AeroVironment Just Delivered Historic Results. Wall Street Says It's a Buy

This year has been quite the rollercoaster ride for AeroVironment (NASDAQ:AVAV) investors. After spiking more than 60% to kick off 2026, the stock lost more than 64% of its value due to restated financials and the loss of a key contract.

Despite the obvious challenges, expectations were high heading into the defense company's quarterly financial report, and shareholders got what they were looking for. The results were a reminder that -- like the company's drones -- AeroVironment has further to fly.

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For the defense

AeroVironment delivered the results of its fiscal 2027 first quarter (ended Aug. 1), and that was a lot to like. The company generated record revenue, up 6% to $480.5 million, driven by strong sales in the autonomous systems segment. This drove adjusted diluted earnings per share (EPS) up 84% to $0.59.

For context, analysts' consensus estimates called for revenue of $456.1 million and adjusted EPS of $0.25, so AeroVironment sailed past expectations.

The automated systems (AxS) segment -- which includes drones -- grew 21% year over year to $346 million, while the space, cyber, and directed energy (SCDE) segment declined 21% to $134 million.

Other metrics confirmed the strength of its overall results. The company delivered bookings of $683 million, which jumped 71% year over year, resulting in a book-to-bill ratio of 1.4. AeroVironment also reported a record funded backlog of $1.5 billion, up 37% year over year and 23% sequentially. Its unfunded backlog -- which involves expected, but not obligated, future funding -- totaled $1.4 billion.

On Tuesday, the company secured its first international order for the LOCUST directed energy counter-drone system, valued at $50 million. This order came in the wake of AeroVironment's U.S. Army contract for $464.8 million for its Enduring-High Energy Laser (E-HEL) -- which marked the first-ever production contract for a high-energy laser weapons system in U.S. history. These were just two of several major contract wins during the quarter.

What the future holds

Management is optimistic about the future. AeroVironment maintained its full-year outlook, which calls for revenue in a range of $2.125 billion and $2.225 billion, representing 10% growth at the midpoint of its guidance. The company is also calling for adjusted diluted EPS of $3.16, or a decline of 4% at the midpoint. Management cited a planned facility and capacity expansion, which will increase its depreciation expense, as the reason for the lower profits.

AeroVironment's challenges from earlier this year have weighed on its stock price, while also making its valuation much more reasonable. The stock is selling for 44 times forward earnings and 32 times next year's expected earnings -- less than one-third their levels from earlier this year.

Wall Street is firmly onboard. Of the analysts who offered an opinion in September, 85% rate the stock a buy or strong buy, and none recommended selling -- and that was even before today's better-than-expected results.

To be clear, AeroVironment is a higher-risk, higher-reward stock, complete with lumpy sales, even lumpier profits, and extreme volatility. That said, the company's expanding product line and recent government contract wins highlight the potential for the drone-maker to take flight.

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.