AeroVironment stock rises on $500M army contract, strong results boost outlook

AeroVironment Inc. AVAV shares rose 4% in premarket trading on Thursday after the US Department of War awarded the defense contractor a $500 million (approx. R 8,6 billion) contract for counter-unmanned aerial systems.

The Simi Valley, California-based company received a firm-fixed-price contract to procure commercial counter-unmanned aerial systems and counter small-unmanned aerial systems capabilities.

According to the Department of War, work locations and funding will be determined with each order placed under the agreement, which is expected to run through June 29, 2029.

Army Contracting Command, Detroit Arsenal, Michigan, is the contracting activity for the agreement, which carries contract number W912CH-26-D-A073.

The contract announcement added to investor optimism following AeroVironment's strong fiscal fourth-quarter earnings report earlier this week.

The company specializes in unmanned aircraft systems and tactical missile systems for military and commercial applications.

Record quarterly results supported by acquisitions and backlog growth

AeroVironment reported record fiscal fourth-quarter revenue of $641,6 million (approx. R 11 billion) for the period ended April 30, 2026, up 133% from a year earlier.

The sharp increase was aided by the acquisitions of defense technology companies BlueHalo and Empirical Systems Aerospace. Excluding those acquisitions, organic revenue growth was approximately 31%.

Profitability also improved significantly.

Non-GAAP adjusted EBITDA more than doubled to $140,1 million (approx. R 2,4 billion), lifting the adjusted EBITDA margin to 22%. Adjusted earnings per share increased to $1.84 from $1.61 in the prior-year quarter.

The company's funded backlog reached $1,2 billion (approx. R 20,5 billion) at the end of fiscal 2026, compared with $726,6 million (approx. R 12,4 billion) a year earlier, while full-year bookings totaled $2,7 billion (approx. R 46,2 billion) against approximately $2 billion (approx. R 34,2 billion) in revenue.

That resulted in a book-to-bill ratio of 1.4, indicating orders continued to outpace shipments and providing greater visibility into future demand.

Counter-drone business seen as long-term growth driver

While AeroVironment is widely known for its Switchblade loitering munitions, management believes its counter-drone business could become an increasingly important contributor over the coming years.

Counter-unmanned aircraft systems generated about $200 million (approx. R 3,4 billion) in revenue during fiscal 2026.

The company is expanding the business through a three-layered approach that includes the Titan family of radio-frequency jamming systems, the LOCUST directed-energy weapon under development, and the Freedom Eagle-1 kinetic interceptor designed to destroy incoming drones.

Discussing the long-term opportunity, CEO Wahid Nawabi said, "It will not surprise me in the next 3-5 years that our directed energy and our counter-UAS business would be equally as large, if not 2-3 times bigger."

Management also cited "unprecedented" demand across its markets and projected fiscal 2027 revenue of $2,1 billion (approx. R 36,4 billion) to $2,2 billion (approx. R 38,1 billion), with the midpoint implying roughly 10% growth.

Despite the recent gains, AeroVironment shares trade at about 54 times the midpoint of management's fiscal 2027 adjusted earnings guidance and remain well below their 52-week high of nearly $420.

Jim Cramer urged investors to remain cautious because of negative sentiment surrounding the stock.

“The short sellers in this thing are so powerful,” he said on CNBC, adding they're fully convinced that AeroVironment “paid too much” for BlueHalo.

According to Cramer, AVAV is trading near a bottom and a strong fourth-quarter report could help keep it in the “green”, but he warned of possible short-term volatility due to what he described as "a coordinated assault by institutional bears."

He also said investors should be cautious because the “lies that have been told about this company and shading of the truth” are extraordinary.

Wall Street, however, continues to rate AeroVironment a "Strong Buy," with a mean price target of about $295 over the next 12 months.