TenQ

The AeroVironment story

AeroVironment makes autonomous aircraft, precision strike systems and space and cyber technologies, with the central question whether its expanded business after BlueHalo can turn funded defense orders into sustained profits and cash.

AeroVironment stock reportTenQ Score 10/36 · every chart and check from its filings
  • $121.79share price, last close
  • $6.2Bmarket value
  • 10/36TenQ Score checks passed

The story in brief

  • Demand exceeds deliveries. Funded backlog reached $1.5 billion as of August 1, 2026, up 37% from a year earlier, with a book-to-bill ratio of 1.4 in the quarter to August 2026.
  • Profit improvement needs context. Gross margin rose to 26% from 21% in the quarter to August 2026, primarily because intangible amortization and other noncash purchase accounting expenses declined.
  • Cash remains the test. Revenue grew 84.4% over the last twelve months, but free cash flow was -$25 million and operating margin was -12.6%.

What drives the business

  • The BlueHalo acquisition in May 2025 broadened AeroVironment's defense technology capabilities, establishing Autonomous Systems and Space, Cyber and Directed Energy as its reportable segments.
  • Autonomous Systems includes Puma and JUMP aircraft, Switchblade precision strike systems and Titan drone defenses, while Space, Cyber and Directed Energy includes BADGER satellite communications antennas, LOCUST laser weapons and cyber services.
  • In the fiscal year ended April 2026, approximately 25% of revenue came from U.S. Army orders for itself and other defense organizations, while other U.S. government agencies and government subcontractors accounted for 47%.
  • In the quarter to August 2026, Autonomous Systems generated $346.0 million of revenue and Space, Cyber and Directed Energy generated $134.5 million, bringing total revenue to $480.5 million, up 6% from a year earlier.
  • The $1.5 billion funded backlog represents firm orders with appropriated funding, and the March 2026 acquisition of ESAero added aircraft engineering, prototyping and manufacturing capabilities as AeroVironment works to expand production.

What the price assumes

At $134.84 per share, the reverse DCF cannot measure an implied growth rate because free cash flow and operating earnings are both negative, leaving the price dependent on future profits.

AeroVironment delivered $2.0 billion of revenue and 84.4% revenue growth over the last twelve months, but that growth has not established a positive free cash flow base.

The 3.4x price-to-sales ratio exceeds TenQ's under 2.5x check, while the -0.4% free cash flow yield falls short of its above 3% bar.

What could change the story

  • Government funding and contract execution remain central risks, illustrated by the January 2026 stop work order, issued by mutual agreement, on the BADGER antenna agreement supporting the Satellite Communication Augmentation Resource program.
  • BlueHalo integration and manufacturing expansion require execution across a broader portfolio, while Space, Cyber and Directed Energy reported lower revenue and negative segment adjusted EBITDA in the quarter to August 2026.
  • The gross margin improvement relied primarily on lower purchase accounting expenses, and adjusted EBITDA declined to $53.4 million from $56.6 million despite higher revenue.
  • Cash and short-term investments of $580 million provide liquidity against $730 million of total debt, but AeroVironment fails TenQ's earnings coverage of interest and sales-to-cash conversion checks.
  • Shares outstanding increased 96.0% over the last three years, making dilution a material part of the growth story alongside $32 million of stock-based pay over the last twelve months.

What to watch next

  • For fiscal year 2027, management maintained revenue guidance of between $2.125 billion and $2.225 billion, net income of between $10 million and $27 million, and adjusted EBITDA of between $305 million and $325 million.
  • The next releases will show whether funded backlog converts into revenue as manufacturing expands, and whether Space, Cyber and Directed Energy improves its revenue and segment adjusted EBITDA.
  • Free cash flow, inventory and unbilled receivables will help distinguish progress in cash generation from improvements driven by lower amortization, while any update on the BADGER agreement will clarify a specific contract uncertainty.

Sources

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