AeroVironment Posts Record Backlog Despite Cramer Warning
AeroVironment delivered its largest earnings surprise in years, driven by a record backlog and a landmark laser contract, contradicting recent market skepticism about its competitive position.
AeroVironment reported fiscal first-quarter 2027 results that significantly exceeded market expectations, posting adjusted earnings per share of $0.59 against a consensus estimate of $0.25. This 138% surprise followed a public warning from financial commentator Jim Cramer just one week prior, who advised investors to avoid the stock due to perceived competitive pressures in the defense sector.
Revenue reached $480.49 million, surpassing the estimated $456.09 million and representing a 5.7% year-over-year increase. The company secured a funded backlog of $1.50 billion, a 37% rise from the previous year, indicating strong future demand. According to reporting by GN markets/earnings (en-US), these figures mark a distinct shift from the earlier narrative of intensifying rivalry that had suppressed the stock’s performance year-to-date.
Directed Energy Contract Dominates Results
The standout driver was a $464 million award for the Army’s Enduring High Energy Laser program, known as LOCUST. CEO Wahid Nawabi described this as the first production contract for direct energy systems in U.S. military history. The contract is central to the company's strategy, with internal projections suggesting the product line could generate over $500 million annually within a year.
Nawabi noted that the LOCUST system fires at a cost of under $10 per shot, offering a significant operational advantage. This win complements the company’s position in reconnaissance, where management reported capturing well over 80% of the dollars for the P550 program. The $117 million P550 award is expected to expand into a $1 billion program over the coming years, further solidifying AeroVironment’s share in these specific defense niches.
Guidance Remains Cautious Amid Cash Flow Strain
Despite the top-line beat, certain financial metrics indicate ongoing operational challenges. GAAP net income remained a loss of $5.07 million, and the Space, Cyber and Directed Energy segment saw revenue fall 21% year-over-year to $134.52 million. Free cash flow was negative $36 million, highlighting the capital-intensive nature of the recent contract wins.
Management reaffirmed full-year guidance rather than raising it, projecting revenue between $2.125 billion and $2.225 billion. Non-GAAP EPS is expected to land between $3.02 and $3.34, with approximately 70% of this earnings potential weighted toward the second half of the fiscal year. Nawabi cited uncertainty regarding the speed of congressional budget approvals as a key variable affecting execution.
