Shares of AeroVironment plunged 10.2% to $183.65 on Thursday as investors cashed in profits from a two-day rally sparked by a $117.3 million U.S. Army contract for 82 long-range reconnaissance drones. The selloff, amplified by broader weakness in growth stocks amid higher-for-longer interest rate fears, raises the central question haunting AVAV shareholders: can a company with a record backlog but persistent earnings misses justify its premium price tag?
The Contract Is Real Money, But Not a Game-Changer by Itself
The Army awarded AeroVironment the firm-fixed-price deal on June 3 to deliver 82 autonomous reconnaissance drones for battalion-level commanders. At roughly $1.43 million per unit, this marks the first major production purchase of the platform since it was unveiled in October 2024. Yet set against fiscal 2026 revenue guidance of $1.85 billion to $1.95 billion , the contract adds just ~6% to the top line — meaningful, but not transformational on its own.
The Army's Drone Spending Boom Benefits AeroVironment — and Its Rivals
The Pentagon has earmarked over $74 billion for drones and counter-drone systems, the biggest investment ever in unmanned military technology. AeroVironment is well positioned, but the Army selected both AeroVironment and a competing system for the reconnaissance program, deliberately fielding multiple manufacturers simultaneously to maintain competition. Investors betting on a monopoly position should take note.
Revenue Is Surging, but Profits Keep Disappointing
Third-quarter revenue hit $408 million , and organic growth ran 38% year-over-year. But adjusted earnings of $0.44 per share missed the $0.79 consensus, and operating margin fell to negative 6.4%.
Funded backlog swelled to $1.1 billion from $726.6 million a year earlier , giving revenue visibility — yet management has lowered its full-year profit outlook. Wall Street wants to see cost discipline as manufacturing scales up.
A Securities Class Action Adds Legal Overhang Multiple law firms have filed securities class action suits against AeroVironment with a deadline of July 27, 2026 , alleging investor harm — an additional cloud over a stock already down ~18% year-to-date. With earnings due June 30, today's pullback is a referendum: the contract pipeline is impressive, but until profits catch up to revenue, every rally will tempt sellers.