AeroVironment (AVAV) Stock After Record Q2 2026 Revenue: Is the December Sell‑Off a Buy Signal or a Warning?

Updated: December 11, 2025 – For informational purposes only; not investment advice.

AeroVironment stock at a glance in December 2025

AeroVironment, Inc. (NASDAQ: AVAV), the defense technology company best known for its small drones and Switchblade loitering munitions, has just delivered record fiscal Q2 2026 revenue – and then watched its stock tumble.

As of the afternoon of December 11, 2025, AVAV trades around $250–255 per share, giving the company a market cap of roughly $12.5 billion. The stock is still up about 59% year-to-date, but down roughly 40% from its October 2025 high near $418. ^[1]

Over the past three years, AeroVironment shares have gained about 204%, and roughly 223% over five years, easily beating the S&P 500’s returns over the same periods. ^[2] Yet the stock has also been extremely volatile, with deep drawdowns in 2021, 2022 and again after its latest earnings report. ^[3]

Valuation is front and center in the current debate. Different data providers put AeroVironment’s price-to-sales ratio somewhere between about 7.6x and 11x, well above large defense peers like RTX and Lockheed Martin, which trade closer to 2–3x sales. ^[4]

That backdrop makes the latest wave of news since November 21, 2025 especially important for investors.

News timeline since November 21, 2025

November 21: “Price is Right… Even After Diving 27%”

On November 21, 2025, Simply Wall St highlighted that AeroVironment shares had fallen about 27% in a month but were still up 41% over the prior year. The piece argued that strong revenue growth – about 44% year-on-year and 140% over three years – helped justify a rich price-to-sales multiple, as long as growth stayed elevated. ^[5]

In other words, the “growth vs. valuation” tug-of-war was already underway before December’s sell-off.

Late November: Performance check and earnings anticipation

On November 28, a Motley Fool analysis (via Nasdaq) walked through AVAV’s past returns. It noted that: ^[6]

One‑year share performance: +46.6% vs. about +14.2% for the S&P 500.
Three‑year return: +203.8% vs. roughly +70% for the S&P 500.
Five‑year return: +222.8% vs. about +88–102% (total return) for the S&P 500.

The article also pointed out that AeroVironment’s fortunes turned sharply after Russia’s invasion of Ukraine in February 2022, when battlefield demand for drones put a spotlight on the company’s technology.

On November 25, AeroVironment’s investor relations site and Simply Wall St flagged that the company would report fiscal Q2 2026 results on December 9, 2025, setting up the catalyst that ultimately drove the latest price move. ^[7]

Early December: Leadership and software updates

In early December, AeroVironment announced several corporate updates that mostly flew under the market’s radar but matter for the long-term story:

Dec. 2 – Expansion of the AV_Halo unified software platform (CORTEX and MENTOR modules), extending the company’s AI‑driven mission software strategy. ^[8]
Dec. 5 – Appointment of Milancy Harris as Chief Security Officer, reinforcing focus on cyber and security governance in a business increasingly exposed to high‑sensitivity national security work. ^[9]

These moves reinforce AeroVironment’s positioning as more than a pure “hardware drone maker,” pushing deeper into software, autonomy and cyber.

December 8–11: Major contracts and record Q2 results

Between December 8 and December 11, AeroVironment unleashed a flurry of contract and earnings news:

Dec. 8 – $874M Foreign Military Sales IDIQ
AeroVironment won a five‑year, $874.26 million IDIQ contract from the U.S. Army Contracting Command to support foreign military sales of Groups 1–3 unmanned aerial systems (JUMP 20, P550, Puma, Raven) and Titan counter‑UAS systems, plus training and logistics. ^[10]
Dec. 8 – P550 contract for U.S. Army LRR
The company also announced a three‑year OTA deal with a base value of $13.2 million (up to $42 million with options) to provide its new P550 all‑electric VTOL Group 2 UAS for the Army’s Long Range Reconnaissance program. ^[11]
Dec. 9 – Fiscal Q2 2026 results and guidance
AeroVironment reported record Q2 revenue of $472.5 million, up 151% year-over-year. BlueHalo contributed $245.1 million, while legacy AeroVironment revenue rose 21% to $227.4 million. ^[12]
Dec. 11 – $4.8M Coast Guard ROV contract
Through its VideoRay subsidiary, AV won a $4.8 million contract to supply Mission Specialist Defender underwater ROVs to the U.S. Coast Guard as part of the Force Design 2028 modernization plan, expanding its underwater robotics footprint. ^[13]

This run of announcements underscored just how strong AeroVironment’s demand pipeline has become – even as profitability faltered.

