America’s biggest defense contractors are fighting for their place in the future of drone warfare

• The Pentagon has a high demand signal for all types of drones and uncrewed capabilities.
• While startups are seeing success in the small drone market, the defense primes are pursuing more exquisite systems.
• Many big names like General Atomics are upgrading their older, combat-proven drones.

Silicon Valley disruptors and defense industry heavyweights are locked in a fight to shape the future of drone warfare.

The competition pits agile startups like Performance Drone Works and Anduril against the big primes — large, traditional defense contractors like Lockheed Martin, Boeing, and General Atomics — to build new and emerging classes of weapons seen as essential for future war.

Billions of dollars are at stake in this battle.

The Pentagon is preparing to spend $9.4 billion on aerial combat drones in fiscal year 2026 as part of its larger $13.4 billion investment in autonomous systems. Furthermore, the Air Force is seeking $789.4 million for research and development of autonomous "loyal wingmen" drones that can fly and fight alongside crewed combat aircraft or carry out missions alone. The Department of Defense also aims to invest $3.1 billion in counter-drone technology.

Pentagon leaders are steering more competition toward upstart defense companies. Their argument is that big traditional contractors can't deliver new weapons fast or cheaply enough to meet today's fast-changing global threats or demands for affordable mass, such as the inexpensive drones dominating the war in Ukraine.

Startups often embrace the Silicon Valley "fail fast" approach, pushing prototypes into the hands of troops quickly and constantly iterating. Moving fast comes with risks, but moving slower does as well, specifically risking irrelevance by the time the weapon is fielded.

The big primes, however, can still leverage their scale, established integration with the US military, and decades of experience to secure both footholds and contracts in emerging technology sectors. These companies are considered the go-to builders for large, complex drones designed for high-risk missions, while startups are taking over the development of smaller, cheaper reconnaissance and attack drones, often made using commercial technology.

"The primes intrinsically understand what the gaps are that the government has because they've been working with them for years upon years," Chip Walter, a defense industry investor, said. "If they want to, they can be the quickest to have an impact on the battlefield."

Readying legacy drones for a new era of warfare

Some of America's biggest defense contractors are upgrading the drones that defined the post-9/11 era and other legacy systems.

During the wars in Afghanistan and Iraq, the US was fixated on drones for counterterrorism operations.

"We haven't pursued their full applicability" for other combat missions and types of armed conflict, Stacie Pettyjohn, a defense analyst at the Center for a New American Security, told Business Insider.

That appears to be changing.

General Atomics, a drone-making powerhouse behind the era-defining MQ-1 Predator, has been upgrading several of its top uncrewed aerial systems. These include drones like the MQ-1C Gray Eagle operated by the US Army and the MQ-9A Reaper flown by the US Air Force and some international militaries.

General Atomics is modernizing its long-endurance drones, adding an electronic warfare suite to disrupt enemy communications, radars, or sensors and pursuing easier upgrades to the Gray Eagle. Meanwhile, the Reaper is receiving artificial intelligence improvements, enhanced sensors, and strengthened cybersecurity to keep it relevant in high-end combat.

The Reaper also has a new electronic warfare pod that a top Marine general said allows it to "disappear off of enemy radar."

The Air Force previously considered retiring the $30 million Reaper, arguing that it wouldn't survive a fight against Russia or China. A Reaper is larger and slower than an F-16 fighter and is as vulnerable to ground-fired missiles as other airframes that lack stealth tech.

Pettyjohn said there's a growing recognition that survivability isn't binary, meaning it isn't a simple yes or no on whether a system can survive modern combat.

"It depends on technologies, but also different tactics, techniques, and procedures, and can be augmented or decremented depending on the capabilities that are on certain platforms," she said.

Another firm, Northrop Grumman, which built the soon-to-be-retired RQ-4 Global Hawk, is improving the effectiveness of its MQ-4C Triton, a large drone flown by the US Navy for intelligence, reconnaissance, and surveillance. And Boeing's subsidiary, Insitu, is working on updates to its MQ-27 ScanEagle drones.

