Dear Reader
I recently visited Mar-a-Lago...
And now I'm p repared to put my reputation on the line.
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Regards,
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Senior Investment Analyst, InvestorPlace
Defense Stocks Are Soaring—AeroVironment's Earnings Could Close the Gap
Authored by Chris Markoch. First 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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Many aerospace stocks are outperforming the S&P 500 nearly two months into 2026. That's largely reflected in the performance of the SPDR S&P Aerospace & Defense ETF (NYSEARCA: XAR), which is up about 16.2% while the S&P 500 is up just over 1%.
That makes AeroVironment Inc. (NASDAQ: AVAV) a laggard in the sector. AVAV is only up about 5.5% in 2026 after a sharp selloff over the past month.
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More notable: XAR is up more than 22% over the past three months, while AVAV is down more than 8% over the same period. Investors will be watching closely as AeroVironment prepares to report earnings on March 3.
Growing in a High-Growth Sector
Many high-profile policy proposals heard in State of the Union speeches amount to rhetoric more than actionable plans. Still, when government commitment does materialize, it can translate into meaningful revenue for defense contractors.
AeroVironment focuses on three areas:
- Unmanned Aerial Systems (UAS)
- Tactical missiles and precision loitering munitions
- Electric vehicle charging and scalable energy systems
All three sit squarely within the "next generation" of defense technologies that the current administration has signaled it will invest in—proposals have referenced up to $1 trillion to rebuild U.S. defense capabilities.
That demand has shown up in AeroVironment's results. Through the first two quarters of fiscal 2026, the company's revenue was up 145% year-over-year.
In its Q2 fiscal 2026 earnings report, AeroVironment guided full-year revenue to $1.95 billion–$2.0 billion, which would more than double first-half revenue. The strong topline was driven by demand for its drone and precision-strike products, and the company set an all-time record with $3.5 billion in contract awards during the quarter.
Geopolitical risk is another potential demand driver. A significant U.S. military action in the Middle East, for example, could increase near-term demand for some of AeroVironment's products and services.
Can Earnings and Margins Catch Up?
The central valuation question for AVAV, as with many growth stories, is when strong revenue growth will translate into sustainable earnings.
Adjusted gross margins fell to 27% in the quarter, down from 41% a year earlier. Management cited three key drivers: a mid-quarter rollout of a major Oracle financial system that created one-time inefficiencies and costs; a shift in the revenue mix toward lower-margin services following the BlueHalo acquisition; and delays from a prolonged U.S. government shutdown that pushed some higher-margin product shipments, including international sales, into later periods.
Management expects margins to recover into the high-30% range by Q4, driven by a ramp-up in product revenue, stabilization after the software transition, and fulfillment of pent-up government orders.
If that margin recovery materializes, it would support analysts' consensus for roughly 31% earnings growth over the next 12 months and help justify the company's current valuation near 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 analysts rating the stock Buy. The consensus price target is $367, roughly 42% above the AVAV share price at the time of writing. Institutional buying has outweighed selling by nearly 2:1 over the past 12 months.
The consensus forecast calls for adjusted EPS of $0.73, while the whisper number sits around $0.66—about 10% below consensus. Even at the whisper number, the company would report more than 100% year-over-year earnings growth versus the prior year, a level of profitability that has not yet appeared in AeroVironment's first-half results.
Investors will be watching March 3 for signs that revenue strength is translating into margin recovery and earnings acceleration—outcomes that could determine whether AVAV moves back in step with the broader aerospace and defense rally.
Nebius' 1.2 GW Win: A $20B Bet on AI Infrastructure
Written by Jeffrey Neal Johnson. Date Posted: 3/5/2026.
Key Points
- The approval of a new AI factory represents a pivotal milestone for Nebius, positioning the company as a key enabler for the entire AI ecosystem.
- This major infrastructure project directly supports the company's aggressive growth targets by meeting the overwhelming and secured customer demand for AI compute.