Inside AeroVironment’s record Q2 2026 earnings

The Q2 report on December 9, 2025 is the linchpin for understanding the stock’s latest move.

Headline numbers

For the quarter ended November 1, 2025, AeroVironment reported: ^[14]

Revenue: $472.5 million (+151% YoY; about 21% organic growth).
Gross margin: $104.1 million, but margin percentage fell to 22% from 39% a year earlier.
Operating result:$30.2 million operating loss, versus $7.0 million operating income in Q2 FY25.
Net income:Net loss of $17.1 million (–$0.34 per diluted share), compared with $7.5 million profit ($0.27 per share) a year ago.
Non‑GAAP adjusted EPS:$0.44, versus $0.47 in the prior-year quarter – and well below analyst expectations around $0.78–0.79.
Non‑GAAP adjusted EBITDA: $45.0 million, up from $25.9 million.

AeroVironment stressed that results were heavily impacted by $48.2 million of intangible amortization and other non‑cash purchase accounting expenses tied to the BlueHalo acquisition, versus just $4.8 million of such expenses a year earlier. ^[15]

Backlog and guidance

The company’s funded backlog at November 1 reached $1.1 billion, up from about $726.6 million at April 30, 2025. ^[16] Barchart notes that unfunded backlog adds another roughly $3.0 billion, providing multi‑year revenue visibility. ^[17]

Updated fiscal 2026 guidance now calls for: ^[18]

Revenue: $1.95–$2.0 billion (raising the low end of the prior range).
Net loss: between –$38 million and –$30 million.
Non‑GAAP adjusted EBITDA: $300–$320 million.
Non‑GAAP EPS: $3.40–$3.55, down from a prior $3.60–$3.70 range.

In short: sales are booming, but earnings guidance moved lower as BlueHalo-related costs weigh on margins.

Why the market sold off

Following the report:

Investor’s Business Daily and other outlets highlighted an adjusted EPS of $0.44 vs. consensus around $0.78, with the company also cutting its full‑year EPS outlook despite raising revenue guidance. ^[19]
The stock fell roughly 13% on December 10, its sharpest single‑day drop since 2023, even though Q2 revenue slightly beat expectations and contract wins piled up. ^[20]

Zacks and Nasdaq both framed the quarter as a revenue beat / earnings miss, emphasizing the tension between growth and profitability. ^[21]

The BlueHalo effect: transformational growth, messy margins

A big part of AeroVironment’s current story – and the market’s confusion – stems from its $4.1 billion all‑stock acquisition of BlueHalo, announced in November 2024 and completed on May 1, 2025. ^[22]

BlueHalo brings:

Space technologies, including the BADGER phased‑array ground terminal for the U.S. Space Force. ^[23]
Counter‑UAS, directed energy, electronic warfare and cyber capabilities, plus AI/ML‑driven autonomy and mission software (e.g., VigilantHalo, Titan C‑UAS). ^[24]
A growing revenue base – BlueHalo’s own revenue was projected above $900 million for 2024, with nearly $600 million funded backlog at the time of the deal. ^[25]

The combined company is now structured into two major segments: Autonomous Systems and Space, Cyber and Directed Energy, with a pro‑forma revenue expectation of more than $1.7 billion at deal close. ^[26]

The Q2 numbers show BlueHalo’s impact clearly:

BlueHalo contributed $245.1 million of the $472.5 million in Q2 revenue.
BlueHalo‑related intangible amortization and purchase accounting costs made up almost the entire $48.2 million of special charges that drove reported operating losses. ^[27]

Bullish analysts argue this is a classic “near‑term GAAP pain, long‑term scale and synergy” situation. Bears worry that even on an adjusted basis, margins are not expanding yet, and BlueHalo’s integration may prove more expensive than modeled.

New contracts support the growth story

The market reaction to Q2 has been negative, but AeroVironment’s contract momentum in late 2025 is hard to ignore:

The $874.26 million FMS IDIQ contract allows allied and partner nations to procure JUMP 20, P550, Puma, Raven and Titan systems, plus training and spares, effectively turning AV into a key export platform for small UAS and C‑UAS. ^[28]
The P550 Long Range Reconnaissance award validates a high‑end Group 2 electric VTOL platform with modular, open‑architecture design tailored for battalion‑level ISR and strike missions. ^[29]
The Coast Guard Defender ROV contract strengthens AeroVironment’s undersea robotics presence via VideoRay and aligns with the Coast Guard’s Robotics and Autonomous Systems initiative. ^[30]

Together with the BlueHalo portfolio, these wins underpin management’s confidence in reaching $1.95–$2.0 billion in revenue for FY26 and frame AeroVironment as a genuinely all‑domain defense technology company.

