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AVAV
Earnings call · Jul 2026 (Q1 FY27)

AeroVironment Q1 FY27 earnings call AVAV

Sep 9, 2026 Source

Executive summary

AeroVironment Q1 FY27 — Record Backlog and Strong Bookings Drive Growth

AeroVironment delivered a strong Q1 FY27, marked by record funded backlog and robust bookings, driven by key contract wins in both Autonomous Systems and Space, Cyber and Directed Energy segments. The company is aggressively investing in capacity expansion across multiple facilities to meet anticipated global demand, while reaffirming its full-year guidance despite some near-term profitability pressures in its services segment and ongoing budget timing uncertainties.

Highlights

5

  • Funded backlog grew to a record $1.5 billion, up 37% year-over-year.

  • Achieved record first quarter revenue of $480 million.

  • Secured bookings totaling $683 million, resulting in a 1.4x book-to-bill ratio for the quarter.

  • Adjusted EBITDA reached $53 million (11% of revenue), exceeding expectations.

  • Adjusted EPS increased 84% year-over-year to $0.59.

Concerns

4

  • Space, Cyber and Directed Energy (SCDE) segment adjusted EBITDA was negative $9 million, impacted by lower revenue and under-absorption of fixed costs.

  • Adjusted SG&A increased to $85 million (18% of revenue) from $65 million (14% of revenue) in the prior year, partly due to increased legal expenses and a $4.2 million nonrecurring bad debt reserve.

  • Free cash flow was negative $36 million in Q1, reflecting higher capital investments for production facility expansion.

  • Adjusted service gross margin declined to 8% from 13% in the prior year, primarily due to discontinued programs and award delays in the Cyber Mission Solutions business.

Guidance & targets

CategoryTargetConfidence
Fiscal Year 2027 Revenue
$2.125 billion to $2.225 billion
high materiality
High
Fiscal Year 2027 Adjusted EBITDA
$305 million to $325 million
high materiality
High
Fiscal Year 2027 Non-GAAP Adjusted EPS
$3.02 to $3.34
high materiality
High
Fiscal Year 2027 R&D Expense
7% to 9% of revenue
medium materiality
High
Fiscal Year 2027 Capital Expenditures
12% to 14% of revenue
medium materiality
High
Fiscal Year 2027 Adjusted SG&A Expenses
14% to 16% of revenue
medium materiality
High
Fiscal Year 2027 Revenue Cadence
45-55 split (first half - second half)
low materiality
High
Fiscal Year 2027 Adjusted EBITDA Cadence
roughly 1/3 in the first half and 2/3 in the second half
low materiality
High
Fiscal Year 2027 Non-GAAP EPS Cadence
roughly 30-70 split (first half - second half)
low materiality
High
Fiscal Year 2027 Free Cash Flow
negative
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Autonomous Systems (AXS)
Driven by loitering munition family, one-way attack system, counter-UAS RF products, and strong domestic/international sales in P550, JUMP 20-X, and Puma.
Contributed 72% of total company revenueContributed 75% of funded backlog ($1.1 billion)
$346 million21%—$62 million adjusted EBITDA (18% adjusted EBITDA margin)
Space, Cyber and Directed Energy (SCDE)
Decline due to Q1 FY26 revenue loss from scar contract termination ($32 million) and other discontinued government programs. Expected to improve in H2 FY27.
Contributed 28% of total company revenueContributed 25% of funded backlog ($358 million)Unfunded backlog: $1.2 billion (89% of total unfunded)
$134.5 million-21%—Negative $9 million adjusted EBITDA
Precision Strike and Defense Systems (within AXS)
Driven by loitering munition family, one-way attack system, and counter-UAS RF products.
$197 million8%——
Uncrewed Aircraft Systems (within AXS)
Led by strong domestic and international sales in P550, JUMP 20-X, and Puma.
$120 million71%——
Space and Directed Energy (within SCDE)
Sales declined due to discontinued scar contract.
—-28%——
Cyber & Mission Solutions (within SCDE)
Revenue declined primarily due to discontinued government programs.
—-16%——

