Here's How R&D Spending Powers ATRO's Long-Term Profitability

Astronics Corporation ATRO places strong emphasis on research and development (R&D) as a fundamental pillar of its long-term growth and competitiveness. Being a leading provider of advanced technologies to the global aerospace, defense and electronics industries, continuous R&D makes its existence relevant. Its ability to win and retain long-term contracts is dependent on technological differentiation — a factor rooted in continuous R&D. 

Astronics is experiencing favorable demand conditions in both defense and commercial aerospace. Rising global defense budgets are driving sustained demand for military aircraft programs, while the continued expansion in air travel is prompting airlines to invest in cabin upgrades, including in-seat power and in-flight connectivity solutions. Continuous R&D positions Astronics to capitalize on this growth opportunity and broaden its addressable market. 

Innovation also contributes to stronger financial performance. Its backlog growth and stabilizing margins in the Aerospace segment bear testimony to the same. A robust backlog — supported by differentiated offerings owing to continuous R&D — underpins revenue visibility, operational leverage and improved profitability.  

Its R&D expenses were $52.1 million in 2024 and $32.8 million in the first nine months of 2025.

R&D is not discretionary for Astronics —it is a strategic necessity. It is the engine that enables cost efficiency, pricing power, product differentiation, margin expansion, and helps it capitalize on growth opportunities, positioning it for sustained long-term value creation.

What About Peers?

Like ATRO, R&D expense is critical to the long-term competitiveness and profitability of Kratos Defense & Security Solutions KTOS and Rocket Lab USA, Inc RKLB.

Kratos Defense directs substantial investment toward advanced unmanned systems, hypersonic platforms, satellite communications and defense electronics, strengthening differentiation, expanding backlog and supporting sustainable organic growth. 

Rocket Lab focuses R&D on next-generation launch vehicles such as Neutron, satellite solutions and vertically integrated space technologies, positioning the company for higher-margin opportunities and scale benefits. 

By prioritizing innovation, Kratos Defense and Rocket Lab enhance pricing power, widen margins, and build durable competitive advantages.

ATRO’s Price Performance

Shares of Astronics have gained 126.4%  in the past six months, outperforming the industry.

ATRO’s Discounted Valuation

The stock is undervalued compared with its industry. It is currently trading at a price-to-sales multiple of 2.83, lower than the industry average of 12.48.

Estimate Movement for ATRO

The Zacks Consensus Estimate for 2026 revenues indicates a 12.5% year-over-year increase, and the same for earnings implies a 36.4% year-over-year increase. 

The Zacks Consensus Estimate for the first quarter of 2026 has moved 3 cents north in the last 30 days. The consensus estimate for 2026 earnings has moved 3.7% north in the past 30 days.
 

ATRO stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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