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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended January 31, 2026

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-33261

AEROVIRONMENT, INC.

(Exact name of registrant as specified in its charter)

Delaware		95-2705790
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

241 18^th Street South, Suite 650
Arlington, Virginia		22202
(Address of principal executive offices)		(Zip Code)

(805) 520-8350

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	AVAV	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller reporting company ☐

		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of March 4, 2026, the number of shares outstanding of the registrant’s common stock, $0.0001 par value, was 49,933,993.

Table of Contents

AeroVironment, Inc.

Table of Contents

Item 1.	Financial Statements :
	Condensed Consolidated Balance Sheets as of January 31, 2026 (Unaudited) and April 30, 2025	3
	Condensed Consolidated Statements of Operations for the three and nine months ended January 31, 2026 (Unaudited) and January 25, 2025 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended January 31, 2026 (Unaudited) and January 25, 2025 (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended January 31, 2026 (Unaudited) and January 25, 2025 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended January 31, 2026 (Unaudited) and January 25, 2025(Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	49
Item 6.	Exhibits	49
Signatures		50

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AeroVironment, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share and per share data)


	January 31,			April 30,
	2026			2025
Assets
Current assets:
Cash and cash equivalents	$	289,878		$	40,862
Short-term investments		297,259			—
Accounts receivable, net of allowance for credit losses of $2,213 at January 31, 2026 and $203 at April 30, 2025		201,046			101,967
Unbilled receivables and retentions		528,557			290,009
Inventories, net		299,277			144,090
Income taxes receivable		43,031			622
Prepaid expenses and other current assets		45,199			28,966
Total current assets		1,704,247			606,516
Long-term investments		61,659			31,627
Property and equipment, net		158,867			50,704
Operating lease right-of-use assets		91,810			31,879
Deferred income taxes		—			61,460
Intangibles, net		925,925			48,711
Goodwill		2,461,714			256,781
Other assets		49,414			32,889
Total assets	$	5,453,636		$	1,120,567
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	109,633		$	72,462
Wages and related accruals		75,765			44,253
Customer advances		67,543			15,952
Current operating lease liabilities		15,569			10,479
Income taxes payable		320			356
Other current liabilities		40,489			28,659
Total current liabilities		309,319			172,161
Long-term debt		727,877			30,000
Non-current operating lease liabilities		82,567			23,812
Other non-current liabilities		1,995			2,026
Liability for uncertain tax positions		6,061			6,061
Deferred income taxes		53,627			—
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares—10,000,000; none issued or outstanding at January 31, 2026 and April 30,2025		—			—
Common stock, $0.0001 par value:
Authorized shares—100,000,000
Issued and outstanding shares—49,934,738 shares at January 31, 2026 and 28,267,517 shares at April 30, 2025		6			4
Additional paid-in capital		4,244,416			618,711
Accumulated other comprehensive loss		(5,514)			(6,514)
Retained earnings		33,282			274,306
Total stockholders’ equity		4,272,190			886,507
Total liabilities and stockholders’ equity	$	5,453,636		$	1,120,567

See accompanying notes to condensed consolidated financial statements (unaudited).

Table of Contents

AeroVironment, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands except share and per share data)


	Three Months Ended				Nine Months Ended
	January 31,		January 25,		January 31,		January 25,
	2026		2025		2026		2025
Revenue:
Product sales	$	277,814	$	139,753	$	916,384	$	450,488
Contract services		130,231		27,883		418,845		95,089
		408,045		167,636		1,335,229		545,577
Cost of sales:
Product sales		199,973		81,001		672,057		253,572
Contract services		109,278		23,436		365,155		73,701
		309,251		104,437		1,037,212		327,273
Gross margin:
Product sales		77,841		58,752		244,327		196,916
Contract services		20,953		4,447		53,690		21,388
		98,794		63,199		298,017		218,304
Selling, general and administrative		99,414		43,788		329,026		115,499
Research and development		27,112		22,498		96,219		75,827
Impairment of goodwill		151,306		—		151,306		—
(Loss) income from operations		(179,038)		(3,087)		(278,534)		26,978
Other income (loss):
Interest income (expense), net		3,696		(248)		(9,050)		(1,177)
Other (expense) income, net		(400)		976		6,912		758
(Loss) income before income taxes		(175,742)		(2,359)		(280,672)		26,559
(Benefit from) provision for income taxes		(19,486)		(605)		(36,960)		659
Equity method investment (loss) income, net of tax		(295)		—		2,688		1,055
Net (loss) income	$	(156,551)	$	(1,754)	$	(241,024)	$	26,955
Net (loss) income per share
Basic	$	(3.15)	$	(0.06)	$	(4.94)	$	0.96
Diluted	$	(3.15)	$	(0.06)	$	(4.94)	$	0.96
Weighted-average shares outstanding:
Basic		49,741,441		28,031,901		48,761,481		28,001,089
Diluted		49,741,441		28,031,901		48,761,481		28,171,089

See accompanying notes to condensed consolidated financial statements (unaudited).

Table of Contents

AeroVironment, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(In thousands)


		Three Months Ended						Nine Months Ended
		January 31,			January 25,			January 31,			January 25,
		2026			2025			2026			2025
Net (loss) income		$	(156,551)		$	(1,754)		$	(241,024)		$	26,955
Other comprehensive income:
Unrealized loss on available-for-sale investments, net of deferred tax expense of $0 for the three and nine months ended January 31, 2026 and January 25, 2025 respectively			169			—			(15)			—
Change in foreign currency translation adjustments			539			(969)			1,015			(605)
Total comprehensive (loss) income		$	(155,843)		$	(2,723)		$	(240,024)		$	26,350

See accompanying notes to condensed consolidated financial statements (unaudited).

Table of Contents

AeroVironment, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the three months ended January 31, 2026 and January 25, 2025 (Unaudited)

(In thousands except share data)


													Accumulated
							Additional						Other
		Common Stock					Paid-In			Retained			Comprehensive
		Shares		Amount			Capital			Earnings			Loss		Total
Balance at November 1, 2025		49,927,306		$	6		$	4,234,464		$	189,833		$	(6,222)	$	4,418,081
Net loss		—			—			—			(156,551)			—		(156,551)
Unrealized gain on investments		—			—			—			—			169		169
Foreign currency translation		—			—			—			—			539		539
Employee stock purchase plan contributions		9,182			—			1,888			—			—		1,888
Restricted stock awards		3,079			—			—			—			—		—
Restricted stock awards forfeited		(4,829)			—			—			—			—		—
Issuance of common stock for business acquisition, net of issuance costs		—			—			(6)			—			—		(6)
Stock based compensation		—			—			8,070			—			—		8,070
Balance at January 31, 2026		49,934,738		$	6		$	4,244,416		$	33,282		$	(5,514)	$	4,272,190

