Terra Drone Corporation, a leading drone and Urban Air Mobility (UAM) technology company headquartered in Japan, announces a full-scale entry into the defense equipment market. Terra Drone also announces the establishment of Terra Defense, a U.S.-based subsidiary by the end of fiscal year 2026, to facilitate the optimized international supply and logistics network for defense assets.

Since its founding, Terra Drone has pursued its vision of transforming mobility in the sky, developing and operating drone technologies around the world while accumulating extensive expertise in drone applications across a wide range of industries.

In recent years, as the international situation has become increasingly unstable, the importance of deterrence through technology to protect the lives and property of citizens has grown more than ever before.

Leveraging the technological capabilities and practical operational expertise it has cultivated in the drone sector across global markets, Terra Drone will contribute to the development of a sustainable next-generation defense foundation by providing defense assets that are rapid to deploy, cost-efficient, and highly capable.

Background and Purpose

Since March 2026, the global geopolitical environment has been rapidly evolving, particularly in the Middle East, where tensions are escalating, as well as in the Indo-Pacific region. As the global security environment enters a major turning point, the very concept of defense is being redefined. Against the backdrop of major countries strengthening their defense capabilities, global defense-related spending in fiscal year 2024 exceeded a record high of USD 2.71 trillion (1), making the response to geopolitical risks one of the most critical shared challenges facing the international community.

In the recent Russia-Ukraine war, low-cost drones were deployed on an unprecedented scale as unmanned assets capable of reducing risks to human life, becoming one of the key applications in modern warfare. In response to these developments, countries around the world are now accelerating the development of new defense systems built on the premise of utilizing various unmanned assets, backed by expanding budgetary investment.

Specifically, the global military drone (UAV) market is estimated to be worth USD 15.8 billion in 2025 and is projected to reach USD 22.8 billion by 2030, representing a compound annual growth rate (CAGR) of 7.6% over the period (2).

Japan’s security environment is also becoming increasingly severe. With intensified military activities in surrounding regions and the emergence of new threats such as missiles and unmanned aerial vehicles, it is becoming increasingly difficult to maintain sufficient deterrence through conventional defense systems alone.

In Japan’s proposed fiscal 2026 budget, approximately USD 1.96 billion (3) has been allocated to strengthen defense capabilities involving unmanned assets, marking the largest budget of its kind to date and clearly demonstrating the national policy of positioning unmanned systems (4) at the core of defense.

In addition, under the “SHIELD” concept (5), a multilayered coastal defense framework targeted for establishment in fiscal 2027, Japan is considering a defense structure that combines unmanned assets and various sensors to provide wide-area, phased protection of coastal regions. Drones are expected to serve as one of the core unmanned assets within this framework.

Terra Drone views the defense market—where further expansion is expected across areas, applications, and operational domains—as a field with layered growth opportunities and significant medium- to long-term growth potential. By leveraging the operational expertise in drones that it has cultivated around the world, Terra Drone will work to accelerate the early implementation of solutions tailored to defense needs.

Future Initiatives

Going forward, Terra Drone believes that in the field of unmanned systems for defense, market demand will increasingly emerge and expand along the following three key axes. Terra Drone will position these areas as core strategic priorities.

1. Establishment of U.S. Subsidiary “Terra Defense” and Development of a Global Logistics Network

Terra Drone will establish “Terra Defense” in the United States to build a rapid and flexible supply structure capable of responding to international defense needs. In carrying out import/export operations and technology collaboration, the U.S. entity will oversee the import/export and logistics of defense assets.

The establishment of “Terra Defense” is planned to be completed within FY2026.

2. Phased Global Market Entry

Challenges such as rising geopolitical risks and the growing need to respond to unmanned assets (6) are increasingly becoming common across borders. Of global defense-related spending, which continues to remain at record-high levels, the unmanned systems sector in particular is regarded as a priority investment area, with annual growth projected to exceed 7.6% (7).

In addition to Japan, Terra Drone will promote the deployment of unmanned assets overseas through its “Terra Defense” including Ukraine, NATO member states, and Asian countries.

• Japan: A market where the adaptation of advanced civilian technologies to strengthen the domestic defense base is increasingly required, including under the government-led multilayered coastal defense concept known as SHIELD.
• Ukraine: A market in which operational knowledge from rapidly evolving modern warfare is updated on a daily basis, making agile product development based on real combat feedback and a highly reliable supply structure essential.
• NATO countries: Markets where, amid rising geopolitical tensions, demand is growing for technologies that support both efficient use of defense budgets and the rapid strengthening of defense capabilities.
• United States: An environment where compliance with strict Western defense standards is a prerequisite, and where interoperability and sustained cooperation within the international joint defense network centered on the Japan-U.S. alliance are emphasized.
• Other regions: Markets in which adoption by major allied countries serves as a benchmark of credibility, and where demand for versatile defense platforms is expected to emerge in phases in regions facing common security challenges, such as Asia and the Middle East.

