December 10, 2025 — AeroVironment, Inc. (NASDAQ: AVAV) just delivered one of the most dramatic “good news / bad news” quarters on Wall Street this year.
The defense-technology and military-drone specialist reported record fiscal Q2 2026 revenue, raised the low end of its full‑year sales outlook, landed a massive $874 million U.S. Army foreign military sales contract, and highlighted a bulging backlog. At the same time, the company swung to a loss, badly missed earnings expectations, and cut its profit forecast — sending AeroVironment stock sharply lower.
As of Wednesday afternoon, AVAV was recently trading around $248 per share, down roughly 11–12% from Tuesday’s close near $281, according to real-time quote data and news feeds. [1] Even after the sell‑off, shares remain up strongly year to date and sit well below their 52‑week high near $418, reached in early October. [2]
Here’s what long‑term investors and short‑term traders need to know about AeroVironment’s latest numbers, guidance, contracts and Wall Street’s updated view of AVAV stock as of December 10, 2025.
1. AeroVironment Stock Today: Price Action and Context
Key trading context
- Latest price: about $247–$250 in Wednesday trading
- Previous close (Dec. 9):$281.42 per share [3]
- Intraday move: news trackers show the stock down roughly 11–12% on the session after earnings and guidance. [4]
- 52‑week high:$417.86 on October 9, 2025 [5]
- YTD performance: still up more than 80% in 2025 despite the post‑earnings slide, reflecting how strong the prior run‑up was. [6]
At the current price, AeroVironment trades at roughly 70x the midpoint of management’s new fiscal 2026 non‑GAAP EPS guidance (around $3.40–$3.55 per share). [7] That’s a lofty multiple for a defense contractor and one reason investors are unforgiving about any profit disappointment.
2. Inside Fiscal Q2 2026 Earnings: Huge Growth, New Loss
AeroVironment’s fiscal Q2 2026 (quarter ended November 1, 2025) was all about scale vs. profitability.
Headline numbers
From the company’s official earnings release: [8]
- Revenue:$472.5 million, up 151% year over year (from $188.5M)
- BlueHalo contribution:$245.1 million of that revenue came from the May 2025 BlueHalo acquisition; legacy AeroVironment revenue was $227.4 million, up 21% organically.
- Segment revenue:
- Autonomous Systems (AxS): $301.6M
- Space, Cyber and Directed Energy (SCDE): $170.9M
- GAAP gross margin:$104.1M, but margin compressed to ~22% of sales, vs. 39% a year earlier, largely due to amortization and mix shift toward services.
- GAAP operating income: swung to a loss of $30.2M vs. a $7.0M profit a year ago.
- GAAP net income:loss of $17.1M, or –$0.34 per diluted share (vs. +$0.27 last year).
- Non‑GAAP adjusted EPS:$0.44, slightly down from $0.47 a year ago.
- Non‑GAAP adjusted EBITDA:$45.0M, up from $25.9M in the prior‑year quarter.
The core story: revenue is exploding, but profitability is being dragged down by:
- Hefty intangible amortization and other non‑cash purchase accounting charges of $48.2M related to BlueHalo (vs. just $4.8M last year). [9]
- Higher SG&A and R&D spending as AeroVironment integrates a much larger platform. [10]
How big was the earnings miss?
Different firms use slightly different consensus numbers, but they all agree on one thing: the EPS miss was huge.
- ChartMill estimates Wall Street expected about $0.80 of non‑GAAP EPS; AeroVironment delivered $0.44, a ~44% miss. [11]
- Zacks pegs consensus closer to $0.85, which makes the miss even wider. [12]
- Investor’s Business Daily (IBD) cites $0.78 as the expectation and notes the company’s adjusted earnings fell 6% year over year to $0.44 per share. [13]
In simple terms: EPS came in roughly half of what many analysts had penciled in.
24/7 Wall St. points out that this is AeroVironment’s third EPS miss in the last four quarters, and the worst surprise percentage since early 2025. [14] That track record is now a key concern for investors who had priced in near‑flawless execution.
3. Guidance: Revenue Intact, Profits Dialed Down
Despite the profit miss, AeroVironment is still projecting a huge step-up in scale for the full fiscal year — but it has dialed back expectations for earnings.
Updated Fiscal 2026 outlook (as of Dec. 9, 2025)
From the company’s full‑year guidance: [15]
- Revenue:$1.95B–$2.0B (raised low end from prior $1.9B, and roughly in line with Street estimates around $2.0B). [16]
- Net income (GAAP):loss of $38M–$30M.
- Non‑GAAP adjusted EBITDA:$300M–$320M.
- GAAP EPS:–$0.76 to –$0.61 per share.
- Non‑GAAP EPS:$3.40–$3.55 (cut from a prior range of roughly $3.60–$3.70, according to IBD and other coverage). [17]
ChartMill notes that the new non‑GAAP EPS range sits below the current analyst consensus of about $3.71, even as revenue guidance brackets the Street’s $2.04B expectation. [18]
That combination — intact top‑line guidance but weaker profitability — is exactly the mix that tends to compress valuation multiples, especially after a big run‑up.
