Why AeroVironment Stock Crashed 27% in March

Shares of AeroVironment (NASDAQ: AVAV) had a tough month in March, falling as much as 27.4%, according to data supplied by S&P Global Market Intelligence.

The catalyst that sent the drone maker lower was the fallout from its weak earnings report and the loss of a key contract.

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Bad reception

For the company's fiscal 2026 third quarter (ended Jan. 31), AeroVironment reported revenue of $408 million, up 143% year over year. The acquisition of aerospace company BlueHalo accounted for much of that increase, as organic growth increased 38%.

The company's loss ballooned to $179 million, compared to a loss of $3 million in the prior-year quarter, resulting in adjusted earnings per share (EPS) of $0.64.

For context, analysts' consensus estimates were calling for revenue of $476 million and EPS of $0.68, so AeroVironment missed by a country mile.

The increased loss was primarily the result of a $151.3 million goodwill impairment charge (more on that in a minute) and a $43.9 million charge to intangible amortization and other non-cash related charges.

AeroVironment also reported bookings of $2.1 billion and had a book-to-bill ratio of 1.6 for the first nine months of fiscal 2026. Moreover, the company reported a record funded backlog of $1.1 billion.

While the results were solid, bad news lurked in the shadows. AeroVironment had a $1.7 billion contract with the U.S. Space Force to build the Broad Area Deployable Ground Terminal Enabling Resilient communications (BADGER) phased-array antenna system to support the Satellite Communication Augmentation Resource (SCAR). Management was working to renegotiate the terms of the deal to allow the company to develop a commercial market for the antenna.

After failing to reach an agreement, Space Force terminated the deal. AeroVironment is working to recompete and plans to submit a proposed solution under the new, revised requirements. Management believes the company has developed "an innovative and compelling solution that is unmatched in the industry," which will lead to a "more flexible and profitable business," but only if it can be sold commercially as well. This was the catalyst for the $151 million writedown.

This led management to lower its full-year guidance. AeroVironment now expects revenue in a range of $1.85 billion to $1.95 billion, down from a range of $1.95 billion to $2 billion, primarily driven by the loss of the Space Force contract.

Wall Street responded in predictable fashion, with at least nine analysts lowering their price targets on AeroVironment stock.

Management continues to focus on the long term, and its willingness to experience some short-term pain for long-term gain is commendable. CEO Wahid Nawabi pointed to the transition of several programs to commercial product offerings, including the BADGER antenna array and the Laser Oriented Counter UAS System (LOCUST) mobile high-energy laser. By focusing on military solutions with commercial applications, the company is building a robust and resilient business.

AeroVironment has never been cheap, but with the stock trading 55% off its peak, it's worth a look.

Danny Vena, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AeroVironment. The Motley Fool has a disclosure policy.