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Defense Stocks Are Soaring—AeroVironment's Earnings Could Close the Gap
Author: Chris Markoch. Originally Published: 3/2/2026.
Key Points
- AeroVironment stock has dropped roughly 15% in 30 days and trails the SPDR S&P Aerospace & Defense ETF by a wide margin, even as defense spending tailwinds accelerate.
- Revenue through the first half of fiscal 2026 surged 145% year over year, and the company posted a record $3.5 billion in quarterly contract awards.
- Adjusted gross margins fell to 27% from 41% a year ago, and the margin recovery timeline is the key variable heading into March 3 earnings.
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Nearly two months into 2026, many aerospace stocks are significantly outperforming the S&P 500, based on the performance of the SPDR S&P Aerospace & Defense ETF (NYSEARCA: XAR). The fund is up about 16.2% versus the S&P's gain of just over 1%.
That makes AeroVironment Inc. (NASDAQ: AVAV) a relative laggard in the sector. AVAV is up roughly 5.5% in 2026, but it has endured a brutal selloff over the past month.
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Wider performance divergence is notable: the XAR is up more than 22% over the past three months, while AVAV has fallen more than 8% over the same period — a disparity investors are weighing as AeroVironment prepares to report earnings on March 3.
Growing in a High-Growth Sector
Many State of the Union proposals amount to lofty rhetoric that often never fully materializes. Still, when administrations prioritize defense modernization, companies exposed to next-generation systems can benefit materially.
Here's how that relates to AeroVironment. The company focuses on three primary areas:
- Unmanned aerial systems (UAS)
- Tactical missiles and precision loitering munitions
- Electric vehicle charging and scalable energy systems
All three categories fall within the "next generation" defense technologies the Trump administration has proposed investing up to $1 trillion to help rebuild U.S. defense capabilities.
That focus is reflected in AeroVironment's recent revenue growth. Through the first two quarters of its 2026 fiscal year, the company's revenue is up 145% year-over-year.
In its Q2 fiscal year (FY2026) earnings report, AeroVironment guided full-year revenue to $1.95 billion–$2.0 billion — more than double the first-half total. The company said robust demand for its drone and precision-strike products drove the strength and reported an all-time record $3.5 billion in contract awards during the quarter.
Those figures also don't account for another potential tailwind: the prospect — and some would say the likelihood — of U.S. military action in Iran, which could increase demand for AeroVironment's products and services.
Can Earnings and Margins Catch Up?
The key question for AVAV, as with many growth names, is valuation — specifically, when AeroVironment's strong top-line growth will translate into improved earnings.
Adjusted gross margins fell to 27%, down from 41% in the same quarter a year earlier. Management points to three primary drivers: a mid-quarter go-live of a major Oracle financial system that created one-time inefficiencies and costs; a revenue mix shift toward lower-margin services after the BlueHalo acquisition; and a prolonged U.S. government shutdown that delayed product shipments, including some international sales, which weighed on higher-margin product revenue.
Management expects margins to recover into the high-30% range by Q4, citing a ramp-up in product revenues, stabilization of the software transition and the start of revenue recognition from pent-up government orders.
If that margin outlook materializes, it would support analysts' current forecast for roughly 31% earnings growth over the next 12 months — a development that would help justify the company's valuation of about 15x sales.
Bullish Sentiment Could Signal an Earnings Beat
AeroVironment is covered by 23 analysts and carries a consensus rating of Moderate Buy, with 20 of 23 analysts rating the stock Buy. The consensus price target is $367, implying about a 42% upside from the AVAV share price at the time of writing. Institutional buying has outpaced selling by nearly a 2:1 margin over the past 12 months.
That optimism may be tied to the earnings outlook: analysts expect adjusted EPS of $0.73. The whisper number sits at $0.66, roughly 10% below consensus, suggesting some skepticism about consensus estimates.
Even if the company reports at the whisper number, EPS would more than double year-over-year — a level of YOY growth that has not yet appeared in AeroVironment's first two quarters.
DTE's Stargate Deal Turns Power Into Profits
Authored by Jeffrey Neal Johnson. Posted: 2/20/2026.
Key Points
- The utility provider exceeded analyst expectations for quarterly earnings and raised its forward guidance, reflecting confidence in its long-term growth.
- A major partnership with leading technology firms to power a new hyperscale data center serves as a transformative catalyst for future capital expansion.
- Shareholders receive a consistent, growing dividend that provides defensive income stability during periods of broader stock market volatility.
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The financial landscape of early 2026 has been defined by one dominant trend: rotation. As investors move away from the speculative froth of the technology sector, capital is flowing back into the tangible economy. While Silicon Valley frets that software efficiency could compress margins, the physical reality is unchanged: artificial intelligence (AI) consumes massive amounts of electricity. In this environment, DTE Energy (NYSE: DTE) is emerging as a defensive shelter and a critical infrastructure partner for the digital age.
