AeroVironment (NASDAQ:AVAV) Q2 2026: Record Revenue Overshadowed by Profit Miss and Guidance Cut

AEROVIRONMENT INC (NASDAQ:AVAV) reported its fiscal 2026 second-quarter results, delivering a quarter of dramatic revenue growth overshadowed by significant profitability pressures. The market's immediate reaction was negative, with shares trading down nearly 5% in after-hours trading following the release.

Quarterly Results vs. Expectations

The headline revenue figure showed explosive growth, primarily fueled by the company's recent acquisition of BlueHalo. However, a closer look at the bottom-line results reveals why investor sentiment turned cautious.

• Revenue: The company reported record Q2 revenue of $472.5 million, a staggering 151% increase year-over-year. This figure narrowly missed the analyst consensus estimate of approximately $477.8 million.
• Earnings Per Share (Non-GAAP): The company reported non-GAAP EPS of $0.44. This fell significantly short of the $0.80 per share that analysts had anticipated, representing a 44% miss against expectations.

The stark divergence between top-line growth and bottom-line performance is the central story of the quarter. While revenue scaled massively, profitability metrics were heavily impacted by costs associated with the BlueHalo integration.

Market Reaction and Price Action

The stock's decline in after-hours trading reflects investor disappointment with the earnings miss and the compression in profitability. This negative movement contrasts with the stock's relatively flat performance over the past two weeks, suggesting the quarterly details prompted a reassessment of near-term value.

Key recent performance metrics include:

• After-Hours Reaction: Down ~4.95%
• Past Month: Down ~15.7%
• Past Week: Essentially flat (+0.06%)

Key Elements from the Earnings Release

Beyond the headline numbers, the earnings release highlighted several critical developments for AeroVironment as it integrates its largest-ever acquisition.

• BlueHalo Acquisition Impact: The May 2025 acquisition of BlueHalo was the primary driver behind the revenue surge, contributing $245.1 million in the quarter. It also fundamentally altered the company's financial profile, increasing the proportion of service revenue and bringing substantial intangible amortization expenses.
• Profitability Pressures: Gross margin contracted to 22% from 39% a year ago. The company reported a GAAP net loss of $17.1 million, or $0.34 per diluted share, compared to a net income of $7.5 million in the prior-year period. Management attributed this largely to $48.2 million in intangible amortization and other non-cash purchase accounting expenses related to the BlueHalo deal.
• Strong Demand Indicators: The company posted robust bookings of $1.4 billion for the quarter, yielding a book-to-bill ratio of 2.9. Funded backlog also grew substantially to $1.1 billion as of November 1, 2025, up from $726.6 million at the end of the last fiscal year.
• Updated Fiscal 2026 Outlook: The company provided updated full-year guidance, which appears to be a factor in the market's reaction. The revenue outlook of $1.95 billion to $2.0 billion brackets the analyst consensus estimate of $2.036 billion but has a midpoint slightly below it. More notably, the non-GAAP EPS guidance of $3.40 to $3.55 is below the current analyst expectation of $3.71.

Looking Ahead

The quarter solidifies AeroVironment's transformation into a larger, more diversified defense technology player. The strategic rationale is clear: leveraging BlueHalo's capabilities in space, cyber, and directed energy to create an integrated multi-domain portfolio. CEO Wahid Nawabi stated the company is operating from "a position of strength" and is prepared to "lead the generational shift in defense over the longer-term."

However, the near-term path involves digesting the acquisition. Investors are now weighing the impressive backlog and long-term contract wins against the significant near-term costs and lowered profitability. The market's reaction suggests a focus on the current earnings dilution and the guidance that implies a slower profit ramp than previously hoped.

For a detailed look at upcoming earnings dates and analyst estimates, you can review the information available on the AeroVironment earnings and estimates page.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, investment recommendation, or an offer to buy or sell any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.