Applied Aerospace & Defense, Inc. (AADX) falls on guidance
Applied Aerospace & Defense, Inc. (AADX) beat Q3 estimates on EPS and revenue, but shares fell as investors focused on softer full-year guidance, margin pressure, and delivery timing issues. Our deep dive covers record quarterly sales, segment growth, analyst views, and why the market looked past the beat.
Applied Aerospace & Defense (AADX) beat Q3 expectations with EPS of $0.18 and revenue of $182.1 million, but the stock fell 14.83% after management lowered 2026 revenue guidance to $660 million-$670 million. Investors are reacting to the weaker outlook and margin pressure, even as backlog, bookings, and segment growth remain strong.
Applied Aerospace & Defense, Inc. (AADX) Falls After Earnings
Applied Aerospace & Defense, Inc. (AADX) delivered a clear Q3 earnings beat, with EPS of $0.18 versus $0.08667 expected and revenue of $0.18B versus $0.16B estimated. Yet AADX falls 14.83% to $9.13 in regular trading, while volume reaches 2,919,867 shares against a 2,078,939 average. The verdict is blunt: strong execution in the quarter met a weaker full-year revenue outlook.
Key Takeaways
AADX reported EPS of $0.18, more than the $0.08667 estimate, and revenue of $0.18B versus a $0.16B consensus forecast.
Third-quarter revenue reached a record $182.1M, up nearly 49% year over year, with about 20% organic growth.
Defense Aviation and Airborne Systems produced the largest segment result at $94.2M, while Advanced Sensing and Precision Strike Systems generated $48.7M.
Applied cut 2026 revenue guidance to $660M-$670M from $670M-$690M. The $665M midpoint sits below the $682.4M analyst consensus.
Management cited ramp costs, supplier constraints, and customer or government approvals as the main causes of margin pressure and delivery timing shifts.
The current analyst consensus remains Buy, with two Buy ratings and one Hold. Recent named actions included price target cuts from RBC Capital and Morgan Stanley before the earnings print.
Financial Performance: AADX Revenue, EPS and Segment Results
The headline AADX earnings result was strong. Revenue reached $182.1M, a quarterly record and a 48.6% year-over-year increase. Organic growth contributed about 20%, which shows that acquisitions were not the only engine behind the quarter.
The result also beat the recent revenue trend. Quarterly revenue stood at $0.17B on June 30 and $0.15B on March 31. Earlier periods showed $0.15B on December 31, $0.12B on September 30, and $0.11B on June 30, 2025. The latest quarter therefore extended a steady revenue expansion across the reported periods.
EPS improved sharply as well. AADX reported $0.18, compared with losses of $1.04 in June and $0.46 in March. The company also posted a $0.0455 loss in December. The latest figure marks a meaningful change in the recent earnings pattern, although the $0.016 EPS recorded in September 2025 shows that the company has produced positive quarterly EPS before.
Adjusted EBITDA reached $39.7M. Applied did not provide a numerical gross margin figure in the reported earnings discussion, but executives said gross margins faced pressure. The causes were specific: hiring and training ahead of production ramps, equipment coming online, material constraints, and delays in customer and government approvals.
Segment performance was broad. Space and Launch Systems generated $39.1M, up 31.1% from the prior year. Growth came from SpaceX and Blue Origin work, along with demand for proprietary propellant tanks. Defense Aviation and Airborne Systems produced $94.2M, up 17.3%, supported by military rotorcraft aftermarket demand and production programs for Anduril, Bell, and other customers.
Advanced Sensing and Precision Strike Systems produced $48.7M. The segment increased by $36.3M, with Advanced Sensing organic growth of 14% and the rest of the increase tied to Precision Strike. Awards included a $7.5M LTAMDS radome order from Raytheon and a $21.9M BLU-136 add-on.
The order picture adds support to the growth case. Third-quarter bookings totaled about $254M, or 1.4 times quarterly revenue. Contracted backlog reached almost $1.3B, about 12% above the second quarter. As of September 30, approximately $600M of remaining performance obligations was expected to become revenue in 2027.
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The market focused on guidance rather than the quarterly beat. AADX traded at $9.13 during the regular session, down 14.83%. Trading volume of 2,919,867 shares exceeded the 2,078,939 average, showing that the response involved more than a quiet repricing.
The main pressure point was the 2026 revenue outlook. Applied moved its range to $660M-$670M from $670M-$690M. The new $665M midpoint trails the $682.4M analyst consensus by $17.4M. That gap explains why investors sold the shares despite the EPS and revenue beats.
