Yesterday we were watching whether AeroVironment could sustain its explosive revenue trajectory while returning to profitability. The defense drone maker delivered a sharp earnings miss after the bell on December 3, and this morning the stock is trading around down significantly.
The Miss That Rattled Investors
AeroVironment reported Q2 fiscal 2026 earnings per share of $0.44, missing the $0.80 estimate by 45%. This marks the third miss in four quarters and the worst surprise percentage since January 2025. Revenue performance wasn’t the issue. The company more than doubled year-over-year sales to $454.7 million, representing 140% growth. The problem was profitability.
Gross margins collapsed to 20.9% from 43% in the prior-year quarter, as cost of goods sold surged to 79% of revenue. The company swung from a $21.2 million profit in Q2 fiscal 2025 to a $67.4 million loss this quarter. An extraordinary $90.3 million depreciation and amortization charge, up from typical quarterly levels of $8 million to $14 million, drove much of the damage. This spike suggests significant acquisition integration costs or asset adjustments.
Interest expense also jumped to $17.4 million from just $1 million the prior quarter, pointing to new debt or acquisition financing. Operating losses reached $69.3 million despite the revenue surge.
Market Reaction: Volatility Then Stabilization
The initial after-hours reaction was severe. Shares dropped from around $284 to $251 within minutes of the release, erasing roughly $1.6 billion in market value.
What We’re Watching Next
The 8-K filing released December 9 should contain critical guidance updates and management commentary on margin recovery. Investors need clarity on whether the margin compression reflects temporary integration costs or a structural shift toward lower-margin government contracts. We’ll update if analyst revisions or management statements provide material new context as the session progresses.
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