AeroVironment’s third quarter was marked by robust revenue growth, but the market responded negatively due to margin pressures and profitability shortfalls. Management highlighted a surge in demand for its autonomous systems, especially the Switchblade and JUMP 20 product lines, and cited a record $3.5 billion in new contract awards. CEO Wahid Nawabi described the quarter as one of “record second quarter bookings,” but acknowledged operational inefficiencies tied to the rollout of a new ERP system and disruptions from the U.S. government shutdown, both of which impacted service mix and gross margins.
Is now the time to buy AVAV? Find out in our full research report (it’s free for active Edge members).
AeroVironment (AVAV) Q3 CY2025 Highlights:
- Revenue: $472.5 million vs analyst estimates of $470.1 million (151% year-on-year growth, 0.5% beat)
- Adjusted EPS: $0.44 vs analyst expectations of $0.79 (44.2% miss)
- Adjusted EBITDA: $45 million vs analyst estimates of $69.12 million (9.5% margin, 34.9% miss)
- The company lifted its revenue guidance for the full year to $1.98 billion at the midpoint from $1.95 billion, a 1.3% increase
- Management lowered its full-year Adjusted EPS guidance to $3.47 at the midpoint, a 4.8% decrease
- EBITDA guidance for the full year is $310 million at the midpoint, below analyst estimates of $312.8 million
- Operating Margin: -6.4%, down from 3.7% in the same quarter last year
- Market Capitalization: $11.7 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From AeroVironment’s Q3 Earnings Call
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Greg Konrad (Jefferies) asked about the SCAR program’s transition to production and its impact on margins. CEO Wahid Nawabi responded that moving to fixed-price contracts would “improve the margin profile” for that business in the coming quarters.
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Anthony Valentini (Goldman Sachs) inquired about key catalysts tied to incoming funding. Nawabi emphasized that loitering munitions, counter-UAS, and the P550 platform are poised for substantial orders as funding is released, but noted unpredictability in exact timing.
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Louie Dipalma (William Blair) pressed for details on long-haul laser communications contracts and their funding status. Nawabi clarified that most of the contract value is not yet funded, but anticipated more task orders and revenue as funding flows in during Q3 and Q4.
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Andre Madrid (BTIG) sought clarity on the international opportunity for counter-UAS platforms and margin differences versus domestic sales. Nawabi stated international margins are generally higher and the international market is still in its early phases.
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Jonathan Siegmann (Stifel) questioned whether pent-up demand could be absorbed amid funding delays. Nawabi acknowledged “timing risk” but expressed confidence in meeting annual guidance, citing manufacturing flexibility and customer support.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will watch (1) the pace at which government funding is converted into revenue for awarded contracts, (2) evidence of margin recovery as product mix shifts toward higher-margin autonomous systems, and (3) progress in scaling manufacturing, particularly with the new Salt Lake City facility. The realization of BlueHalo acquisition synergies and international contract momentum will also be important indicators.
AeroVironment currently trades at $234.83, down from $282 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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