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AIRO Group Holdings (AIRO) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 13, 2026

Source: earnings call transcript

Executive summary

AIRO Group Holdings Q2 FY26 — Strong Drone Performance and Strategic Milestones

AIRO Group delivered a strong second quarter, driven by robust drone segment performance and key strategic advancements like the RQ-35's Blue UAS certification. The company reiterated its full-year revenue growth guidance, despite anticipating increased FX headwinds and sequential revenue decline in Q3. Management remains focused on diversifying revenue, scaling manufacturing, and accelerating new product introductions, with an eye on M&A and evaluating strategic alternatives for its training segment.

Highlights

5

  • Revenue grew by nearly 76% year-over-year to $43.2 million, outperforming expectations driven by the drone segment.

  • Gross margins improved to 64% in Q2 FY26 from 61% in Q2 FY25, leading to a small operating profit of $1.7 million.

  • Total drone backlog increased by approximately 9% from last quarter to $163 million as of June 30, 2026.

  • The RQ-35 drone achieved Blue UAS certification, opening significant U.S. defense procurement opportunities.

  • Development costs for the JC250 and JX250 cargo and ISR drone variants are running below internal expectations by a low double-digit percent.

Concerns

5

  • Net loss for the quarter was $2 million, compared to a net income of $5.9 million in Q2 FY25.

  • EBITDA declined to $5.1 million in Q2 FY26 from $18.9 million in Q2 FY25.

  • Avionics and training segments underperformed expectations, with avionics revenue largely flat quarter-over-quarter.

  • Anticipate greater FX headwinds in the second half of the year, with an incremental revenue impact of a few million dollars.

  • Joint ventures Nord and Bullitt are experiencing significant issues with the Ukrainian government's permitting process.

Guidance & targets

CategoryTargetConfidence
Full-year revenue growth
15% to 25% year-over-year
high materiality
High
RQ-70 production start
January 2027
medium materiality
High
JC250 and JX250 first flight
later this year
medium materiality
High
Training segment strategic alternatives update
by the end of the year
low materiality
Medium
Second half revenue
in line with, or modestly above, first half revenue
medium materiality
Medium
Third quarter revenue
decline sequentially from the second quarter
medium materiality
Medium
Fourth quarter revenue
modestly above the second quarter
medium materiality
Medium
Full-year gross margin
modest compression versus 2025, broadly in line with first half levels
medium materiality
Medium
Full-year Adjusted EBITDA
negative mid to high teens millions
high materiality
Medium
Free cash flow
shift into positive cash flow
high materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Drone
Revenue outperformance against expectations driven by solid execution within our drone segment. Product mix shift back towards drone products drove gross margin improvement.
outperformance against expectations———
Avionics
Revenue largely flat quarter-over-quarter as demand remained stable. Underperformed expectations.
largely flat—flat—
Training
Underperformed expectations. Performance below expectations driven by U.S. government task orders not within Aero's strengths. Evaluating strategic alternatives.
underperformance———

Orderbook & backlog

Total drone backlog $163 million June 30, 2026

grew roughly 9% from last quarter

expect the majority of this backlog to convert to revenue within the next 12 months

International drone backlog $163 million June 30, 2026

does not currently include any U.S. backlog

Product announcements

ProductTypeDetails
RQ-35 dronemilestone
RQ-70 long-range ISR platformlaunch
JC250 and JX250 cargo and ISR drone variantsmilestone

Deals & partnerships

Nord and Bullitt partnerships to expand access to multiple markets and accelerate growth plans

Experiencing significant issues with the Ukrainian government's permitting process for aircraft transfers. Company is not dependent on any one JV for growth and is evaluating additional partnerships.

Risks & headwinds

Underperformance in Avionics and Training segments Q2 FY26

partially offset by underperformance in avionics and training

Mitigation:evaluating strategic alternatives for training; consolidating avionics and drone operations for synergies

Foreign exchange headwinds second half FY26

incremental revenue impact of a few million dollars

Mitigation:incorporated that impact into our outlook and remain confident in our full-year guidance range

Ukrainian government permitting issues for JVs ongoing

significant order issues or significant issues with the Ukrainian government's permitting process

Mitigation:working with legal counsel; not dependent on any one JV for growth; evaluating additional partnerships

Training segment capital intensity and underperformance ongoing

performance here has been below expectations

Mitigation:evaluating strategic alternatives for training by year-end; positioning, investing, and strengthening training asset for future close air support opportunities

What to watch in Q3 FY26

Training segment strategic alternatives decision

by year-end
Current actively evaluating a range of strategic options
Target decision made

Why it matters

This will clarify the future capital allocation and focus for a segment that has underperformed and is capital-intensive.

we're planning to have decisions by year-end.

Find out whether AIRO delivers this. Inve re-checks your case every morning.

Q&A highlights

Inquired about the mix of U.S. and international drone orders, milestones for increasing backlog, and early customer interest in the RQ-70.

Mariya clarified that the $163 million backlog is international, with U.S. opportunities expected to add incrementally. Joe highlighted Blue UAS certification and RQ-70 launch as key milestones, noting strong customer interest in the RQ-70 for its high-end ISR capabilities.

“Our $163 million backlog represents international drone backlog and does not currently include any U.S. backlog.”

asked by Colin Canfield · answered by Mariya Pylypiv

2 min read 6 chapters

Detailed narrative

Drone Segment Outperformance and Strategic Milestones

The drone segment was a key driver of Q2 outperformance, with revenue exceeding expectations. The RQ-35 achieved Blue UAS certification, significantly expanding access to U.S. defense procurement. The company also unveiled the new RQ-70 long-range ISR platform, with production expected to start in January 2027, leveraging existing manufacturing and supply chain.

Product Development and Cost Discipline

Development of the JC250 and JX250 cargo and ISR drone variants is progressing well, with first flight still on track for later this year. Notably, Aero-specific development costs are running below internal expectations by a low double-digit percentage due to shared foundation, supply chain negotiations, and faster synergy realization. This cost discipline is crucial for the program's trajectory.

Avionics and Operational Synergies

The avionics segment delivered largely flat revenue quarter-over-quarter but remains strategically important. The company is advancing next-generation sensor and navigation solutions and expects synergies from consolidating avionics and U.S. drone operations in Phoenix to bear fruit in coming quarters. This integration aims to streamline operations, reduce supply chain complexity, and strengthen gross margins.

Financial Performance and Liquidity

Aero reported Q2 FY26 revenue of $43.2 million, a 76% YoY increase, and gross margin improved to 64%. Operating income turned positive at $1.7 million. The company's cash balance significantly strengthened to $56 million as of July 31, 2026, up from $25.9 million at June 30, 2026, primarily due to the collection of international drone receivables. This improved liquidity provides flexibility for strategic priorities.

Strategic Alternatives for Training Segment

The training segment underperformed expectations, driven by U.S. government task orders not aligning with Aero's strengths. The company is actively evaluating strategic alternatives for this capital-intensive segment, with an update expected by year-end, to focus capital on its core unmanned systems business.

M&A and Capital Allocation

Aero continues to evaluate inorganic opportunities, focusing on accretive acquisitions that enhance its drone, avionics, and electronics portfolios. M&A is seen as a tool to reduce quarterly revenue variability and maximize long-term shareholder value, leveraging the company's flexible balance sheet.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.