Red Cat Reports Narrowing Losses

While revenue declined year-over-year, strong demand from government contracts and enterprise customers signals a strategic pivot for Red Cat's future.

November 14, 2025

Revenue Realignment

Red Cat Holdings is working through a shift in focus—and the latest quarterly results reflect that change in motion. For the three months ending October 31, 2025, the company posted a revenue total of $1.6 million, down from the prior year. The driver: a full exit from its Consumer segment, which impacted top-line performance but cleared the way for a more targeted strategy.

That strategy is now centered on enterprise and government clients. Teal Drones, the company’s flagship defense unit, is mid-way through delivering a large federal contract. Red Cat reports that roughly 65% of the order is complete, with more deliveries to follow. This work is key to building out its Enterprise segment, which is expected to lead growth going forward.

Margins and Cost Control

Margins saw a slight lift. Gross profit came in at $451,000, or 28.6% of revenue—up a touch from last year. Operating expenses dropped to $5.6 million, a notable reduction from $7.5 million in the same quarter a year ago. Cuts to consumer-related costs and a more focused R&D approach played a role here.

Those adjustments helped Red Cat narrow its losses. Operating loss was $5.2 million, down from $6.3 million. Net loss followed the same trend, improving from $6.1 million to $4.8 million. The company ended the quarter with $2.4 million in cash and no long-term debt, offering some breathing room as it scales its defense work.

Inventory and Fulfillment

Inventory increased to $5.5 million, up from $3.3 million last quarter. Most of that reflects production in progress for government contracts. The company expects this inventory to convert into revenue in the quarters ahead.

Operational Execution

The operational side of the business is moving in parallel. Red Cat has ramped up production on its Teal 2 platform and is expanding outreach to federal and public safety clients. Its Utah facility is now fully functional and compliant with key cybersecurity standards required for defense contracts.

Strategic Outlook

Looking ahead, Red Cat is focused on growth in public sector markets. The team is building next-gen drone systems, expanding its domestic production capacity, and deepening relationships with government buyers. While consumer revenue is no longer in play, the company is betting on enterprise-grade hardware and secure, NDAA-compliant solutions to drive future performance.

This quarter shows a company in transition—one tightening its focus, reducing burn, and setting the stage for new revenue streams tied to national security and enterprise demand. Execution over the next few quarters will be critical to proving that strategy out.