AeroVironment (AVAV) Stock Plunges 9% on Q3 Miss and $1.7B Contract Uncertainty

TLDR

• Q3 FY2026 earnings per share reached $0.64, falling short of analyst expectations ranging from $0.68 to $0.72
• Quarterly revenue totaled $408 million against consensus estimates of $476–$484 million — approximately 15% below expectations
• Year-over-year revenue surged 143%, primarily driven by the BlueHalo acquisition completed in May 2025
• The Space, Cyber, and Directed Energy division experienced a 19% decline amid appropriation delays and potential forfeiture of the $1.7 billion SCAR Space Force program
• Annual FY2026 EPS projections reduced to $2.75–$3.10 range from previous outlook of $3.40–$3.55

Shares of AeroVironment (AVAV) retreated during after-hours trading on March 10 following the company’s fiscal third-quarter financial report that showed results falling below analyst projections despite strong top-line growth.

The defense technology firm delivered earnings of $0.64 per share alongside $408 million in quarterly revenue. Analyst consensus had anticipated earnings between $0.68 and $0.72 per share with revenue projections spanning $476 million to $484 million. The revenue gap represents approximately a 15% underperformance.

AeroVironment, Inc., AVAV

While a 143% year-over-year revenue increase appears remarkable at first glance, the growth largely reflects the BlueHalo integration completed in May 2025. Excluding the acquisition impact, organic revenue expansion reached 38% — respectable performance, yet below market expectations.

Profitability metrics also faced headwinds, with gross margin contracting to 27% from the prior year’s 40% in Q3 FY2025. Management attributed the compression to ongoing supply chain challenges and evolving product mix dynamics.

The SCAR Problem

Beyond the quarterly miss, investor attention centered on developments surrounding a critical Space Force program. BlueHalo provides antenna systems for SCAR (Satellite Communications Augmentation Resource), representing a $1.7 billion U.S. Space Force procurement agreement.

Market concerns emerged on March 2 when AVAV shares plummeted 17.4% — triggered not by operational issues but speculation that the Space Force might restart the competitive bidding process for SCAR. Those apprehensions have now materialized.

AeroVironment acknowledged in its quarterly disclosure that SCAR options previously included in unfunded backlog are “no longer expected to be awarded.” Consequently, the Space, Cyber, and Directed Energy business unit registered a 19% quarterly revenue decline.

The organization’s total unfunded backlog currently stands at $3 billion, incorporating $1.4 billion connected to SCAR-related activities. This represents substantial prospective revenue now facing significant uncertainty.

Funded backlog remained stable at $1.1 billion compared to the previous quarter. More encouragingly, AeroVironment secured $2.1 billion in fresh orders during the initial nine months of fiscal year 2026 — substantially exceeding the $1.3 billion in revenue recognized over that timeframe.

Guidance Cut

Management adjusted full-year 2026 revenue expectations downward to $1.9 billion from approximately $2 billion in prior guidance. Earnings per share projections were similarly reduced to the $2.75–$3.10 range versus earlier guidance of $3.40–$3.55. Street consensus had centered around $3.31.

The updated forecast implies fourth-quarter EPS near $1.50, roughly 30 cents beneath current analyst estimates.

CEO Wahid Nawabi maintained an optimistic outlook, noting that customer demand for the company’s solutions “remains robust” while highlighting Q4’s potential to deliver record quarterly revenue. He additionally 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% relative to FY2025 levels.

AVAV concluded regular session trading at $221.57, declining 2.5% during market hours, before surrendering an additional ~9% in extended trading. Shares currently trade approximately 47% beneath the 52-week peak of $417.86, though they remain roughly 80% higher than levels from twelve months ago.

The company maintains a market capitalization of approximately $11.05 billion.

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