Key Takeaways
- Q3 FY2026 earnings per share landed at $0.64, falling short of analyst expectations ranging from $0.68 to $0.72
- Quarterly revenue totaled $408 million against forecasts of $476–$484 million — representing approximately a 15% shortfall
- Year-over-year revenue jumped 143%, primarily driven by the BlueHalo acquisition completed in May 2025
- The Space, Cyber, and Directed Energy division saw a 19% decline amid funding uncertainties and risks to the $1.7 billion SCAR contract with the Space Force
- The company lowered its fiscal 2026 EPS forecast to $2.75–$3.10 from the previous range of $3.40–$3.55
AeroVironment (AVAV) unveiled its third-quarter fiscal results on March 10, delivering numbers that, despite showing strong top-line expansion, disappointed Wall Street. Shares retreated during extended trading hours as investors digested underwhelming earnings and revenue figures.
The defense technology specialist delivered earnings of $0.64 per share alongside $408 million in quarterly sales. Analysts had anticipated EPS between $0.68 and $0.72 with revenue projections ranging from $476 million to $484 million. The revenue gap amounted to approximately 15% below consensus.
While a 143% year-over-year revenue surge appears impressive at first glance, context matters. The bulk of this growth stemmed from integrating BlueHalo following last May’s acquisition. Excluding this transaction, organic revenue expansion reached 38% — respectable performance, yet below market expectations.
Profitability metrics also deteriorated, with gross margins contracting to 27% compared to 40% during the same quarter last fiscal year. Management attributed this decline to supply chain challenges and changes in the revenue composition across product categories.
SCAR Contract Uncertainty Looms Large
Beyond the quarterly miss, the more significant concern involves the Space Force contract situation. BlueHalo manufactures antenna systems for SCAR (Satellite Communications Augmentation Resource), a $1.7 billion program with the U.S. Space Force.
Market jitters first surfaced on March 2, when AVAV shares plummeted 17.4% amid speculation that the Space Force might reopen the SCAR bidding process. These concerns have now materialized.
AeroVironment acknowledged in its quarterly disclosure that SCAR options within its unfunded backlog are “no longer expected to be awarded.” This development contributed to the 19% quarterly decline in the Space, Cyber, and Directed Energy segment.
The company maintains a $3 billion unfunded backlog, with $1.4 billion connected to SCAR-related work. This represents a substantial portion of anticipated future revenue now facing uncertainty.
Funded backlog remained steady 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.
Revised Financial Outlook
AeroVironment reduced its full-year fiscal 2026 revenue projection to $1.9 billion from nearly $2 billion previously. The earnings guidance was lowered to $2.75–$3.10 per share, down from the earlier range of $3.40–$3.55. The Street consensus had been $3.31.
The revised forecast implies fourth-quarter EPS around $1.50, approximately 30 cents below current analyst estimates.
CEO Wahid Nawabi maintained an optimistic stance, emphasizing that customer demand for the company’s technology “remains robust.” He highlighted Q4’s potential to deliver record quarterly revenue and 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% versus fiscal 2025 levels.
AVAV concluded regular market hours at $221.57, declining 2.5% during the session, then dropping an additional ~9% in after-market trading. The stock currently trades approximately 47% beneath its 52-week peak of $417.86, while remaining up roughly 80% over the trailing twelve months.
The defense contractor’s market capitalization currently stands near $11.05 billion.