What Wall Street is saying about AVAV now

Despite the post‑earnings sell‑off, consensus analyst sentiment remains strongly positive, though there is a wide spread of opinions on valuation and risk.

Mainstream consensus: Strong Buy with 40–60% upside

Different aggregators show broadly similar, bullish conclusions:

StockAnalysis.com: 14 analysts, “Strong Buy”, average 12‑month target $366.50 (about 45% upside from recent levels), with a range from $275 to $450. ^[31]
Simply Wall St (valuation page): 15 analysts, average target $395.67, implying around 61% upside from a reference price of $245.25, with targets between $315 and $486. ^[32]
TipRanks: 15 Wall Street analysts, consensus “Strong Buy”, average target $393.86 (roughly 40% upside vs. a quoted price of $281.42), with the same $315–$486 range. ^[33]
Barchart: Notes ratings from 17 analysts, with 14 “Strong Buy,” two “Moderate Buy” and one “Hold”, and an average target around $392.60, implying more than 60% upside from prices in the mid‑$240s. ^[34]

Several firms trimmed their price targets after the Q2 report but kept bullish ratings:

RBC Capital: Buy, target cut from $440 to $400.
Canaccord Genuity: Strong Buy, target cut from $430 to $400.
Cantor Fitzgerald: Buy, target cut from $335 to $315.
Needham: Strong Buy, target reiterated at $450. ^[35]

Barchart also notes that Piper Sandler recently initiated or reiterated an Overweight rating, emphasizing AeroVironment’s evolution from a drone specialist into a diversified defense platform capable of “multi‑year, outsized growth.” ^[36]

Cautious takes: High growth, “Very High” valuation

Not everyone is comfortable with the current price.

A detailed Trefis note on December 11, “AeroVironment Stock To $172?”, labels AVAV “Risky” and argues that a price as low as $172 is plausible. Key points: ^[37]

Valuation: Price‑to‑sales about 11.4x, far above the S&P 500 average around 3.2x; negative P/E and negative free cash flow metrics.
Growth: Very strong – revenue has grown about 80% over the last 12 months and 150% year-on-year in the most recent quarter.
Profitability: Very weak – trailing 12‑month operating margin around –5.1% and similarly negative net and cash‑flow margins.
Downturn resilience: Stock historically suffers steep drawdowns in crises and corrections (e.g., ~61% peak‑to‑trough in the 2022 inflation shock), though it eventually recovers.

A new Simply Wall St article on December 10, “AeroVironment (AVAV) Revenue Spike to $454.7M Clashes With Deepening EPS Loss Narrative,” reaches similar conclusions: rapid revenue growth, but a trailing 12‑month net loss of about $44.9 million, EPS –$1.37, and an 11.2x price‑to‑sales multiple versus peers around 6x and a broader aerospace & defense industry near 2.9x. ^[38]

Barchart: “Next Palantir” narrative, but earnings miss

The Barchart column explicitly frames AeroVironment as being touted as “the next Palantir” – a defense and AI‑enabled platform with heavy software and data components – but notes that stretched valuation and an earnings miss have triggered a roughly 40% correction from the October high. ^[39]

Still, the author views the pullback as “a good accumulation opportunity,” citing:

Strong order backlog (funded $1.1B; unfunded $3.0B).
Fiscal 2026 revenue guidance of $1.95–$2.0B and mid‑range adjusted EBITDA around $310M.
Heavy R&D investment (about 7.5% of revenue in the first half of FY26) to sustain innovation. ^[40]

Valuation snapshot: growth stock in a defense wrapper

Across multiple sources, a consistent picture emerges:

High sales multiple: Depending on methodology, AeroVironment trades at roughly 7–11x trailing sales, compared with about 1.5–3x for many major defense contractors. ^[41]
Negative GAAP earnings: Trailing 12‑month EPS is negative, and Q2’s GAAP results show a net loss, though adjusted EBITDA and non‑GAAP EPS are solidly positive. ^[42]
Aggressive growth forecasts: Simply Wall St notes analyst expectations of roughly 14% annual revenue growth and near 98% annual earnings growth over the coming years, as BlueHalo integration benefits show up in margins. ^[43]
Next‑quarter revenue estimates from TipRanks cluster around $494 million, up from the just‑reported $472.5 million. ^[44]

For investors, AVAV behaves more like a high-growth, AI‑and‑software‑adjacent tech name than a traditional defense contractor – with corresponding valuation and volatility.

