A contract worth less than $1 billion may not seem like much these days, but for drone maker AeroViironment it's a big deal.
Shares of the defense contractor shot up 10% Monday after it announced that it had secured a $315 million initial award for "product deliveries and support" to the U.S. government. By midday, the company's shares were trading around $124.
The total contract amount could reach $940 million as part of the multiyear arrangement known as an IDIQ contract. IDIQ stands for indefinite delivery, indefinite quantity and is a typical means by which the federal government procures goods and services.
AeroVironment said the contract was for its autonomous systems, but didn't disclose exactly which ones. The category includes its tube-launched Switchblade line of drones, which have been used by Ukraine in its war with Russia. They include the lightweight 300 models, which can be carried in a backpack, and its 600 models, capable of destroying larger targets such as an armored tank or patrol boat.
The reason why the deal matters so much is that even the initial $314 million amount is the equivalent of two thirds of its typical revenue in a single quarter. Should the company reach the $914 million deal cap, that would work out to more than half a year's revenue from a single contract.
It's also in-line with other big contracts the company has announced in recent year, such as the $990 million IDIQ for its Switchblade systems announced back in 2024.
What's unusual this time is the secrecy around what the government is buying from AeroVironment. "It's precision strike related," BTIG analyst Andre Madrid told Barron's. He added that the stock has "been beaten down, significantly. It's at levels that I would consider cheap for the stock."
AeroVironment is among the many defense contractors whose stock price has languished this year over concerns about possible defense spending cuts. The drone maker's stock had already fallen 50% for the year even before the Democrats' swept Congress in the midterm elections. Through last Friday's close, it was down by 53%.
Other hard-hit defense stocks include Karman, which is down 37% for the year even after closing up 42% on Friday, and Kratos, which is down 50% in 2026. Karman makes specialized parts for missiles and drones, while Kratos makes drones, engines for cruise missiles, and defense electronics.
Larger defense contractors aren't having a great year, either. Shares of L3Harris, Lockheed Martin, and Northrop Grumman are all down by single digits in 2026.
That said, defense stocks were rising more broadly Monday, with the iShares U.S. Aerospace & Defense ETF up nearly 4%. "It's a bullish day for defense tech," BTIG's Madrid added. "People are really loading up."
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