AVAV operating KPIs by quarter

AVAV operating KPIs stated on its earnings calls, by fiscal quarter
KPI Jan 2026 Q3 FY26 Apr 2026 Q4 FY26This call Jul 2026 Q1 FY27Change vs prior quarter
Backlog Funded
$1.1B We ended the quarter with $1.1 billion of funded backlog and approximately $3 billion of unfunded backlog. Source transcript
$1.2B Funded backlog closed at $1.2 billion, unfunded backlog at $1.5 billion, which now excludes SCAR contract values following the contract termination for convenience announced in March. Source transcript
$1.5B Funding backlog totaled $1.5 billion at quarter end, which is 37% higher than the first quarter of fiscal year '26. Source transcript
+25%
Backlog Unfunded
~$3B We ended the quarter with $1.1 billion of funded backlog and approximately $3 billion of unfunded backlog. Source transcript
$1.5B Funded backlog closed at $1.2 billion, unfunded backlog at $1.5 billion, which now excludes SCAR contract values following the contract termination for convenience announced in March. Source transcript
$1.4B Unfunded backlog at the end of the first quarter was $1.4 billion, was $1.2 billion or 89% attributable to the SCDE segment and $157 million or 11% to the AFS segment. Source transcript
-6.7%
Funded backlog Autonomous Systems—
$869M Funded backlog totaled $1.2 billion at quarter end with $869 million or 73% attributable to the AxS segment and $314 million or 27% to the SCDE segment. Source transcript
$1.1B Funding backlog composition by segment is $1.1 billion or 75% attributable to the AXS segment and $358 million or 25% to the [ FEEE ] segment. Source transcript
+26.6%
Unfunded backlog Space, Cyber and Directed Energy—
$1.25B Unfunded backlog finished the year at $1.5 billion, which now excludes $1.5 billion related to the SCAR program with $1.25 billion or 86% attributable to SCDE and $209 million or 14% to AxS. Source transcript
$1.2B Unfunded backlog at the end of the first quarter was $1.4 billion, was $1.2 billion or 89% attributable to the SCDE segment and $157 million or 11% to the AFS segment. Source transcript
-4%
Unfunded backlog Autonomous Systems—
$209M Unfunded backlog finished the year at $1.5 billion, which now excludes $1.5 billion related to the SCAR program with $1.25 billion or 86% attributable to SCDE and $209 million or 14% to AxS. Source transcript
$157M Unfunded backlog at the end of the first quarter was $1.4 billion, was $1.2 billion or 89% attributable to the SCDE segment and $157 million or 11% to the AFS segment. Source transcript
-24.9%
Backlog —
$2.7B As we enter fiscal '27, we believe we have strong momentum across our product lines and a robust $2.7 billion of total backlog. Source transcript
$2.8B+ Total funded and unfunded backlog at the end of the first quarter was just over $2.8 billion. Source transcript
—
Orders —
$572M We secured bookings totaling $572 million in new authorized contract value. Source transcript
$683M We secured bookings totaling $683 million in new authorized contract value. Source transcript
+19.4%
Book-to-bill ratio —
0.9 ratio Our book-to-bill ratio for the quarter 4 was 0.9x, reflecting the exceptional quarter 4 revenue performance, partially offset by some timing delays of anticipated large program awards, while our trailing 12-month book-to-bill ratio stands at 1.4x. Source transcript
1.4 ratio Our book-to-bill ratio for quarter 1 was 1.4x and reflecting strong demand from large program awards. Source transcript
+55.6%

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Funded Backlog $1.5 billion Q1 FY27

Up 37% YoY; Up 23% QoQ

Unfunded Backlog $1.4 billion Q1 FY27

Relatively consistent QoQ

Excludes ceiling values from sole-source IDIQ contracts (e.g., $990M U.S. Army Switchblade, $874M UAS and Counter U.S. SMS, $500M GIA-401 counter USRF contracts).

Total Funded and Unfunded Backlog $2.8 billion Q1 FY27
Trailing 12-month Bookings $3 billion Q1 FY27

Product announcements

ProductTypeDetails
P550milestone
Puma AE and Puma LE systemsmilestone
JUMP 20milestone
Switchblade 400milestone
Switchblade 600milestone
LOCUST (E-HEL program)milestone
LOCUST-directed energy counter UAS laser weapon systemmilestone
Titan MSmilestone
PANTHER phased-array antennamilestone

Deals & partnerships

Greek military Localizing production in Europe

Engaged with several countries for local content and presence, including Greece, for producing subsystems or doing final assembly. Greek military has made public statements about procuring loitering munitions, specifically Switchblade.

Capital programs

Huntsville, Alabama facility expansion underway
Funding: Internally funded

Benefit:Support near-term growth for Freedom Eagle-1 counter UAS kinetic INTERCEPT solution; rapidly scale FE-1 manufacturing.

Purchased and looking to expand existing facility to meet U.S. Army's urgent operational needs for Freedom Eagle-1.

Southern California campus investment announced $100 million
Funding: Internally funded
Start: After Q1 FY27

Benefit:New state-of-the-art innovation center and campus; consolidate multiple existing lease facilities, resulting in expected lower annual operating expenses; improve execution on engineering, design and development alongside production operations.

Long-term investment announced just after the close of Q1 FY27.

Albuquerque, New Mexico facility underway
Funding: Internally funded

Benefit:One of the world's largest and highest volume full rate manufacturing space for laser weapon systems.

Building out production for rapidly growing LOCUST counter UAS solutions, along with additional future global demand.

