Aerospace and defense company AeroVironment (NASDAQ: AVAV) fell short of the market’s revenue expectations in Q4 CY2025, but sales rose 143% year on year to $408 million. The company’s full-year revenue guidance of $1.9 billion at the midpoint came in 3.2% below analysts’ estimates. Its non-GAAP profit of $0.64 per share was 7.4% 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 put up a good quarter or two, but many enduring ones grow for years. Luckily, AeroVironment’s sales grew at an incredible 32.5% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. AeroVironment’s annualized revenue growth of 51% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Products and Services, which are 68.1% and 31.9% of revenue. Over the last two years, AeroVironment’s Products revenue (aircrafts, missile systems, satellites) averaged 69.4% year-on-year growth while its Services revenue (maintenance, training, consulting) averaged 205% growth.

This quarter, AeroVironment achieved a magnificent 143% year-on-year revenue growth rate, but its $408 million of revenue fell short of Wall Street’s lofty estimates.

Looking ahead, sell-side analysts expect revenue to grow 35.6% over the next 12 months, a deceleration versus the last two years. Still, this projection is noteworthy and implies the market is forecasting success for its products and services.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

AeroVironment’s high expenses have contributed to an average operating margin of negative 8.4% 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 15.3 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 Q4, AeroVironment generated a negative 43.9% operating margin.

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.

AeroVironment’s EPS grew at a solid 10.7% compounded annual growth rate over the last five years. However, this performance was lower than its 32.5% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Diving into AeroVironment’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, AeroVironment’s operating margin declined by 15.3 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 more recent period because it can provide insight into an emerging theme or development for the business.

For AeroVironment, its two-year annual EPS declines of 8.4% mark a reversal from its (seemingly) healthy five-year trend. We hope AeroVironment can return to earnings growth in the future.

In Q4, AeroVironment reported adjusted EPS of $0.64, up from $0.30 in the same quarter last year. Despite growing year on 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 $3.01 to grow 54.6%.

Key Takeaways from AeroVironment’s Q4 Results

We struggled to find many positives in these results. Its full-year revenue guidance missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 8.3% to $203.88 immediately following the results.

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).