3. Expansion of a Next-Generation Asset Portfolio Across Land, Air, and Sea

In the defense market, while multilayered air defense and coastal defense systems for protecting critical infrastructure remain central, demand is steadily expanding for unmanned assets across land, air, and sea. These include FPV drones (including fiber-optic models), interceptor drones (rocket-type, fixed-wing, and jet-engine-powered), unmanned surface vessels, reconnaissance drones, and OSA (Official Security Assistance) -related drones. Terra Drone will continue to advance product development to expand its lineup of drones and other systems tailored to these various applications.

• FPV drones: Primarily intended for responding to low-altitude threats such as reconnaissance drones. Certain models will incorporate fiber-optic systems to enable extremely stable operations even in jamming environments.
• Rocket-type interceptor drones: An interception solution with high cost efficiency and mass-production capability. These are designed to serve as an effective final line of defense against saturation attacks involving large numbers of small drones.
• Fixed-wing interceptor drones: Designed for wide-area patrol enabled by the characteristics of fixed-wing aircraft. If a target is detected but not intercepted, the drone can return to base and be reused, balancing operational efficiency with preventive defense capability.
• Jet-engine-powered interceptor drones: Core next-generation assets offering superior speed and range, designed for earlier detection and response at greater distances.
• Reconnaissance drones (ISR): Assets equipped with advanced imaging recognition and sensor technologies, specialized for real-time battlefield awareness and intelligence gathering.
• Unmanned surface vessels (USVs): Unmanned assets that support coastal and maritime security operations.
• Response to OSA (Official Security Assistance): Japanese-made aircraft provided through the “OSA” framework, which aims to enhance the security capabilities of like-minded countries. These platforms feature performance specialized for defense and security operations.

Representative’s Comment

Toru Tokushige, CEO of Terra Drone stated:
“The evolution of drone technology is irreversibly transforming the nature of security and defense. Our decision to enter this market marks an important first step in Terra Drone’s long-term business strategy. In line with the accelerating efforts to strengthen defense capabilities, we will focus on the deployment of products that address the needs of each country. By leveraging the real-world operational expertise in drones that we have cultivated around the world, we will actively promote digital transformation in defense that supports public safety and strengthens international deterrence.”

Future Outlook (Impact on Financial Results)
The impact of this matter on our financial results, as currently anticipated, has already been incorporated into the full-year consolidated earnings forecast for the fiscal year ending January 2027, announced on March 16, 2026. Should any matters requiring disclosure arise in the future due to the progress of this business, we will promptly make an announcement.

Editor’s Notes

(1) Aggregate estimate based on the Stockholm International Peace Research Institute (SIPRI) Military Expenditure Database and publicly disclosed defense budgets of major countries. https://www.sipri.org/databases/milex
(2) Based on data from the MarketsandMarkets research report, Military UAV Market – Global Forecast to 2030. https://www.marketsandmarkets.com/Market-Reports/military-drone-market-221577711.html?gad_source=1&gad_campaignid=272040196&gbraid=0AAAAADxY7SzVD22fsOVrWz5AQyFMwvLtz&gclid=Cj0KCQiA2bTNBhDjARIsAK89wlHf0R6tkhU4KUr5BG_YRYEaIFRnEe_HGFm8xq3hCC51eIShHtxTsB0aAsmoEALw_wcB
(3) Ministry of Defense, Defense of Japan and Budget (Overview of the FY2026 Budget Request). https://www.mod.go.jp/j/budget/yosan_gaiyo/index.html
(4) Unmanned systems refer to the overall frameworks, operational structures, and networks that utilize unmanned assets (see Note 6). Source: Ministry of Defense, Ground Staff Office, Ground Research & Development Command, publicly available materials.
https://www.mod.go.jp/gsdf/tercom/img/file2705.pdf
(5) Ministry of Defense, published materials on Development of the Multilayered Coastal Defense Framework (SHIELD). https://www.mod.go.jp/gsdf/tercom/img/file2705.pdf

(6) Unmanned assets refer to individual physical defense equipment and platforms, including drones (unmanned aerial vehicles), unmanned surface vessels (USVs), and unmanned underwater vehicles (UUVs). Source: Ministry of Defense, Ground Staff Office, Ground Research & Development Command, publicly available materials.
https://www.mod.go.jp/gsdf/tercom/img/file2705.pdf
(7) For further details, see the MarketsandMarkets research report, Military UAV Market – Global Forecast to 2030.
https://www.marketsandmarkets.com/Market-Reports/military-drone-market-221577711.html?gad_source=1&gad_campaignid=272040196&gbraid=0AAAAADxY7SzVD22fsOVrWz5AQyFMwvLtz&gclid=Cj0KCQiA2bTNBhDjARIsAK89wlHf0R6tkhU4KUr5BG_YRYEaIFRnEe_HGFm8xq3hCC51eIShHtxTsB0aAsmoEALw_wcB