													Accumulated
							Additional						Other
		Common Stock					Paid-In			Retained			Comprehensive
		Shares		Amount			Capital			Earnings			Loss		Total
Balance at October 26, 2024		28,205,237		$	4		$	604,225		$	259,396		$	(5,228)	$	858,397
Net income		—			—			—			(1,754)			—		(1,754)
Foreign currency translation		—			—			—			—			(969)		(969)
Restricted stock awards		16,804			—			—			—			—		—
Restricted stock awards forfeited		(2,601)			—			—			—			—		—
Stock based compensation		—			—			5,381			—			—		5,381
Balance at January 25, 2025		28,219,440		$	4		$	609,606		$	257,642		$	(6,197)	$	861,055

Table of Contents

AeroVironment, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the nine months ended January 31, 2026 and January 25, 2025 (Unaudited)

(In thousands except share data)


													Accumulated
							Additional						Other
		Common Stock					Paid-In			Retained			Comprehensive
		Shares		Amount			Capital			Earnings			Loss		Total
Balance at April 30, 2025		28,267,517		$	4		$	618,711		$	274,306		$	(6,514)	$	886,507
Net loss		—			—			—			(241,024)			—		(241,024)
Unrealized loss on investments		—			—			—			—			(15)		(15)
Foreign currency translation		—			—			—			—			1,015		1,015
Employee stock purchase plan contributions		27,737			—			4,355			—			—		4,355
Restricted stock awards		178,561			—			—			—			—		—
Restricted stock awards forfeited		(14,566)			—			—			—			—		—
Tax withholding payment related to net share settlement of equity awards		(7,820)			—			(10,900)			—			—		(10,900)
Issuance of common stock for business acquisition, net of issuance costs		17,425,849			2			2,637,339			—			—		2,637,341
Shares issued, net of issuance costs		4,057,460			—			966,846			—			—		966,846
Stock based compensation		—			—			28,065			—			—		28,065
Balance at January 31, 2026		49,934,738		$	6		$	4,244,416		$	33,282		$	(5,514)	$	4,272,190

													Accumulated
							Additional						Other
		Common Stock					Paid-In			Retained			Comprehensive
		Shares		Amount			Capital			Earnings			Loss		Total
Balance at April 30, 2024		28,134,438		$	4		$	597,646		$	230,687		$	(5,592)	$	822,745
Net income		—			—			—			26,955			—		26,955
Foreign currency translation		—			—			—			—			(605)		(605)
Stock options exercised		16,164			—			506			—			—		506
Restricted stock awards		88,587			—			—			—			—		—
Restricted stock awards forfeited		(7,764)			—			—			—			—		—
Tax withholding payment related to net share settlement of equity awards		(11,985)			—			(4,064)			—			—		(4,064)
Stock based compensation		—			—			15,518			—			—		15,518
Balance at January 25, 2025		28,219,440		$	4		$	609,606		$	257,642		$	(6,197)	$	861,055

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AeroVironment, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)


		Nine Months Ended
		January 31,			January 25,
		2026			2025
Operating activities
Net (loss) income		$	(241,024)		$	26,955
Adjustments to reconcile net (loss) income to cash used in operating activities:
Depreciation and amortization			202,960			27,144
Impairment of goodwill			151,306			—
Gain from equity method investments			(2,688)			(1,055)
Amortization of debt issuance costs			10,273			1,121
Provision for credit losses			1,867			(64)
Reserve for inventory excess and obsolescence			5,125			2,025
Other non-cash expense, net			3,543			1,810
Non-cash lease expense			18,889			7,379
Loss (gain) on foreign currency transactions			264			(22)
Unrealized gain on available-for-sale equity securities, net			(7,446)			(1,187)
Deferred income taxes			(4,334)			—
Stock-based compensation			28,065			15,518
Loss on disposal of property and equipment			1,149			201
Amortization of debt securities			(661)			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable			(19,892)			(11,095)
Unbilled receivables and retentions			(142,088)			(30,172)
Inventories			(92,721)			(1,167)
Income taxes receivable			(38,646)			(14,738)
Prepaid expenses and other assets			(13,287)			(9,314)
Accounts payable			(17,397)			(1,359)
Other liabilities			(17,174)			(13,034)
Net cash used in operating activities			(173,917)			(1,054)
Investing activities
Acquisition of property and equipment			(46,134)			(14,292)
Contributions in equity method investments			(3,243)			(2,309)
Purchase of available-for-sale investments			(335,183)			—
Redemption of available-for-sale investments			21,500
Acquisition of capitalized software to be sold			(17,275)			—
Business acquisitions, net of cash acquired			(844,586)			—
Net cash used in investing activities			(1,224,921)			(16,601)
Financing activities
Principal payments of term loan			(700,000)			(28,000)
Principal payments of revolver			(265,000)			—
Proceeds from long-term debt			693,202			—
Proceeds from revolver, net of creditor costs			233,939			25,000
Proceeds from shares issued, net of underwriter costs			968,515			—
Proceeds from convertible debt, net of underwriter costs			726,944			—
Payment of debt issuance costs			(2,445)			(1,056)
Payment of equity issuance costs			(1,388)			(365)
Holdback and retention payments for business acquisition			—			(390)
Tax withholding payment related to net settlement of equity awards			(10,900)			(4,064)
Employee stock purchase plan contributions			4,355			—
Exercise of stock options			—			506
Other			(12)			(19)
Net cash provided by (used in) financing activities			1,647,210			(8,388)
Effects of currency translation on cash and cash equivalents			644			(258)
Net increase (decrease) in cash and cash equivalents			249,016			(26,301)
Cash and cash equivalents at beginning of period			40,862			73,301
Cash and cash equivalents at end of period		$	289,878		$	47,000
Supplemental disclosures of cash flow information
Cash paid, net during the period for:
Income taxes		$	4,335		$	19,342
Interest		$	12,535		$	1,196
Non-cash activities
Issuance of common stock for business acquisition		$	2,640,365		$	—
Unrealized loss on available-for-sale investments		$	(15)		$	—
Change in foreign currency translation adjustments		$	1,015		$	(605)
Acquisitions of property and equipment included in accounts payable		$	4,961		$	1,608

See accompanying notes to condensed consolidated financial statements (unaudited).

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AeroVironment, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization and Significant Accounting Policies

Organization

AeroVironment, Inc. (“AeroVironment”, “AV” or “the Company”), a Delaware corporation, is a defense technology provider delivering integrated capabilities across air, land, sea, space, and cyber. AV develops and deploys autonomous systems, uncrewed aircraft systems (“UAS”), precision strike systems, counter-UAS (“C-UAS”) technologies, space-based platforms, directed energy systems, and cyber and electronic warfare capabilities. AV operates a national manufacturing footprint to deliver proven systems and capabilities whose markets offer the potential for significant long-term growth. In addition, the Company believes that some of the innovative potential products, services and technologies in its research and development (“R&D”) pipeline will emerge as new growth platforms in the future, creating additional market opportunities.

Effective May 1, 2025, the Company reorganized its segments. In connection with the Company’s acquisition of BlueHalo Financing Topco, LLC (“BlueHalo”), the reorganization was implemented to drive additional operational improvements, foster synergies and provide leaders with greater autonomy over their product lines. The Company’s reportable segments are as follows:

Autonomous Systems (“AxS”)— The AxS segment focuses on the design, development, production, delivery, and support of intelligent, multi-domain robotic systems, including UAS, uncrewed underwater vehicles and ground robot systems. The segment includes the Company’s former Uncrewed Systems, Loitering Munitions Systems (“LMS”), and MacCready Works segments as well as Radio Frequency and Kinetic C-UAS, Electronic Warfare Systems and Uncrewed Maritime products and services from the BlueHalo acquisition. It primarily serves organizations within or supplying the U.S. Department of Defense (“DoD”), other federal agencies, and international allied governments. This segment encompasses the Company’s core autonomous platforms, such as drones and robotic systems, tailored for mission-critical applications across air, land and sea domains.

