“Service revenue will create another $51-billion opportunity by 2035,” added research director Marc Einstein. “The value proposition will shift from hardware to AI, software, autonomous services and data-driven business models.”

Researchers say commercial applications will drive much of that growth as manufacturers and industrial operators increasingly deploy drones for inspection, mapping, monitoring and data collection.

“Consumer drones have already transformed aerial photography, but the real growth opportunity lies in commercial drones,” said principal analyst Soumen Mandal. “The expanding range of applications across agriculture, logistics, industrial operations, public safety and disaster management is unlocking the true potential of Physical AI.”

Counterpoint expects the industry to evolve well beyond hardware as artificial intelligence, edge computing, advanced sensors and autonomous capabilities become increasingly important.

China currently leads global drone manufacturing, supported by an extensive supply chain. However, the report notes that the United States, Europe, India and other regions are accelerating domestic drone development through regulatory changes, government support and investments in local manufacturing ecosystems.

There is growing interest in building domestic drone supply chains following U.S. restrictions on new DJI drones, particularly for defense and commercial applications.

Despite the industry's projected growth, several challenges remain. Battery technology continues to limit flight time and fully autonomous operations, while cybersecurity, privacy concerns and geopolitical tensions are expected to influence how the market develops over the next decade.