AeroVironment (NASDAQ: AVAV) opened fiscal 2027 with a quarter that beat consensus estimates by a wide margin. The company chose not to raise its full-year guidance. That tension between a strong print and a cautious outlook is the story of this report.
Revenue for the fiscal first quarter ended August 1 came in at $480.5 million, up 6% from $454.7 million a year ago and ahead of the $452 million consensus estimate. Non-GAAP diluted EPS of $0.59 more than doubled the $0.22 analyst estimate and rose 84% from $0.32 in the prior-year period. The beat was driven entirely by the Autonomous Systems (AxS) segment, which posted revenue of $346 million, up 21% year over year. The Space, Cyber and Directed Energy (SCDE) segment was a drag, declining 21% to $134.5 million.
The GAAP picture was less flattering. Net loss narrowed sharply to $5.1 million, or $0.10 per diluted share, from $67.4 million, or $1.44 per share, a year ago. The improvement came largely from lower intangible amortization and acquisition-related expenses tied to the BlueHalo acquisition. GAAP loss from operations was $10.9 million versus $69.3 million in the prior year. The gap between GAAP and non-GAAP remains wide: $43.4 million in intangible amortization and other purchase accounting adjustments weighed on the GAAP bottom line.
Gross margin expanded to 26% from 21%, driven by lower intangible amortization and a favorable product mix within AxS. On an adjusted basis, gross margin was 30%, up from 29% a year ago, with product margins improving to 40% from 36%. Adjusted EBITDA margin was 11%, slightly below the 12% posted in the prior-year period, as higher AxS sales were partially offset by investment spending.
The most forward-looking number in the release is the funded backlog: $1.5 billion, up 37% year over year and 23% sequentially. The book-to-bill ratio of 1.4x signals that demand is outstripping the company's ability to convert orders into revenue in the current quarter. Management cited 86% revenue visibility for the full year, supported by the backlog and anticipated bookings. Major wins included a $464 million LOCUST laser system production contract, a $117 million P550 Long-Range Reconnaissance award, and a $51 million Switchblade 600 order.
Despite the strong quarter, AeroVironment reiterated its full-year fiscal 2027 guidance: revenue of $2.125 billion to $2.225 billion, non-GAAP EPS of $3.02 to $3.34, and adjusted EBITDA of $305 million to $325 million. The midpoint of the revenue range implies roughly 10% growth for the full year, which is consistent with the 6% growth in Q1 but leaves room for acceleration in the back half. The company expects 55% of revenue and two-thirds of adjusted EBITDA to come in the second half, a typical defense industry pattern that also reflects planned capacity expansion.
Management's decision to hold guidance flat despite a beat that exceeded estimates by a wide margin suggests a deliberate signal of caution. The company is investing heavily in manufacturing capacity, with capital expenditures guided to 12% to 14% of revenue, up from 11% in Q1. That spending, combined with elevated stock-based compensation of approximately $40 million for the year, is compressing near-term margins. The implied non-GAAP EPS range of $3.02 to $3.34 at the midpoint represents roughly 8% growth from fiscal 2026's $3.31, a modest step-up for a company with a record backlog and accelerating demand.
The SCDE segment remains a concern. Revenue fell 21% year over year, and segment adjusted EBITDA swung from a positive $3.8 million to a loss of $8.9 million. The segment includes directed energy, space, and cyber businesses that are still early in their commercialization cycles. The LOCUST production contract is a positive signal for directed energy, but the segment's profitability trajectory will need to improve for the company to hit its full-year targets without relying entirely on AxS.
What to watch next: the pace of funded backlog conversion into revenue and whether the SCDE segment can stabilize. The $1.5 billion backlog gives AeroVironment unusual visibility for a defense tech company, but the reiterated guidance implies management sees risk in the second half, likely tied to program timing and the ramp of new production lines. The Q1 beat is a strong start, but the full-year story depends on execution against a record order book.