T3 Defense took a controlling 60% position in Project35, an Israeli unmanned systems developer whose autonomous interceptor drones have already seen operational deployment with defense customers the company declined to name. The acquisition, announced July 2026, marks T3's first major move into counter-UAV technology after years focused on tactical ground robotics and vehicle-mounted payloads. Project35's portfolio includes reconnaissance UAVs, loitering munitions, and a kinetic interceptor platform designed to neutralize hostile drones in contested airspace. Financial terms were not disclosed, though industry sources familiar with Israeli defense acquisitions estimate the deal valued Project35 between $45 million and $65 million based on comparable transactions over the past eighteen months. T3 Defense, headquartered in Virginia, has raised approximately $180 million across three funding rounds since its 2019 founding, most recently closing a $92 million Series C in March 2025 led by Shield Capital and AE Industrial Partners. The company employs roughly 320 people across facilities in Arlington, Virginia and Huntsville, Alabama, where it manufactures ruggedized robotic systems for explosive ordnance disposal and perimeter security.
Project35's engineering team, roughly 40 people based in central Israel, will remain intact and continue operating from their current facility under the T3 organizational structure. The team includes veterans of Israel Aerospace Industries and Elbit Systems, companies that have dominated the Israeli unmanned systems market for two decades. Project35's lead interceptor, a fixed-wing platform the company has not publicly named, uses computer vision and onboard processing to identify and engage small UAVs autonomously, requiring no operator input once a target zone is designated. The system can operate in GPS-denied environments, a capability that has become essential as adversaries increasingly deploy jamming against coalition forces. Project35 has demonstrated the interceptor in live-fire exercises with at least two NATO member militaries, according to marketing materials reviewed by trade publications in late 2025, though the company has not disclosed which nations participated. The interceptor carries no explosive payload; it disables targets through physical collision at high speed, a design choice that reduces regulatory complexity and allows deployment in urban or mixed civilian-military environments where explosive ordnance faces restrictions.
T3's interest in counter-UAV systems reflects the defense sector's broader scramble to address small drone proliferation. The U.S. Department of Defense allocated $1.4 billion to counter-small UAS programs in fiscal year 2026, nearly triple the budget from three years prior. That spending has flowed primarily to directed energy systems, electronic warfare platforms, and kinetic interceptors—the category where Project35 competes. Competitors include Anduril's Anvil drone, DroneShield's kinetic systems, and Fortem Technologies' DroneHunter, all of which have secured contracts with U.S. military branches or allied governments. The market has consolidated rapidly; Anduril acquired Area-I in 2021 and has since captured roughly 30% of U.S. military counter-UAV procurement by value, according to defense contract databases. T3's acquisition positions the company to compete for upcoming contracts from U.S. Special Operations Command and the Army's Program Executive Office for Intelligence, Electronic Warfare, and Sensors, both of which plan major counter-UAV purchases through 2027. Project35's existing relationships with Tier-1 customers—defense industry shorthand for the largest national militaries and their primary contractors—give T3 access to procurement channels that typically take years to establish. T3's CEO, former Marine Corps officer Marcus Reilly, has previously stated the company aims to reach $500 million in annual revenue by 2028, a target that would require either a major program-of-record win or several mid-sized contracts across U.S. and allied forces.
The acquisition also brings Project35's reconnaissance platforms and loitering munition designs under T3's control, though neither company has disclosed whether those systems will continue active development or serve primarily as intellectual property for future derivatives. Loitering munitions—drones that can hover over a target area for extended periods before engaging—have seen explosive demand since their battlefield effectiveness became evident in the Nagorno-Karabakh conflict in 2020 and subsequent theaters. AeroVironment, a California-based competitor, reported $560 million in loitering munition sales for fiscal 2025, up from $340 million two years earlier. Project35's version uses electric propulsion and modular payloads, allowing operators to swap between kinetic warheads, ISR sensors, or electronic warfare packages depending on mission requirements. The system's endurance exceeds four hours on a single battery charge, comparable to AeroVironment's Switchblade 600 but below the eight-plus hours achieved by larger platforms like the Israeli-made Hero-400EC. T3 has not announced whether it will manufacture Project35's systems in the United States or continue production in Israel, a decision with significant implications for U.S. defense contracts that often include domestic production requirements under Buy American provisions.
What to Watch: T3 Defense is expected to demonstrate the Project35 interceptor at the Association of the United States Army's annual conference in October 2026, where the company has reserved booth space and filed for live demonstration permits with event organizers. U.S. Special Operations Command's counter-small UAS program office plans to release a request for proposals in the fourth quarter of 2026 for a portable kinetic interceptor system; industry observers expect T3 to submit the Project35 platform as its bid. Watch for announcements regarding domestic manufacturing partnerships, likely with a Southeastern U.S. aerospace contractor, as T3 works to meet federal contracting requirements.
