Valued at a market cap of $5.5 billion, AeroVironment (AVAV) designs and produces robotic systems, uncrewed aircraft, ground robots, and loitering munitions primarily for the U.S. Department of Defense and international governments. In the last 10 years, AVAV stock has returned 650% to shareholders. Despite these outsized gains, the stock is down 17% from all-time highs. 

AeroVironment’s stock climbed 2.3% on Friday, June 6, following defense startup Anduril Industries’ massive $2.5 billion funding round that doubled its valuation to $30.5 billion. The funding demonstrates strong investor appetite for drone technology companies, benefiting publicly traded peers like AeroVironment.

Anduril, closely aligned with Palantir (PLTR) and President Donald Trump’s administration, has established itself as a significant player in national security. Its valuation surge from $14 billion in 2024 reflects growing demand for autonomous defense technologies, with their surveillance towers now covering one-half to one-third of the U.S. border.

William Blair analyst Louie DiPalma noted that Anduril’s valuation suggests very strong investor appetite for drone exposure, which benefits AeroVironment and similar companies. Recent developments in Ukraine have highlighted the transformational nature of drones in modern warfare.

AeroVironment’s CEO confirmed the company produces drones with launching mechanisms similar to those used in Ukraine’s operations.

Is the Drone Stock a Good Buy Right Now?

In fiscal Q3 of 2025 (ended in January), AeroVironment reported revenue of $167.6 million, down 10% year over year. Its revenue missed estimates due to unprecedented Los Angeles area wildfires and windstorms that disrupted manufacturing operations. Despite operational challenges, the company achieved several strategic milestones that reinforce its long-term growth trajectory.

AeroVironment’s Loitering Munitions Systems generated record revenue of $83.9 million, up 46% year-over-year. The company also secured over $350 million in Switchblade contracts during the quarter, including a historic $288 million single award under its $990 million Indefinite Delivery/Indefinite Quantity (IDIQ) contract. Global adoption continues expanding with ten countries placing firm orders and twenty more in active negotiations.

AeroVironment’s strategic transition away from Ukraine-related revenue is progressing successfully. Ukraine now accounts for 17% of expected fiscal 2025 revenue compared to 38% in the prior year, with Ukraine exposure dropping to just 6% in fiscal Q4. This pivot toward diversified, long-term growth opportunities includes significant international wins, such as the $181 million Danish military contract for JUMP 20 systems over 10 years.

AeroVironment’s backlog reached a record $764 million, providing strong visibility for fiscal 2026 growth. Management expects to exit Q4 with approximately $240 million to $250 million in quarterly revenue, positioning for nearly $1 billion in annual revenue next year. Production capacity expansion continues aggressively, with a new Utah facility expected to be online by the end of the calendar year, which will be five times larger than current operations.

Moreover, the pending BlueHalo acquisition, will add complementary capabilities in counter-drone systems, space communications, and cyber warfare, further strengthening AeroVironment’s market leadership position.

Is AVAV Stock Undervalued?

Analysts tracking AeroVironment stock expect revenue to increase from $787 million in fiscal 2025 to $1.28 billion in fiscal 2029. In this period, adjusted earnings are forecast to grow from $3.07 per share to $7.05 per share.

Today, AVAV stock trades at a forward price-to-earnings multiple of 44x, below its five-year average of 47x. If it is priced at 35x, the drone stock could trade around $245 in June 2028, 29% above the current price near $190. 

Out of the six analysts covering AVAV stock, five recommend “Strong Buy” and one recommends “Moderate Buy.” The average target price for AVAV stock is $205.17, 8.5% above the current trading price.