4. Backlog and Bookings: Demand Is Not the Problem
If you’re looking for signs of demand weakness, they’re not in this report.
AeroVironment’s Q2 numbers show robust order momentum: [19]
- Bookings:$1.4 billion for the quarter
- Book‑to‑bill ratio:2.9, meaning new orders were nearly three times quarterly revenue
- Funded backlog:$1.1 billion as of November 1, 2025, up from $726.6 million at the end of April
ChartMill highlights these same metrics and frames them as evidence that demand for AeroVironment’s expanded portfolio — including BlueHalo’s space, cyber, and directed‑energy capabilities — remains extremely strong. [20]
The tension in the story is clear:
Strong sales + strong orders – weak margins = confused, nervous investors.
5. Why Wall Street Sold AVAV: Margin Compression and Integration Risk
Several outlets and analysts converged on the same explanation for today’s sell‑off:
- Margin squeeze is severe.
- Gross margin dropped from about 39% to 22% in a single year, driven by a heavier mix of service revenue and high amortization charges tied to BlueHalo. [21]
- 24/7 Wall St. notes gross margin effectively collapsing and highlights a swing from a $21.2M profit to a $67.4M loss, driven largely by an unusually large ~$90M depreciation and amortization charge and higher interest expense. [22]
- Guidance cut focuses on earnings, not revenue.
- IBD and ChartMill both stress that while revenue guidance was nudged higher at the low end, non‑GAAP EPS guidance was cut, signaling a slower path to profit recovery than investors had priced in. [23]
- Multiple EPS misses have hurt credibility.
- 24/7 Wall St. calls this the third miss in four quarters, reinforcing a pattern of earnings volatility even as revenue outperforms. [24]
- Valuation left little room for error.
- With the stock trading at a premium multiple vs. traditional defense peers and more than 80% higher year to date prior to earnings, even a small narrative wobble could trigger large profit‑taking. [25]
Put simply, the market likes AeroVironment’s growth and positioning, but is now questioning how much of that growth will drop to the bottom line in the next 12–24 months.
6. New Contracts: $874M FMS IDIQ and High‑Profile C‑UAS Win
While margins took center stage this week, AeroVironment also scored major contract wins that bolster the long‑term bull case.
$874M Foreign Military Sales (FMS) IDIQ (December 8, 2025)
Just two days before the earnings release, AeroVironment announced a five‑year Indefinite Delivery, Indefinite Quantity (IDIQ) contract worth $874.26 million from the U.S. Army Contracting Command. [26]
- The agreement supports Foreign Military Sales (FMS), allowing allied and partner nations to purchase AeroVironment Group 1–3 UAS and counter‑UAS systems.
- Covered systems include JUMP 20, P550, Puma, Raven, and Titan C‑UAS, plus training, spares and logistics support. [27]
Schaeffer’s Research notes that the news sent AVAV up about 1.8% to $287.61 on December 9, ahead of the earnings release, and that shares remained up more than 83% YTD at that point. [28]
IBD’s coverage ties the FMS award to rising global demand for drone and counter‑drone capabilities, including AeroVironment’s role in a multi‑layered “Golden Dome for America” concept aimed at protecting U.S. infrastructure from aerial threats. [29]
$95.9M Next‑Generation C‑UAS Missile (LRKI / FE‑1) Contract
Back in October, AeroVironment announced it had been selected to deliver the U.S. Army’s Next‑Generation C‑UAS Missile (NGCM) and awarded a $95.9M contract under the Long‑Range Kinetic Interceptor (LRKI) program. [30]
- AV will manufacture and deliver its Freedom Eagle (FE‑1) kinetic C‑UAS missile, designed to defeat Group 2 and 3 drones and even certain fixed‑ and rotary‑wing aircraft. [31]
This win deepens AeroVironment’s position in kinetic counter‑drone and air defense, complementing its loitering munitions and RF‑based Titan C‑UAS systems.
7. Product & Platform Updates: AV_Halo, Puma VNS and AI‑Driven Capabilities
Beyond contracts and quarterly numbers, AeroVironment has been quietly expanding its technology stack in ways that could support higher‑margin software and training revenue over time.
AV_Halo™ Unified Software Platform (CORTEX and MENTOR)
On December 2, AeroVironment unveiled AV_Halo CORTEX and AV_Halo MENTOR, extensions to its AV_Halo unified mission software platform. [32]
- CORTEX: focuses on AI‑driven intelligence fusion, integrating open‑source intelligence (OSINT), geolocation and analytics to help operators “understand faster and prepare smarter.”
- MENTOR: is an immersive VR/AR training environment that supports weapons training and mission rehearsal, tying directly into the same AV_Halo ecosystem.
AV describes AV_Halo as the “connective tissue” that unifies command‑and‑control, AI analytics, synthetic training and autonomous targeting across air, land, sea, space and cyber. [33]
This kind of software‑centric, hardware‑agnostic platform is exactly what investors hope will eventually push margins higher once integration noise fades.
