By HARRISON MILLER

AeroVironment signage is seen during the Association of the United States Army annual meeting and exposition at the Walter E. Washington Convention Center in Washington, U.S., October 14, 2024. REUTERS

AeroVironment late Tuesday hiked its earnings outlook with its Q1 report as defense demand continues. Shares swung higher early Wednesday on results. The drone maker and defense technology provider on Monday announced another contract for its growing backlog.

Like most defense stocks this year, Aerovironment (AVAV) has trended higher driven by proposed increases to the U.S. defense budget, greater spending commitments from NATO, and ongoing conflicts in the Middle East and Europe. The company in May completed its $4.1 billion all-stock acquisition of BlueHalo.

AeroVironment Earnings

AeroVironment on Tuesday reported Q1 2026 earnings of 32 cents per share adjusted, down from 89 cents per share last year.

Revenue spiked 140% to a Q1 record of $454.7 million.

FactSet expected earnings of 33 cents per share on $438 million in sales.

Autonomous Systems recorded $285.3 million in revenue, while the Space, Cyber and Directed Energy segment saw $169.4 million in sales.

AeroVironment's backlog rose to a record $1.1 billion for the quarter, while new bookings of $399 million topped estimates for $366 million.

"We are excited by the continued strength across both our Autonomous Systems and Space, Cyber and Directed Energy segments with record revenue and backlog," CEO Wahid Nawabi said in the release. "AV is exceptionally well positioned to capture growing demand due to our innovative solutions and manufacturing capacity that can quickly scale to meet our customers' expedited delivery timelines."

The company maintained its 2026 revenue outlook for $1.9 billion to $2 billion in sales. AeroVironment lifted its earnings to range from $3.60 to $3.70 per share adjusted. Its previous forecast from Q4 called for earnings between $2.80 and $3 per share adjusted.

FactSet analysts expect full year earnings of $3.40 per share on $1.99 billion in revenue.

New Contracts, Deliveries

AeroVironment on Monday announced that it received a nearly $240 million order for long-haul laser communications terminals from an undisclosed customer, who plans to deploy the systems into orbit. The communication terminals use lasers to transmit data over vast distances with greater accuracy and reliability, which AeroVironment says has far-reaching implications for the commercial sector. The company validated the technology earlier this year and completed two demonstrations in March.

William Blair analyst Louie DiPalma in a research note after the announcement said that "this is the largest laser communications contract we have seen." DiPalma added that the satellite laser links could play a critical role in President Trump's Golden Dome for America initiative, by enabling rapid and secure flow of sensor data and control signals between missile tracking satellites. He said that AeroVironment has been internally investing in scaling production to meet demand.

William Blair sees more than 25% upside to AVAV shares over the next year, while future Switchblade 600 orders should drive earnings growth during that period. The firm has an outperform rating on AeroVironment.

Elsewhere, AeroVironment last week reported that it delivered the first two of its Laser Weapon Systems to the U.S. Army to counter unmanned aircraft systems. The delivery was the first increment of the Army's Multi-Purpose High Energy Laser prototyping effort. The company last month delivered its Group 2 of P550 drones to the Army as part of the Long-Range Reconnaissance program.

AeroVironment in August announced that it partnered with aerospace and national security company Sierra Nevada to support the Golden Dome for America. Under the partnership, the two companies will collaborate on an open architecture system for air and missile defense for specific, limited-area locations, such as air fields or bases.

AeroVironment A Leader In Defense Boom

Canaccord in mid-August resumed coverage of AeroVironment, writing that drones and spacecraft are reshaping warfare, according to a report from The Fly. The firm noted that the Pentagon's fiscal 2026 budget includes $9.4 billion in funding for unmanned systems, including aircraft, ground robots, surface and underwater vehicles. The budget also allocates $3.1 billion for counter-drone systems.

Canaccord has a buy rating and 305 price target on AVAV stock.

Needham said AeroVironment is "uniquely positioned to see industry-leading growth," while the unmanned drone market enters a multiyear supercycle. The company's manufacturing capacity is increasing while its portfolio is "strongly aligned with the unprecedented global defense spending initiatives," analyst Austin Bohlig wrote. He believes that AeroVironment has evolved into a "leading next-generation" defense contractor following the BlueHalo acquisition.

Needham initiated coverage of AVAV stock with a buy rating and 300 price target.

AeroVironment Stock

AeroVironment advanced 3.3% early Wednesday. The stock slid 2.5% during Tuesday trade. Shares jumped 4.8% Monday following its communications terminal announcement.

AVAV stock has pulled back from its record high of 295.90 from the end of June, to fall back below its 50-day and 21-day lines. Shares are still up 50% so far this year through Tuesday.

You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison

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Source article: Investor's Business Daily