Salt Lake City, Utah manufacturing facility underway
Funding: Internally funded

Benefit:120 square foot facility for rapid scaling of loitering munition products and additional space for other products facing increased demand.

Getting significantly closer to opening, on track for Spring 2027.

Risks & headwinds

Timing of U.S. Congress budget approval for FY27 FY27

Uncertainty remains, not expected to affect current guidance.

Mitigation:Monitoring closely; aggressively expanding production capacity to meet potential demand when budget is approved. Expecting a short-term CR followed by an approved defense budget in December timeframe.

SCDE segment adjusted EBITDA Q1 FY27

Negative $9 million in Q1 FY27.

Mitigation:Expected to improve significantly in the second half of FY27 as LOCUST and other programs transition to higher-volume, firm fixed-price contracts.

Services gross margin decline Q1 FY27

Declined to 8% in Q1 FY27 from 13% in Q1 FY26.

Mitigation:Expected to improve as overall services revenues increase and volume returns to cover fixed costs.

Increased Adjusted SG&A expenses Q1 FY27

$85 million (18% of revenue) in Q1 FY27, compared to $65 million (14% of revenue) in Q1 FY26.

Mitigation:Full year FY27 adjusted SG&A projected to be 14%-16% of revenue. Increase driven by infrastructure investments, business development, legal expenses, and a $4.2 million nonrecurring bad debt reserve.

What to watch in Q2 FY27

U.S. Congress FY27 budget approval

December timeframe
Current Uncertainty remains, not expected to affect current guidance.
Target Approval of defense budget.

Why it matters

Affects timing of awards and potential for further growth beyond current guidance.

There is one thing that's really uncertain about the market today, which is the timing of the fiscal year government fiscal year 2027 budgets. We have an election year, a lot of elections and uncertainty within Congress. That by itself represents a significant potential risk.

Q&A highlights

How will LOCUST impact SCDE margins long-term, given recent awards?

LOCUST is expected to drive strong margin improvement in SCDE, especially in H2 FY27 and beyond, as it transitions to high-volume, firm fixed-price contracts, eventually reaching segment-level margins.

“We expect the Locus product line and the segment margin profile to eventually get to the same model of the segment on over the next couple of years.”

asked by Ned Morgan · answered by Wahid Nawabi

2 min read 6 chapters

Detailed narrative

Strategic Contract Wins and Backlog Growth

AeroVironment secured $683 million in bookings during Q1 FY27, contributing to a record funded backlog of $1.5 billion, a 37% increase year-over-year. Key wins included a $117 million award for the P550 in the U.S. Army's long-range reconnaissance program, a $30 million contract for Puma AE/LE systems for Germany, and a $51 million U.S. Army contract for Switchblade 600. These wins position the company for continued growth and reflect its ability to capture key opportunities.

Directed Energy Leadership with LOCUST

The company announced a landmark $465 million contract for the U.S. Army's E-HEL program, marking the first production contract for directed energy systems in U.S. military history. This was followed by the first international direct commercial sale of the LOCUST system, underscoring growing global demand for cost-effective counter-UAS solutions. Management believes this represents an inflection point for the market, with LOCUST redefining the cost balance against drone threats.

Counter-UAS Portfolio Expansion

Beyond directed energy, AV's counter-UAS portfolio saw significant wins, including a $500 million IDIQ for the Titan MS RF jammer, with an initial $80 million contract for the Golden Dome initiative. The Freedom Eagle-1 kinetic intercept solution is also seeing accelerated production due to increased congressional funding and urgent U.S. Army needs, with investments in the Huntsville facility to rapidly scale manufacturing.

Manufacturing Capacity Expansion

AeroVironment is undertaking significant internal investments to expand manufacturing capacity across multiple sites. This includes a $100 million investment in a new Southern California innovation center, expansion of the Salt Lake City facility for loitering munitions, and increased production capabilities in Albuquerque for LOCUST and Huntsville for Freedom Eagle-1. These projects are designed to keep pace with rising demand and support future growth.

Segment Performance and Profitability Drivers

The Autonomous Systems segment contributed $346 million (72%) of total revenue, growing 21% YoY, driven by loitering munitions, one-way attack systems, and uncrewed aircraft systems. While the Space, Cyber and Directed Energy segment revenue declined 21% YoY due to contract terminations, management expects its profitability to improve significantly in the second half of FY27 as LOCUST and other programs transition to higher-volume, firm fixed-price contracts, eventually reaching segment-level margins.

Market Dynamics and Future Outlook

Management emphasized the inflection point for directed energy and counter-UAS solutions, comparing it to the drone market's evolution during the Ukraine conflict. They anticipate a multi-billion dollar market for laser weapon systems, with strong international demand complementing domestic growth, and are positioning AV as a leader in this rapidly expanding sector. The company's domestic supply chain also provides a competitive advantage amidst new tariffs.

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