- This landmark project validates the company's focused strategy on AI infrastructure, earning positive notice and strong price targets from Wall Street analysts.
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Shares of Nebius Group (NASDAQ: NBIS) have risen after a major announcement that further cements the company's pivot into the heart of the artificial intelligence (AI) revolution.
The company has secured approval to build a large-scale AI factory in the United States — a project with a power capacity rivaling some of the biggest data centers in the world. This is more than a construction project; it is the cornerstone of a redefined corporate identity and a validation of Nebius's strategy to become a key provider of global AI infrastructure.
Missouri Milestone: Powering a Strategic Pivot
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Currently, $2 TRILLION worth of transactions go through the traditional network every single day. But soon, it will be funneled through the new network that the Federal Reserve has built, operates and can see in real time.
That's the part buried in the Federal Reserve Docket No. OP-1670.
In fact, on page 84 of the 93-page document, they admit that it will make it easier to track the spending of Americans.
At the center of this plan is a 400-acre campus in Independence, Missouri, expected to create more than 1,300 local jobs. The most critical figure for investors is the facility's potential power capacity: up to 1.2 gigawatts (GW). In an industry measured by compute, securing electricity at this scale is a strategic breakthrough — 1.2 GW is an immense amount of energy, capable of powering a large city.
Power is the most critical and scarce resource for AI. Over the past year the industry conversation has focused on the availability of high-powered GPUs; as chip supply catches up, the real bottleneck is emerging as physical space and massive electrical infrastructure to host those chips. A company can have the best algorithms, but without reliable, large-scale power its ambitions are limited. By securing this capacity, Nebius has claimed a vital piece of the infrastructure puzzle and positioned itself as an enabler for the broader AI ecosystem.
This Missouri facility is the flagship of the new Nebius. The company has transformed from its past as the diversified tech conglomerate Yandex N.V. into a focused, pure-play AI infrastructure provider. That strategic pivot concentrates resources on what management views as the single largest market opportunity today, and this tangible project is a key proof point of that new identity.
From Power to Profit
For investors, the pressing question is how this infrastructure investment will translate into revenue. The answer lies in the severe supply-and-demand imbalance in AI compute. During its fourth-quarter 2025 earnings call, Nebius management said available computing capacity was sold out months in advance. Customers are not only lining up for capacity but are signing longer-term contracts at attractive prices to secure it.
Building and powering new data centers is the most direct way to capture that revenue. Nebius has guided to an annualized revenue run rate (ARR) of $7 billion to $9 billion by the end of 2026. ARR extrapolates current monthly recurring revenue to a full year, offering a forward-looking view of scale; reaching this target depends on bringing additional capacity online.
Such growth requires significant capital. Nebius outlined capital expenditures of $16 billion to $20 billion for 2026. While substantial, the company has a structured funding plan: roughly 60% of the required capital is already secured through cash on hand, operating cash flow, and upfront payments from long-term customer agreements. With a strong balance sheet and limited existing debt, management says it can fund the remainder of the expansion without taking excessive risk. This is presented not as a speculative gamble but as a calculated expansion backed by contracted customer demand.
A Clear Runway for Growth
Approval of the Missouri factory is a major de-risking event. What was once a plan on a spreadsheet is now a tangible project with government and community backing, giving investors a concrete milestone to follow. It validates Nebius's aggressive strategy to pursue a leadership role in high-demand AI infrastructure.
Wall Street has taken notice. The stock currently carries a Moderate Buy consensus rating from analysts, with an average price target of $143.22. That target implies meaningful upside from current levels and reflects confidence in the company's growth trajectory. Analyst targets range from $84 to $211, showing differing views but a generally bullish case for substantial appreciation. The company's broader technology assets — including autonomous vehicle developer Avride and EdTech platform TripleTen — add diversification to the infrastructure story.
With strategy validated and capacity expansion now visibly underway, investor focus will shift to execution. This landmark project gives Nebius a clear runway to move from participant to a critical pillar of the global AI revolution.
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