Defense contractor AeroVironment (AVAV) reported fiscal 2025 third-quarter results that fell short of analyst expectations on the top and bottom line.
As the maker of unmanned drones sees its business pivot away from the war in Ukraine, it is scrambling to replace the lost business with new growth opportunities.
AeroVironment has been expecting a “shift in demand” away from Ukraine and is seeking out new business channels. Last year, Ukraine represented 38% of the drone maker’s business, but for the current fiscal year it expects it will only represent 17% of revenue and it expects the conflict to account for as little as 6% of the total.
With the prospects for a peace being negotiated in the war-torn country, AeroVironment says Ukraine “is not material to our future growth plans.”
To replace the lost revenue from the three-year-old war, AeroVironment acquired BlueHalo in November for $4.1 billion. The company makes a variety of next-generation defense systems including space technologies unmanned, underwater vehicles, directed energy weapons, electronic warfare, and other technologies, which AVAV sees expanding its portfolio. The acquisition is set to close in the second quarter of the current calendar year.
However, investors will have to wait for fiscal year 2026 for the hoped-for growth to materialize. AeroVironment lowered its full-year revenue guidance to $787.5 million at the midpoint from $805 million, down 2% while lowering full-year adjusted earnings expectations 9% to $3.03 per share at the midpoint, short of expectations.
It wasn’t all bad for AeroVironment as it did report record orders and backlog of $764 million and it says full-year revenue will also be a record. It also encountered several short-term headwinds, including the California wildfires.
Management says 2025 was a “transition year” for the company, but it expects to remain on a long-term growth trajectory and pointed to a new sole-source contract with the Danish government for its Jump20 vertical takeoff and landing drone.
