EPS of $0.27 decreased by 59.1% from previous year
Gross margin of 39.1%
Net income of 7.54M
"Revenue rose to $188 million, representing a new second-quarter record for the company. LMS was the strongest revenue growth driver with nearly $78 million in Q2 revenue; a 61% year-over-year increase." - Wahid Nawabi
AeroVironment Inc (AVAV) QQ2 2025 Results Analysis — Record Revenue, LMS Growth, and Backlog Momentum; BlueHalo Strategic Advance and P550 Upside
Executive Summary
AeroVironment reported a robust second quarter of fiscal 2025 (QQ2 2025) with revenue of $188.46 million, a new quarterly record and up 4.2% year over year. The strength was driven primarily by the Loitering Munition Systems (LMS) segment, which posted $77.7 million in revenue, a 157% YoY increase, underscoring the strong demand for Switchblade variants and the stabilization of the UCAS awards. The Uncrewed Systems (UxS) segment delivered approximately $85.4 million in revenue, but was down 36% YoY largely due to a sharp drop in Ukraine-related sales, highlighting AVAV’s ongoing strategic pivot to diversify revenue sources away from Ukraine exposure. MacCready Works contributed $25.3 million, with HAPS-related activity fueling top-line growth in that segment.
Key Performance Indicators
Revenue
188.46M
QoQ: -0.54% | YoY:4.23%
Gross Profit
73.64M
39.07% margin
QoQ: -7.68% | YoY:-2.27%
Operating Income
7.01M
QoQ: -69.62% | YoY:-72.17%
Net Income
7.54M
QoQ: -64.36% | YoY:-57.72%
EPS
0.27
QoQ: -64.47% | YoY:-59.09%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $188.46M, up 4.23% YoY; QoQ: -0.54% (per earnings data).
Gross margin: GAAP 39.0%; adjusted gross margin 41.0% (lower vs. prior-year due to mix shift toward LMS).
Operating income: GAAP 7.01M; adjusted EBITDA: $25.90M (down vs. $39.5M prior-year, reflecting higher SG&A/R&D in the period).
Net income: $7.54M; GAAP EPS: $0.27; Adjusted/diluted non-GAAP EPS: $0.47.
Backlog: funded backlog $467.1M (up 25% QoQ); unfunded backlog approximately $1.8B; 95% visibility to the midpoint of revenue guidance.
Financial Highlights
Key quarterly metrics and trends (Q2 FY2025 vs Q2 FY2024 where available):
- Revenue: $188.46M, up 4.23% YoY; QoQ: -0.54% (per earnings data).
- Gross margin: GAAP 39.0%; adjusted gross margin 41.0% (lower vs. prior-year due to mix shift toward LMS).
- Operating income: GAAP 7.01M; adjusted EBITDA: $25.90M (down vs. $39.5M prior-year, reflecting higher SG&A/R&D in the period).
- Net income: $7.54M; GAAP EPS: $0.27; Adjusted/diluted non-GAAP EPS: $0.47.
- Backlog: funded backlog $467.1M (up 25% QoQ); unfunded backlog approximately $1.8B; 95% visibility to the midpoint of revenue guidance.
- Segments mix (Q2): UxS $85.4M (down 36% YoY, Ukraine exposure declined); LMS $77.7M (up 157% YoY); MacCready Works $25.3M.
- Cash and liquidity: cash and cash equivalents end of period $68.96M; total cash/investments $91.2M; total debt $35.28M; net debt to cash flow position: net cash approx. -$33.68M.
