Boresight (ASX:BST) IPO Lands With Drones Designed to Be Shot Down Repeatedly

IPO Takes Off as Disposable Drones Target Recurring Defence Demand

Drone IPOs have emerged as a hot topic this month.

While semiconductors continue to dominate investor attention, drones are quickly becoming another important technology theme. Boresight has now made its market debut, with shares jumping around 70% on the open after the company raised A$8 million at an implied market capitalisation of approximately A$41 million.

What makes Boresight interesting is the problem it is trying to solve.

The company designs and manufactures low-cost drones that are purpose-built to be shot down.

That may sound unusual at first, but the commercial logic is straightforward. As defence forces invest more heavily in counter-drone capabilities, soldiers need realistic targets to practise detecting, tracking and destroying hostile drones.

Using real surveillance drones for training is not economically viable. Advanced military drones can cost more than A$500,000 each, making them far too expensive to repeatedly destroy during live exercises.

Boresight addresses this gap by producing lower-cost drones that are designed to behave like credible battlefield threats.

The opportunity extends beyond the hardware.

Boresight also provides control-station and mission-planning software that allows multiple drones to operate together as a swarm rather than as individual units. This enables defence forces to recreate more realistic combat scenarios, where soldiers may need to respond to multiple coordinated threats at the same time.

The investment case is therefore relatively simple.

Boresight is not trying to build the most advanced drone on the battlefield. It is building an affordable and repeatable training platform for the growing counter-drone market.

Why deliberately cheap, and why at volume

This is an important point for investors to understand.

Products described as low-cost or disposable are often dismissed as low-value. But in modern drone warfare, that can miss the commercial opportunity entirely.

The Russia-Ukraine war has shown how small drones can be deployed in large numbers, often carrying explosive payloads and operating as low-cost kamikaze weapons. Many of these systems cost only a few thousand dollars, which makes them highly expendable on the battlefield.

That changes the training requirement.

It makes little sense for defence forces to repeatedly use expensive intelligence, surveillance and reconnaissance drones as live targets. Instead, soldiers need lower-cost drones that can realistically replicate the threats they are increasingly likely to face.

Boresight is targeting this gap with purpose-built, expendable drones designed for realistic counter-drone training.

The low-cost model is not a weakness. It is actually what creates the potential for recurring revenue.

When a drone is destroyed during training, it needs to be replaced before the next exercise. What may initially look like a one-off hardware sale can therefore become a repeat purchasing cycle as customers continue to run live counter-drone drills.

Boresight’s broader strategy is to become more deeply embedded in military training programs over time.

The company is also releasing two new surveillance drones, which could allow it to move further up the value chain and upsell customers into higher-value platforms with broader defence applications.

The investment case is therefore not simply about selling cheap drones.

It is about building a repeatable training ecosystem around a rapidly changing style of warfare, then using that customer relationship to expand into more sophisticated defence products.

The financials

Boresight’s revenue increased from A$2.7 million in FY24 to A$4.3 million in FY25, representing growth of approximately 58%. U.S. revenue also reached around A$1 million, which suggests the company is beginning to gain traction in a much larger defence market.

However, the key metric investors need to watch is gross profit.

Gross profit reached approximately A$2.8 million in FY25, implying a gross margin of around 64.5%. While still healthy, this was down from approximately 77% in FY24.

The decline is worth monitoring because cost of goods sold increased by around 148%, materially faster than the 58% growth in revenue.

There may be reasonable explanations for this.

Boresight is expanding its manufacturing capabilities, investing in new product development and building the infrastructure required to support future growth. The margin decline could also reflect a temporary inventory build, a changing product mix or the costs associated with establishing the U.S. business.

However, the next few reporting periods will be important.

As revenue scales, investors will want to see evidence of operating leverage, with sales growing faster than the underlying cost base. Gross margin will therefore be one of the first questions we would put to management.

The encouraging point is that Boresight generated positive operating cash flow in FY25.

This appears to have been supported by an improvement in working capital, with stronger cash collections potentially reflecting contracts that were pushed into FY25 and subsequently converted into receipts.

While the business is still early in its growth cycle, Boresight does not appear to be far away from breakeven. The next step is proving that revenue growth can translate into stronger margins and more sustainable cash generation.

Is there a moat 

Manufacturing cheap drones isn’t the moat; anyone with the capital and supply relationships can create cheap drones, but it really comes down to the position of sovereignty, certification, doctrine embedding, and the software, not the drone itself. That is a real moat but a softer one than “first mover” suggests.

The investor’s takeaway for Boresight 

Boresight is an interesting model, and among the drone companies currently listed on the ASX, it stands out as a genuinely differentiated one.

The next major share price catalyst is likely to come from pipeline conversion.

This is the single most important lever for investors to watch.

Boresight has already secured follow-on orders from the Australian Defence Force, generated demand from the U.S. military and worked with major defence primes including Lockheed Martin and Northrop Grumman.

For a company with a revenue base of just A$4.36 million, every new contract matters.

Each order announcement can be material enough to drive a meaningful re-rate, particularly if it provides further evidence that Boresight is becoming embedded in recurring defence training programs.

The 2026 product rollout could also expand the opportunity.

Boresight plans to launch the BF-100 fixed-wing target and the BQ-300 FPV target in Q3, followed by the BF-150 loitering-munition target in Q4.

These launches broaden the catalogue beyond traditional quadcopters and allow the company to replicate a wider range of threat profiles, including fixed-wing drones, first-person-view systems and loitering munitions.

Boresight is building a broader counter-drone training platform, with the potential to increase order sizes, deepen customer relationships and capture a larger share of defence spending as drone warfare continues to evolve.