AeroVironment, Inc. (NASDAQ:AVAV) third-quarter results missed analyst expectations, with strong demand for its drone and counter-drone systems offset by funding delays and Space segment headwinds.
On the company's Tuesday evening earnings call, AV executives recognized the miss but struck an upbeat tone on the outlook for next year.
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Q3 Setbacks
CEO Wahid Nawabi told analysts and investors that the Q3 miss was primarily due to adjustments made to its Space segment and revenue timing.
"Given industry-wide delays in government funding along with the shutdown, several orders we anticipated to receive in the third quarter have shifted to the right by a quarter or two," Nawabi said, also noting the stop-work order on its SCAR (Satellite Communication Augmentation Resource) program.
Despite the shortfall, management highlighted robust demand across core franchises and a growing backlog that sets the stage for accelerating growth.
"Strong order flow increased our funded backlog in the third quarter, which is positioning us for record fourth quarter revenue and a solid start to our fiscal year 2027," Nawabi shared.
Autonomous Systems
The Autonomous Systems business remained Aerovironment's primary growth engine.
"Our Autonomous Systems segment continues to drive revenue growth for the company," the CEO said, adding that despite funding delays "revenue for the segment still experienced significant growth compared to the same quarter last year."
Space and Directed Energy
In the company's space and directed energy business, AV stressed that it remains engaged with the U.S. Space Force on its phased array antenna technology even as the SCAR program has faced disruption.
"We remain in active discussions with the U.S. Space Force regarding the Badger phased array antenna system to support the SCAR, or Satellite Communication Augmentation Resource program. We appreciate that the contract was temporarily paused while we work together on a firm-fixed-price contract that provides a commercialized product solution," Nawabi said.
AeroVironment also underscored its confidence in its counter‑drone franchise, particularly RF counter‑UAS systems and the LOCUST directed energy system, as governments respond to the surge in one‑way attack drones and small UAS threats on modern battlefields.
"We are clearly not only the leader, but we're the only game in town that actually has a solution that works. It's been performing in the field today. It is actively involved and engaged in theaters, multiple theaters, and the customer is extremely satisfied with its performance," the CEO boasted.
Looking Ahead
AeroVironment framed Q3 as a funding- and timing‑driven miss rather than a demand problem, emphasizing a record backlog, strong Autonomous Systems growth and growing adoption of its counter‑UAS and directed energy technologies as it heads into what it expects to be a record fourth quarter and a stronger fiscal 2027.
"The money is starting to flow, seems like to the different forces, different branches, and then down to the programs, then the war. That activity is significant and likely to drive our growth higher than this year for next year," CFO Kevin McDonnell stated.
Photo: Piotr Swat / Shutterstock
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