Anduril’s new mega‑deal rewrites the rules for Silicon Valley—and raises new risks

Last week, the U.S. Army announced an enormous deal with Anduril—a five‑ to ten‑year enterprise contract with a ceiling of up to $20 billion—that consolidates roughly 120 to 130 existing orders they already have under one umbrella and creates a one‑stop vehicle to cut future deals much faster. The Army already inked a brand-new $87 million contract with Anduril earlier this week, as the first task order under that agreement. 

For venture-funded defense tech startups, which make everything from AI-powered drones to advanced threat detection systems, Anduril’s long-term contract sets a new bar that reflects how the young industry has evolved in the past few years—and opens the door to new opportunities and risks. The Pentagon’s embrace of a select few companies also comes at a time when the military has clashed with Anthropic, which develops general-purpose AI models and has sought to set limits on how the military can use its technology. 

The contract is a “meaningful signal,” says Steven Simoni, cofounder of the autonomous precision weapons startup Allen Control Systems, which also has a contract with the U.S. Army.
“For a long time, the defense acquisition system rewarded presentations, prototypes, and promises. What we’re seeing now is an institutional desire to back companies that can actually build, deploy, and sustain real systems in the field,” he said in an email.

Anduril, which was founded in 2017 by virtual reality technology pioneer Palmer Luckey, has focused squarely on security applications like anti-drone defense and border protection from the start. While the company is reportedly eyeing a $60 billion valuation in its latest funding round, it is still a young company that pales in size next to incumbents like Lockheed Martin or Boeing when you look at revenue and order backlogs.

The enterprise contract “suggests the government increasingly sees Anduril’s stack as repeatable and scalable, rather than bespoke R&D,” says Ali Javaheri, a senior analyst at PitchBook.

This isn’t the first time the Army has done a deal like this with a tech company. Last year, it signed a 10‑year, enterprise service agreement with the data analytics and AI company Palantir, with a ceiling of up to $10 billion, consolidating about 75 of its existing software and data contracts into a single channel. Anduril’s contract both copies and extends that model: this time wrapping hardware and services around the software. It also doubles the ceiling, and ties the whole thing to a live mission—countering drones across the military. Massive enterprise agreements with tech providers are no longer one‑off flukes; there is now a pattern of VC‑backed platforms winning prime‑like enterprise deals that let them compete directly with the old guard.

“Autonomy, counter-UAS, and software-defined C2 are moving from experimental budgets into more durable procurement pathways, which is exactly the kind of shift investors have been waiting to see from defense tech,” Javaheri says, referring to counter-drone systems and the ways that system commanders are directing their forces.

Playing with the primes

Playing in the big leagues comes with some risks. All of the individual task orders that happen under the Anduril deal will be firm-fixed price contracts, or FFPs, which tend to only be used when both the requirements and costs are well understood. The advantage for the Army is price certainty: It locks in what it will pay, and the company has to eat any unexpected or surging costs over the life of the deal. The upside for the contractor is that if it can deliver more cheaply than expected, it keeps the extra margin.

All this is fine and dandy unless something goes wrong. For defense contractors, there’s a long list of examples—now cautionary tales—in which fixed-price structures ultimately proved to be a bad fit for complex or immature designs. There was Boeing’s KC‑46 tanker, which started as a fixed‑price incentive contract of around $4.4 billion to $4.9 billion. Technical problems piled up with its remote vision capabilities and fuel system issues, which led Boeing to ultimately absorb more than $7 billion in losses. 

The Navy’s experience with Lockheed Martin’s Freedom‑class Littoral Combat Ships tells a similar story. Design flaws in the combining gear forced the service and the company to spend roughly $8 million–$10 million per ship on fixes.

Simoni says large contracts like what Anduril has notched set a “much higher bar,” as it requires “dedicated manufacturing capacity, consistent supply chain discipline, and the proven ability to deliver on timelines that matter operationally, not just technically.”

Matthew Steckman, president and chief business officer at Anduril, says taking on these kinds of risk is part of Anduril’s stated objective.

“That’s the goal, to take the risk out of the government’s hands and into industry, incentivizing defense companies to deliver capabilities on time for that price and holding them accountable if that outcome isn’t achieved,” he said in a statement to Fortune.

By signing on to write fixed-priced contracts with such an enormous ceiling—which, to be clear, the Army is under no obligation to fully spend—the government is signaling confidence that Anduril’s software and hardware are mature enough to warrant that kind of cost assurance. If they’re wrong, big bills could shake the startup’s financial position, and the Army formations that now depend on the company.