- Guidance: reaffirmed FY2025 revenue, adjusted EBITDA, and non-GAAP EPS; Q3 projected to be ~40% of H2 revenue; BlueHalo transaction pending close in H1 2025 (pro forma guidance to reflect post-close).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
188.46M
4.23%
-0.54%
Gross Profit
73.64M
-2.27%
-7.68%
Operating Income
7.01M
-72.17%
-69.62%
Net Income
7.54M
-57.72%
-64.36%
EPS
0.27
-59.09%
-64.47%
Key Financial Ratios
currentRatio
4.61
grossProfitMargin
39.1%
operatingProfitMargin
3.72%
netProfitMargin
4%
returnOnAssets
0.74%
returnOnEquity
0.88%
debtEquityRatio
0.04
operatingCashFlowPerShare
$-0.13
freeCashFlowPerShare
$0.06
priceToBookRatio
7.21
priceEarningsRatio
205.07
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways and quotes from the earnings call:
- Strategy and portfolio momentum: Wahid Nawabi stated, “Revenue rose to $188 million, representing a new second-quarter record for the company,” and highlighted LMS as a primary growth driver with “nearly $78 million” in Q2 revenue and a “61% year-over-year increase.” The management also called out the P550 launch as a major step to fill the gap between Puma and JUMP 20 ISR platforms and noted the US Army LRReconnaissance program competitive positioning.
- Backlog and guidance: Nawabi emphasized, “funded backlog continues to grow and is now at a healthy $467 million,” and that the company remains on track to meet production goals, with 95% visibility to the midpoint of guidance. Kevin McDonnell added that funded backlog was $467.1 million with unfunded backlog of about $1.8 billion and that guidance for FY25 is reaffirmed despite BlueHalo integration uncertainties.
- International and operational momentum: Nawabi noted expanding international demand for Switchblade and JUMP 20, including initial orders from Lithuania, Romania and Sweden, with Taiwan and Greece signaling intent to purchase. He also discussed integrating Kinesis/Ground Control ecosystem and the potential for a common operating picture across AVAV’s portfolio, including BlueHalo assets, subject to regulatory approvals.
- Ukraine exposure and diversification: Nawabi reiterated diversification away from Ukraine-driven demand, stating that the UxS pipeline remains robust with over $0.5B in JUMP 20 opportunities, and that the company expects continued healthy demand for AVAV’s UXS solutions in 2025 and beyond.
Revenue rose to $188 million, representing a new second-quarter record for the company. LMS was the strongest revenue growth driver with nearly $78 million in Q2 revenue; a 61% year-over-year increase.
— Wahid Nawabi
We reaffirm revenue, adjusted EBITDA and non-GAAP EPS guidance for fiscal year 2025.
— Wahid Nawabi
Forward Guidance
Outlook and management commentary: AVAV reaffirmed revenue, adjusted EBITDA, and non-GAAP EPS guidance for FY2025. They expect Q3 revenue to represent about 40% of the second-half revenues and noted 95% visibility to the midpoint of the revenue guidance. Management also highlighted that the BlueHalo acquisition is expected to close in the first half of calendar 2025, with pro forma earnings and revenue implications to be incorporated after closing. The firm cited robust demand across LMS, UxS, and MacCready Works, with expanding overseas orders for Switchblade and JUMP 20. Our assessment: With a sizable funded backlog and a multi-year pipeline (e.g., LRR, international Switchblade interest, Replicator orders), AVAV’s near-term revenue cadence may be uneven (as indicated by Q2 YoY declines in UxS) but the long-run trajectory appears favorable as the P550 accelerates Group 2 UAS growth and BlueHalo adds breadth in space, counter-UAS, cyber, and EW. Risks include continuing resolution/appropriations timing, integration execution for BlueHalo, and continued geopolitical volatility that could impact DoD orders. Key monitoring indicators: fulfillment rate of funded backlog, progress on P550 manufacturing ramp, international Switchblade orders, and regulatory approvals for the BlueHalo combination.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
AVAV Focus
39.07%
3.72%
0.88%
205.07%
KTOS
25.00%
4.17%
0.59%
94.83%
AXON
60.30%
6.70%
2.12%
133.82%
EVEX
0.00%
0.00%
-34.60%
-6.23%
LHX
22.00%
9.64%
1.94%
29.10%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
AVAV presents a compelling mid- to long-term thesis anchored by a diversified, high-growth portfolio in unmanned systems and autonomous platforms. The Q2 2025 results confirmed scale in LMS and a resilient demand base beyond Ukraine, with funded backlog at $467.1M and unfunded backlog at roughly $1.8B, implying a sizable revenue runway. The P550 launch and the expanding JUMP 20 pipeline, coupled with a large international Switchblade footprint and ongoing LRR opportunities, position AVAV to transition toward higher-volume, higher-margin product revenues as LMS scales toward targeted >$500M annual Switchblade revenue. The BlueHalo acquisition, expected to close in H1 2025, could broaden AVAV’s addressable market across space, EW, cyber, and counter-UAS, further strengthening the investment case, though it introduces integration and regulatory risk that requires monitoring. Near-term cash flow remains influenced by working capital dynamics (unbilled receivables) and acquisition spend, but the company exits the period with a net cash position and ample liquidity to fund capex while maintaining a strong backlog trajectory. Investors should monitor: (1) the sequencing and timing of BlueHalo closing and integration; (2) progress in P550 manufacturing ramp and international Switchblade orders; (3) DoD budget timing and potential impact of CRs; and (4) conversion of unfunded backlog into revenue over the next several quarters.
