Key Takeaways
- AeroVironment delivered Q3 FY2026 earnings of $0.64 per share, falling short of analyst projections of $0.68–$0.72
- Quarterly revenue reached $408 million versus Wall Street’s expectations of $476–$484 million — approximately 15% below consensus
- 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 Space Force program
- Management lowered full-year 2026 EPS projections to $2.75–$3.10 from previous guidance of $3.40–$3.55
AeroVironment (AVAV) unveiled its third-quarter fiscal results on March 10, delivering numbers that failed to satisfy investor expectations despite strong year-over-year growth figures. Shares tumbled in extended trading as market participants digested disappointing earnings and revenue figures.
The defense technology company delivered earnings of $0.64 per share alongside quarterly revenue of $408 million. Analysts had anticipated earnings between $0.68 and $0.72 per share with revenue in the range of $476–$484 million. The revenue figure represented a substantial 15% shortfall.
While a 143% year-over-year revenue increase appears impressive at first glance, much of this expansion stemmed from the BlueHalo integration following last May’s acquisition. When adjusting for this deal, organic revenue climbed 38% — a respectable performance, yet insufficient to meet heightened market expectations.
Profitability metrics also deteriorated, with gross margin contracting to 27% from 40% during the same quarter last fiscal year. Management attributed this compression to supply chain challenges and an evolving product mix.
SCAR Contract Uncertainty Looms Large
The primary concern extending beyond the quarterly miss centers on the status of a critical Space Force program. BlueHalo manufactures antennas for SCAR (Satellite Communications Augmentation Resource), representing a $1.7 billion contract with the U.S. Space Force.
Market anxiety around this contract first surfaced on March 2, when AVAV plummeted 17.4% — not due to operational issues, but over speculation that the Space Force might reopen the competitive bidding process. These concerns now appear well-founded.
AeroVironment acknowledged in its quarterly announcement that SCAR options previously in its unfunded backlog are “no longer expected to be awarded.” This uncertainty directly contributed to the Space, Cyber, and Directed Energy segment’s 19% quarterly decline.
The company maintains $3 billion in total 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 orders during the first nine months of fiscal 2026 — significantly exceeding the $1.3 billion in revenue recognized during that timeframe.
Revised Financial Outlook
AeroVironment reduced its full-year 2026 revenue forecast to $1.9 billion from approximately $2 billion previously. Earnings per share guidance was lowered to $2.75–$3.10, down from earlier projections of $3.40–$3.55. The Street consensus had been positioned at $3.31.
The updated guidance implies Q4 earnings around $1.50 per share, trailing analyst estimates by approximately 30 cents.
CEO Wahid Nawabi maintained an optimistic tone, emphasizing that customer demand for the company’s offerings “remains robust” while highlighting Q4 as potentially achieving 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 over 50% compared to FY2025.
AVAV concluded regular session trading at $221.57, declining 2.5% during the day, before dropping an additional ~9% in after-hours activity. The shares currently trade approximately 47% beneath their 52-week peak of $417.86, though they remain up roughly 80% over the trailing twelve months.
The defense contractor’s market capitalization currently stands near $11.05 billion.
