What Happened?

Shares of aerospace and defense company AeroVironment (NASDAQ: AVAV) fell 10.6% in the afternoon session after the company's third-quarter earnings badly missed Wall Street expectations and it lowered its full-year profit forecast. While the company reported strong revenue of $472.5 million, a 151% jump year on year, its profits fell significantly short. AeroVironment posted adjusted earnings of $0.44 per share, missing the analysts' consensus forecast of $0.79. Profitability was a key issue, as the company's operating margin fell to negative 6.4% from 3.7% in the same quarter last year. Adding to investor concerns, management lowered its full-year adjusted earnings guidance to a midpoint of $3.47 per share, a 4.8% decrease. The combination of a substantial earnings miss and a reduced outlook overshadowed the robust sales growth.

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What Is The Market Telling Us

AeroVironment’s shares are very volatile and have had 26 moves greater than 5% over the last year. But moves this big are rare even for AeroVironment and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 27 days ago when the stock dropped 8.5% on the news that the broader U.S. stock market declined amid investor caution and a pullback in technology stocks. The main story? Investors are cashing in on a good run and feeling a bit cautious. After a fantastic run, many of those high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced. There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.

AeroVironment is up 58.6% since the beginning of the year, but at $248.19 per share, it is still trading 39.4% below its 52-week high of $409.83 from October 2025. Investors who bought $1,000 worth of AeroVironment’s shares 5 years ago would now be looking at an investment worth $2,871.

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