Key Investment Factors
Growth Potential
Strong multi-year growth drivers: LMS Switchblade franchise expansion toward >$500M annualized revenue target; P550 for Group 2 UAS growth with potential to become a new franchise alongside Raven/Puma; JUMP 20 expansion with >$0.5B sales pipeline; MacCready Works, including HAPS/SAR and DoD flight tests; BlueHalo combination potentially broadening AVAV’s addressable market in space, C-UAS, cyber, and EW; expected pro forma revenue of ~$1.7B for the combined entity.
Profitability Risk
Execution risk from BlueHalo integration and regulatory approvals; reliance on DoD budgets and continuing-resolution constraints; quarterly revenue mix volatility due to Ukraine exposure and project timing; potential competition and capacity constraints in switching/expansion manufacturing to meet >$0.5B Switchblade run-rate; geopolitical risk and foreign military sales (FMS) complexity.
Financial Position
Solid balance sheet with net cash position (-$33.68M net debt) and a healthy asset base: total assets ~$1.02B; funded backlog $467.1M; unfunded backlog ~$1.8B; cash and investments $91.2M; liquidity supports capex and manufacturing expansion for LMS and UxS programs; 12-13% R&D as a percentage of revenue in FY25 guidance; product revenue >80% of total revenue, supporting higher gross margins.
SWOT Analysis
Strengths
Dominant LMS portfolio with Switchblade as a global standard for loitering munitions
Diversified product portfolio across LMS, UxS, and MacCready Works (including HAPS)
Record quarterly revenue and strong backlog with 95% visibility to midpoint guidance
Robust international demand for Switchblade and JUMP 20; multiple IDIQs and FMS opportunities
Strategic BlueHalo acquisition broadening capabilities in space, cyber, EW, and counter-UAS
Weaknesses
Near-term revenue mix sensitivity to Ukraine-related demand (UxS exposure)
GAAP gross margins pressured by mix shift; reliance on higher R&D and SG&A in short term
Integration risk and regulatory approvals for the BlueHalo transaction
Execution risk of scaling Switchblade production to >$500M/year and expanding capacity
Opportunities
LRR program leadership position with near-term updates expected from DoD
Expanding international deployments with Lithuania, Romania, Sweden, Taiwan, Greece; further countries in the pipeline
P550 as Group 2 UAS growth engine; potential to become a new global franchise
Kinesis/Ground Control integration synergy across AVAV portfolio and potential BlueHalo integration benefits
BlueHalo combination enabling broader market access in space, counter-UAS, cyber, and electronic warfare
Threats
Continuing resolution and budget timing risk affecting order flow and backlog realization
Regulatory and shareholder approvals timing for BlueHalo, potential closing delays
Geopolitical tension impacting DoD demand cycles or foreign customer decisions
Competition in the unmanned systems and counter-UAS space; supply chain constraints
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