Space, Cyber, and Directed Energy (“SCDE”)— The SCDE segment focuses on advanced technologies in the space domain providing space-based and ground-based platforms, cyber capabilities, and directed energy systems. This segment positions the Company in high-growth areas of next-generation defense technology, addressing emerging threats and mission requirements in space, cyber warfare, and directed energy applications (e.g., high-energy lasers). It also primarily serves organizations within or supplying the U.S. DoD, other federal agencies, and international allied governments.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation with respect to the interim financial statements have been included. The results of operations for the three and nine months ended January 31, 2026 are not necessarily indicative of the results for the full year ending April 30, 2026. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2025, included in the Company’s Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, including estimates of anticipated contract costs and revenue utilized in the revenue recognition process,

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that affect the reported amounts in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

The Company’s unaudited condensed consolidated financial statements include the assets, liabilities and operating results of wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Recent Acquisition

On May 1, 2025, the Company closed its acquisition of BlueHalo, a Delaware limited liability company, pursuant to the Agreement and Plan of Merger, dated as of November 18, 2024 (the “Merger Agreement”) by and among AV, Archangel Merger Sub LLC, a Delaware limited liability company (“Merger Sub”), BlueHalo, and BlueHalo Holdings Parent, LLC, a Delaware limited liability company and sole member of BlueHalo (“Seller”). Refer to Note 17—Business Acquisitions for further details.

Recently Adopted Accounting Standards

The Company did not adopt any accounting standards during the three and nine months ended January 31, 2026.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. Specifically, the Company’s disaggregated revenue disclosure and disclosure of revenue by segment and the segment disclosures for prior periods have been recast to conform to the new segments and new measure of segment profitability.

Revenue Recognition

The Company’s revenue is generated pursuant to written contractual arrangements to design, develop, manufacture and/or modify complex products and to provide related engineering, technical and other services according to the specifications of its customers. These contracts may be firm fixed price (“FFP”), cost plus fixed fee, cost plus award fee, and cost plus incentive fee (collectively “Cost Plus”), or time and materials (“T&M”). The Company considers all such contracts to be within the scope of ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”).

Performance Obligations

On January 31, 2026, the Company had approximately $1,120,675,000 of remaining performance obligations under fully funded contracts with its customers, which the Company also refers to as funded backlog. The Company currently expects to recognize approximately 39% of the remaining performance obligations as revenue in fiscal 2026 and the remaining 61% in fiscal 2027 or beyond.

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Revenue by Category

The following tables present the Company’s revenue disaggregated by operating group, contract type, customer category and geographic location (in thousands).


		Three Months Ended						Nine Months Ended
		January 31,			January 25,			January 31,			January 25,
Revenue by operating group		2026			2025			2026			2025
Uncrewed Aircraft Systems		$	89,842		$	59,766		$	243,099		$	249,041
Precision Strike and Defense Systems			158,165			84,795			515,020			214,483
Other			30,737			23,075			107,523			82,053
Space and Directed Energy			53,198			—			199,872			—
Cyber and Mission Services			76,103			—			269,715			—
Total revenue		$	408,045		$	167,636		$	1,335,229		$	545,577


		Three Months Ended						Nine Months Ended
		January 31,			January 25,			January 31,			January 25,
Revenue by contract type		2026			2025			2026			2025
FFP		$	280,369		$	148,768		$	880,854		$	489,388
Cost Plus			95,802			17,372			346,080			52,413
T&M			31,874			1,496			108,295			3,776
Total revenue		$	408,045		$	167,636		$	1,335,229		$	545,577

Each of these contract types presents advantages and disadvantages. Typically, the Company assumes more risk with FFP contracts. However, these types of contracts generally offer additional profits when the Company completes the work for less than originally estimated. Cost Plus contracts generally subject the Company to lower risk. Accordingly, the associated base fees are usually lower than fees on FFP contracts. Under T&M contracts, the Company’s profit may vary if actual labor hour rates vary significantly from the negotiated rates.


		Three Months Ended						Nine Months Ended
		January 31,			January 25,			January 31,			January 25,
Revenue by customer category		2026			2025			2026			2025
U.S. government		$	365,816		$	129,029		$	1,158,722		$	418,345
Non-U.S. government			42,229			38,607			176,507			127,232
Total revenue		$	408,045		$	167,636		$	1,335,229		$	545,577

		Three Months Ended						Nine Months Ended
		January 31,			January 25,			January 31,			January 25,
Revenue by geographic location		2026			2025			2026			2025
Domestic		$	226,110		$	104,097		$	933,848		$	258,053
International			181,935			63,539			401,381			287,524
Total revenue		$	408,045		$	167,636		$	1,335,229		$	545,577


	Three Months Ended					Nine Months Ended
	January 31,			January 25,		January 31,			January 25,
Revenue percentage by recognition method	2026			2025		2026			2025
Over time		72%			66%		73%			55%
Point in time		28%			34%		27%			45%
Total revenue		100%			100%		100%			100%

Contract Balances

Changes in the contract asset and liability balances during the three and nine month periods ended January 31, 2026 were not materially impacted by factors other than billings, cash collections, and timing of revenue recognition. For the

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Company’s contracts, there are no significant gaps between the receipt of payment and the transfer of the associated goods and services to the customer for material amounts of consideration.

Revenue recognized for the three and nine month periods ended January 31, 2026 that was included in customer advances balances as of April 30, 2025 was $335,000 and $12,112,000, respectively. Revenue recognized for the three and nine month periods ended January 25, 2025 that was included in customer advances balances as of April 30, 2024 was $1,701,000 and $9,662,000, respectively.

Investments

The Company’s investments are accounted for as available-for-sale and are reported at fair value. Unrealized gains and losses for debt securities are excluded from earnings and reported as a separate component of stockholders’ equity, net of deferred income taxes for available-for-sale investments. Gains and losses realized on the disposition of investment securities are determined on the specific identification basis and credited or charged to income. Investments in equity securities and warrants are measured at fair value with net unrealized gains and losses from changes in the fair value recognized in other income (expense), net. Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date.

Fair Values of Financial Instruments

Fair values of cash and cash equivalents, accounts receivable, unbilled receivables and retentions, and accounts payable approximate cost due to the short period of time to maturity.

Accounts Receivable

The Company is party to a receivables sales agreement with Citibank, N.A. with an aggregate capacity of $100,000,000. The receivables sold under the factoring facilities are without recourse for any customer credit risk and result in a true sale. Receivables are de-recognized in their entirety when sold. As of January 31, 2026, no receivables have been sold, proceeds collected, or purchase discount fees incurred under the agreement.

