EPS of $0.59 increased by 168.2% from previous year
Gross margin of 41.4%
Net income of 16.66M
"We expect additional incremental opportunities. Details of that are not well known yet. But I think the momentum is very much on our back." - Wahid Nawabi
AeroVironment Inc (AVAV) Q4 2025 Results Review: Record Revenue, Blue Halo Integration, and Elevated Backlog Position Driving 2026 Outlook across Autonomous Systems and Space Cyber Directed Energy
Executive Summary
AeroVironment reported a record year in fiscal 2025 with revenue of $821 million, up 14% year over year, including a fourth quarter revenue of $275 million, up 40% YoY. The company closed the Blue Halo acquisition mid-year (May 1, 2025) and began reporting under two segments: Autonomous Systems and Space Cyber Directed Energy, with updated pro forma FY2025 revenue of roughly $1.7 billion and a guiding framework for FY2026 of $1.9β$2.0 billion in revenue and adjusted EBITDA of $300β$320 million. The LMS (Switchblade) franchise delivered a standout Q4 with $138.3 million in LMS revenue (87% YoY growth), while UXS (Puma, JUMP 20X, etc.) posted $112.6 million in Q4 revenue (9% YoY). Management highlighted robust international demand, the largest-ever Army IDIQ for Switchblade, and a sizable P550/JUMP 20X pipeline alongside Red Dragon expansion. Backlog reached a record $726.6 million funded, supported by $1.2 billion in bookings in FY2025. The guidance reflects a shift in financial model toward larger, multi-domain solutions and higher-scale production, with profitability supported by steady gross margins (adjusted gross margins ~43.8% for the year, GAAP 41.2%), and a targeted operating discipline as synergies from Blue Halo unfold. Investors should monitor DoD budget trajectories, pace of foreign military sales, Blue Halo integration (costs and realized synergies), and the expansion of manufacturing capacity to meet higher production requirements.
Key Performance Indicators
Revenue
242.23M
QoQ: 44.50% | YoY:22.97%
Gross Profit
100.33M
41.42% margin
QoQ: 58.76% | YoY:35.30%
Operating Income
13.82M
QoQ: 547.59% | YoY:126.29%
Net Income
16.66M
QoQ: 1 050.06% | YoY:175.62%
EPS
0.59
QoQ: 1 083.33% | YoY:168.18%
Revenue Trend
Margin Analysis
Key Insights
Q4 2025 Revenue: $242.234 million, up 40% YoY; Full-year 2025 Revenue: $821.0 million, up 14% YoY.
GAAP gross margin Q4 2025: 36.0%; Adjusted gross margin Q4 2025: 39.0%; Full-year gross margin: 41.2% (GAAP) with adjusted gross margin close to 43% for product lines.
Adjusted EBITDA: Q4 2025: $61.6 million; FY2025 Adjusted EBITDA: $146.4 million (17.8% of revenue).
Net income: Q4 2025: $16.64 million; FY2025 net income: $43.6 million (vs. $59.7 million in FY2024).
Revenue and profitability metrics:
- Q4 2025 Revenue: $242.234 million, up 40% YoY; Full-year 2025 Revenue: $821.0 million, up 14% YoY.
- GAAP gross margin Q4 2025: 36.0%; Adjusted gross margin Q4 2025: 39.0%; Full-year gross margin: 41.2% (GAAP) with adjusted gross margin close to 43% for product lines.
- Adjusted EBITDA: Q4 2025: $61.6 million; FY2025 Adjusted EBITDA: $146.4 million (17.8% of revenue).
- Net income: Q4 2025: $16.64 million; FY2025 net income: $43.6 million (vs. $59.7 million in FY2024).
- Diluted EPS: Q4 2025 Adjusted EPS: $1.61; Q4 2025 GAAP EPS: $0.59.
- Backlog and bookings: FY2025 bookings of $1.2 billion; funded backlog at end of Q4 2025: $726.6 million (record); unfunded backlog converting to funded backlog as orders come under the Army IDIQ framework.
- Cash and liquidity: Cash and cash equivalents at end of Q4 2025: $40.86 million; net debt: -$6.57 million; net cash provided by/used in operating activities: modest quarterly negative (~$0.264 million); free cash flow for the year: -$8.79 million; cash outflows include working capital changes and integration-related spend related to Blue Halo.
