So, defense stocks are having a moment. After a joint U.S.-Israel strike on Iran ratcheted up tensions in the Middle East, investors started betting on more military spending. That sector-wide tailwind helped lift shares of AeroVironment Inc. (AVAV) on Tuesday. But the drone and defense tech company wasn't just riding the wave; it had its own news driving the rally, including progress on a key Space Force contract and a major manufacturing expansion.

Negotiating the Final Frontier

Let's talk about the Space Force contract. AeroVironment said it's still actively negotiating with the U.S. government over a contract to deliver ground stations. This isn't just any hardware—it's for deploying BADGER phased-array antenna systems to support the Satellite Communications Augmentation Resource (SCAR) program. You know, for when you need to talk to satellites.

The contract hit a temporary pause, but that seems to be part of the plan. Both sides are working to hammer out a firm-fixed-price agreement. The goal? To create a more commercialized product that can be delivered faster. AeroVironment seems pretty confident here, saying its "innovation and ability to scale ahead of manufacturing remains a key differentiator" and that it can deliver systems ahead of competitors. In the defense business, being faster than the other guy is often the whole game.

Building a High-Tech Hub in the Desert

Separately, the company is putting down deeper roots in New Mexico. AeroVironment plans to invest over $30 million to expand its manufacturing footprint in Albuquerque. To sweeten the deal, state and local authorities are chipping in a $6 million performance-based incentive package—$5 million from the State of New Mexico and $1 million from the City of Albuquerque.

This isn't just about building more factory space. The expansion will upgrade operations across the company's three facilities in the Sandia Science & Technology Park. The company expects this "vertically integrated campus" to generate more than $670 million in economic impact over the next decade and create more than 450 high-wage jobs. They already employ over 400 people locally and report nearly 30% year-over-year growth from 2023 to 2026.

This site is crucial—it supports the company's Space & Directed Energy Group. That's the team making advanced RF systems, satellite communications ground terminals, laser systems, and counter-drone (UAS) technologies. In other words, the kind of gear that's very much aligned with current U.S. national security priorities.

All Eyes on the Earnings Report

With all this news, investors are now looking ahead to the company's next financial report card. AeroVironment is scheduled to report its third-quarter fiscal year 2026 results after the market closes on March 10, 2026.

The expectations are high. Analysts are looking for earnings per share (EPS) of 73 cents, which is a big jump from 30 cents in the year-ago quarter. On the revenue side, the estimate is $483.39 million, up sharply from $167.64 million. That's the kind of growth that gets a stock moving.

Speaking of analysts, the consensus view on the stock remains a Buy, with an average price target of $353.89. But it's worth noting the recent moves: Baird lowered its target to $260 while maintaining an Outperform rating, Piper Sandler cut its target to $290 but kept an Overweight rating, and Jefferies held its target steady at $390 with a Buy rating. Even with some target reductions, the overall sentiment is still positive.

Putting it all together, AeroVironment shares were up 8.80% at $226.66 on Tuesday. It's a classic case of a stock benefiting from both macro trends (defense sector strength) and company-specific catalysts (contract news and expansion plans). Now, everyone waits to see if the earnings can deliver on the high expectations.