Unusual Machines Completes Upgrade Energy Deal

The Tip Desk · November 11, 2026 · 3 min read

Third-quarter revenue was $13.9 million, down 17% from the prior quarter as the drone-parts maker invested in capacity, and the company closed Upgrade Energy.

Unusual Machines (UMAC), a provider of NDAA-compliant drone components, generated $13.9 million of revenue in the third quarter ended September 30, 2026, a 17% decline from $16.7 million in the second quarter after 106% sequential growth in that period.

The company said the drop was at the high end of its revenue targets and reflected foundational work to support later growth, including more capital equipment for motor throughput, pre-close scaling of Upgrade Energy, and new additive-manufacturing capacity. Year-over-year growth slowed to 551% from 687% in the second quarter.

Gross margin was 35.4%, up from 34.7% in the prior quarter. Versus 39.4% a year earlier, the company said margins had slipped as revenue shifted primarily to enterprise from retail and as it incurred near-term costs to keep inventory stocked.

GAAP loss from operations widened to $8.4 million from $7.8 million in the second quarter. Adjusted EBITDA loss widened to about $0.7 million from about $0.4 million. Stock compensation expense was $5.5 million.

Net loss attributable to common shareholders was $25.0 million, or ($0.50) a share, versus net income of $1.6 million, or $0.05 a share, a year earlier. The company said the swing related primarily to an $18.4 million unrealized loss on short-term investments, compared with a $5.8 million unrealized gain in the year-ago quarter.

Headcount grew from 240 at the end of the second quarter to 276 at quarter-end, then to 325 after the Upgrade Energy close and more than 340 as of the letter date. Inventory and prepaid inventory rose from $42.4 million at June 30 to $65.9 million at September 30; finished goods rose from $4.4 million to $9.3 million. Accounts receivable increased from $9.3 million to $18.7 million. The company made about $3.0 million of equipment purchases.

Upgrade Energy generated $3.32 million of third-quarter revenue, nearly matching $3.37 million for the entire first half of 2026. The company said its team helped grow Upgrade’s workforce from 24 to 49 employees starting at the beginning of the third quarter. The acquisition added battery-pack production.

Cash fell to $162.0 million from $229.6 million at June 30, primarily from $24.8 million of inventory purchases and $35.0 million of investments including a loan receivable. Working capital was $342.1 million, down from $367.5 million in the second quarter, which the company attributed to the unrealized investment loss.

The single best-selling product accounted for about 19% of revenue. The company said it expects customer concentration to generally increase through 2027. It received a $16.9 million order from Powerus and said several Department of War programs had allocated 2026 money to support 2027 demand, including Drone Dominance Phase 3 and about $4.5 billion in counter-drone IDIQ awards to 10 vendors.

The company said it is working to add 100,000 square feet in the fourth quarter and that a new automated motor line is expected to support 100,000 additional motors per month once fully operational. It said it will work toward a 40% margin target, that achieving it may take longer as it prioritizes rapid growth, and that it reiterates a goal of positive adjusted EBITDA in 2027.