Government Contracts

Payments to the Company on government Cost Plus or T&M contracts are based on provisional, or estimated indirect rates, which are subject to an annual audit by the Defense Contract Audit Agency (“DCAA”). The cost audits result in the negotiation and determination of the final indirect cost rates that the Company may use for the period(s) audited. The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company for Cost Plus and T&M contracts.

For example, during the course of its audits, the DCAA may question the Company’s incurred costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations, the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs. Historically, the Company has not experienced material disallowed costs as a result of government audits. However, the Company can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future. The Company’s revenue recognition policy calls for revenue recognized on all cost reimbursable government contracts to be recorded at estimated full year rates unless collectability is not reasonably assured. At January 31, 2026 and April 30, 2025, the Company had no reserve for incurred cost claim audits.

(Loss) Earnings Per Share

Basic (loss) earnings per share is computed using the weighted-average number of common shares outstanding, excluding shares of unvested restricted stock.

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The reconciliation of basic to diluted shares is as follows (in thousands except share data):


			Three Months Ended						Nine Months Ended
		January 31, 2026			January 25, 2025			January 31, 2026			January 25, 2025
Net (loss) income		$	(156,551)		$	(1,754)		$	(241,024)		$	26,955
Denominator for basic (loss) earnings per share:
Weighted average common shares			49,741,441			28,031,901			48,761,481			28,001,089
Dilutive effect of employee stock options, restricted stock and restricted stock units			—			—			—			170,000
Denominator for diluted (loss) earnings per share			49,741,441			28,031,901			48,761,481			28,171,089

Due to the net loss for the three and nine months ended January 31, 2026, no shares reserved for issuance upon exercise of stock options or shares of unvested restricted stock were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive. Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 326,724 and 344,723 for the three and nine months ended January 31, 2026, respectively. Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 200,667 and 265 for the three and nine months ended January 25, 2025, respectively.

Recently Issued Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires updates to the rate reconciliation, income taxes paid and other disclosures. The new standard is effective for fiscal years beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted. ASU 2023-09 is adopted retrospectively. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires disclosure in the notes to financial statements of specified information about certain costs and expenses included in each expense caption on the face of the income statement at interim and annual reporting periods. The new standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, and should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which better aligns the accounting guidance to how software is developed by eliminating project stages from capitalization criteria. The new standard is effective for annual reporting periods beginning after December 15, 2027 and interim periods within those annual reporting periods. The standard allows for prospective, modified, or retrospective transition. Early adoption is permitted. We are currently evaluating the impact of adopting this new pronouncement.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (“ASU 2025-11”), which is intended to improve the navigability of required interim disclosures and clarify when that guidance is applicable, and also to provide additional guidance on what disclosures should be provided in interim reporting periods. The new standard is effective for annual reporting periods beginning after December 15, 2027 and interim periods within those annual reporting periods. The standard allows for prospective or retrospective transition. Early adoption is permitted. We are currently evaluating the impact of adopting this new pronouncement

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2. Investments

Investments consist of the following (in thousands):


		January 31,			April 30,
		2026			2025
Short-term investments:
Available-for-sale securities:
U.S. government securities			175,071			—
Corporate securities			112,252			—
Certificates of deposit			9,936			—
Total short-term investments			297,259			—
Long-term investments:
Available-for-sale securities:
U.S. government securities			14,086			—
Equity securities and warrants			11,650			1,204
Total long-term available-for-sale securities investments			25,736			1,204
Equity method investments
Investments in limited partnership funds			35,923			30,423
Total equity method investments			35,923			30,423
Total long-term investments		$	61,659		$	31,627

Available-For-Sale Securities

As of January 31, 2026, the balance of available-for-sale securities consisted of U.S. government securities, certificate of deposits and high-grade corporate bonds. Interest earned from these investments is recorded in interest income (expense), net. Realized gains on sales of these investments on the basis of specific identification are recorded in interest income (expense), net. As of April 30, 2025, the company held no available-for-sale securities.

The following table is a summary of the activity related to the available-for-sale investments recorded in short-term and long-term investments as of January 31, 2026 (in thousands):


		January 31, 2026
					Gross		Gross
		Amortized			Unrealized		Unrealized		Fair
		Cost			Gains		Losses		Value
Corporate securities		$	189,156		$	45	$	(7)	$	189,194
U.S. government securities			112,253			25		(37)		112,241
Certificates of deposit			9,936			—		(11)		9,925
Total available-for-sale securities		$	311,345		$	70	$	(55)	$	311,360

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Equity Securities

Certain equity securities and warrants are measured at fair value with net unrealized gains and losses from changes in the fair value recognized in other income (expense), net. Unrealized gain (loss) recorded (in thousands):


	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	January 31, 2026		January 25, 2025		January 31, 2026		January 25, 2025
Net gain (loss) recognized during the period on equity securities	$	(1,405)	$	1,454	$	7,446	$	1,187
Less: Net loss recognized during the period on equity securities sold during the period		—		—		—		—
Unrealized gain (loss) recognized during the period on equity securities still held at the reporting date	$	(1,405)	$	1,454	$	7,446	$	1,187

Investments Measured at Cost

On December 22, 2025, the Company invested $3,000,000 in a privately-held technology company through a Simple Agreement for Future Equity (“SAFE”). The SAFE provides the Company with the right to receive equity in the issuing company upon the occurrence of certain future events, including a qualifying equity financing or a liquidity event. The Company measures the investment at cost, less any impairment and is recorded in long-term investments and included in Equity securities and warrants line in the investments table above.

3. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels as follows:

●Level 1—Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

●Level 2—Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.

●Level 3—Inputs to the valuation that are unobservable inputs for the asset or liability.

The Company’s financial assets measured at fair value on a recurring basis at January 31, 2026, were as follows (in thousands):


		Fair Value Measurement Using
					Significant
		Quoted prices in			other			Significant
		active markets for			observable			unobservable
		identical assets			inputs			inputs
Description		(Level 1)			(Level 2)			(Level 3)			Total
Equity securities		$	6,220		$	—		$	—		$	6,220
Warrants			—			2,430			—			2,430
Total		$	6,220		$	2,430		$	—		$	8,650

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The Company had no financial liabilities measured at fair value on a recurring basis at January 31, 2026.

The Company’s financial assets measured at fair value on a recurring basis at April 30, 2025, were as follows (in thousands):


		Fair Value Measurement Using
					Significant
		Quoted prices in			other			Significant
		active markets for			observable			unobservable
		identical assets			inputs			inputs
Description		(Level 1)			(Level 2)			(Level 3)			Total
Equity securities		$	1,080		$	—		$	—		$	1,080
Warrants			—			124			—			124
Total		$	1,080		$	124		$	—		$	1,204

The Company had no financial liabilities measured at fair value on a recurring basis at April 30, 2025.

On September 12, 2022, the Company invested $5,000,000 and acquired 500,000 shares of common stock and 500,000 privately placed, redeemable warrants of Amprius Technologies, Inc. The privately placed, redeemable warrants have an exercise price of $12.50 and redemption price of $20.00. The Company measures the fair value of the privately placed, redeemable warrants using the quoted market price of the public warrants which have an exercise price of $11.50 and a redemption price of $18.00 and classifies the warrants as a level 2 fair value measurement.

