AeroVironment (AVAV) Stock Drops 9% After Q3 Revenue Misses by 15%

TLDR

• AeroVironment posted Q3 FY2026 EPS of $0.64, missing the $0.68–$0.72 Wall Street estimate
• Revenue came in at $408 million vs. the expected $476–$484 million — a miss of roughly 15%
• Sales still grew 143% year-over-year, boosted by the May 2025 acquisition of BlueHalo
• The Space, Cyber, and Directed Energy segment dropped 19% due to funding delays and the threatened loss of the $1.7 billion SCAR Space Force contract
• Full-year 2026 EPS guidance was cut to $2.75–$3.10, down from prior guidance of $3.40–$3.55

AeroVironment (AVAV) reported its fiscal third-quarter earnings on March 10, and while the headline growth numbers looked impressive, they weren’t enough. The stock dropped in after-hours trading as investors reacted to a miss on both earnings and revenue.

The company posted EPS of $0.64 on revenue of $408 million. Wall Street had been expecting around $0.68–$0.72 EPS and revenue closer to $476–$484 million. That’s a revenue shortfall of roughly 15%.

AeroVironment, Inc., AVAV

On the surface, revenue growing 143% year-over-year sounds like a win. But much of that jump came from the BlueHalo acquisition in May 2025. Strip that out, and comparable sales grew 38% — still solid, but not what the market was pricing in.

Gross margin also compressed, falling to 27% from 40% in Q3 FY2025. The company pointed to supply chain pressures and a shift in product mix as the main culprits.

The SCAR Problem

The real story here isn’t the headline miss — it’s the Space Force contract situation. BlueHalo supplies antennas for the SCAR (Satellite Communications Augmentation Resource) program, a $1.7 billion U.S. Space Force contract.

Investors first started worrying about this on March 2, when AVAV dropped 17.4% — not because of anything AVAV did, but over fears the Space Force would reopen bidding on the SCAR contract. Those fears now appear justified.

AeroVironment confirmed in its earnings release that SCAR options in its unfunded backlog are “no longer expected to be awarded.” The Space, Cyber, and Directed Energy segment posted a 19% decline in the quarter as a result.

The company’s total unfunded backlog sits at $3 billion, which includes $1.4 billion tied to SCAR-related work. That’s a meaningful chunk of future revenue now in question.

Funded backlog held flat at $1.1 billion versus the prior quarter. On the bright side, AeroVironment pulled in $2.1 billion in new orders in the first nine months of the fiscal year — well ahead of the $1.3 billion in reported sales over the same period.

Guidance Cut

AeroVironment trimmed its full-year 2026 revenue outlook to $1.9 billion, down from just under $2 billion previously. EPS guidance was cut to $2.75–$3.10, compared to prior guidance of $3.40–$3.55. Wall Street had been sitting at $3.31.

The implied Q4 EPS of around $1.50 is roughly 30 cents below where analysts currently sit.

CEO Wahid Nawabi tried to keep the tone positive, saying demand for the company’s products “remains robust” and pointing to Q4 as a potential record revenue quarter. He also flagged a “solid start to fiscal year 2027.”

The Autonomous Systems segment — the drone side of the business — held up well, with Uncrewed Aircraft Systems revenue up more than 50% compared to FY2025.

AVAV closed regular trading at $221.57, down 2.5% on the day, before falling another ~9% in after-hours. The stock trades about 47% below its 52-week high of $417.86, though it’s still up roughly 80% over the past 12 months.

The company’s market cap stands at approximately $11.05 billion.

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