AeroVironment Inc. (NASDAQ:AVAV) has an additional revenue stream from outside the U.S., which indicates promising prospects for the company’s mission-proven LOCUST Laser Weapon System beyond orders from the U.S. military. The company received its first international LOCUST order, valued at more than $50 million, for a direct commercial sale, involving initial delivery and ongoing support.
The development came after AeroVironment secured a $464.8 million landmark contract from the U.S. Army, for the production of Enduring-High Energy Laser (E-HEL) counter-drone systems. AeroVironment’s $464.8 million laser contract yields long-term revenue visibility and acknowledges the company’s platform-agnostic designs.
International Demand for LOCUST Signals New Growth Path
The latest order reflects growing global recognition of high-energy lasers that are becoming integral for modern air defense. The low-cost drones pose a worldwide threat that has changed the economics of warfare. LOCUST offers a scalable and affordable way to overcome drone threats without relying too much on expensive interceptors.
Beyond that, the company is also planning to invest more than $30 million to expand its Albuquerque manufacturing facility across three existing sites. The financial impact of this $50 million order may not be very significant in the short run, as it would account for only a small fraction of the overall business. However, it could create possibilities for additional orders further down the line. Investors may also pay attention to this other aerospace and defense giant that is expanding its aftermarket opportunity.
What Could Go Wrong?
Commercial sales across international markets could face regulatory risks, as AeroVironment might be required to attain relevant government approvals and export licenses. This might result in delayed execution, and possibly order cancellations in a worse-case scenario. As highlighted above, the expansion of Albuquerque facility is a highly encouraging prospect. But the real question is whether or not the company can scale up production within its budgetary limits and on schedule.
Finally, what is worth mentioning is that the broader defense contracting space is characterized with intense competition involving many large contractors. Other well-established laser developers could keep market share, pricing power, and margins under pressure. AeroVironment’s $1.5 Billion Funded Backlog offers healthy demand visibility, but execution and conversion will remain key discussion points for investors.
Premium Valuation Despite A Sharp Dip
The drone and defense systems maker was trading at $140.82 by closing on October 2, which puts its market capitalization at $7.92 billion. The stock has dropped 41.78% in 2026, and 62.55% during the last 52 weeks, yet its negative trailing GAAP earnings make the trailing P/E an unsuitable valuation measure. Valued at around four times its trailing sales, it is left up with very little room for business contraction. The forward P/E multiple does lead to some investor confidence in earnings growth further down the line. Based on management’s fiscal 2027 adjusted EPS guidance of $3.02–$3.34, the stock trades at approximately 42–47 times expected adjusted earnings, suggesting a premium valuation. Despite such valuation concerns, investors should look beyond the latest quarter’s 6% year-over-year revenue growth, negative profitability margins, and negative free cash flows, in anticipation of a turnaround.
Institutional Sentiment
Based on data tracked across 1,000+ hedge funds by Insider Monkey, institutional sentiment toward AeroVironment remains strong, as the number of smart-money managers with long-term exposure in the stock has been going up. A total of 44 hedge funds held positions by the end of Q2 2026, compared to 37 in Q1 2026. Short interest of 8.50% indicates moderate level of institutional pessimism around the stock.
BlackRock is among the largest institutional stakeholder, as per Yahoo Finance database, holding 3.48 million shares as of June 30. This amounts to 6.85% of outstanding shares. Other notable institutional investors include State Street Corporation and Vanguard Capital Management, holding 4.31% and 3.24% of outstanding shares respectively.
Verdict
Expansion across international markets lowers AeroVironment’s dependence on local demand. It also enhances the company’s credibility around its directed energy operations, further backed by the planned expansion of the Albuquerque site to address an expanding local and international demand. Going forward, investors will also remain keen on how the management strengthens its foothold within the rapidly growing counter-drone segment. LOCUST could become another growth driver for AeroVironment, but sustained upside will depend on repeat international orders, production execution, and stronger profitability.
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