AeroVironment CEO Says Drone Warfare Shift Is ‘Our Moment’ as Defense Demand Builds

Key Points

• CEO Wahid Nawabi said the Ukraine and Iran conflicts have accelerated the shift toward drones and counter-drone systems, calling the moment a major opportunity for AeroVironment as militaries move away from traditional platforms and toward unmanned warfare at scale.
• AeroVironment is seeing strong Pentagon momentum as the Defense Department looks to consolidate funding and decision-making for autonomous systems, while the company competes for major programs like the Army’s E-HEL laser effort and next-generation counter-UAS missile contract.
• The company is pushing a layered counter-drone strategy that combines RF jamming, directed-energy systems and kinetic interceptors, and Nawabi said the market could eventually expand to tens of thousands of civilian and infrastructure sites as regulations evolve.

AeroVironment NASDAQ: AVAV Chairman, President and CEO Wahid Nawabi said accelerating global security threats are reshaping defense priorities toward drones, loitering munitions and counter-unmanned aircraft systems, areas where he said the company is well positioned.

Speaking at a Bank of America event, Nawabi said conflicts involving Ukraine and Iran have “shifted the paradigm dramatically” for defense procurement. He said military leaders historically focused on platforms such as fighter jets, aircraft carriers, tanks and armored vehicles, but recent events have underscored the need to produce armed drones at scale and defend against them economically.

“This is, like, our moment,” Nawabi said, describing the growing focus on unmanned systems. He added that the U.S. does not currently have enough capability to defeat large volumes of drones “at an economic way,” particularly if adversaries can deploy them in the thousands or more.

Company Sees Momentum From Pentagon Focus on Autonomous Systems

Nawabi said the Defense Autonomous Warfare Group, or DAWG, appears to be part of a Department of Defense effort to consolidate decision-making and funding authority for autonomous systems. He said AeroVironment has been “involved in very heavily” with DAWG-related activity, while noting that much of the execution would still occur through the military services, program offices and contracting offices.

He said the change could help the Pentagon move faster over the next 12 months by creating more direct responsibility and authority for unmanned and autonomous systems. Later in the discussion, Nawabi said the department is trying to consolidate line items into a larger funding bucket for autonomous systems, drones and unmanned platforms, though he acknowledged that Congress typically prefers more specific line-item detail.

“Their argument to the Congress is, ‘I need to have some level of flexibility,’” Nawabi said, adding that he believes there is bipartisan support for higher defense funding but uncertainty around “how much, where, in what form, and when.”

Layered Counter-Drone Strategy

Nawabi described AeroVironment’s counter-UAS approach as layered, rather than relying on one solution. He said the first layer is radio-frequency jamming, citing the company’s Titan Series, which he called widely used in Ukraine. He said that business is “doubling every year.”

For drones immune to RF jamming, Nawabi pointed to directed energy systems, including the company’s LOCUST Series and the recently announced X3 system. He said X3 is designed to be mounted on vehicles such as a Stryker or JLTV, allowing forces to detect and defeat drones while moving.

Nawabi also discussed the U.S. Army’s E-HEL program, which he described as an emerging high-energy laser effort expected to reach a decision within 30 to 90 days. He said the program would be the first production-level program of record for a laser weapon system in U.S. military history and that AeroVironment is competing for it.

As a third layer, Nawabi cited kinetic options, including missiles or systems such as Switchblade. He said the company is competing in the U.S. Army’s next-generation counter-UAS missile program, or NGCM, and has been awarded a contract after being down-selected alongside RTX. He said AeroVironment expects to deliver “80 some odd systems” and that the missile is targeted at Group 1 through 3 drones at an estimated $100,000 to $150,000 price target, compared with current missiles costing millions of dollars.

Civilian and Infrastructure Protection Could Expand Market

Asked about the vulnerability of civilian targets to unmanned systems, Nawabi said there is a scenario in which high-profile civilian venues and critical infrastructure require protection from drones. He mentioned events and facilities such as the Olympics, World Cup, music festivals, NFL games, Major League Baseball venues, nuclear power plants, hydroelectric dams, water sanitation sites, stadiums and data centers.

He said the initial focus would likely be on military sites and critical infrastructure, including domestic applications under initiatives such as Golden Dome. Nawabi added that at some sites, lower-end systems such as Titan jammers or smaller LOCUST systems may be more likely than vehicle-mounted high-energy laser systems.

“The market for that is basically tens of thousands of sites,” he said. Nawabi added that regulation remains the biggest hurdle, but said the Department of Defense and Federal Aviation Administration recently announced that LOCUST had been proven safe and operationally deployable domestically, which he said could support adoption in coming years.

Portfolio, Competition and Open Architecture

Nawabi said AeroVironment’s portfolio spans non-lethal small and medium unmanned systems, loitering munitions, one-way attack drones and counter-UAS technologies. He said the company is a leader in Group 1, 2 and 3 systems, cited JUMP 20 and JUMP 20-X, and said AeroVironment has won seven of eight recent international programs, with the one loss attributed to a non-compliant bid.

On lethal systems, Nawabi cited Switchblade, Red Dragon, the Dragon family and Mayhem. He said the company is the largest producer of these systems globally and called AeroVironment a dominant player in the category.

Addressing competition from startups, European companies and large defense primes, Nawabi said the market is growing quickly enough to attract more players. However, he said AeroVironment’s advantages include installed base, customer breadth, production scale and internal technology development. He said the company has more than 55,000 small drone systems installed, customers across 55 allied nations outside the U.S., and products in use by every branch of the U.S. military.

Nawabi also said AeroVironment designs many of its own subsystems, including structures, motors, autopilots, autonomy packages, propulsion battery packs and gimbals. He said that gives the company an edge in program-of-record competitions. He added that AeroVironment is already supplying some technologies to other manufacturers, including ground control systems from Tomahawk Robotics and autonomy packages integrated into competitors’ unmanned systems.

BlueHalo Integration and R&D Spending

A company executive identified as Sean said the BlueHalo acquisition, which closed May 1 of last year, was “transformational” compared with prior tuck-in or bolt-on deals. He said the company reorganized into two operating segments while also making digital infrastructure, tool, process and personnel changes.

Sean said AeroVironment expects to remain acquisitive and is developing playbooks for future integrations. Nawabi added that the company has invested heavily in upgrading its ERP system to Oracle Fusion and is entering a third phase of that work after completing the first two phases.

On research and development, Nawabi said AeroVironment has historically spent between roughly 10% and 18% of revenue, with some years lower, and is now around 7% to 8% after BlueHalo increased revenue and lowered the percentage. He said the company expects to spend about 8% to 10% of revenue on internally funded R&D, with customer-funded R&D bringing the total closer to 15%.

“We intentionally are not increasing EBITDA margins as we grow because we’re going to continue to invest because we don’t want to miss out on the growth,” Nawabi said. He cited recent product launches including JUMP 20-X, Switchblade 400, Mayhem, X3 and Titan 4 as examples of where the company is directing its investment.

About AeroVironment NASDAQ: AVAV

AeroVironment, Inc NASDAQ: AVAV is a technology company specializing in unmanned aerial systems (UAS), tactical missiles and precision loitering munitions, electric vehicle charging and scalable energy systems. Headquartered in Monrovia, California, the company develops solutions for defense, public safety and commercial markets. Their offerings include small UAS for intelligence, surveillance and reconnaissance, as well as advanced weapons systems designed to meet the needs of modern military operations.

The company's unmanned aerial systems portfolio features platforms such as the Raven, Puma and Switchblade series, which are deployed by the U.S.

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