AeroVironment shares: Why AVAV fell 5% despite earnings beat

US defence technology company AeroVironment reported fiscal Q1 2027 revenue of $480.5 million, up 6% year-on-year. The results came as demand for drones and other defence technologies remained firm, although the stock reaction was initially negative. (Source: TradingView; AeroVironment)

AeroVironment's quarterly revenue increased from $454.7 million a year earlier to $480.5 million. GuruFocus, however, noted that the figure was below its cited analyst estimate of $526.61 million. The company also posted a gross margin of 26%, improving from 21% in the year-ago quarter.

Despite the revenue-estimate mismatch cited by different market sources, AeroVironment's adjusted earnings of 59 cents per share beat Wall Street expectations of 22 cents, according to Barron's. The company had reported adjusted earnings of 32 cents per share in the year-ago quarter, highlighting the improvement in quarterly profitability.

One of the biggest positives from the quarter was AeroVironment's funded backlog of $1.5 billion, up 37% year-on-year. The company also recorded around $700 million in bookings, with a book-to-bill ratio of 1.4, indicating that new orders exceeded revenue recognised during the quarter.

AeroVironment shares came under pressure despite the earnings beat. The stock fell 4.99% to $141.36. The muted market response reflects investor concerns around the company's valuation, execution and the broader outlook for defence stocks, even as drone demand remains a key growth driver.

AeroVironment maintained its fiscal 2027 outlook, with management targeting approximately $2.2 billion in sales and around $315 million in EBITDA. The company's record backlog provides visibility for future revenue, while continued demand for autonomous systems, counter-drone technology and other defence products remains an important growth catalyst.