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AeroVironment (AVAV), valued at a market cap of $3.8 billion, is a defense contractor specializing in unmanned aircraft systems. The stock went public in early 2007 and has since returned more than 460% to shareholders. However, it currently trades almost 44% below all-time highs, following a weaker-than-expected quarterly report and a broader market selloff.
In the third quarter of its fiscal 2025, AeroVironment reported an operating loss of $3.1 million, compared to a $14.3 million profit in the same period last year. Wall Street had anticipated AeroVironment to report a $14 million profit in Q3.
Quarterly sales dropped 10% to $167.6 million, significantly below analysts’ expectations of $192 million. CEO Wahid Nawabi cited “unprecedented high winds and fires in Southern California” as factors that impacted operations at the Arlington, Virginia-based company’s manufacturing facilities.
Ukraine-related concerns have also affected investor sentiment, with President Donald Trump’s uncertain support for the country raising questions about future demand. Notably, Ukrainian sales accounted for approximately 38% of AeroVironment's total revenue in fiscal 2024.
According to a report from MarketWatch, William Blair's Louie DiPalma described the quarter as “noisy” but maintained his “Buy” rating, noting the company’s backlog growth as positive. Jefferies analyst Greg Konrad, who has a $230 price target, advised investors to look past the operational “hiccup” and emphasized potential sales growth ahead.
Ukraine a Key Driver for AeroVironment’s Sales
AeroVironment reported mixed financial results for its fiscal third quarter of 2025, as several unforeseen challenges impacted its performance despite record orders and backlog growth. While its sales fell by 10% year-over-year, adjusted earnings per share narrowed by more than 50% to $0.30 in Q3, compared to $0.63 last year.
As stated above, winds and wildfires in Southern California forced extended facility shutdowns and caused power outages, disrupting manufacturing operations and supply chain logistics. CEO Wahid Nawabi noted these events “partially constrained our ability to achieve our full operational goals.”
Additionally, AeroVironment received stop work orders on four foreign military sales contracts, representing approximately $13 million in orders expected to ship in Q4. The company also faced challenges from the U.S. government’s pause in military aid to Ukraine and new tariff implementations.
What’s Next for AVAV Stock?
AeroVironment continues to transition away from Ukraine-related revenue, which will represent only 17% of total sales in fiscal 2025, down from 38% last year. Ukraine is expected to account for just 6% of Q4 revenue and is “not material to our future growth plans,” according to Nawabi.
Despite these setbacks, AeroVironment secured several significant contracts, including a record $288 million Switchblade order — the largest in its 50-year history. The company’s funded backlog reached a record $763.5 million, providing 100% visibility to the midpoint of its revised guidance range.
In response to these challenges, AeroVironment lowered its fiscal 2025 guidance and forecasts revenue between $780 and $795 million, adjusted EBITDA between $135 and $142 million, and non-GAAP earnings between $2.92 and $3.13 per share. However, it remains confident in its long-term growth strategy and expects record fourth-quarter revenue with accelerating growth in fiscal 2026.
Priced at 44.9x forward earnings, AVAV stock trades at a premium. Out of the six analysts covering AeroVironment stock, four recommend “Strong Buy,” one recommends “Moderate Buy,” and one recommends “Hold.” The average target price for AVAV stock is $221.20, indicating upside potential of 64% from current levels.