On Feb. 17, 2026, the Detroit-based utility delivered a beat-and-raise that quieted skeptics. DTE reported fourth-quarter operating earnings of $1.65 per share, comfortably above the analyst consensus of $1.52. Revenue rose to $4.43 billion, versus expectations of $3.39 billion. The market reacted quickly, sending shares up about 2.8% on a day when the tech-heavy Nasdaq struggled. For investors fatigued by chip-stock volatility, DTE offers a clear signal: one of the smartest ways to play AI right now may be through the power grid.
Project Stargate: 1.4 Gigawatts of Guaranteed Growth
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The centerpiece of the bullish case for DTE is the confirmed agreement to power 100% of the Stargate OpenAI data center campus in Saline Township, Michigan. This is not a typical commercial contract; it is a strategic partnership with industry titans Oracle (NYSE: ORCL) and OpenAI. The facility will require about 1.4 gigawatts (GW) of power — an immense load roughly equivalent to a nuclear reactor or enough to power roughly one million homes — and represents an estimated 25% increase in DTE's total electric load.
For investors, the economics of the deal matter more than the engineering. The agreement includes minimum monthly charges that cover 80% of the billing demand. This take-or-pay provision is critical: DTE will be paid for the capacity whether AI servers run at full tilt or not. In effect, the company captures a recurring revenue stream tied to the growth of the AI economy, without taking on the execution risk of choosing the winning software.
The physical build-out underscores the scale of the "Physical AI" trade. Developed by Related Digital, the site will use advanced closed-loop cooling to limit water use and is expected to create more than 2,500 union construction jobs.
Management also said it is in advanced talks for an additional 3 GW of load, suggesting Stargate may be the opening act of a broader transformation. Unlike peers such as CMS Energy (NYSE: CMS), which pursues a larger number of smaller data-center projects, DTE is targeting a smaller set of very large customers that can move the needle immediately.
Dividends, Earnings, and $36 Billion in Spending
DTE's recent guidance gives the market rare visibility. Management projects 2026 operating earnings per share (EPS) of $7.59 to $7.73, a 6%–8% increase over the prior year — growth toward the upper end of the utility sector. Executives signaled confidence in reaching the high end, supported in part by tax credits from their Renewable Natural Gas (RNG) business.
To support the infrastructure build required by Stargate and the energy transition, DTE increased its five-year capital plan by $6.5 billion, bringing total committed spending to $36.5 billion through 2030. In the regulated utility model, capital expenditures drive future earnings: regulators allow utilities to earn a specified return on equity (ROE) on investments added to the rate base. In that sense, a $36.5 billion plan is a roadmap to predictable profit growth as the grid is upgraded to accommodate AI loads.
Income-focused investors should also take note: the company declared a quarterly dividend of $1.165 per share, or an annualized $4.66. With a yield of about 3.2% and 16 consecutive years of dividend increases, DTE offers an inflation-resistant income stream that speculative tech names generally cannot match.
The Wall of Worry: Risks and Reality
No investment is risk-free, and DTE faces several headwinds investors should weigh. The most immediate is regulatory friction: Michigan Attorney General Dana Nessel recently filed a motion to reopen the approval for the Stargate contracts. Her objection focuses on a change in contract language — from a guarantee that payments would cover costs to language referencing aggregate revenues — which she contends could allow DTE to run a deficit in early years, potentially shifting costs to ratepayers until the project repays those sums later.
That argument creates political noise and could delay the project, but DTE counters that the deal will eventually reduce costs for all customers by about $300 million.
Separately, a federal judge ordered DTE to pay a $100 million civil penalty related to environmental violations at its Zug Island facility. While a nine-figure fine attracts headlines, it should be seen in context: DTE generates roughly $1.5 billion in annual operating earnings, so the penalty is a manageable, one-time hit to liquidity rather than an existential threat to the business model.
Finally, timing is a constraint. The One Big Beautiful Bill Act (OBBBA), signed in 2025, requires wind and solar projects to begin construction by July 4, 2026, to qualify for key tax credits. That deadline compresses execution risk — forcing DTE to keep projects on schedule — but it also accelerates asset growth if the company meets the milestones.
A Physical Toll Booth on the Digital Highway
DTE Energy trades at a price-to-earnings ratio (P/E) of about 21x. That is a premium to slower-growing utilities (often 16x–18x) but a discount relative to many AI hardware and software names, which commonly trade at 30x or higher.
The stock offers a hybrid profile well-suited to the current market: downside protection from a regulated monopoly and a secure dividend, plus upside from exposure to one of the largest technological shifts in history. As capital rotates away from intangible software promises and toward the hard assets that power them, DTE Energy is positioned as a pragmatic way to access AI-related growth without the extreme valuations and volatility of pure-play tech names. For investors seeking AI exposure with a steadier risk profile, the power grid is an attractive, physical hedge.
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