The listed analyst actions around the print came before the earnings announcement. RBC Capital analyst Ken Herbert maintained an Outperform rating but cut the price target from $21 to $18 on October 28. Morgan Stanley analyst Kristine Liwag maintained Equal-Weight and reduced the target from $24 to $16 on October 19.
Other recent actions were more constructive. Guggenheim analyst Michael Ciarmoli initiated coverage with a Buy rating and a $30 target on September 15. Bank of America analyst Ronald Epstein maintained Buy while cutting the target from $24 to $23 on August 14. The current consensus remains Buy, based on two Buy ratings and one Hold.
The analyst reaction centers on a familiar aerospace trade-off. Demand, backlog, and program awards are growing, but the company must convert that demand into shipments without allowing ramp costs and supply constraints to absorb the benefit. The stock's decline shows that investors placed more weight on near-term delivery timing than on the quarter's clean headline beat.
Management Commentary: Backlog, Capacity and 2027 Outlook
CEO Trip Ferguson framed the quarter as a capacity-building phase. Applied expects capital investment of about $50M in 2026, including new equipment and expansions at existing facilities. The company is also approaching 1,800 employees and has added Robert Wingfield as chief information officer to strengthen systems, cybersecurity, data analytics, and artificial intelligence work.
"The demand is there. We're laser-focused on building the organization and production capability to deliver it." - Trip Ferguson, CEO, Earnings Call
That statement captures the central strategic issue. Applied has customer demand, but it is expanding people, equipment, and factory space before those investments reach full productivity. Ferguson said investment and ramp-related costs will continue into the first half of 2027. He also linked delivery timing to constraints involving forgings, castings, specialized fasteners, and government approvals.
"Although we expect some investment and ramp-related costs will carry into the first half of 2027, we remain confident in both the demand outlook and ultimate margin profile of our growing backlog." - Trip Ferguson, CEO, Earnings Call
The CFO's message focused on spending discipline. Jeff McRae said 2027 capital investment will normalize to about 4%-5% of revenue, with roughly 1%-2% for maintenance and 3%-4% for growth. That outlook places the $50M 2026 investment plan in the context of a planned step down after the current capacity cycle.
"2027 capex should normalize to about 4%-5% of revenue, with roughly 1%-2% maintenance and 3%-4% growth capex." - Jeff McRae, CFO, Earnings Call
Management also pointed to several long-term growth assets. The Long Beach operation is expected to generate more than $45M of revenue in 2026. Tank capacity is expected to approach 200 units by the end of 2026 and reach about 400 by 2028. In defense, Applied is preparing production space in Stockton for the Anduril CCA Fury program and expanding capacity for solid rocket motor cases.
"The breadth of that opportunity also makes strategic focus essential." - Trip Ferguson, CEO, Earnings Call
That focus matters because Applied is pursuing multiple programs at once. Its Precision Strike work spans PrSM, SM-3, SM-6, THAAD, GMLRS, and GEM-T. The company has also completed three acquisitions in 2026 and is evaluating additional opportunities. The strategy offers scale, but it also raises execution demands at a time when the company is already dealing with supplier and approval delays.
Bottom Line
The AADX earnings beat is real, and the $1.3B backlog, $254M of quarterly bookings, and $600M of 2027 performance obligations support the long-term growth case. However, the stock falls because the lower 2026 revenue guide confirms that supply constraints, approvals, and ramp costs are delaying the conversion of demand into reported sales. For investors, execution against that backlog now matters more than the quarter's EPS surprise.
+Why did Applied Aerospace & Defense stock fall after earnings?
AADX fell because management cut 2026 revenue guidance to $660 million-$670 million, below the prior range and under the $682.4 million analyst consensus. The market looked past the Q3 beat and focused on slower expected growth and margin pressure.
+Did Applied Aerospace & Defense beat earnings estimates in Q3?
Yes. AADX reported EPS of $0.18 versus the $0.08667 estimate and revenue of $182.1 million versus the $160 million consensus. Revenue also rose 48.6% year over year to a quarterly record.
+What is Applied Aerospace & Defense's updated 2026 revenue guidance?
Applied Aerospace & Defense lowered 2026 revenue guidance to $660 million-$670 million from $670 million-$690 million. The midpoint of $665 million is below the $682.4 million analyst consensus.
+How strong was AADX's backlog and bookings after the quarter?
Third-quarter bookings were about $254 million, or 1.4 times quarterly revenue. Contracted backlog reached nearly $1.3 billion, and about $600 million of remaining performance obligations is expected to convert to revenue in 2027.
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