AVAV's $2.2B Guidance: BlueHalo and Factory Expansion

AeroVironment reported record fourth-quarter revenue of $642 million and issued FY2027 guidance of $2.125 billion to $2.225 billion. The midpoint of $2.175 billion would represent roughly 25% growth from the just-completed fiscal year, based on analyst estimates for FY2026 near $1.75 billion.

The company is betting on its BlueHalo acquisition and a manufacturing capacity expansion to reach that target. BlueHalo adds counter-drone and electronic warfare products, segments that are growing faster than AeroVironment's core drone business. Management said the deal is on track to close this quarter. The expanded production lines in California and Virginia are expected to come online by late 2026, according to the earnings presentation. Those lines will increase output of the Switchblade loitering munition and Raven small drone, as well as BlueHalo's counter-drone systems.

The BlueHalo acquisition, expected to close this quarter, adds a new product category that complements AeroVironment's existing drone lineup. Counter-drone systems are a fast-growing segment. Militaries are seeking defenses against small unmanned aircraft. Electronic warfare products, which disrupt enemy communications and sensors, are also in high demand. The deal gives AeroVironment exposure to these markets without building the technology from scratch.

Backlog ended the year at a record level, the company said, without giving a specific figure. The order book gives visibility into the first half of FY2027. The $100 million spread between the low and high ends of the guidance range reflects uncertainty around BlueHalo's revenue contribution and the timing of government contracts. Management said the range accounts for potential delays in contract awards.

Margins are the open question. AeroVironment's gross margin has run around 35% in recent quarters. The mix shift toward higher-margin BlueHalo products could lift that number. Integration costs will pressure operating margins in the near term. Management said EBIT margins will improve year over year. They did not provide a specific target. The company expects gross margins to expand as BlueHalo products become a larger share of revenue, according to the earnings presentation.

The stock trades at 28 times forward earnings, compared with a median of 22 for the defense sector. At that multiple, the market is pricing in revenue near the top of the guidance range. If growth slows to 15% instead of 25%, the stock's current multiple would be harder to justify.

The risks include regulatory approvals and smooth integration of the BlueHalo deal. Government contract timing can shift quarter to quarter, especially with federal spending uncertainty in an election year. AeroVironment's guidance assumes no major disruption to current programs, including its Switchblade and Raven systems. Integration of BlueHalo's workforce and technology also carries execution risk.

The Pentagon's drone and electronic warfare budgets are growing, which supports demand for AeroVironment's products. The Switchblade has seen strong demand from Ukraine and the U.S. military. The Raven is a staple for infantry units. BlueHalo's counter-drone systems address a different threat, giving the combined company a broader portfolio. AeroVironment competes with larger primes like Lockheed Martin and Northrop Grumman. Its focus on smaller tactical systems gives it a niche.

The first-quarter FY2027 filing is due in late August. Based on past seasonal patterns, the company's guidance implies Q1 revenue near $510 million. That print will be the first check on whether the ramp is on track.