- Pro forma segment revenue (FY2025): Autonomous Systems >$1.0B; Space Cyber Directed Energy (SCDE) ~$646M; Company-wide pro forma FY2025 revenue ~ $1.7B prior to full integration.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
242.23M
22.97%
44.50%
Gross Profit
100.33M
35.30%
58.76%
Operating Income
13.82M
126.29%
547.59%
Net Income
16.66M
175.62%
1 050.06%
EPS
0.59
168.18%
1 083.33%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways and quotes from the earnings call:
- Wahid Nawabi highlighted record results and strong demand: βWe had an incredible year, marked by robust demand for our innovative solutions, which enabled us to achieve double-digit organic revenue growth and a significant increase in profitability.β He cited record FY25 revenue of $821M (up 14% YoY) and record Q4 revenue of $275M (up 40% YoY).
- LMS momentum and international mix: LMS Q4 revenue rose 87% to $138M; international contribution remains strong (over half of total revenue in 2025; Switchblade orders from eight countries, nearly $250M; JUMP-20 orders ~ $100M in Q4 with over half international).
- Blue Halo integration and multi-domain strategy: The acquisition closed May 1, 2025; management outlined two reporting segments starting FY2026 (Autonomous Systems and Space Cyber Directed Energy) and emphasized the integration as a platform to win broader DoD programs across air, land, sea, space and cyber.
- P550, JUMP-20X, and Red Dragon opportunity: P550 expected to perform strongly with US Army LRR program of record (~$1B potential) and significant international demand; JUMP-20X traction internationally; Red Dragon positioned for longβterm growth with potentially βhundreds of millions to a billion-plus backlogβ over time.
- FY2026 guidance and visibility: Revenue guide of $1.9β$2.0B; Adj EBITDA $300β$320M; Non-GAAP EPS $2.8β$3.0; adjusted gross margins 29β31%; R&D 6β7% of revenue; 70% revenue visibility; first-half versus second-half cadence (roughly 45/55 split).
We expect additional incremental opportunities. Details of that are not well known yet. But I think the momentum is very much on our back.
β Wahid Nawabi
The market for Red Dragon is well over a billion. The base unit is exportable internationally, and the product is designed to be modular so payloads can be integrated globally.
β Wahid Nawabi
Forward Guidance
FY2026 guidance reflects integration of Blue Halo and a shift to a two-segment structure with pro forma 2025 revenue around $1.7B and two major growth engines:
- Autonomous Systems (AXS): projected revenue $1.2Bβ$1.4B, reflecting mid-teens to low-20s% growth versus pro forma FY2025. Growth drivers include Switchblade expansion, P550 orders, JUMP 20X international demand, and loitering munitions backlog conversion. Margin discipline remains a priority, with gross margins guided to 29β31% as mix shifts toward higher value product and services.
- Space Cyber Directed Energy (SCDE): projected revenue $700Mβ$900M, double-digit growth vs pro forma FY2025, supported by space tech, counter UAS, directed energy, and cyber offerings from Blue Halo and AVβs legacy platforms. SG&A and R&D strategies are designed to support longer-duration contracts and strategic programs.
- Synergies and costs: Blue Halo synergies are expected to materialize gradually; management noted that cost synergies of at least $10M annualized were highlighted in S-4 filings, with more to come as the integration progresses. Revenue synergies will take longer to realize and are not fully reflected in FY2026 guidance.
- Key risk factors: DoD budget timing and congressional appropriations, international demand variability, ITAR/regulatory exposure for Red Dragon payloads, integration execution, and supply chain dynamics.
Overall assessment: Management views the FY2026 guidance as achievable with high confidence around the midpoint (revenue ~2.0B) given the DoD priority alignment and Blue Halo-enabled portfolio. Investors should monitor order cadence from the US Armyβs modernization initiatives, international bookings, and the rate at which unfunded backlog converts to funded backlog as programs progress.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
AVAV Focus
41.42%
N/A
N/A
N/A
KTOS
24.70%
1.06%
0.29%
259.59%
AXON
60.10%
-2.74%
5.81%
83.93%
EVEX
0.00%
0.00%
-32.80%
-9.95%
LHX
25.30%
10.30%
2.32%
21.95%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
AVAV enters FY2026 with a strengthened platform following the Blue Halo acquisition and a disciplined, two-segment structure designed to capture sustained DoD demand across multiple domains. The midpoint guidance implies roughly 15% revenue growth year over year, with adj EBITDA of $300β$320 million and non-GAAP EPS of $2.80β$3.00, signaling a durable profitability trajectory even as the company expands capacity and investments in R&D and manufacturing. The LMS (Switchblade) momentum remains a primary driver, supported by robust international demand and a large sole-source Army IDIQ award that can convert to funded backlog over time. The P550, JUMP 20X, and Red Dragon pipelines offer optionality for outsized backlog growth, especially as international customers accelerate procurements in response to evolving national security commitments. However, investors should monitor DoD budget execution, Blue Halo integration progress, and potential ITAR/export control considerations that could influence international expansion. Overall, AVAV presents an attractive risk-adjusted opportunity in the defense-tech arena, leveraging a diversified portfolio and scalable production capacity to translate bookings into revenue with a favorable long-term growth trajectory.
