Why this defense industry stock has spiked 22%

Its outlook calls for massive revenue growth.

With geopolitical tensions rising, defense industry stocks in general have garnered more interest from investors. Defense and aerospace industry stocks have climbed about 6% over the past month and are up roughly 23% year-to-date.

But there is one specific defense industry stock that soared on Wednesday, drone manufacturer AeroVironment (NASDAQ:AVAV).

AeroVironment stock rose some 23% on Wednesday, fueled by a strong fiscal fourth quarter earnings report that blew away estimates. But what perhaps drove the stock even higher was the company’s outlook, which projects revenue to more than double this fiscal year.

Record revenue and bookings

AeroVironment primarily makes unmanned aerial systems, or drones, along with unmanned ground vehicles and missile systems for the U.S. military and other government agencies.

In the fiscal fourth quarter, it generated record revenue of $275 million, a 40% increase over the same quarter a year ago. That crushed estimates of $242 million.

It produced adjusted EBITDA of $62 million, which was up 148% year-over-year. Adjusted earnings rose a whopping 274% to $1.61 per share and that blew away estimates of $1.40 per share.

For the full fiscal year that just ended, AeroVironment made revenue of $821 million, a 14% increase from the previous year. Adjusted EBITDA was $146 million for the full year, up 15%, while adjusted earnings rose 10% to $3.28 per share.

Further, the company posted a record $1.2 billion in bookings last year and had a funded backlog that skyrocketed 82% to $727 million.

“AeroVironment finished out fiscal year 2025 with a remarkable fourth quarter, which included record revenue, significantly higher profits and a robust backlog nearly double that from fiscal year 2024,” Wahid Nawabi, AeroVironment chairman, president and CEO, said. “The investments we’ve consistently made in our multi-generational Uncrewed Systems and Loitering Munition Systems products coupled with our strong execution, continue to pay off, as evidenced by significantly higher demand and key strategic wins leading to a record $1.2 billion in total bookings throughout this fiscal year.”

Ridiculous growth ahead

AeroVironment also closed on its $4.1 billion acquisition of BlueHalo in the quarter. BlueHalo also makes drones, as well as anti-drone technology, and its capabilities are complementary to AeroVironment’s. It is expected to add to the already robust growth that the firm expects in fiscal 2026.

In this fiscal year, AeroVironment anticipates revenue of between $1.9 billion and $2.0 billion, which would be more than twice the $821 million made last year.

Further, adjusted EBITDA is targeted to fall between $300 million and $320 million, more than twice the $146 million haul in fiscal 2025. Earnings are anticipated to be in the range of $2.80 to $3.00 per share, excluding amortization of intangible assets, other non-cash purchase accounting expenses and equity securities investments gains or losses.

“With integrated solutions across every domain of modern warfare, enhanced innovation and domestic manufacturing scale, we believe we are well positioned to meet the rising demand across the globe and drive strong growth and value creation in fiscal year 2026 and beyond,” Nawabi said.

Analysts at Raymond James raised its price target by $25 to $225 per share, which the company basically exceeded with today’s surge to $236 per share. Look for more price target upgrades in the coming days and weeks.

But in general, according to Investing.com, Raymond James projects 15% annual earnings growth for AeroVironment over the next three years. Analysts added that the company is well-positioned to counter current global threats as well as potentially benefit from “Golden Dome demand.”

AeroVironment stock is up about 54% YTD and its valuation has soared to 124 times earnings. There is a lot of growth ahead, but particularly after today’s surge, it is not cheap.