4. Inventories, net

Inventories consist of the following (in thousands):


		January 31,			April 30,
		2026			2025


Raw materials		$	157,015		$	52,567
Work in process			80,709			73,434
Finished goods			97,189			46,761
Inventories, gross			334,913			172,762
Reserve for inventory excess and obsolescence			(35,636)			(28,672)
Inventories, net		$	299,277		$	144,090

5. Equity Method Investments

Investments in Limited Partnership Funds

In July 2019, the Company made its initial capital contribution to a limited partnership fund focusing on highly relevant technologies and start-up companies serving defense and industrial markets. Under the terms of the limited partnership agreement, the Company contributed a total of $10,000,000 during the fiscal years ended April 30, 2021 and 2022, and there were no further contribution commitments to this fund as of April 30, 2022. On December 30, 2025, the Company received an initial distribution from the limited partnership fund of $528,000.

In March 2022, the Company entered into a limited partnership agreement with a second limited partnership fund also focusing on highly relevant technologies and start-up companies serving defense and industrial markets. Under the terms of the limited partnership agreement, the Company is committed to contributions totaling $20,000,000 over an expected five year period. During the fiscal years ended April 30, 2025, 2024 and 2023, the Company made total contributions of $5,674,000, $3,074,000, and $5,778,000 respectively. During the nine months ended January 31, 2026, the Company made contributions of $3,244,000. Under the terms of the limited partnership agreement, the Company has committed to make additional capital contributions of $2,230,000 to the fund, which are expected to be made over the next two fiscal years.

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The Company accounts for investments in limited partnerships as equity method investments as the Company is deemed to have significant influence when it holds more than a minor interest. For the three and nine months ended January 31, 2026, the Company recorded its ownership percentage of the net (loss) gain of equity method investments, of $(295,000) and $2,688,000, respectively, in equity method investment income, net of $0 tax in the unaudited condensed consolidated statements of operations, respectively. For the three and nine months ended January 25, 2025, the Company recorded its ownership percentage of the net gains of the limited partnerships, or $0 and $1,066,000 respectively, in equity method investment income (loss), net of $0 tax in the unaudited condensed consolidated statements of operations, respectively. At January 31, 2026 and April 30, 2025, the carrying value of the equity method investments of $35,923,000 and $30,423,000, respectively, was recorded in long-term investments.

6. Warranty Reserves

The Company accrues an estimate of its exposure to warranty claims based upon both current and historical product sales data and warranty costs incurred. The warranty reserve is included in other current liabilities on the unaudited condensed consolidated balance sheet. The related expense is included in cost of sales. Warranty reserve activity is summarized as follows for the three and nine months ended January 31, 2026 and January 25, 2025, respectively (in thousands):


		Three Months Ended						Nine Months Ended
		January 31,				January 25,		January 31,			January 25,
		2026			2025			2026			2025
Beginning balance		$	6,610		$	3,642		$	4,189		$	5,538
Balance acquired from acquisition			—			—			2,274			—
Warranty expense			1,961			(230)			3,959			(1,070)
Change in estimate			(1,655)			—			(1,655)			—
Warranty costs settled			(1,439)			(625)			(3,290)			(1,681)
Ending balance		$	5,477		$	2,787		$	5,477		$	2,787

7. Intangibles, net

The components of intangibles are as follows (in thousands):


		January 31,			April 30,
		2026			2025
Technology		$	582,260		$	101,645
Licenses			1,008			1,008
Customer relationships			577,291			77,588
Backlog			52,961			2,963
In-process research and development			550			550
Non-compete agreements			320			320
Trademarks and tradenames			1,668			1,668
Other			146			146
Intangibles, gross			1,216,204			185,888
Less accumulated amortization			(290,279)			(137,177)
Intangibles, net		$	925,925		$	48,711

Technology, backlog and customer relationships intangibles were recognized in conjunction with the Company’s acquisition of Blue Halo on May 1, 2025. Refer to Note 17—Business Acquisitions for further details.

The Company tests identifiable intangible assets for impairment in the fourth quarter of each fiscal year unless there are interim indicators that suggest that it is more likely than not that either the identifiable intangible assets or goodwill may be impaired. In January 2026, a stop-work order was received on the Company’s Other Transaction Agreement for the delivery of BADGER phased array antenna systems to support Space Force’s Satellite Communication Augmentation Resource (“SCAR”) program. The Company concluded that the stop-work order represented a trigger event that indicated the carrying value of the Space reporting unit exceeded its fair value. Due to the trigger event, the Company

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performed a recoverability test on the long-lived assets of the Space reporting unit, inclusive of the intangibles, for impairment in accordance with ASC 360. The undiscounted cash flows exceeded the carrying value and no impairment was recorded for long-lived assets.

The weighted average amortization period as of January 31, 2026 and April 30, 2025 was six and three years, respectively. Amortization expense for the three and nine months ended January 31, 2026 was $49,864,000 and $152,287,000, respectively. Amortization expense for the three and nine months ended January 25, 2025 was $4,778,000 and $14,348,000, respectively.

Estimated remaining amortization expense for the next five years is as follows (in thousands):


		Year ending
		April 30,
2026		$	50,157
2027			164,101
2028			156,636
2029			153,940
2030			130,905
		$	655,739

8. Goodwill

The following table presents the changes in the Company’s goodwill balance by segment (in thousands):


	AxS		SCDE		Total

Goodwill	$	431,157	$	—	$	431,157
Accumulated impairment losses		(174,376)		—		(174,376)
Balance at April 30, 2025		256,781		—		256,781

Additions to goodwill		943,157		1,413,082		2,356,239
Impairment to goodwill		—		(151,306)		(151,306)

Goodwill		1,374,314		1,413,082		2,787,396
Accumulated impairment losses		(174,376)		(151,306)		(325,682)
Balance at January 31, 2026	$	1,199,938	$	1,261,776	$	2,461,714

In January 2026, a stop-work order was received on the Company’s Other Transaction Agreement for the delivery of BADGER phased array antenna systems to support Space Force’s SCAR program. The Company concluded that the stop-work order represented a trigger event that indicated the carrying value of the Space reporting unit exceeded its fair value. As a result, the Company updated its estimates of the long-term cash flows of the Space reporting unit to reflect the reduced revenue associated with the stop-work order as well as an increase in expected research and development and capital investments to achieve product commercialization, which is expected to result in expanded opportunities and improve long term product margins. The changes in estimates resulted in the recognition of a goodwill impairment charge of approximately $151,000,000 in the Space reporting unit. As of January 31, 2026, the Company has not identified any events or circumstances, other than those identified for Space, that could trigger an impairment review prior to the Company’s annual impairment test during the fourth quarter of fiscal year 2026, including taking into account the reporting units identified from the BlueHalo acquisition on May 1, 2025.

The AxS segment includes goodwill from the acquisitions of Pulse Aerospace, LLC (“Pulse”), Arcturus UAV, Inc. (“Arcturus”), Telerob Gesellschaft für Fernhantierungstechnik mbH (“Telerob”), Planck Aerosystems, Inc., Tomahawk Robotics, Inc. and certain BlueHalo reporting units and includes goodwill from the purchase of certain assets of Intelligent Systems Group business segment of Progeny Systems Corporation. The SCDE segment includes goodwill from certain BlueHalo reporting units.

