AeroVironment, Inc. (AVAV) Business Profile

What it does

AeroVironment is a defense technology company that develops and sells systems for use in the air, on land and at sea, in space and across computer networks. Its customers include the U.S. military, allied governments, intelligence and public safety agencies, and commercial organizations. The company was founded in 1971. Its headquarters is Simi Valley, while its principal executive offices are in Arlington, Virginia. Wahid Nawabi is its president and chief executive officer.

The company’s uncrewed aircraft range from portable observation drones to larger aircraft that carry heavier equipment and stay airborne longer. Its Switchblade products are loitering munitions: weapons that can remain in flight before attacking a target. AeroVironment also makes systems designed to detect and defeat hostile drones, including radio-frequency equipment, interceptors and laser weapons.

Beyond aircraft and weapons, AeroVironment supplies satellite communications and other space hardware, electronic warfare systems, cybersecurity capabilities and engineering services. Its command-and-control software helps operators coordinate missions across different domains. It also makes remotely operated underwater vehicles and ground robots used for tasks such as detecting mines and handling hazardous materials.

The business operates in two segments: Autonomous Systems, which includes drones and precision strike products, and Space, Cyber and Directed Energy. AeroVironment also supports its equipment after delivery with training, spare parts, repairs and replacements.

How it makes money

AeroVironment earns revenue by designing, producing, selling, supporting and operating defense systems. It also performs customer-funded research and development, engineering, training, repairs and cyber services. Most revenue comes from fixed-price and cost-plus-fee contracts, largely with the U.S. government and allied foreign governments.

In FY2026, Autonomous Systems revenue was $1.4 billion; total company revenue in Q1 FY2027 was $480 million.

Autonomous Systems includes uncrewed aircraft, Switchblade loitering munitions, counter-drone products and electronic warfare systems. Space, Cyber and Directed Energy includes satellite-related hardware, laser weapons, cyber capabilities and mission services. In FY2026, precision strike and defense systems generated $848.3 million in revenue, while contract services also generated revenue.

Contract terms affect how AeroVironment is paid and how much cost risk it carries. Under fixed-price contracts, the company generally bears the risk that its costs will exceed the agreed price. Cost-plus contracts reimburse allowable costs and include a fee, although costs can be unrecoverable if they are not allowable or exceed available funding. Time-and-materials work is paid using fixed hourly rates for specified labor categories.

Support, training and customer-funded development can generate business beyond an initial equipment sale. International customers with established aircraft fleets may use multi-year support agreements to buy products and services as funding becomes available. These agreements do not make all future purchases automatic: government procurement and funding decisions still determine orders. Revenue for contract services is generally recognized as work is performed; the timing of product revenue depends on the performance obligations and contract terms.

Customers and how it sells

AeroVironment sells most of its products and services to the U.S. Department of Defense. Its customers include the Army, Marine Corps, Special Operations Command, Air Force, Navy, Space Force and Cyber Command. It also serves intelligence agencies, other federal and public safety agencies, allied governments and commercial customers.

The U.S. Army accounted for approximately 25.0% of FY2026 revenue. Army orders include purchases for the Army itself and for other organizations within the Department of Defense. Non-U.S. customers accounted for 28.0% of FY2026 revenue; that category includes foreign military sales made through the U.S. Department of Defense as well as commercial and consumer customers. No individual foreign country accounted for greater than 10% of total sales revenue during FY2026.

International sales can take two routes. In a foreign military sale, the U.S. government is the purchaser and intermediary for equipment, services or training supplied to a foreign customer. In a direct commercial sale, AeroVironment contracts with the foreign customer itself and is responsible for delivery and compliance with applicable U.S. export rules.

The company’s international customers include operators with established fleets of its uncrewed aircraft. Multi-year support agreements allow those customers to purchase equipment and services as funding becomes available. AeroVironment also serves commercial customers involved in infrastructure protection, open-source intelligence and research.

Suppliers and costs

AeroVironment manufactures through an international footprint and concentrates its operations on prototyping, assembly, integration, quality control and testing. Its production process also involves suppliers of materials, components and subsystems. The company uses long-term, non-binding agreements with some suppliers to help manage pricing, lead times and planning.

AeroVironment says over 98% of its supply chain and supply base is domestic. It is increasing inventory to secure critical components with long lead times against funded backlog. The company also says the supply chain for its LOCUST laser system is young and that it is scaling its suppliers.

