AeroVironment Inc. (AVAV) saw its shares climb 4% in premarket trading Thursday following the announcement of a $500 million firm-fixed-price contract from the U.S. Department of War for counter-unmanned aerial systems (C-UAS). The award, issued by the Army Contracting Command in Detroit Arsenal, Michigan, covers procurement of commercial C-UAS and counter small-unmanned aerial systems capabilities, with work locations and funding determined per order through June 29, 2029.
The contract news added to investor enthusiasm after the Simi Valley, California-based defense contractor reported record fiscal fourth-quarter results earlier this week. For the period ended April 30, 2026, AeroVironment posted revenue of $641.6 million, a 133% surge from the prior year. The sharp increase was fueled by acquisitions of BlueHalo and Empirical Systems Aerospace; excluding those deals, organic revenue grew approximately 31%.
Record Profitability and Backlog Growth
Profitability also strengthened significantly. Non-GAAP adjusted EBITDA more than doubled to $140.1 million, lifting the adjusted EBITDA margin to 22%. Adjusted earnings per share rose to $1.84 from $1.61 in the year-ago quarter. Funded backlog reached $1.2 billion at fiscal year-end, up from $726.6 million, while full-year bookings totaled $2.7 billion against roughly $2 billion in revenue, yielding a book-to-bill ratio of 1.4. This indicates orders outpaced shipments, providing greater visibility into future demand.
Counter-Drone Business Poised for Expansion
While AeroVironment is best known for its Switchblade loitering munitions, management sees its counter-drone segment as a key long-term growth driver. The C-UAS business generated about $200 million in revenue during fiscal 2026. The company is pursuing a three-layered approach: 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.
CEO Wahid Nawabi highlighted the potential, stating, "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 cited "unprecedented" demand across its markets and projected fiscal 2027 revenue of $2.1 billion to $2.2 billion, with the midpoint implying roughly 10% growth.
Valuation and Analyst Sentiment
Despite the recent gains, AeroVironment shares trade at about 54 times the midpoint of fiscal 2027 adjusted earnings guidance and remain well below their 52-week high of nearly $420. Jim Cramer urged caution, noting on CNBC that "the short sellers in this thing are so powerful" and are convinced the company "paid too much" for BlueHalo. He warned of possible short-term volatility due to what he described as "a coordinated assault by institutional bears."
Wall Street, however, rates AeroVironment a "Strong Buy," with a mean price target of about $295 over the next 12 months. The company's strong backlog and expanding counter-drone business provide a solid foundation, though investors should weigh the high valuation and bearish sentiment against the growth trajectory.
For broader market context, see our coverage of UK GDP Rises 0.6% in Q1 2026 and Copper Edges Up but Faces Headwinds.
This article is for informational purposes only and does not constitute financial advice.
