AeroVironment Stock: Record Backlog Offsets Major Contract Setback

AeroVironment's core drone business shows strength with a record $1.1B backlog and new Navy contract, offsetting a major Space Force program termination. Analyst sentiment remains bullish.

Despite the termination of a multi-billion dollar contract with the U.S. Space Force, AeroVironment’s core unmanned systems business is demonstrating remarkable resilience. The company continues to secure new business, highlighting a diversified growth strategy that is cushioning the impact of the recent loss.

Analyst Sentiment and Financial Performance

Market experts remain largely positive on the defense contractor’s outlook. Currently, 47% of analysts rate the shares a "Strong Buy," with an equal percentage recommending a "Buy." The consensus price target stands at $318.78, suggesting significant upside from the current trading level near $189 per share. In February, JPMorgan initiated coverage with an "Overweight" rating and a $320 target.

This optimism persists even as the company navigates a mixed quarterly report. For the third fiscal quarter of 2026, which concluded at the end of January, revenue reached $408 million. This figure fell short of analyst expectations, which were approximately $484 million. Adjusted earnings per share also missed estimates, coming in at $0.64 versus the anticipated $0.68.

However, a year-over-year perspective provides crucial context. Revenue surged by 143%, a jump primarily fueled by the acquisition of BlueHalo in May 2025.

The SCAR Program Halt and Its Aftermath

The primary challenge emerged from the company’s space segment. In January 2026, AeroVironment received a stop-work order from the U.S. Space Force for the SCAR program. This contract was originally valued at roughly $1.7 billion. The consequence was a non-cash goodwill impairment charge of $151.3 million.

In response, management revised its full-year fiscal 2026 guidance. Revenue is now projected to be between $1.85 billion and $1.95 billion, with adjusted earnings per share expected in the range of $2.75 to $3.10.

Unmanned Systems Demand Drives Record Backlog

Counterbalancing the SCAR setback is robust demand across AeroVironment’s product lines. The funded backlog hit a record $1.1 billion as of January 31, 2026. Over the first nine months of the fiscal year, the company booked orders worth $2.1 billion, resulting in a book-to-bill ratio of 1.6. A single $186 million order for Switchblade loitering munitions contributes to this strong pipeline.

New Navy Contract Expands Service Model

Further evidence of momentum came in early April. The U.S. Navy selected AeroVironment to provide intelligence, surveillance, and reconnaissance (ISR) services under a Contractor-Owned, Contractor-Operated (COCO) model. The centerpiece is the JUMP 20-X, a maritime variant of the vertical take-off and landing drone system. It is engineered for shipboard operations, featuring a corrosion-resistant airframe and a heavy-fuel engine to simplify onboard logistics.

This arrangement represents an "ISR-as-a-Service" approach. Rather than maintaining its own equipment and personnel, the Navy purchases operational ISR capacity directly from the provider. For AeroVironment, this translates into recurring service revenue instead of one-time equipment sales.

While the loss of the SCAR contract is a notable headwind, the record order backlog and strategic Navy win illustrate that AeroVironment is successfully building its growth on multiple pillars.