Aerospace and defense company AeroVironment (NASDAQ: AVAV) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 151% year on year to $472.5 million. On the other hand, the company’s full-year revenue guidance of $1.98 billion at the midpoint came in 1.1% below analysts’ estimates. Its non-GAAP profit of $0.44 per share was 44.2% 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 29.4% 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 44.8% 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 68.8% and 31.2% of revenue. Over the last two years, AeroVironment’s Products revenue (aircrafts, missile systems, satellites) averaged 62.1% year-on-year growth while its Services revenue (maintenance, training, consulting) averaged 165% growth.

This quarter, AeroVironment reported magnificent year-on-year revenue growth of 151%, and its $472.5 million of revenue beat Wall Street’s estimates by 0.5%.

Looking ahead, sell-side analysts expect revenue to grow 57% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will spur better top-line performance.

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Operating Margin

AeroVironment’s high expenses have contributed to an average operating margin of negative 4.3% 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 8.4 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.

This quarter, AeroVironment generated a negative 6.4% operating margin.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

AeroVironment’s EPS grew at a solid 10% compounded annual growth rate over the last five years. However, this performance was lower than its 29.4% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into AeroVironment’s earnings to better understand the drivers of its performance. As we mentioned earlier, AeroVironment’s operating margin declined by 8.4 percentage points over the last five years. Its share count also grew by 105%, 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 declines of 9.9% mark a reversal from its (seemingly) healthy five-year trend. We hope AeroVironment can return to earnings growth in the future.

In Q3, AeroVironment reported adjusted EPS of $0.44, down from $0.47 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects AeroVironment’s full-year EPS of $2.67 to grow 70.1%.

Key Takeaways from AeroVironment’s Q3 Results

It was good to see AeroVironment narrowly top analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Looking ahead, full-year EPS guidance was also lowered, adding to the negatives. Overall, this quarter could have been better. The stock traded down 6.1% to $264.83 immediately after reporting.

The latest quarter from AeroVironment’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. 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 for active Edge members.