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    AIRO
    Earnings call· Jun 2026(Q2 FY26)

    AIRO Group Holdings Q2 FY26 earnings call AIRO

    Aug 13, 2026 Source

    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

    10
    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

    3
    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———

    Operational metrics

    13
    Revenue
    $43.2 millionup nearly 76% YoY
    Q2 FY26

    Revenue for the second quarter of 2026 was $43.2 million, compared to $24.6 million in the second quarter of 2025. This represents growth of nearly 76% year-over-year.

    Gross profit
    $27.7 millionvs $15 million in Q2 FY25
    Q2 FY26

    Gross profit for the quarter was $27.7 million, representing a gross margin of 64%, compared to a gross profit of $15 million and gross margin of 61% versus the same period last year.

    Gross margin
    64%up from 61% in Q2 FY25
    Q2 FY26

    Gross margins improved to 64%, leading to a small operating profit for the quarter, a big improvement from the loss we saw in the same period last year.

    Operating income
    $1.7 millionvs negative $19.7 million in Q2 FY25
    Q2 FY26

    Operating income for the quarter was $1.7 million versus negative $19.7 million in the second quarter of 2025.

    Net loss
    $2 millionvs net income of $5.9 million in Q2 FY25
    Q2 FY26

    Our second quarter net loss was $2 million versus a net income of $5.9 million in the second quarter 2025.

    EBITDA
    $5.1 millionvs $18.9 million in Q2 FY25
    Q2 FY26

    Second quarter 2026 EBITDA was $5.1 million compared to $18.9 million in the prior year period.

    Adjusted EBITDA
    $6.8 millionup from $4.7 million in Q2 FY25
    Q2 FY26

    On an adjusted basis, EBITDA was $6.8 million, up from $4.7 million in the second quarter 2025.

    JC250 and JX250 development costs
    low double-digit percentbelow internal expectations
    Q2 FY26

    Aero-specific costs for development are running below our internal expectations by a low double-digit percent.

    Cash balance
    $25.9 million
    as of June 30, 2026

    As of June 30, 2026, we had $25.9 million in cash on the balance sheet

    Cash balance
    $56 millionsignificantly strengthened
    as of July 31, 2026

    As of July 31, we had approximately $56 million of cash, primarily reflecting the subsequent collection of international drone receivables outstanding at quarter end.

    Total debt
    $6.8 million
    as of June 30, 2026

    we had $25.9 million in cash on the balance sheet, with $6.8 million in debt.

    First half revenue
    approximately 50%of current full-year expectations
    H1 FY26

    First, 1 material drone delivery originally expected in the third quarter was completed in the second quarter. As a result, first half revenue represented approximately 50% of our current full-year expectations.

    FX headwinds revenue impact
    a few million dollarsincremental impact compared with prior expectations
    H2 FY26

    We now anticipate greater FX headwinds in the second half, with an incremental revenue impact of a few million dollars compared with our prior expectations.

    Industry KPIs

    1
    MetricValueDetails
    Program segment backlog$163 millionUSD

    Orderbook & backlog

    2
    Total drone backlog$163 millionJune 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 millionJune 30, 2026

    does not currently include any U.S. backlog

    Product announcements

    3
    ProductTypeDetails
    RQ-35 dronemilestone
    RQ-70 long-range ISR platformlaunch
    JC250 and JX250 cargo and ISR drone variantsmilestone

    Deals & partnerships

    1
    Nord and Bullittpartnerships 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

    4
    Underperformance in Avionics and Training segmentsQ2 FY26

    partially offset by underperformance in avionics and training

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

    Foreign exchange headwindssecond 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 JVsongoing

    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 underperformanceongoing

    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

    5

    Training segment strategic alternatives decision

    by year-end
    Currentactively evaluating a range of strategic options
    Targetdecision 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.

    Q&A highlights

    4

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.