Shield AI took its drones from the ‘Batcave’ to the battlefield. Now the $5.6 billion defense-tech startup’s new CEO says it’s at an inflection point

There are plenty of conventional indicators that signal that a product is turning heads: Weekly active user figures start to soar, products fly off the shelves, there is unsolicited praise.

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But for San Diego-based Shield AI, validation has looked a little different. In April of this year, Russian armed forces fired two HESA Shahed 136 missiles into a hangar in Kyiv, where a team of 30 Shield AI employees had been doing research and development just two weeks earlier. The missiles turned the facility into a skeleton of twisted metal and rubble, according to a photo and video footage reviewed by Fortune.

Incredibly, no one was harmed. James Lythgoe, a former U.K. Royal Marine who is now Shield AI’s managing director of Ukrainian operations, had moved the Shield AI employees to a new site, as he had been concerned about the newfound attention that its sprawling nine-foot-tall surveillance drone, the V-BAT, was picking up. “We were advised that the Russians were very aware of a new capability on the battlefield,” Lythgoe says.

On the frontlines in Ukraine, Russian jammers intersect communications and radio signals, leading drones to veer off course or even fall from the sky and crash. Many U.S. drones haven’t been able to perform. But after an eight-month iteration period in 2024, Shield AI’s V-BAT cleared rigorous Ukrainian jamming tests. In 2025 alone, the drones have executed more than 35 missions and identified more than 200 Russian targets in the warzone, according to the company.

The initial success Shield AI has seen with V-BAT in Ukraine and on U.S. shores with the Coast Guard and Marines has helped the startup land a $5.6 billion valuation and positioned it as one of the hottest defense startups of 2025, right behind its higher-valued and more hardware-heavy rival Anduril Industries. Major government contractors, known as the “primes,” have begun to pilot Shield AI’s autonomous aircraft software system, Hivemind, for the experimental aircraft they are building for the U.S. military. Foreign allies and U.S. partners like Romania, Indonesia, and Japan have purchased its surveillance drones.

Shield AI wants to harness this traction and turn it into meaningful financial results. It’s looking to a brand-new autonomous fighter jet it’s building, the X-BAT, to help make it happen.

It’s also looking to a new CEO. In May, the company brought in a new chief executive—Gary Steele—who has a track record of taking tech companies to multi-billion exits. With Shield AI’s cofounder and former CEO, Ryan Tseng, stepping into another leadership position, Steele has plans to grow the company’s revenue 70%-100% each year until it hits $1 billion in annual revenue for 2028, up from the approximately $300 million Shield AI notched in 2025.

“I think the number one thing I think about is: How do we scale this?” says Steele, who spoke with Fortune over two interviews, his first since being named Shield AI’s CEO.

Gary Steele became CEO of Shield AI in May 2025.Courtesy of Shield AI

It won’t be easy. As part of Shield AI’s strategy, the 1,200-person company will need to convince legacy defense shops that the AI-powered autonomous software Hivemind can do more than power Shield AI’s own drone. A gruesome accident in 2024—in which a U.S. Navy servicemember had the tips of his fingers effectively sliced off during a drill with the V-BAT—put a damper on last year’s revenue, and gave the company a public black eye that its executives are anxious to put behind them. And Steele, who is likable and seemingly adept at navigating internal politics, has walked into a leadership position notoriously difficult in the startup world: a CEO seat at a company where the founders maintain key leadership roles, board seats, and stakes in the business they created.

Shield AI is at an inflection point. Now Steele will have to prove that he’s the one who can take it to the next level.

‘This inflection was happening’

Even before Anduril, there was Shield AI.

Brandon Tseng, a former Navy SEAL, partnered up with his brother after he, Ryan Tseng, had sold a startup to Qualcomm. The two of them, with cofounder Andrew Reiter, wanted to take the autonomy that Elon Musk and Jeff Bezos were promising would transform the auto and e-commerce industries and translate it to the battlefield. This was back in 2015—two years before Anduril started to take shape, and not long before protests erupted within Google over a contract it was renewing with the Department of Defense.

While Palantir had been securing government contracts for years, building military technology was rare among Silicon Valley tech-types at the time, not to mention exceedingly controversial. The Shield AI team turned down an initial $5 million investment because it had been contingent on Shield AI ditching its intended military focus and going commercial—which its founders weren’t willing to do. “It was really, really uncommon, if non-existent, for venture firms to