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AeroVironment (AVAV +18%) is soaring higher today after this supplier of drones and and tactical missile systems delivered a blowout fiscal Q4 (Apr), snapping a string of three consecutive EPS misses with a decisive beat as revenue more than doubled yr/yr and comfortably exceeded expectations. While FY27 EPS guidance came in below consensus, investors are looking through the shortfall because it reflects higher non-cash depreciation and amortization tied to aggressive capacity investments rather than deteriorating operating fundamentals.

• Growth mix: Autonomous Systems drove the quarter, with segment revenue of $492 mln, or 76% of company revenue, up 49% on a pro forma basis; within that, Precision Strike and Defensive Systems revenue surged 80%.
• Demand: Demand remained broad-based across flagship products, including Switchblade loitering munitions, Titan counter-UAS systems, Red Dragon attack drones, and JUMP 20 tactical systems, underscoring the depth of AVAV's product portfolio.
• Visibility: Trailing 12-month book-to-bill was 1.4x, unfunded backlog was $1.5 bln excluding SCAR, and management pointed to strong demand in Switchblade, Red Dragon, Titan, LOCUST, and other counter-UAS and space-related programs.
• Investment cycle: FY27 capex is set to rise sharply to 12%-14% of revenue and R&D to 7%-9% as AeroVironment expands production capacity, including a Salt Lake City facility and other site buildouts; management said FY27 free cash flow is not expected to be positive.
• Cadence risk: Management expects FY27 revenue to be 45%/55% split between the first and second half, with EBITDA and EPS even more back-half loaded.

Briefing.com Analyst Insight

AVAV continues to benefit from a structural shift in global defense spending as governments accelerate investments in unmanned and precision-strike capabilities. AVAV's quarter reinforces that demand remains exceptionally strong, with management highlighting multiple franchise programs capable of generating more than $0.5 bln of revenue over time and a healthy pipeline of expected contract awards over the next 12-24 months. The softer FY27 EPS outlook initially appears disappointing, but the underlying explanation matters. Higher depreciation and amortization are non-cash expenses stemming from substantial investments in manufacturing capacity and commercialization, suggesting management is positioning the company to meet expected demand rather than responding to operational weakness. The more important variables remain the timing of government appropriations and contract awards, which could create quarterly volatility but do little to alter the long-term demand outlook. After a strong run over the past year, AVAV entered earnings with elevated expectations, making this decisive beat particularly meaningful.