Red Cat Holdings Inc. (RCAT) faced a severe pre-market sell-off on Tuesday, with its stock plummeting 17.13% following the release of its disappointing fiscal second-quarter 2025 earnings results.

The drone technology company reported a wider net loss of $13.3 million, or $0.18 per share, compared to a net loss of $5.8 million, or $0.11 per share, in the same period last year. More concerning was the 60.95% decline in revenue to $1.53 million, significantly missing analyst estimates of $4.13 million.

While Red Cat had recently announced a strategic partnership with Palantir Technologies to integrate visual navigation software into its Black Widow drones, this positive development was overshadowed by the weak financial performance. The company cited its decision to halt production of the Teal 2 drone and focus on the Black Widow model as a key factor impacting short-term revenue. However, Red Cat believes this strategic shift will prioritize long-term growth and position it to meet the demands of a new U.S. Army contract and other programs.