AeroVironment (NASDAQ:AVAV) Surprises With Strong Q1 But Stock Drops

Aerospace and defense company AeroVironment (NASDAQ:AVAV) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 39.6% year on year to $275.1 million. The company’s full-year revenue guidance of $1.95 billion at the midpoint came in 76% above analysts’ estimates. Its GAAP profit of $0.59 per share was 51.5% below analysts’ consensus estimates.

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Company Overview

Focused on the future of autonomous military combat, AeroVironment (NASDAQ:AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, AeroVironment’s 17.4% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. AeroVironment’s annualized revenue growth of 23.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Products and Services, which are 88.1% and 11.9% of revenue. Over the last two years, AeroVironment’s Products revenue (aircrafts, missile systems, satellites) averaged 18.4% year-on-year growth. On the other hand, its Services revenue (maintenance, training, consulting) averaged 3.8% declines.

This quarter, AeroVironment reported wonderful year-on-year revenue growth of 39.6%, and its $275.1 million of revenue exceeded Wall Street’s estimates by 12.9%.

Looking ahead, sell-side analysts expect revenue to grow 141% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will fuel better top-line performance.

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Operating Margin

Although AeroVironment was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 1.1% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, AeroVironment’s operating margin decreased by 6 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. AeroVironment’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q1, AeroVironment generated an operating margin profit margin of 5%, up 2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for AeroVironment, its EPS declined by 2% annually over the last five years while its revenue grew by 17.4%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of AeroVironment’s earnings can give us a better understanding of its performance. As we mentioned earlier, AeroVironment’s operating margin expanded this quarter but declined by 6 percentage points over the last five years. Its share count also grew by 17.1%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For AeroVironment, its two-year annual EPS growth of 49.1% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q1, AeroVironment reported EPS at $0.59, up from $0.22 in the same quarter last year. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Key Takeaways from AeroVironment’s Q1 Results

We were impressed by how significantly AeroVironment blew past analysts’ revenue and EBITDA expectations this quarter. We were also excited its EBITDA guidance outperformed. On the other hand, its EPS missed. Still, we think this quarter featured some important positives. Investors were likely hoping for more, and shares traded down 5.5% to $183 immediately after reporting.

Is AeroVironment an attractive investment opportunity right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.