This article first appeared on GuruFocus .
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Revenue:$43.2 million in Q2 2026, up nearly 76% year-over-year from $24.6 million in Q2 2025.
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Gross Profit:$27.7 million, with gross margin of 64%, up from $15 million and 61% in the prior-year quarter.
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Operating Income:$1.7 million, versus a loss of $19.7 million in Q2 2025.
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Net Loss:$2 million in Q2 2026, compared to net income of $5.9 million in Q2 2025.
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EBITDA:$5.1 million in Q2 2026, down from $18.9 million in the prior-year period; adjusted EBITDA was $6.8 million, up from $4.7 million.
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Cash Position:$25.9 million in cash as of June 30, 2026, with $6.8 million in debt; approximately $56 million as of July 31, 2026, after collecting international drone receivables.
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Drone Backlog:Approximately $163 million as of June 30, 2026, up roughly 9% from the prior quarter, with the majority expected to convert to revenue within 12 months.
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Segment Performance:Drone segment outperformed expectations; avionics revenue was largely flat quarter-over-quarter; training segment performance was below expectations.
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Guidance:Reiterating full-year revenue growth of 15%-25%; expects modest gross margin compression versus 2025, with full-year adjusted EBITDA in the negative mid-to-high tens of millions.
Release Date: August 13, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Revenue surged 76% year-over-year to $43.2 million, beating expectations.
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Gross margin improved to 64%, up from 61% in the prior year.
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Achieved Blue UAS certification for the RQ-35, opening U.S. defense procurement opportunities.
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Drone backlog grew 9% to approximately $163 million, with strong conversion expected.
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Development costs for JC250 and JX250 are tracking below expectations by low double-digit percent.
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Cash balance strengthened to approximately $56 million as of July 31, 2026, after collecting receivables.
Negative Points
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Net loss of $2 million in Q2, swinging from net income of $5.9 million in the prior year.
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Adjusted EBITDA guidance for full year remains negative, in the mid to high tens millions.
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Third quarter revenue is expected to decline sequentially from Q2 due to delivery timing.
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Foreign exchange headwinds are expected to increase, impacting revenue by a few million dollars.
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Training segment performance remains below expectations, with limited synergies and ongoing strategic review.
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Avionics revenue was flat quarter-over-quarter, showing static growth.
Q & A Highlights
Q: Can you parse out the mix of U.S. and international drone orders for the RQ-35, discuss the milestones needed to increase the backlog, and provide an update on early customer interest in the RQ-70? A: CFO Mariya Pylypiv stated that the $163 million backlog represents international drone backlog and does not currently include any U.S. backlog. The majority is expected to convert to revenue over the next 12 months, with a portion extending into 2027. As U.S. RFQs convert into orders, they will incrementally add to the reported backlog. The backlog is mostly composed of RQ-35 orders, with a very small percentage of RQ-70. CEO Joseph Burns added that key milestones include the Blue UAS certification, which opens the U.S. market, and the RQ-70 launch. Early customer interest in the RQ-70 has been very strong as it fills a gap in the high-end ISR market with long-duration flight, ease of operations, and low cost.
Q: Can you walk through the level of investment related to the defense transport platform (JC250/JX250) and how you think about the company's ability to generate free cash flow? A: CFO Mariya Pylypiv noted that the company is comfortable with its liquidity position, which is tracking internal expectations. The biggest factor for the quarter was timing, as inventory was built to support deliveries, but a significant portion of receivables converted to cash, resulting in approximately $56 million in cash as of July 31st. Development costs for the air mobility platform are running in the low double digits below initial expectations. The shift in focus to ISR and cargo drones has significantly reduced expected development costs compared to the passenger platform. The company anticipates a shift into positive free cash flow in 2027 and beyond. CEO Joseph Burns clarified that the JC250 and JX250 are eVTOL aircraft but are large cargo drones, not passenger carriers, with long duration and hybrid drive capabilities, targeting a new and growing market for combat resupply and medical logistics.
Q: Can you provide an update on where you are with the Nord- Drone and Bullet joint ventures? A: CEO Joseph Burns explained that there are significant issues with the Ukrainian government's permitting process, which has stopped licensing of aircraft and technology transfers due to the current battle conditions. The company is working extensively with local counsel to obtain permits. However, the company is not dependent on any single partnership for growth. These JVs are a compelling route to expand access to multiple markets, and AIRO is currently evaluating additional partnerships in the drone dominance market.
Q: Is there any update on the strategic alternatives for the training segment and when a decision might be made? A: CEO Joseph Burns stated that the company plans to have decisions by year-end. AIRO is actively evaluating a range of strategic options and is being transparent with the market. The core focus remains on drone and avionics operations, as there are limited synergies between the training segment and the core business. Training is capital-intensive, and while the company remains excited about its long-term opportunities, drones are the main focus for capital allocation.
Q: What drove the strong second-quarter revenue performance and the improvement in gross margins? A: CFO Mariya Pylypiv reported that Q2 2026 revenue was $43.2 million, up nearly 76% year-over-year, driven by outperformance in the drone segment, partially offset by underperformance in avionics and training. Gross profit was $27.7 million, representing a 64% gross margin, up from 61% in the prior year period. The improvement in gross margins was driven by a product mix shift back towards drone products, consistent with expectations, after Q1 margins were impacted by upgrade revenue.
Q: What is the expected revenue cadence for the remainder of 2026, and how are foreign exchange headwinds impacting the outlook? A: CFO Mariya Pylypiv explained that one material drone delivery originally expected in Q3 was completed in Q2, meaning first-half revenue represented approximately 50% of full-year expectations. The company expects second-half revenue to be in line with or modestly above first-half revenue, with Q3 declining sequentially from Q2, followed by a stronger Q4 that is expected to be modestly above Q2. The company now anticipates greater FX headwinds in the second half, with an incremental revenue impact of a few million dollars compared to prior expectations, but this has been incorporated into the reiterated full-year revenue growth guidance of 15%-25%.
Q: What are the key strategic milestones achieved in the second quarter, and how do they position AIRO for future growth? A: Executive Chairman Dr. Chirinjeev Kathuria highlighted that the RQ-35 drone achieved Blue UAS certification, opening up meaningful new opportunities in U.S. defense procurement. The company also unveiled the new RQ-70 long-range ISR platform. Development continues on the JC250 and JX250 cargo and ISR drone variants, with costs coming in below expectations and first flight still on track for later this year. CEO Joseph Burns added that the company is actively working to reduce quarterly variability by expanding its international and domestic revenue base.
Q: How is the avionics segment performing, and what role does it play in the company's broader strategy? A: CEO Joseph Burns noted that the avionics segment delivered largely flat revenue quarter-over-quarter, with demand remaining stable. The company is advancing next-generation sensor and navigation solutions, which were showcased at the EAA Air Venture in Oshkosh. With avionics and U.S. drone operations consolidated under one roof in Phoenix, synergies are expected to begin bearing fruit in the coming quarters. Over time, AIRO expects to bring more avionics systems in-house across its unmanned platforms, streamlining operations and strengthening the gross margin profile.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