Key Investment Factors
Growth Potential
Strategic growth anchored by: (1) high-demand loitering munitions (Switchblade) with a multi-country international footprint; (2) P550 and JUMP 20X product cycles feeding long-cycle DoD programs and international awards; (3) Red Dragon as a scalable,δΈδΈ generation one-way attack drone with a large TAM; (4) Blue Halo's Space, Cyber, Directed Energy capabilities expanding AVβs addressable market across air, land, sea, space and cyber. The two-segment framework (Autonomous Systems and Space Cyber Directed Energy) provides diversified growth vectors and enhanced platform capabilities that align with DoD priorities.
Profitability Risk
Key risks include (1) DoD budget timing and potential delays in awards; (2) regulatory/export controls for Red Dragon and deeper ITAR requirements if payloads are added; (3) integration-related execution risk and realizing expected synergies from Blue Halo; (4) international order volatility and currency/regulatory environments; (5) potential funding gaps or disruptions in Ukraine-related revenue in FY2026; (6) competition in autonomous systems and directed energy could pressure margins or share gains.
Financial Position
Healthy liquidity with cash and equivalents of about $40.9M; net debt of roughly -$6.6M; funded backlog of $726.6M and total bookings of $1.2B in FY2025; pro forma FY2025 revenue ~$1.7B; scalable manufacturing capacity as evidenced by capacity expansion in Utah for Switchblade; adjusted gross margins in the 43% range for product lines and overall gross margins in the low-40s historically, with guidance targeting 29β31% adjusted gross margins for FY2026, reflecting a shift in mix toward higher R&D and growth investments; strong backlog-to-revenue conversion capability driven by the company's manufacturing scale.
SWOT Analysis
Strengths
Market leadership in loitering munitions with Switchblade and expanding international footprint (eight countries with orders; >$250M Switchblade orders in FY2025).
Integrated Blue Halo capabilities expanding AVβs addressable market into space, cyber, directed energy, and electronic warfare.
Two-segment operating model (Autonomous Systems; Space Cyber Directed Energy) provides diversified revenue streams and cross-domain capability.
Strong backlog and bookings momentum: FY2025 bookings of $1.2B and funded backlog of $726.6M, with record quarterly LMS revenue and robust UXS performance.
Weaknesses
Reliance on DoD budgets and funding cycles; revenue visibility heavily influenced by government contracting cycles.
Short-term working capital drag and negative quarterly operating cash flow (Q4 CFO β$0.264M; FY2025 free cash flow β$8.8M) due to project timing and contract recognitions.
Integration risk associated with Blue Halo and potential delays in realizing synergies.
ITAR/export-control considerations for Red Dragon payloads may impact international growth if restrictions tighten.
Opportunities
Significant international demand growth, including European NATO members and Asia-Pacific opportunities, with P550 and Red Dragon expanding AVβs portfolio into high-priority domains.
Large TAM for Red Dragon in one-way attack drone category; potential multi-hundred-million to billion-dollar backlog contributions over time.
Space technologies and counter-UAS/directed energy programs (e.g., laser communications, cyber solutions) offer long-duration, multi-year contracts and cross-sell opportunities.
UK/other European program upgrades for Puma, Switchblade upgrades, and international deployments create incremental orders.
Threats
Budgetary uncertainty and political dynamics around defense spending could delay awards or affect order cadence.
Competition from other defense primes in autonomous systems and directed energy segments could erode share or pressure pricing.
Integration risks and ability to realize synergistic cost savings and revenue synergies in a timely manner.
Geopolitical risk could alter demand trajectories, including sanction restrictions or policy shifts affecting international sales.
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