AeroVirution (AVAV) shares soared after first-quarter results far exceeded expectations

Core Highlights

The drone manufacturer's earnings per share (EPS) for the first quarter of fiscal 2027 were US$0.59, significantly exceeding market expectations of US$0.22.

Quarterly revenue reached US$480.5 million, exceeding the forecast of US$452 million and a year-on-year increase of 5.7%.

The order backlog expanded to US$1.5 billion from US$1.2 billion at the end of April.

The company maintains its full-year revenue outlook for fiscal 2027 at US$2.18 billion.

Shares rose 2.9% to close at US$144.91 in after-hours trading after falling 5.4% in regular trading.

Understand the stock's recent weak performance

AeroVirmony Inc. (AVAV) shares rose 2.9% to $144.91 in after-hours trading on Tuesday. The unmanned aerial vehicle systems maker reported quarterly results easily exceeding Wall Street expectations.

For the first quarter of fiscal 2027, the defense contractor reported earnings per share of $0.59 and revenue of $480.5 million. The previous consensus forecast was only $0.22 per share and revenue of $452 million. In a comparable range for the same period last year, the company reported earnings per share of $0.32 and sales of $455 million.

The company's adjusted EBITDA reached $53.4 million, 36.6% higher than analysts 'expectations of $39.1 million. Operating profit margin showed a significant improvement at-2.3%, a substantial recovery from-15.2% reported in the same period last year.

Although free cash flow remained negative, recording-35.95 million, this marked a significant improvement from-146.5 million in the same quarter last year.

The company's order backlog expanded to $1.5 billion, up from $1.2 billion at the end of April. This indicator is an important indicator to measure customers 'continued demand for the company's unmanned aerial vehicle systems and related products.

The company's leadership maintained its mid-term revenue guidance for the full year of fiscal 2027 at US$2.18 billion and an adjusted EPS guidance price of US$3.18. The EBITDA outlook is $315 million, slightly below Wall Street's forecast of $318.2 million.

Before the release of this earnings report, AVAV faced huge headwinds. Its share price has fallen about 40% year-to-date and has experienced similar declines since the outbreak of the war in Iran, making this quarterly report critical to investor confidence.

The broader defense sector has been under selling pressure since the conflict began, and market participants fear that political divisions in Congress after the midterm elections could lead to budget gridlock.

In addition to sector-specific challenges, AeroViroun also faces company-specific obstacles. In March, federal authorities terminated a contract worth approximately $1 billion involving the manufacturer's BADGER phased array antenna system, citing the fact that the Space Force believed commercially available alternatives were more cost-effective.

Contract cancellations had a significant impact on stock price performance. The stock's valuation multiple has shrunk from a forward-looking price-to-earnings ratio of approximately 90 times at the beginning of 2026 to approximately 39 times today. Despite the compression, analysts expect earnings per share to grow at an annual rate of nearly 39% over the next few years.

Top-level growth continues to be impressive

AeroVirmony's revenue has reached a compound annual growth rate of 37.4% over the past five years. This expansion has recently strengthened, with annualized revenue growth of 63% in the past two years.

The "Products" segment, which covers aircraft, missile systems and satellite technology, has achieved an average year-on-year growth of 65.4% over the past two years. The "Services" segment, which includes maintenance, training and consulting services, showed an even more alarming average growth of 195% over the same period.

Looking ahead, Wall Street analysts expect revenue to grow by 13.9% over the next twelve months. Although this represents a slowdown in recent performance levels, it still shows expectations for continued momentum in the business.

Historically, AVAV's share price has shown significant volatility after earnings reports are announced. The stock surged about 19% after releasing fourth-quarter results for fiscal 2026 in June, and fell 6% after releasing its third-quarter report in March.