CACI International: A Hidden Gem in the Counter-Drone Boom

The global counter-drone systems market is on fire, projected to grow at a 19% CAGR through 2026, yet one critical player—CACI International (CACI)—remains underappreciated by investors. Despite securing $638 million in U.S. intelligence community contracts in 2025 and spearheading breakthroughs in AI-driven counter-drone tech, the stock trades at a valuation discount to peers. This creates a textbook case of valuation arbitrage, where CACI's market position, technological edge, and secular tailwinds are not yet fully reflected in its stock price. Here's why investors should take notice.

The Counter-Drone Market: A $2.5B Opportunity Ignoring CACI's Strength

The counter-drone market is a strategic battleground. From protecting critical infrastructure to neutralizing threats in combat zones, governments are pouring billions into solutions like CACI's SkyTracker® suite. Yet CACI's valuation—13x forward EBITDA—lags peers like Raytheon (20x) and Lockheed Martin (18x). This gap persists despite CACI's:- $2.5B+ defense contracts (including C-UAS work) in 2025.- $1B+ in R&D-driven growth catalysts, such as its TLS-BCT Manpack system, which integrates electronic warfare and AI for real-time threat disruption.- A 11.8% YoY revenue growth in FY2025, driven by classified national security projects.

The disconnect arises because CACI's counter-drone wins are often buried in broader defense contracts, making its true market share hard to quantify. Analysts at William Blair noted this in 2025, upgrading CACI to Outperform and predicting a “valuation re-rating” as its role in the $2.5B market becomes clearer.

Why CACI's Growth Is Underappreciated

1. Strategic Contracts with Unseen Upside

CACI's Canadian Armed Forces deal (May 2024) and its $414M U.S. Army task order (July 2024) are just the tip of the iceberg. The company's SkyTracker® system, which uses AI to detect and neutralize drones, is now being deployed in regions like the Asia-Pacific, where geopolitical tensions are driving demand. Crucially, these contracts often include replenishment orders and upgrades, creating recurring revenue streams analysts have yet to model fully.

2. A Legally Protected Moat: The JCO Play

The Joint Counter-UAS Office (JCO), now under U.S. Army oversight, is standardizing counter-drone protocols. CACI's early partnerships with the JCO give it a first-mover advantage in shaping requirements for future contracts. This contrasts with competitors like Boeing, which are still developing comparable systems.

3. Financial Engineering at Work

In 2025, CACI upsized its senior notes offering to $1B, using proceeds to reduce high-interest debt. This de-risking move lowers interest expenses, freeing cash flow to fuel R&D and M&A. The company's $750M institutional notes offering further signals confidence in its balance sheet—a stark contrast to overleveraged peers.

Data Points: The Case for a Valuation Re-Rate

• Margin Growth: CACI's margins are set to expand by 20 basis points in FY2026, per Jefferies, as high-margin contracts (e.g., SkyTracker®) scale.
• Market Share: While competitors focus on hardware, CACI's AI integration and low SWaP (size, weight, power) design are winning contracts in niche markets like naval defense and urban counter-drone patrols.
• Legislative Tailwinds: The $1.9B allocated to counter-drone systems in the 2023 Defense Reconciliation Bill directly fuels CACI's pipeline. Analysts estimate 40% of this funding could flow to the company's solutions by 2026.

Investment Thesis: Buy the Discount Before the Re-Rate

Buy CACI now at 13x EBITDA, targeting 15x+ by 2026. The catalysts are clear:1. 2025 Q4 Earnings: Management will likely provide FY2026 guidance highlighting counter-drone revenue visibility.2. JCO Contract Wins: Standardization under the JCO could trigger multi-year contracts worth hundreds of millions.3. M&A Activity: CACI could acquire smaller C-UAS innovators, accelerating its tech lead.

Risk Factors: Overreliance on U.S. defense spending, regulatory scrutiny of classified contracts, and competition from primes like Raytheon. However, CACI's operational agility and classified work backlog mitigate these risks.

Final Verdict: A 2025 Contrarian Play

CACI International is a valuation anomaly in the counter-drone boom. Its technological leadership, under-the-radar contract wins, and financial discipline position it to outperform peers as the market matures. With a $570 price target (Jefferies' FY2026 estimate) and a current price of ~$480, the upside is compelling. Investors ignoring CACI's stealthy growth are missing a rare opportunity in a sector that's only just taking off.