Ondas Inc. (ONDS) stock intrinsic value fair value estimate & owner earnings analysis

Ondas (ticker ONDS) sells drones, counter-drone systems and ground robots, mainly to governments and defense customers, plus wireless radio networks for utilities and railroads. Its main unit, Ondas Autonomous Systems, sells the Optimus automated drone system and the Iron Drone Raider counter-drone system (from the Airobotics acquisition), and in 2025 added Sentrycs (a cyber and radio-signal counter-drone product), 4M Defense (land intelligence for demining) and Roboteam (ground robots). Ondas Networks sells the FullMAX wireless radio platform. What the numbers show. Revenue rose from $7.2 million in 2024 to $50.7 million in 2025 and reached $133.9 million in the first half of 2026 alone. Much of the 2025 jump was bought: $26.9 million of the $44.5 million increase in the main unit came from companies acquired during the year. The business has not yet earned money on the measure we use, owner earnings (cash from operations, less swings in working capital, less stock compensation, less the maintenance part of capital spending). That figure was negative in each of the eight years we could measure, 2018 to 2025, ranging from about -$0.19 to -$1.13 per share. In 2025 it was about -$42.4 million, or -$0.19 per share. Losses are widening: in the first half of 2026 cash used in operations was $137.4 million and stock compensation was $88.8 million, against $38.7 million and $16.0 million for all of 2025. The share count has grown from 34.2 million diluted shares in 2021 to 221.8 million in 2025 and 529.8 million by June 30, 2026 (570.6 million by August 11, 2026). The reported first-half 2026 profit is not real earnings. The company reported net income of $362.8 million in the first quarter and a net loss of $88.4 million in the second, but the profit comes from a non-cash gain of about $405 million from revaluing its own warrants. We ignore it. We also could not fully explain from the filings available to us why the operating loss rose from about $42.7 million in the first quarter of 2026 to $162.9 million in the second; stock compensation is part of the answer but we did not reconcile all of it. The main asset is cash. The company raised about $829.5 million (net) in 2025 and about $1 billion (gross) in January 2026 by selling shares and warrants. On June 30, 2026 it held $666.4 million of cash and restricted cash plus $726.6 million of short-term investments, about $1.39 billion, or roughly $2.63 per share on the 529.8 million shares then outstanding. Borrowings were small ($13.2 million at the end of 2025). Some of the cash is held in escrow for deferred payments on the Sentrycs purchase ($37.6 million at the end of 2025). Warrants for about 75.5 million shares were outstanding at the end of 2025, and the January 2026 offering added warrants for up to 121.6 million more shares; exercising them would bring in cash but add shares, and we have not modeled that. Risks we can see in the filings: in 2025 two customers made up 55% and 11% of revenue and one customer made up 73% of receivables. Israel produced $30.8 million of 2025 revenue (about 61%), and the war in Israel that began in October 2023 is still ongoing; the company says it has caused disruptions but no materially adverse effects so far. The company has repeatedly spent large sums on acquisitions ($206.8 million of cash on business acquisitions in 2025). How we valued it. We found no disclosed order backlog, signed contract or record of profits from which we can credit future earnings, and growth that comes from acquisitions or from a market expanding does not count. So each case is today's cash less what it costs to keep running, with nothing credited for profits beyond that. We take the cost to shareholders at about $470 million a year, which is the first-half 2026 pace doubled: $146.5 million of cash used in operations and equipment purchases plus $88.8 million of stock compensation, each doubled. Costs are discounted at 6%. Bear case, $0.00 per share: spending continues at this pace for more than three and a half years, and, as in 2025, more cash goes to acquisitions. The cash is used up and nothing is left for shareholders. Shares cannot be worth less than zero, so we show zero. Base case, $0.26 per share: the current pace continues for three more years and nothing is credited after that. The discounted cost is about $1,257 million against $1,393 million of liquid assets, leaving about $136 million, or $0.26 on 529.8 million shares. The three-year length is our judgement, not a figure from the filings. Bull case, $1.00 per share: the pace continues for two years and then stops, with nothing credited afterwards. This rests on gross profit already rising, from $24.7 million in the first quarter of 2026 to $36.1 million in the second (a 45% gross margin over the half), giving the business a chance to cover its costs sooner. The discounted cost is about $862 million, leaving about $531 million, or $1.00 per share. What would make us wrong: if the business reaches large, steady profits, it would be worth much more than its cash, and our cases would be too low. We do not credit that because there is no year of positive owner earnings, gross margin was only 40% in 2025, and a good part of the growth was purchased. On the other side, faster spending or further deals would make the cash-based values too high. These values are as of mid-2026 and do not reflect cash raised or spent since then. The margin-of-safety price of $0.10 reflects a large margin of safety because two of three cases are at or near zero and the value depends on how long spending lasts.