AeroVironment, Inc. (NASDAQ: AVAV) saw its shares jump 19.7% in premarket trading on Tuesday following the release of fiscal fourth-quarter results that topped analyst expectations. The defense technology company reported revenue of $641.6 million, up 133% year over year, and non-GAAP earnings per share of $1.84, both significantly ahead of consensus estimates of $556.0 million and $1.46, respectively.
The strong quarterly performance was largely fueled by recent acquisitions. BlueHalo and Empirical Systems Aerospace (ESAero) together contributed $282.3 million, or 44% of Q4 revenue, according to company data. Excluding these acquisitions, organic revenue rose approximately 31% from the prior year, reaching $359.3 million.
Despite the headline beat, the earnings release revealed some mixed signals that investors are likely to scrutinize. Product gross margin improved to 42.4% from 37.8%, benefiting from scale, but contract services—swollen by the BlueHalo acquisition—posted a negative gross margin of 6.4%, compared to a positive 27.0% a year earlier. Total gross margin slipped to 32% from 36%, driven by the shift toward service revenue and higher amortization and purchase accounting costs.
CEO Wahid Nawabi highlighted the company's focus on supply chain strengthening and rising global demand across drones, counter-drone systems, and space technologies, calling fiscal 2026 the strongest financial year in AeroVironment's history. Funded backlog reached $1.2 billion, up 65% from the previous year, providing visibility into about 55% of the midpoint of fiscal 2027 revenue guidance.
Looking ahead, AeroVironment provided fiscal 2027 revenue guidance of $2.125 billion to $2.225 billion, with the midpoint representing roughly 10% growth over fiscal 2026's $1.98 billion—a notable deceleration from the more than 100% growth seen in the past year. However, the adjusted EPS guidance of $3.02 to $3.34 fell short of the current analyst estimate of $3.84, with the top end of company guidance still about 13% below that consensus figure.
In a separate development, AeroVironment underwent a Russell index reshuffle just before the earnings release. The stock was removed from the Russell 2000 Index and added to the Russell 1000 Value and Russell Midcap Value benchmarks. The annual Russell rebalancing, which affects approximately $12.2 trillion in investor assets, took effect after the close on June 26.
Analyst sentiment remains generally positive, with 16 buy ratings, one overweight, and two holds among 19 analysts tracked by MarketWatch. The average price target stands at $277.56, well above the premarket quote of $166.40, though the stock remains roughly 60% below its 52-week high of $417.86. However, the EPS estimate trend has softened, with the fiscal 2027 estimate declining from $4.02 to $3.84 over the past month.
On a GAAP basis, AeroVironment reported Q4 net income of $63.2 million, but the full year showed a net loss of $265.1 million, largely due to a $240.7 million goodwill impairment and $51.4 million in intangible amortization and other purchase accounting costs. The market's reaction will likely hinge on how investors weigh the strong quarterly beat against the softer guidance and margin challenges ahead.
