Key Takeaways
- AeroVironment’s Q3 FY2026 earnings per share reached $0.64, falling short of analyst expectations of $0.68–$0.72
- Quarterly revenue totaled $408 million against consensus estimates of $476–$484 million — approximately 15% below expectations
- Year-over-year revenue surged 143%, largely attributed to the BlueHalo acquisition completed in May 2025
- The Space, Cyber, and Directed Energy division experienced a 19% decline amid funding uncertainties and potential loss of the $1.7 billion SCAR contract with the Space Force
- Management reduced full-year 2026 EPS projections to $2.75–$3.10 from the previous range of $3.40–$3.55
Shares of AeroVironment (AVAV) tumbled during after-hours trading on March 10 following the release of fiscal third-quarter results that disappointed Wall Street despite strong top-line growth figures.
The defense technology company delivered earnings of $0.64 per share alongside quarterly revenue of $408 million. Analyst consensus had anticipated EPS between $0.68–$0.72 and revenue in the range of $476–$484 million, representing a substantial revenue gap of approximately 15%.
While a 143% year-over-year revenue increase appears remarkable at first glance, the majority of this growth stemmed from the BlueHalo acquisition that closed in May 2025. Excluding this acquisition, organic revenue growth measured 38% — a respectable performance, but below market expectations.
Gross profit margins faced compression as well, contracting to 27% from 40% during the same quarter last year. Management attributed this decline to ongoing supply chain challenges and changes in the company’s product sales composition.
Contract Uncertainty Weighs Heavy
The primary concern extending beyond the quarterly miss centers on uncertainty surrounding a critical Space Force contract. BlueHalo manufactures antennas for the SCAR (Satellite Communications Augmentation Resource) initiative, representing a $1.7 billion agreement with the U.S. Space Force.
Market concerns initially surfaced on March 2, when AVAV shares plummeted 17.4% on speculation that the Space Force might reopen the SCAR contract bidding process. These worries have now materialized.
AeroVironment disclosed in its quarterly announcement that SCAR options previously included in unfunded backlog are “no longer expected to be awarded.” Consequently, the Space, Cyber, and Directed Energy division reported a 19% quarterly revenue decline.
The company maintains a $3 billion unfunded backlog, with $1.4 billion connected to SCAR-related activities. This represents a substantial portion of anticipated future revenue now facing uncertainty.
Funded backlog remained stable at $1.1 billion compared to the previous quarter. More encouragingly, AeroVironment secured $2.1 billion in new contract awards during the first nine months of fiscal 2026 — significantly exceeding the $1.3 billion in revenue recognized during that timeframe.
Lowered Outlook
Management reduced its full-year 2026 revenue forecast to $1.9 billion from nearly $2 billion in prior guidance. EPS expectations were similarly lowered to a range of $2.75–$3.10, down from previous guidance of $3.40–$3.55. The Street consensus had been positioned at $3.31.
The updated guidance implies fourth-quarter EPS around $1.50, approximately 30 cents beneath current analyst projections.
CEO Wahid Nawabi maintained an optimistic outlook, emphasizing that customer demand for the company’s technology “remains robust” and highlighting the potential for Q4 to deliver record quarterly revenue. He also referenced a “solid start to fiscal year 2027.”
The Autonomous Systems division — encompassing the company’s drone operations — demonstrated resilience, with Uncrewed Aircraft Systems revenue climbing more than 50% versus FY2025.
AVAV shares concluded regular trading at $221.57, declining 2.5% during the session, before dropping an additional ~9% after hours. The stock currently trades approximately 47% beneath its 52-week peak of $417.86, while remaining roughly 80% higher over the trailing twelve months.
The company maintains a market capitalization of approximately $11.05 billion.
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