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9. Debt

On October 4, 2024, the Company entered into a Third Amendment to Credit Agreement with the existing lenders, Bank of America, N.A. (“BofA NA”), the administrative agent and the swingline lender, JPMorgan Chase Bank, N.A. (“JPM”), U.S. Bank National Association (“U.S. Bank”), and Citibank, N.A. (“Citibank”) (the “Third Amendment to Credit Agreement”).

The Third Amendment to Credit Agreement provided for an aggregate $200,000,000 revolving credit facility (the “Revolving Facility”), including a $25,000,000 sublimit for the issuance of standby and commercial letters of credit, and a $10,000,000 sublimit for swingline loans, secured by all assets of the Company and the Company’s domestic subsidiaries (the “Guarantors”), and extended the maturity date for obligations pursuant to the Credit Agreement to October 4, 2029. Upon effectiveness of the Third Amendment to Credit Agreement, the Company drew $15,000,000 from the amended Revolving Facility and repaid in full all outstanding amounts owed pursuant to the prior Term Loan Facility. The unamortized debt issuance costs allocated to the prior Term Loan Facility of $590,000 were expensed upon repayment of the Term Loan Facility and recorded in interest expense.

On May 1, 2025 (the “Closing Date”), in connection with the consummation of the BlueHalo acquisition, the Company entered into a Fourth Amendment to Credit Agreement with BofA NA, the administrative agent and the swingline lender, JPM, U.S. Bank, Citibank, BMO Bank N.A. (“BMO”), Citizens Banks, N.A. (“Citizens”) and Royal Bank of Canada (“RBC”) (the “Fourth Amendment to Credit Agreement” and the existing Credit Agreement as amended thereby, the “Amended Credit Agreement”). The Amended Credit Agreement now provides for an aggregate $700,000,000 term loan (the “Term Loan Facility” and, together with the Revolving Facility, the “Credit Facilities”) and an aggregate $350,000,000 revolving credit facility, including a $25,000,000 sublimit for the issuance of standby and commercial letters of credit, and a $10,000,000 sublimit for swingline loans, secured by all assets of the Company and the Guarantors, maintains the maturity date for obligations of October 4, 2029, as extended by the Third Amendment to Credit Agreement.

The Term A Loan drawn under the Term Loan Facility matures two years after the Closing Date and amortizes at a rate of 5.00% per annum, with the remaining outstanding principal amount due and payable on the maturity date. The applicable margin on the Term A Loan is based upon the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) and whether the Company elects as its benchmark rate (i) SOFR (in which case, the applicable margin ranges from 1.50 - 2.50% per annum depending on the Company’s Consolidated Leverage Ratio) plus a credit spread adjustment of 0.10% or (ii) Base Rate (in which case, the applicable margin ranges from 0.50 - 1.50% per annum depending on the Company’s Consolidated Leverage Ratio). Upon the occurrence of an event of default, an additional 2.00% per annum default interest rate may apply. Pursuant to the Fourth Amendment to Credit Agreement, the Company is subject to two financial maintenance covenants which require that (i) the Consolidated Senior Secured Leverage Ratio (as defined in the Credit Agreement) not exceed 3.50 to 1.00 as of the end of any fiscal quarter, for the four fiscal quarters following consummation of the BlueHalo acquisition, and thereafter 3.00 to 1.00 as of the end of any fiscal quarter, and (ii) the Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) not be less than 1.25 to 1.00 as of the end of any fiscal quarter.

Upon effectiveness of the Amended Credit Agreement, the Company drew $225,000,000 from the amended Revolving Facility and the full $700,000,000 of the Term Loan Facility. In June 2025, the Company drew an additional $10,000,000 under the Revolving Facility. In July 2025, the Company used the proceeds from the issuance of common stock and the Company’s 0% Convertible Senior Notes due 2030 (the “Notes”) to fully repay the Term A Loan and outstanding Revolving Facility balance. The unamortized debt issuance costs allocated to the Term Loan Facility of $6,668,000 were expensed upon repayment of the Term Loan Facility and recorded as interest expense in the consolidated statements of operations. The Revolver Facility remains open and available to the Company. The Company’s ability to borrow under the Revolving Facility is reduced by outstanding letters of credit, which as of January 31, 2026 and April 30, 2025, was $11,008,000 and $9,376,000, respectively, and as of January 31, 2026, approximately $338,992,000 was available under the Revolving Facility. Borrowings under the Revolving Facility may be used for working capital and other general corporate purposes, including acquisitions that meet certain parameters. As of January

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31, 2026, the Company was in compliance with all amended covenants. Please refer to Note 10–Convertible Notes and Note 16–Share Issuances for further details.

Long-term debt and the current period interest rates were as follows:


	January 31,			April 30,
	2026			2025
	(In thousands)			(In thousands)
Revolving credit facility	$	—		$	30,000
Convertible notes		747,500			—
Total long-term debt		747,500			30,000
Less unamortized debt issuance costs–convertible notes		19,623			—
Total long-term debt, net of unamortized debt issuance costs–convertible notes	$	727,877		$	30,000
Unamortized debt issuance costs–revolving credit facility	$	1,872		$	1,281
Current period interest rate		0%			5.9%

Future contractual long-term debt principal payments at January 31, 2026 were as follows:


Fiscal Year	(In thousands)
2026	$	—
2027		—
2028		—
2029		—
2030		—
2031		747,500
	$	747,500

10. Convertible Notes

In July 2025, the Company entered into an underwriting agreement (the “Note Underwriting Agreement”) with certain underwriters (the “Note Underwriters”) agreeing, subject to customary conditions, to issue and sell $650,000,000 aggregate principal amount of the Notes to the Note Underwriters as well as an option, exercisable within 30 days after entering the Note Underwriting Agreement, to purchase up to an additional $97,500,000 aggregate principal amount of Notes solely to cover over-allotments. The Note Underwriters exercised such option to purchase an additional $97,500,000 aggregate principal amount of Notes. The issuance of $747,500,000 aggregate principal amount of Notes was completed in July 2025.

The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness, including any borrowings under the Company's revolving credit facility; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.

The Notes do not bear regular interest, and the principal amount of the Notes will not accrete. Special interest will accrue on the Notes upon the occurrence of certain events relating to the Company's failure to file certain SEC reports as provided in the Indenture. The Notes will mature on July 15, 2030, unless earlier repurchased, redeemed or converted. Before April 15, 2030, noteholders have the right to convert their Notes only upon the occurrence of certain events. From and after April 15, 2030, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will have the right to elect to settle conversions either entirely in cash or in a combination of cash and shares of its common stock. Upon conversion of

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any Note, the consideration due upon conversion, which will be determined over an “Observation Period” (as defined in the Indenture) consisting of 60 consecutive trading days, will be paid in cash up to at least the principal amount of the Notes being converted and the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the principal amount of the Notes being converted. The initial conversion rate is 3.1017 shares of the Company's common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $322.40 per share of the Company's common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes will be redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after July 21, 2028 and on or before the 61st scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. However, the Company may not redeem less than all of the outstanding Notes unless at least $100.0 million aggregate principal amount of Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers as provided in the Indenture, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date. The definition in the Indenture of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of special interest on the Notes, will be subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the Company's failure to convert a Note in accordance with the Indenture within a specified period of time; (iv) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (v) a default by the Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (vi) certain defaults by the Company or any of its significant subsidiaries with respect to indebtedness for borrowed money of at least $55,000,000; and (vii) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest, if any, on all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest, if any, on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders

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to receive special interest on the Notes for up to 365 days, at a rate per annum equal to 0.25% of the principal amount of the Notes for the first 180 days on which special interest accrues and, thereafter, at a rate per annum equal to 0.50% of the principal amount thereof.