Bull case vs. bear case for AVAV stock

Bull case: structurally higher demand and platform leverage

Supporters of AeroVironment’s stock focus on several themes:

Secular drone and counter‑drone demand
Drones, loitering munitions and counter‑UAS systems have shifted from niche to core capabilities in modern warfare, as seen in Ukraine and other conflicts. Products like Switchblade, Raven, Puma, JUMP 20, Titan C‑UAS and now P550 leave AV well placed to benefit from sustained demand and rising global defense budgets. ^[45]
BlueHalo: entry into higher‑value mission areas
The BlueHalo acquisition gives AeroVironment credible scale in space, directed energy, cyber and advanced AI/ML, expanding its total addressable market and allowing cross‑selling of integrated “sensor‑to‑shooter” solutions. ^[46]
Backlog and contract pipeline
With $1.1 billion funded backlog, about $3 billion unfunded backlog, and new IDIQs and program wins, AeroVironment has strong revenue visibility for several years, and management is confident enough to guide for up to $2 billion in sales this year. ^[47]
R&D and software investments
R&D spending at roughly 7.5% of revenue, plus platforms like AV_Halo, CORTEX and MENTOR, position AV to generate higher‑margin software and services revenue over time, not just hardware sales. ^[48]
Analyst support and price targets
With most Wall Street analysts rating the stock Buy or Strong Buy and average targets in the mid‑$300s to high $300s, bulls see the recent drop as an opportunity to buy a structurally advantaged defense‑tech platform at a discount to its recent high. ^[49]

Bear case: valuation, profitability and execution risk

Skeptics, led by Trefis and some valuation‑focused analysis, worry about three main issues:

Rich valuation vs. peers and cash flows
Even after the correction, AVAV trades at a very high sales multiple and effectively infinite or negative P/E and P/FCF multiples due to weak GAAP profitability. If growth slows or margins disappoint, there is room for a substantial valuation re‑rating. ^[50]
Negative margins today
Trailing operating and net margins are negative, and Simply Wall St points out that losses have widened in recent periods, with trailing basic EPS around –$1.37 despite revenue nearing $1.1 billion. ^[51] While most of the hit comes from BlueHalo amortization and integration costs, skeptics argue that investors are being asked to pay up for earnings that have yet to materialize.
Integration and program risk
Large acquisitions in defense come with integration risk, cultural challenges and the possibility of delayed or cancelled programs. AeroVironment’s heavy reliance on U.S. government spending and specific high‑profile programs (e.g., FMS drone packages, classified space work) adds concentration risk. ^[52]
Volatility and “hot money” flows
AVAV has a history of sharp swings – including a more than 60% drawdown during the 2021–2022 inflation shock – and has attracted momentum‑oriented investors and thematic funds (e.g., ARK Invest), which can amplify moves in both directions. ^[53]

From this perspective, December’s sell‑off may be the start, not the end, of a valuation reset if execution slips or defense sentiment cools.

What to watch next

For investors tracking AeroVironment from here, key catalysts and questions include:

Margin trajectory in 2026: Do gross and operating margins begin to recover as BlueHalo integration progresses and purchase accounting effects normalize, or do costs remain stubbornly high? ^[54]
Backlog conversion and new awards: How quickly does the $874M IDIQ convert into firm orders, and does AeroVironment win additional large contracts in space, cyber, directed energy and maritime robotics? ^[55]
Next earnings report (expected March 2026): The next quarterly release will show whether the Q2 earnings miss was a one‑off integration dip or the beginning of a more persistent profitability issue. ^[56]
Valuation vs. growth: As new data points come in, does AVAV’s growth and margin profile start to look more like a “defense‑tech compounder” that justifies a premium multiple – or more like a cyclical defense supplier temporarily boosted by war‑driven demand?

Bottom line: Is AeroVironment stock a buy after the December 2025 pullback?

Since November 21, 2025, the story around AeroVironment has sharpened rather than changed:

Growth, contracts and strategic positioning have rarely looked better. Record Q2 revenue, massive backlogs, and expansion into space, cyber and maritime robotics support the idea that AV is becoming a central player in next‑generation, AI‑enabled defense. ^[57]
Valuation and profitability concerns have also grown louder. Integrating BlueHalo has driven losses higher even as revenue explodes, and multiple independent analyses now flag AVAV’s valuation as expensive on most traditional metrics. ^[58]

For long‑term investors comfortable with volatility and the defense sector, AVAV may look like a high‑beta way to bet on the militarization of autonomy, AI and space – with Wall Street largely in their corner. More conservative or value‑oriented investors may prefer to wait for clearer evidence of sustained margin expansion or a further derating toward more typical defense valuations.

Either way, the period from November 21 through December 11, 2025 marks a turning point where AeroVironment’s “growth at any price” narrative is being actively re‑priced by the market into something more nuanced: high‑growth, high‑valuation and high‑execution‑risk.