Innovative Solutions & Support (NASDAQ:ISSC) Reports Strong Q3 Revenue Growth but Misses EPS Estimates

Innovative Solutions & Support (NASDAQ:ISSC) Reports Strong Q3 Revenue Growth but Misses EPS Estimates

Innovative Solutions & Support (NASDAQ:ISSC) posted fiscal third-quarter 2025 results, delivering a significant revenue beat but falling short on earnings per share (EPS). The avionics solutions provider reported revenue of $24.1 million, up 105.2% year-over-year and well above analyst estimates of $18.5 million. However, diluted EPS came in at $0.14, below the consensus estimate of $0.15.

Key Financial Highlights

• Revenue: $24.1M (+105.2% YoY) vs. $18.5M estimate
• EPS: $0.14 vs. $0.15 estimate
• Gross Profit: $8.6M (35.6% margin), impacted by higher costs on F-16 product line
• Adjusted EBITDA: $4.4M (+43.3% YoY)
• Backlog: $72.4M as of June 30, 2025

The revenue surge was driven by the recently acquired F-16 product line, including accelerated deliveries as Honeywell built safety stock ahead of production transitioning to ISSC’s Exton facility. However, gross margins were pressured by elevated costs related to this transition, which management expects to normalize in fiscal 2026.

Market Reaction

Despite the revenue beat, the stock is down sharply in pre-market trading, falling ~28%. This suggests investor concerns over:

• Lower-than-expected profitability (EPS miss)
• Temporary margin compression due to F-16 transition costs
• Near-term revenue headwinds as F-16 production normalizes

Management Commentary & Outlook

CEO Shahram Askarpour highlighted strong execution but acknowledged near-term challenges:

"The pull-forward of F-16 production will impact revenue over the next two quarters, but we expect to drive additional growth and efficiencies once the migration is complete."

The company remains on track for full-year revenue and EBITDA growth of over 30% compared to fiscal 2024. Additionally, ISSC secured a new $100 million credit facility, enhancing liquidity for future growth initiatives.

Analyst Estimates vs. Company Performance

| Metric | Reported Q3 2025 | Analyst Estimate | Variance |
|-----------------|------------------|------------------|----------|
| Revenue | $24.1M | $18.5M | +30.3% |
| EPS | $0.14 | $0.15 | -6.7% |

For the full year, analysts project revenue of $70.6M and EPS of $0.56, while Q4 estimates stand at $16.8M in revenue and $0.12 EPS.

Conclusion

Innovative Solutions & Support delivered robust top-line growth but faced margin pressures, leading to a mixed earnings report. The market’s negative reaction reflects concerns over near-term profitability, though the long-term outlook remains positive with a strong backlog and expanded manufacturing capacity.

For more detailed earnings estimates and historical performance, visit Innovative Solutions & Support’s earnings page.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research before making any decisions.