AeroVironment, Inc.

AV reported first-quarter revenue of $480 million, record funded backlog of $1.5 billion, bookings of $683 million, adjusted EBITDA of nearly $46 million, and adjusted EPS of $0.59 versus $0.32 in the prior-year quarter. Funded backlog was 23% higher than the prior quarter and 37% higher than the same period last year; total funded and unfunded backlog was just over $2.8 billion. Gross margin was 30% adjusted, versus 29% a year ago. Segment revenue included $346 million from Autonomous Systems and $134.5 million from Space, Cyber and Directed Energy. For fiscal 2027, the company reiterated revenue guidance of $2.125 billion to $2.225 billion, adjusted EBITDA guidance of $305 million to $325 million, and non-GAAP EPS guidance of $3.02 to $3.34. Management also said it still expects fiscal 2027 free cash flow to be negative because of higher capital expenditures, with CapEx expected at 12% to 14% of revenue and R&D at 7% to 9% of revenue.

Wahid Nawabi framed the quarter as evidence that AV is hitting an inflection point across multiple franchise programs, especially counter-UAS, loitering munitions and uncrewed systems. He emphasized landmark awards like E-HEL, Titan, LOCUST, Switchblade 400/600 and P550, and said the company is scaling capacity aggressively to support multiyear growth. His tone was highly upbeat, but he also noted uncertainty around the timing of final U.S. budget approval and said the company is watching that closely.

Sean Woodward said the quarter exceeded targets on revenue, adjusted EBITDA and non-GAAP EPS, while also generating $13 million of positive operating cash flow. He pointed to adjusted gross margin of 30% versus 29% last year, adjusted product gross margin of 40% versus 36%, and adjusted service gross margin of 8% versus 13%, with service margin pressured by lower volume and about $5 million of revenue impact from discontinued programs and award delays. He also noted adjusted SG&A was $85 million, or 18% of revenue, and said fiscal 2027 free cash flow is still expected to be negative due to elevated capital spending. Cash investments ended at $675 million, debt was $747.5 million of zero-coupon convertible notes, and net leverage was 1.6x adjusted EBITDA.

Analysts focused on LOCUST profitability, production capacity, international demand, the remaining value in Switchblade-related IDIQs, cyber mission weakness, and whether the company should have raised guidance. Management said LOCUST margins should improve significantly in the second half and beyond as volumes rise and firm-fixed-price contracts take over, and that the business could eventually resemble the margin profile of the core segment over the next couple of years. On backlog/contract runway, Sean said there is still a couple hundred million left on the current $990 million IDIQ ceiling, while Wahid said the company has approvals for close to 20 countries for FMS/DCS sales and sees a large international opportunity for laser weapons and Switchblade. On guidance, Wahid said the main uncertainty is the timing of the fiscal 2027 budget process, but he does not expect it to change the current outlook.