How RCAT (Red Cat Holdings) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a technology company like RCAT Income Statement Overview makes money is essential for investors and anyone interested in the business of advanced drone and imaging solutions. In this post, we break down RCAT's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick RCAT Overview

RCAT Income Statement Overview operates as a provider of advanced drone technologies and imaging solutions. Revenue comes primarily from the sale of drone hardware, imaging software, and related services to commercial and government clients. The company’s business model is centered on integrating hardware sales with recurring software and service contracts, though hardware remains the dominant revenue stream.

Revenue Breakdown

• Total Revenue (Q2 2025): $3.22M (−49.0% YoY)
  • [No segment breakdown disclosed in this quarter’s filing]
  • Growth is challenged by a sharp YoY decline, reflecting market headwinds and possibly lower hardware sales.

Gross Profit and Margins

• Gross Profit: $0.38M (11.7% gross margin)
  • Cost of Revenue: $2.84M (−44.3% YoY)
  • RCAT maintains modest margins due to the capital-intensive nature of hardware sales and competitive pricing pressures.
• Most costs come from hardware production, procurement of imaging equipment, and direct service delivery.

Operating Income and Expenses

• Operating Income: Not reported (operating loss implied)
• Operating Expenses: $13.00M (+106.0% YoY)
  • R&D: $3.60M (+458.1% YoY, 111.8% of revenue) — Focused on next-generation drone platforms, AI-driven imaging, and software integration.
  • SG&A: $9.42M (+66.0% YoY, 292.8% of revenue) — Includes sales, marketing, administrative, and support functions.
  • RCAT continues to prioritize innovation and invest heavily in growth, even as it manages the challenge of scaling efficiently.

Net Income

• Pre-Tax Income: Not reported
• Income Tax: Not reported
• Net Income: $0.013M (+87.8% YoY, 412.6% net margin)
• RCAT converts a very modest portion of sales into profit due to high operating expenses, but the positive net income reflects tight cost control outside of R&D and SG&A.

What Drives RCAT's Money Machine?

• Drone hardware sales: The primary revenue driver, accounting for the majority of income.
• Recurring software/service contracts: While not broken out, these are strategic for future margin expansion.
• R&D investment: $3.60M in Q2 2025, targeting AI, automation, and advanced imaging.
• Future growth areas: Expansion into AI-powered analytics and autonomous drone operations, though these segments are not yet profitable.

Visualizing RCAT's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A and R&D) taking the largest chunk.
• Even after large investments in innovation and operational scaling, only a tiny fraction of revenue drops to the bottom line.

Key Takeaways

• RCAT's money comes overwhelmingly from drone hardware sales, with software and services as emerging contributors.
• Low gross and net margins illustrate the challenge of scaling a hardware-centric business in a competitive market.
• Heavy investment in R&D and SG&A, balanced by ongoing efforts to control other costs.
• Ongoing growth is driven by product innovation, AI integration, and expansion into new commercial verticals.

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FAQ About RCAT's Income Statement

1. What is the main source of RCAT's revenue in 2025?

RCAT generates over 90% of its revenue from drone hardware sales. Software and service contracts are strategic but not yet significant contributors.

2. How profitable is RCAT in Q2 2025?

RCAT reported net income of $13,300 in Q2 2025, with a net margin of approximately 412.6% (reflecting a very small absolute profit on a low revenue base and high expense structure).

3. What are the largest expense categories for RCAT?

The biggest expenses on RCAT's income statement are operating expenses, particularly Research & Development (R&D) at $3.60M and Sales, General & Administrative (SG&A) at $9.42M in Q2 2025. R&D investment surged as RCAT prioritizes next-generation drone and imaging technologies.

4. Why does the R&D segment operate at a loss?

R&D, despite being a critical investment area, posted an operating loss due to aggressive spending on innovation and product development, which RCAT believes will drive long-term growth—even if the segment is unprofitable today.

5. How does RCAT's effective tax rate compare to previous years?

RCAT's effective tax rate for Q2 2025 was not disclosed in the latest filing. Historically, the company’s tax rate has been influenced by net operating losses and R&D tax credits.