More broadly, RTX, another leading defense company, is building sensors for drone fleets. The company is also advancing counter-drone measures, like the Coyote.

The usefulness of these upgraded systems will depend on what the next war demands and where it's fought.

"We are seeing innovation happen in the Ukrainian battlefield on a daily basis," Walter told Business Insider. "The battle that we're going to see in the South China Sea, in my opinion, is going to look very different," he added, which will likely shift which types of drones and capabilities will be most useful.

The battle for the future of drone warfare is on

The big, established defense companies generally are not producing expendable quadcopter-style drones. Instead, they're pitching ideas for a different kind of war. With the US seeking a wide range of drone capabilities, these firms are betting on new uncrewed combat platforms that can fight alongside high-end aircraft or go on missions too risky for piloted jets.

General Atomics is working on one of the Air Force's new Collaborative Combat Aircraft, commonly called "loyal wingman" drones. The jet-powered aircraft are built to fly with front-line fighters and boost firepower, situational awareness, and communications.

Another airframe selected in the first round is one developed by Anduril, a rapidly growing defense startup with 6,000 employees that has signaled its willingness and ability to compete against some slower-moving primes.

Other defense power players are still a big part of the conversation, though.

Lockheed Martin's Skunk Works, long recognized for its decades of expertise as a developer of advanced stealth aircraft, recently entered the fray with Vectis, advertising its design as a stealthy, low-cost solution.

And beyond the company's wingman pitch, its subsidiary Sikorsky recently unveiled a new uncrewed Black Hawk helicopter — the autonomous U-Hawk. This comes as the US Army is looking to dramatically overhaul its helicopter force to a structure that is only around 10% crewed and 90% drone.

Boeing, Northrop Grumman, General Atomics, and Anduril have all been tapped by the Navy to develop conceptual carrier-based wingman drone designs. Lockheed has a "common control" contract in this space for the development of a shared software interface to control different drones from a single system.

RTX isn't building airframes, but it's still key to the drone revolution. The Air Force, for instance, has tapped RTX and Shield AI, a startup, to provide the AI brain for the coming "loyal wingmen" that may be flying and fighting alongside crewed aircraft in the future.

The companies highlighted in this story did not respond to requests for comment.

The Pentagon is heavily prioritizing speed and mass

America's biggest defense contractors have the money, talent, and connections needed to make big moves on drones, but they aren't the only game in town. The current administration is signaling greater support for companies that can move faster and cheaper than the big defense giants.

In July, Secretary of Defense Pete Hegseth sent a memo to senior Pentagon leadership, combatant commanders, and the directors of defense agencies about "unleashing US military drone dominance."

He touted the opportunities in building lower-cost drones rather than larger, more complex designs to match US foes in volume. That's a mission that the top defense contractors aren't necessarily chasing right now.

Service secretaries have taken public digs at the primes, with Army Secretary Dan Driscoll being among the most direct.

"We are going to completely disrupt the system that held the Army back for decades and lined the primes' pockets for so long," Driscoll said in October.

He said a Silicon Valley approach combining "venture capital money and mentorship with startup culture" would be "absolutely ideal for the Army." He previously said it'd be a win if one of the primes went out of business.

Some of the big primes have said that there's space for more competition and collaboration across the defense industry. Earlier this year, Jim Taiclet, CEO of Lockheed Martin, said during an earnings call that he sees "us all working together."

"I think that it's industry's role to help marshal the talent and expertise in our country to provide the best possible deterrent capabilities" for the US, Taiclet said.

Startups have been seizing on this moment by selling commercially developed drones directly to the military, in some cases bypassing the traditional contracting cycles that center on waiting for the military to set its requirements. There's a high-risk, high-reward aspect to this approach.

Putting capital into developing systems before the actual competition process is risky, Anduril President and Chief Business Officer Matthew Steckman told Business Insider earlier this year, but it also has its rewards.

The "risk is obvious," he said, explaining that if "we make the wrong decisions, we lose a whole lot of capital. But if we bet right, then we're ahead. We have sort of a head start."

Walter, the defense industry investor, said the big primes could do the same thing.

"They just have to get out of their own way," he said.