11. Leases

The components of lease costs recorded in cost of sales and selling, general and administrative (“SG&A”) expense were as follows (in thousands):


		Nine Months Ended		Nine Months Ended
		January 31,		January 25,
		2026		2025
Operating lease cost		$	18,889	$	7,379
Short term lease cost			980		398
Variable lease cost			2,796		1,212
Sublease income			—		—
Total lease costs, net		$	22,665	$	8,989

Supplemental lease information was as follows:


		Nine Months Ended		Nine Months Ended
		January 31,		January 25,
		2026		2025
		(In thousands)		(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities		$	16,176	$	7,328
Right-of-use assets obtained in exchange for new lease liabilities		$	4,297	$	7,112

Weighted average remaining lease term			72 months		50 months
Weighted average discount rate			6.9%		5.6%

Maturities of operating lease liabilities as of January 31, 2026 were as follows (in thousands):


Fiscal Year
2026	$	2,590
2027		24,122
2028		22,538
2029		19,402
2030		15,261
Thereafter		40,167
Total lease payments	$	124,080
Less: imputed interest		(25,944)
Total present value of operating lease liabilities	$	98,136

12. Accumulated Other Comprehensive Loss and Reclassifications Adjustments

The components of accumulated other comprehensive loss and adjustments are as follows (in thousands):


		Nine Months Ended		Nine Months Ended
		January 31,		January 25,
		2026		2025
Balance as of April 30, 2025 and April 30, 2024, respectively		$	(6,514)	$	(5,592)
Change in foreign currency translation adjustments			1,015		(605)
Unrealized available-for-sale security losses			(15)		—
Balance as of January 31, 2026 and January 25, 2025, respectively		$	(5,514)	$	(6,197)

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13. Customer-Funded Research & Development

Customer-funded R&D costs are incurred pursuant to contracts (revenue arrangements) to perform R&D activities according to customer specifications. These costs are direct contract costs and are expensed to cost of sales as costs are incurred. Revenue from customer-funded R&D contracts is recognized in accordance with ASC 606 over time as costs are incurred. Revenue from customer-funded R&D was approximately $58,520,000 and $177,671,000 for the three and nine months ended January 31, 2026. Revenue from customer-funded R&D was approximately $19,730,000 and $58,569,000 for the three and nine months ended January 25, 2025.

14. Long-Term Incentive Awards

During the three months ended August 2, 2025, the Company granted awards under its 2021 Equity Incentive Plan (the “2021 Plan”) to key employees (“Fiscal 2026 LTIP”). Awards under the Fiscal 2026 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2026, July 2027 and July 2028, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) targets for the three-year period ending April 30, 2028. At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric. Threshold achievement levels for which the PRSUs would vest at 50% for each such metric and maximum achievement levels for which such awards would vest at 250% for each such metric were also established. The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and non-GAAP adjusted EBITDA targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of the Company’s common stock. For the three and nine months ended January 31, 2026 the Company recorded $1,202,000 and $4,216,000 of compensation expense related to the Fiscal 2026 LTIP, respectively. The Company recorded no compensation expense to the Fiscal 2026 LTIP for the three and nine months ended January 25, 2025, respectively. At January 31, 2026, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2026 LTIP is $31,323,000.

During the three months ended July 27, 2024, the Company granted awards under its 2021 Plan to key employees (“Fiscal 2025 LTIP”). Awards under the Fiscal 2025 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2025, July 2026 and July 2027, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and non-GAAP adjusted EBITDA targets for the three-year period ending April 30, 2027. At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric. Threshold achievement levels for which the PRSUs would vest at 50% for each such metric and maximum achievement levels for which such awards would vest at 250% for each such metric were also established. The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and non-GAAP adjusted EBITDA targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of the Company’s common stock. For the three and nine months ended January 31, 2026, the Company recorded $1,541,000 and $6,625,000 of compensation expense related to the Fiscal 2025 LTIP. For the three and nine months ended January 25, 2025, the Company recorded $918,000 and $2,192,000 of compensation expense related to the Fiscal 2025 LTIP. At January 31, 2026, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2025 LTIP is $17,463,000.

During the three months ended July 29, 2023, the Company granted awards under the 2021 Plan to key employees (“Fiscal 2024 LTIP”). Awards under the Fiscal 2024 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2024, July 2025 and July 2026, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and non-GAAP adjusted EBITDA targets for the three-year period ending April 30, 2026. At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric. Threshold achievement levels for which the PRSUs would vest at 50% for each such metric and maximum achievement levels for which such awards would vest at 250% for each such metric were also established. The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and non-GAAP adjusted EBITDA targets for the performance period. Settlement of the PRSUs will be made in fully-vested

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shares of the Company’s common stock. For the three and nine months ended January 31, 2026, the Company recorded $1,239,000 and $5,123,000 of compensation expense related to the Fiscal 2024 LTIP. For the three and nine months ended January 25, 2025, the Company recorded $938,000 and $3,128,000 of compensation expense related to the Fiscal 2024 LTIP. At January 31, 2026, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2024 LTIP is $14,454,000.

During the three months ended July 30, 2022, the Company granted awards under the 2021 Plan to key employees (“Fiscal 2023 LTIP”). Awards under the Fiscal 2023 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2023, July 2024 and July 2025, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and non-GAAP adjusted EBITDA targets for the three-year period ending April 30, 2025. During the three months ended August 2, 2025, the Company issued a total of 61,605 fully-vested shares of the Company’s common stock to settle the PRSUs in the Fiscal 2023 LTIP. For the three and nine months ended January 31, 2026 the Company recorded no compensation expense related to the Fiscal 2023 LTIP. For the three and nine months ended January 25, 2025, the Company recorded $587,000, and $2,253,000 of compensation expense related to the Fiscal 2023 LTIP, respectively.

At each reporting period, the Company reassesses the probability of achieving the performance targets for the PRSUs. The estimation of whether the performance targets will be achieved requires judgment, and, to the extent actual results or updated estimates differ from the Company’s current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised. No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited.

