The U.S. Army just handed AeroVironment its largest single contract in company history, and the stock is still trading near multi-year lows. Earnings arrive tonight, September 9, after market close. That combination of a landmark contract and a beaten-down stock makes this one of the more interesting defense situations heading into a reporting date in 2026.

The Business

AeroVironment makes autonomous systems for the military, including small drones, loitering munitions, counter-drone technology, and, now, directed-energy weapons. The company has been a major U.S. supplier of small tactical drones for years, with systems deployed across multiple theaters and in Indo-Pacific exercises. Fiscal 2026 revenue reached $1.9768 billion, up 141% from the prior year, reflecting the acquisition of BlueHalo, which expanded AeroVironment’s portfolio into space, cyber, electronic warfare, and directed energy.

Why Wall Street Is Paying Attention

On September 2, the Army awarded AeroVironment a $464.8 million contract under its Enduring-High Energy Laser program to supply dozens of its LOCUST X3 laser weapon systems. The deal is the Army’s first production contract for a high-energy laser weapon system, moving the system from prototype development into production. LOCUST X3 is described by the company as a scalable 20–35+ kilowatt directed-energy laser weapon system designed to defeat Group 1 through 3 unmanned aircraft threats. AeroVironment is supporting the production ramp with a more than $30 million facility investment in Albuquerque, New Mexico, announced March 3.

Stifel analyst Jonathan Siegmann reiterated a Buy rating with a $220 price target, describing the award as directly anchoring the roughly $500 million LOCUST E-HEL opportunity management outlined at its July 8 Investor Day. Of the 22 analysts covering AVAV, the mix of ratings remains heavily skewed positive, and the average published target has clustered in the mid-$200s in recent data services. Directionally, consensus still implies substantial upside from recent trading levels.

What’s Driving the Opportunity

The structural tailwind is substantial. The administration’s fiscal 2027 budget materials call for major increases in unmanned and counter-unmanned systems investment, including a “Drone Dominance” line item of $53.6 billion that includes $14.4 billion for counter-unmanned systems development and deployment. Separately, President Trump signed a Section 232 proclamation on August 13 imposing up to a 100% additional duty on certain imported drones and critical components, with the first tranche taking effect September 3. That policy shift raises the bar for foreign suppliers in portions of the U.S. market, but it does not remove overseas competition entirely across categories and exemptions.

AeroVironment has positioned itself across offensive drone systems, counter-drone, and now directed energy. In fiscal 2026, the company reported bookings of $2.7 billion and a book-to-bill ratio of 1.4, signaling demand that is still running ahead of recognized revenue.

What Could Go Wrong

Fiscal 2026 was not clean. AeroVironment reported a $265.1 million net loss, driven by acquisition-related costs and non-cash purchase accounting and amortization tied to the BlueHalo deal. Fiscal 2027 guidance of $2.125 to $2.225 billion in revenue and only $8 to $24 million in net income points to thin profitability near term. And while the E-HEL contract is significant, management’s own FY2027 outlook implies a revenue ramp that is weighted to the second half of the year, which means tonight’s Q1 results are unlikely to show much financial impact from this award yet.

The Bottom Line

AeroVironment owns the Army’s first production contract for a high-energy laser weapon system, leads in tactical drone supply to an increasingly drone-dependent military, and is adding capacity in a market where parts of the import stack just got materially more expensive. The stock is down roughly 37% over the past 12 months, and Wall Street’s published targets still suggest meaningful upside from here. Tonight’s earnings call, and specifically management’s commentary on fiscal 2027 revenue phasing and directed-energy margins, is the catalyst worth watching.