Puma™ Visual Navigation System (VNS) Kit
In early December, AeroVironment also expanded its Visual Navigation System (VNS) kit to the Puma LE platform. [34]
- The VNS kit uses downward‑facing cameras, inertial sensors and onboard computing to provide GNSS‑denied navigation, allowing drones to maintain precise flight paths even when GPS is jammed or unavailable. [35]
- It’s available as a retrofit for existing Puma customers and enhances the aircraft’s role from pure ISR to precision engagement with upgrades like a laser target designator and universal gimbal kit. [36]
These upgrades reinforce AeroVironment’s technology moat and strengthen the case for higher‑value, system‑of‑systems offerings rather than just low‑margin hardware.
8. Wall Street’s Latest View: Price Targets and Ratings
Despite today’s sell‑off, Wall Street remains overwhelmingly bullish on AeroVironment — though several firms have trimmed price targets and highlighted margin risk.
Consensus snapshot
- Barron’s notes that all 16 analysts covering AVAV currently rate it a Buy, with a consensus price target around $394, well above current levels. [37]
Individual moves and commentary
Recent analyst actions as of December 10, 2025 include:
- BTIG
- Reiterated Buy rating
- Price target: $415 per share
- A Yahoo Finance summary notes an average target near $389.57, implying roughly 37% upside from around $284 at the time of that note. [38]
- Canaccord Genuity
- Cut target to $400 from $430
- Maintains Buy, citing margin pressure and the EPS miss, but still positive on demand and long‑term positioning. [39]
- Cantor Fitzgerald
- Lowered target to $315 from $335
- Retains an “Overweight” rating, signaling that the firm still expects outperformance even after baking in lower profitability. [40]
- Needham & Company
- Reiterated Buy, pointing to strong demand despite EPS of $0.44 coming in well below the $0.79 estimate and revenue slightly topping forecasts. [41]
- Citizens
- Reiterated its rating on AVAV with a $400 price target, describing the quarter as a mixed performance but underscoring long‑term demand and the expanding backlog. [42]
The pattern: no major firm has thrown in the towel, but several have nudged price targets lower to reflect:
- Lower near‑term EPS
- Integration and margin uncertainty
- The stock’s still‑elevated valuation vs. traditional defense names
9. Key Bull and Bear Drivers for AVAV Stock
Bull case highlights
- Explosive revenue growth and scale-up
- 151% year‑over‑year revenue growth, with 21% organic growth even excluding BlueHalo, signals strong underlying demand. [43]
- Massive and growing backlog
- $1.4B in bookings and $1.1B funded backlog underscore sustained demand visibility. [44]
- Strategic contracts and mission‑critical role
- The $874M FMS IDIQ and $95.9M LRKI FE‑1 contract position AeroVironment at the heart of drone and counter‑drone modernization for both the U.S. and allies. [45]
- Technology moat and software shift
- AV_Halo, CORTEX, MENTOR, Puma VNS and BlueHalo’s advanced capabilities collectively push AeroVironment toward a higher‑value, software‑ and systems‑driven model. [46]
- Secular tailwinds
- Rising global defense budgets, increased importance of loitering munitions, ISR drones and C‑UAS, and lessons from modern conflicts (e.g., Ukraine) all favor AeroVironment’s product set. [47]
Bear case / risk factors
- Margin compression and volatility
- The step‑down in gross margin and the move from profit to loss, even with record revenue, raise questions about sustainable profitability post‑acquisition. [48]
- Integration risk from BlueHalo
- BlueHalo fundamentally changes the revenue mix toward services and complex programs, increasing the risk of cost overruns, execution missteps, and prolonged amortization drag. [49]
- Valuation risk
- Even after the drop, AVAV trades at a premium forward earnings multiple vs. classic defense primes, leaving the stock vulnerable to further derating if EPS guidance is cut again.
- Dependence on government budgets and geopolitics
- Concentration in U.S. and allied defense spending means AeroVironment is exposed to appropriation cycles, policy changes, and shifting priorities, all of which can delay or resize contracts. [50]
- Execution track record
- Multiple recent EPS misses, as highlighted by 24/7 Wall St. and Zacks, may cause some investors to discount management guidance until they see margin recovery materialize. [51]
10. What Today’s Move Means for Investors
For investors watching AeroVironment stock today, the picture is nuanced:
- If you’re focused on growth and strategic positioning:
AeroVironment just confirmed surging demand, a huge backlog, and won headline contracts that validate its role in next‑generation drone and C‑UAS architectures. The AV_Halo ecosystem and BlueHalo integration could support higher‑margin software and systems revenue over time. - If you’re focused on near‑term earnings and valuation:
The company is now guiding to lower EPS, margins are under pressure, and integration costs will likely remain elevated for several quarters. At ~70x the midpoint of non‑GAAP FY26 EPS guidance, the stock still assumes a sharp profit ramp in later years.
In other words, the long‑term thesis is intact but more execution‑dependent. Bulls will see the pullback as the first real reset after an 80%+ run‑up; skeptics will see a richly valued defense name that must prove it can translate contract wins into durable, high‑margin earnings.
References
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