AeroVironment, Inc. (AVAV) stock surged in Thursday premarket trading after the defense technology company reported better-than-expected first-quarter results and boosted its guidance.

Funded backlog climbed 37% year over year to a record $1.5 billion. Total funded and unfunded backlog reached about $2.8 billion.

First-quarter book-to-bill was 1.4 times. Trailing 12-month bookings topped $3 billion, with a 1.5-times book-to-bill ratio.

Key awards included a $117 million P550 Long Range Reconnaissance contract, a $30 million Puma contract for Germany and a $51 million Switchblade 600 award.

LOCUST secured a nearly $465 million U.S. Army EHEL contract, which AeroVironment described as the U.S. military's first production contract for directed-energy systems. The program also received its first international order.

TITAN MS received a $500 million sole-source IDIQ award, including an initial $80 million contract supporting the U.S. Golden Dome initiative.

During the earnings call, CEO Wahid Nawabi said AeroVironment's LOCUST directed-energy weapon business could grow into a "flagship franchise" that rivals its largest businesses in revenue, profitability and scale.

He said the laser weapons product line could become a more than $500 million-a-year franchise within roughly a year, supported by rising U.S. and international demand and expanded production capacity.

Earnings Beat

Revenue rose to $480.49 million, beating the $456.20 million analyst estimate, according to market data.

Adjusted earnings of 59 cents per share beat the 24-cent estimate.

Adjusted gross margin improved to 30% from 29%. Product margin increased to 40% from 36%, while service margin fell to 8% from 13%.

AeroVironment generated $13 million in operating cash flow. Free cash flow was negative $36 million, mainly due to higher spending on facility expansion.

The company ended the quarter with $675 million in cash and investments and $747.5 million in debt.

Autonomous Systems Drives Growth

Autonomous Systems revenue increased 21% to $346 million, representing 72% of total revenue. Precision Strike and Defensive Systems revenue rose 8% to $197 million, while Uncrewed Aircraft Systems revenue jumped 71% to $120 million.

SCDE revenue fell 21% to about $134 million, partly due to the SCAR contract termination. Space and Directed Energy revenue declined 28%, while Cyber and Mission Solutions revenue fell 16%.

Fiscal 2027 Outlook

For fiscal 2027, AeroVironment expects revenue of $2.125 billion to $2.225 billion, compared with the $2.195 billion analyst estimate.

The company maintained its fiscal 2027 adjusted earnings outlook of $3.02 to $3.34 per share, versus the $3.23 analyst estimate.

Management expects revenue and earnings to be weighted toward the second half. AeroVironment also expects negative free cash flow for the year due to elevated capital spending.

AVAV Price Action: AeroVironment shares were up 6.87% at $150.47 during premarket trading on Thursday, according to market data.