. The Iron Drone Raider and Optimus platforms appear well-positioned to capitalize on increasing global demand for autonomous security and counter-UAS solutions. Simultaneously, the Ondas Networks segment retains substantial long-term potential in the North American rail market, underpinned by its standards-based technology, pending the eventual large-scale network upgrades.

However, the company's financial position, marked by historical losses, ongoing cash requirements, and dependence on external funding, introduces significant uncertainty. The ability to successfully execute on the ambitious growth plan, manage operational scaling, navigate geopolitical risks, and secure necessary financing will be paramount. For investors, the story of Ondas is one of significant technological promise and market opportunity, particularly in the rapidly expanding autonomous systems space, balanced against considerable execution and financial risks. The key factors to watch will be the company's progress in converting its growing OAS pipeline into revenue, securing follow-on and volume orders, effectively scaling its operations, and demonstrating progress towards sustainable funding while awaiting the long-anticipated inflection point in the rail market.