Cost of sales includes direct labor, materials, travel, subcontractors and other contract-specific costs. It also includes allocated expenses such as overhead, employee benefits, depreciation, inventory reserves and amortization of acquired intangible assets. Selling and administrative costs include staff, marketing, proposals and business development. AeroVironment also funds research and development itself, alongside work funded by customers.

Fixed-price contracts can require working capital before delivery because the company typically pays for labor and other expenses before it is paid for products. Cost-plus and time-and-materials contracts are generally billed monthly as work progresses. Supply constraints can delay production or development programs.

Competitive position

AeroVironment competes for defense contracts on product performance, safety, cost, ease of use, integration, reliability and customer support. Customers also consider lifetime operating costs, including maintenance and support. Most of the company’s current U.S. government contracts were awarded through competitive bidding, and international competitions can favor local suppliers.

In uncrewed aircraft, its named competitors include Elbit Systems, Lockheed Martin, Boeing, Textron and Anduril. In loitering munitions, it competes with companies including Textron, RTX, Lockheed Martin and Anduril. Counter-drone and electronic warfare competitors include DroneShield, Boeing, RTX and L3Harris. Space and directed energy competitors include Boeing, Lockheed Martin, L3Harris and nLIGHT; cyber and mission services competitors include Leidos and Booz Allen Hamilton.

AeroVironment held 407 U.S. patents as of April 30, 2026, and also protects some intellectual property as trade secrets. The U.S. government licenses some intellectual property developed under government contracts and may allow others to use it. The company also supplies support and training, and some international customers have established fleets of its aircraft.

Our reading: The combination of installed aircraft, training and support can help sustain customer relationships, but competitive procurement limits how secure future orders are. Our reading: Patents and technical know-how provide some protection, although government rights over certain contract-developed technology limit exclusivity.

Growth opportunities

AeroVironment’s strategy is to sell more existing products to U.S. and allied customers, develop new applications, invest in research and development, and use partnerships or acquisitions to add capabilities. Its acquisition of BlueHalo expanded its technology portfolio and established the Space, Cyber and Directed Energy segment.

The company is expanding production capacity at several sites. It plans to increase loitering-munition manufacturing capability in Salt Lake City, expand its Albuquerque facility for LOCUST production and increase Huntsville capacity for the Freedom Eagle interceptor. It has also announced a $100 million long-term investment in Southern California facilities to consolidate operations and add production capacity.

Recent awards include a $117 million P550 award for the U.S. Army’s Long-Range Reconnaissance program and a nearly $465 million Army contract for LOCUST under the Enduring High-Energy Laser program. AeroVironment also received its first international LOCUST order as a direct commercial sale. It expects the Army’s Long-Range Reconnaissance program to be a $1 billion program over the next few years; that is the company’s estimate of the program, not guaranteed revenue to AeroVironment.

Funded backlog was $1.5 billion at the end of Q1 FY2027. AeroVironment expects FY2027 revenue to be between $2.125 billion and $2.225 billion. It also expects revenue to be stronger in the second half of the fiscal year. Funded backlog represents remaining obligations under firm orders with funding appropriated to the company, but delivery schedules and orders can change.

Structural risks

• Government funding and concentration: AeroVironment depends heavily on government customers. Changes in programs, spending priorities or appropriations can affect orders, while the timing of budget approval remains uncertain.
• Contract cancellation and backlog: The U.S. government can terminate contracts for convenience. Unfunded backlog does not oblige customers to purchase goods or services, and funded backlog can change with delivery schedules or cancellations.
• Execution and cost: Fixed-price contracts expose the company to costs exceeding the agreed price. Component shortages or supplier constraints can delay manufacturing and development, while scaling newer supply chains takes time.
• Competition and technology: Defense markets are competitive and customer requirements change. AeroVironment must win contracts and develop products that meet those requirements; it cannot predict when, or whether, all projects in its development pipeline will be commercialized.
• Regulation and exports: Government contractors face audits and extensive rules. Export restrictions or failure to obtain authorizations can prevent international shipments; violations can result in penalties, including suspension or debarment from government contracting.
• Program losses and financing: A customer terminated the SCAR agreement for convenience in March 2026, and AeroVironment recorded a goodwill impairment of approximately $241 million in its Space reporting unit. The company also identifies access to capital, including capital to refinance indebtedness, as a risk.

Bottom line

Our reading

Our reading: AeroVironment combines equipment sales with support and engineering services across several defense markets, with government procurement central to the business. Its installed systems and funded orders support ongoing activity, but future sales still depend on contract awards, appropriations and delivery. The expansion of laser weapons and other production capacity creates opportunities alongside execution and supplier risks.