Investing in the New Age of Attritional Warfare: The Rise of Low-Cost Drone Swarms and Counter-Drone Technologies

The global defense landscape is undergoing a seismic shift as attritional warfare-centered on overwhelming adversaries with low-cost, high-volume systems-replaces traditional, capital-intensive strategies. At the heart of this transformation are low-cost drone swarms and counter-drone technologies, which are redefining military operations, industrial scalability, and investment dynamics. European defense firms like MBDA and emerging innovators are leading this charge, leveraging artificial intelligence (AI), modular design, and strategic partnerships to unlock high-growth, capital-efficient opportunities. For investors, this represents a pivotal inflection point in the evolution of modern warfare and the defense industrial base.

The Disruptive Potential of Low-Cost Drone Swarms

Low-cost drone swarms are emerging as a cornerstone of attritional warfare, enabling militaries to deploy large numbers of expendable platforms at a fraction of the cost of traditional systems. According to a report by ResearchAndMarkets, the global low-cost drone swarms market is projected to grow from USD 970.1 million in 2025 to USD 3,060.8 million by 2032, with a compound annual growth rate (CAGR) of 17.8%. This growth is driven by advancements in AI and autonomous control systems, which allow drones to perform complex missions such as surveillance, combat, and logistics with minimal human intervention.

European defense firms are at the forefront of this trend. MBDA, a key player in the region, has unveiled the One-Way Effector, a 40-kg, 500-kilometer-range drone designed to saturate enemy air defenses in mass formations. By partnering with a French automaker and an undisclosed drone manufacturer, MBDA aims to achieve a production rate of 1,000 units per month, emphasizing cost-effectiveness and scalability. This aligns with the broader global shift toward attritable systems, as seen in the war in Ukraine, where low-cost drones have proven critical in disrupting high-value assets.

Industrial Scalability and Strategic Partnerships

The scalability of low-cost drone swarms hinges on industrial partnerships and dual-use technologies. European companies like Daher are pioneering this approach by converting certified civilian aircraft into military drones, reducing production costs and regulatory hurdles. For instance, Daher's EyePulse project leverages existing civil certifications to rapidly industrialize platforms suitable for surveillance, reconnaissance, and even precision agriculture. This dual-use strategy not only accelerates deployment but also creates cross-sector revenue streams, enhancing capital efficiency for investors.

Collaborative R&D initiatives are further driving scalability. The European Commission's 2024 European Defence Fund has allocated grants for projects like BEAST (Better Affordable Swarm Technologies) and GARUDA, which aim to enhance integrated air defense and next-generation combat systems. These projects underscore Europe's push toward technological sovereignty, with a focus on interoperable, modular systems that align with NATO and Ukrainian defense frameworks.

The Counter-Drone Arms Race: Emerging Innovators and Market Dynamics

As the proliferation of low-cost drones accelerates, the counter-drone market is experiencing explosive growth. The European anti-drone market, valued at USD 432.6 million in 2024, is projected to expand to USD 4,079.3 million by 2033, with a CAGR of 28.1%. This expansion is fueled by AI-driven detection systems and multi-sensor technologies that enhance real-time threat identification and response capabilities.

Emerging innovators like HENSOLDT and Robin Radar Systems are leading the charge. HENSOLDT's advanced sensor solutions, including radar and optronics, are critical for detecting and neutralizing drone swarms. Meanwhile, Robin Radar Systems' IRIS® system, deployed in the Netherlands, offers high-accuracy tracking of rogue drones. These technologies are being integrated into systems like MBDA's SKY WARDEN, a modular counter-UAS (C-UAS) platform capable of managing the full kill chain-from detection to neutralization-using a combination of jammers, lasers, and kinetic interceptors.

Government initiatives are amplifying this momentum. The UK's investment in drone detection technologies and Germany's focus on modernizing defense systems highlight the strategic importance of counter-drone capabilities. Additionally, the European Drone Defence Initiative (EDDI), part of the EU's Readiness 2030 strategy, is creating a unified framework to counter drone threats through interoperable standards and NATO alignment.

Financial Performance and Investment Trends

The financial performance of European defense firms and startups underscores the sector's capital efficiency and growth potential. MBDA's 2025–2030 investment plan includes a EUR 2.4 billion allocation for industrial capacity expansion, advanced technologies like AI and hypersonics, and doubling missile production. This strategy is already yielding results, with systems like CAMM and BRIMSTONE seeing significant production increases.

Meanwhile, European counter-drone startups are securing record funding. Quantum Systems, a German firm, raised EUR 160 million in a 2025 Series C round, while Helsing and Tekever have also secured major investments. Between 2022 and 2025, the European defense sector attracted USD 4.3 billion in funding, driven by strategic autonomy goals and the need to counter drone incursions.

Investment trends in attritable systems are equally compelling. The European Drone Defense System market, valued at USD 182.5 million in 2024, is projected to grow at a CAGR of 25.57% through 2035, reaching USD 2,233.6 million. This growth is underpinned by AI integration, multi-sensor systems, and government contracts, creating a fertile ground for investors seeking high-margin, scalable opportunities.

Implications for Investors

For investors, the convergence of attritional warfare, industrial scalability, and technological innovation presents a unique opportunity. European firms like MBDA and emerging innovators are not only redefining modern warfare but also creating capital-efficient models that balance operational readiness with long-term strategic goals. Key investment themes include:
1. Dual-Use Platforms: Companies leveraging civilian certifications to reduce costs and accelerate production cycles.
2. AI-Driven C-UAS Systems: Firms integrating machine learning for real-time threat assessment and predictive modeling.
3. Collaborative R&D Projects: Initiatives like BEAST and EDDI that align with NATO and EU defense strategies, ensuring long-term demand.
4. High-Growth Startups: Counter-drone startups securing substantial funding to address urgent security needs.

As attritional warfare becomes the new norm, the defense sector's shift toward low-cost, high-volume systems will continue to attract capital. For investors, the challenge lies in identifying firms that can scale rapidly while maintaining technological and operational superiority-a task that European defense firms and innovators are uniquely positioned to achieve.