15. Income Taxes

For the three and nine months ended January 31, 2026, the Company recorded an income tax benefit of $(19,486,000) and $(36,960,000) yielding an effective tax rate of (11.1)% and (13.2%), respectively. For the three and nine months ended January 25, 2025, the Company recorded an income tax benefit of $(605,000) and a provision for income taxes of $659,000 yielding an effective tax rate of (25.6)% and 2.5%, respectively. The variance from statutory rates for the three and nine months ended January 31, 2026 was primarily due to the non-deductible goodwill impairment, for the three months ended January 31, 2026. The variance from statutory rates for the nine months ended January 25, 2025 was primarily due to the decrease in income before taxes, offset by a decrease in foreign-derived intangible income (“FDII”) deductions and federal R&D credits.

On July 4, 2025, the reconciliation bill, commonly known as the One Big Beautiful Bill Act (“OBBBA”), was enacted into law. The OBBBA, among other things, eliminates the requirement to capitalize U.S. R&D expenses, permanently extends certain provisions of the Tax Cuts & Jobs Act of 2017 and modifies certain international tax provisions, as part of a broader set of updates to the U.S. international tax rules. These changes are effective for tax years beginning after December 31, 2025, and include modifying key elements of the TCJA-era regime. These include adjusting the international tax effective rates, renaming and reworking of the current global intangible low-taxed income (“GILTI”) regime as “net CFC tested income” and foreign derived intangible income (FDII) deduction as “foreign derived deduction eligible income”, eliminates QBAI reduction, and modifies deductions and foreign tax credit rules. As the OBBBA was enacted during the Company’s fiscal quarter ended August 2, 2025, the Company reflected the impacts of the OBBBA on the condensed consolidated financial statements. The Company is in the process of evaluating the financial statement impact of these provisions in future periods. Each of these changes may result in accelerated tax deductions during the current and future tax years. Cash tax payments for the fiscal year ending April 30, 2026 are expected to be significantly reduced as a result of the accelerated tax deductions. However, the Company's total income tax expense and effective tax rate are not expected to materially change as a result of the new legislation.

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16. Share Issuances

In July 2025, the Company entered into an underwriting agreement (the “Common Stock Underwriting Agreement”) with certain underwriters (the “Common Stock Underwriters”) agreeing, subject to customary conditions, to issue and sell 3,528,226 shares of the Company’s common stock to the Common Stock Underwriters. In addition, pursuant to the Common Stock Underwriting Agreement, the Company granted the Common Stock Underwriters an option, exercisable within 30 days after entering the Common Stock Underwriting Agreement, to purchase up to an additional 529,234 shares of the Company’s common stock (the “Over-allotment Option”). The issuance of 3,528,226 shares of common stock was completed in July 2025. Subsequently, the Company closed the issuance and sale of 529,234 shares of its common stock pursuant to the underwriters’ full exercise of the Over-allotment Option in July 2025 for a total issuance of 4,057,460 shares, generating gross proceeds to the Company of $1,006,250,000, proceeds of $968,515,000, net of underwriting discount and $966,846,000 net of underwriting discount and other equity issuance costs.

17. Business Acquisitions

BlueHalo Acquisition

On May 1, 2025, the Company closed its acquisition of BlueHalo for merger consideration, net of cash acquired, of $3,484,945,000. Through the acquisition, BlueHalo is incorporated into the Company’s AxS and SCDE segments. The Company believes that the acquisition will help to advance the combined company as a global defense technology leader across air, land, sea, space, and cyber. The Company accounted for the acquisition under the acquisition method of accounting for business combinations.


(in thousands)		Amount
Equity consideration transferred	$	2,640,365
Settlement of BlueHalo’s transaction expenses		25,214
Settlement of BlueHalo’s debt		863,207
Merger consideration	$	3,528,786
Less cash acquired		(43,841)
Fair value of consideration transferred	$	3,484,945

The fair value of the Company’s common stock issued is based on 17,425,849 shares issued as consideration, per the terms of the Merger Agreement, and the closing share price of $151.52 on April 30, 2025.

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The following table summarizes the preliminary allocation of the fair value of the merger consideration transferred to assets acquired and liabilities assumed as of the acquisition date. The allocation of the purchase price is preliminary and subject to change as the Company continues to evaluate the fair values of certain assets and liabilities acquired. Open items in the purchase price allocation include the valuation of assets acquired and liabilities assumed including, but not limited to technology, backlog and customer relationships intangibles; fair value adjustment to inventory, property, plant and equipment; leases; details surrounding tax matters; and assumptions underlying certain existing or potential reserves, such as those for inventory and legal matters. During the six months ended January 31, 2026, the Company recorded adjustments related to the preliminary allocation of the purchase price including a revision to the fair value of technology, backlog and customer relationships intangibles; fair value adjustment to inventory; and deferred tax liability resulting in a net increase to goodwill of $73,460,000. These adjustments resulted in a reduction of amortization expense of $(7,427,000) and an increase of amortization expense of $10,957,000 related to the three months ended August 2, 2025 and November 1, 2025, respectively, (in thousands):


	May 1,
	2025
Fair value of assets acquired:
Accounts receivable, net of allowance for credit losses of $420 at May 1, 2025	$	80,752
Unbilled receivables and retentions		96,455
Inventories, net		88,167
Income taxes receivable		3,941
Prepaid expenses and other current assets		13,628
Long-term investments		151
Property and equipment		89,327
Operating lease right-of-use assets		70,879
Intangibles		1,029,800
Goodwill		2,356,239
Other assets		1,086
Total identifiable assets	$	3,830,425

Fair value of liabilities assumed:
Accounts payable		56,930
Wages and related accruals		43,031
Customer advances		42,700
Current operating lease liabilities		6,707
Other current liabilities		11,971
Non-current operating lease liabilities		64,720
Deferred income taxes		119,421
Total liabilities assumed		345,480
Total identifiable net assets	$	3,484,945

Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The fair value assigned to intangible assets has been estimated based on third-party preliminary valuation studies utilizing income-based methodologies and corroborated with benchmarks of similar transactions in the industry. Use of different estimates and judgments could yield materially different results. All intangible assets acquired in the BlueHalo acquisition are subject to amortization.

The goodwill is attributable to the differences between the estimated fair value of the consideration transferred and the estimated fair value of the assets acquired, and liabilities assumed. For income tax purposes the goodwill and intangibles are not deductible for tax purposes.

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The following table summarizes the valuation of the fair value of intangible assets acquired (in thousands):


		Preliminary Fair Value	Estimated Useful Life
			Years
Preliminary fair value of intangible assets acquired:
Backlog	$	49,900	1-2
Customer relationships		499,500	4-9
Developed technology		480,400	4-10
Intangible assets acquired	$	1,029,800

BlueHalo Supplemental Pro Forma Information (unaudited)

BlueHalo revenue and loss from operations for the nine months ended January 31, 2026 since its acquisition on May 1, 2025 was $656,854,000 and $(334,922,000), inclusive of $161,153,000 of intangible amortization and $151,306,000 of goodwill impairment, respectively. The following unaudited pro forma summary presents condensed consolidated information of the Company as if the business acquisition had occurred on May 1, 2024, the first day of the Company's fiscal year 2025. The pro forma amounts include the historical operating results of the Company and BlueHalo prior to the acquisition. The pro forma results are not necessarily indicative of the Company's results of operations that would have been obtained had the acquisition of BlueHalo been completed for the period presented, or which may be realized in the future (in thousands):

AeroVironment Inc 10-Q