AIRO Group (NASDAQ:AIRO) reported a nearly 180% increase in third-quarter revenue as drone sales exceeded management’s expectations, but the company said it now expects full-year growth to land at the lower end of its previously issued range.
Revenue rose to $17.5 million from $6.3 million a year earlier, Chief Financial Officer Dr. Mariya Pylypiv said on the company’s third-quarter 2026 earnings call. Stronger-than-expected drone performance offset weaker results in avionics and training. Management had anticipated a sequential decline from the second quarter because of delivery timing and the variability of its business.
AIRO reaffirmed its forecast for 15% to 25% revenue growth in 2026, while guiding toward the low end. Pylypiv said some orders expected this year have shifted into 2027 as discussions evolve toward larger contracts with longer procurement timelines. The outlook also incorporates greater foreign-exchange headwinds in the second half.
Higher drone sales lift margins
Third-quarter gross profit increased to $9.9 million from $2.8 million, and gross margin expanded to 57% from 44%. Pylypiv attributed the improvement primarily to a more favorable revenue mix, including higher volumes of drone sales, which carry stronger margins.
The company’s operating loss widened to $13.1 million from $12 million, while its net loss increased to $12 million from $8 million. Adjusted EBITDA, a non-GAAP measure, improved to a loss of $7.5 million from a loss of $8 million. The adjusted EBITDA margin improved to negative 43% from negative 128%.
For the full year, AIRO continues to expect an adjusted EBITDA loss in the mid- to high-teen millions of dollars and modest gross margin compression relative to 2025. At September 30, the company had $37.8 million in cash and approximately $1.2 million in debt. Cash generation during the quarter benefited from the collection of nearly $30 million in accounts receivable, partly offset by a roughly $5.5 million repayment of a Sky-Watch line of credit.
Drone backlog tops $200 million
As of November 5, AIRO’s drone backlog exceeded $200 million, with the majority expected to convert to revenue over the following 12 months, Pylypiv said. The figure includes U.S. opportunities for the first time as the company ramps up domestic manufacturing. U.S. programs accounted for approximately one-quarter of the total, with international drone sales representing roughly three-quarters.
AIRO’s opportunity pipeline across its four segments stood at $1.5 billion as of the same date. Pylypiv said the pipeline comprises opportunities the company reasonably expects to convert to backlog over the next 12 to 24 months. Management did not provide a historical or expected win rate or a detailed geographic breakdown.
Asked whether AIRO had enough manufacturing capacity to serve the backlog, Chief Executive Officer Captain Joseph Burns said the company had expanded its factories over recent quarters. Its Arizona facility can produce 100 airframes a month, he said, adding that existing capacity can support the volume discussed on the call.
U.S. orders and product development
AIRO secured its first U.S. orders for the RQ-35 and RQ-70 drones, executives said. Burns also said the RQ-35 was selected under a NATO Support and Procurement Agency framework agreement, enabling participating NATO nations to procure it through a streamlined process. The company was selected to participate in phase 2.5 of the Drone Dominance Program at Camp Grayling.
The RQ-70 remains on track to enter production in January 2027. Burns said AIRO intends to seek Blue UAS certification for the aircraft; the RQ-35 has already received it. He said the company’s in-house Zentra camera suite would not receive Blue UAS certification, which applies to an aircraft system, but would be certified for NDAA compliance.
AIRO is also working toward the first flight of its JC250 and JX250 platforms. Pylypiv said the company anticipates commercializing the drones in the latter half of 2027. She did not disclose spending by program, but said stopping investment in the two platforms would significantly reduce cash burn.
Separately, AIRO’s Canadian subsidiary entered a strategic collaboration with Vertiko Mobilité to develop autonomous cargo logistics operations in Canada using the JC250. A letter of intent contemplates an initial deployment of 10 aircraft, with an estimated value of $15 million to $20 million based on indicative pricing. Initial operations are expected to support logistics services for First Nations communities in Quebec.
Burns said avionics revenue was modestly lower year over year amid softness in general aviation. AIRO continues to evaluate strategic options for its training business and expects to provide an update by year-end, he added.
About AIRO Group (NASDAQ:AIRO)
AIRO Group Holdings, Inc. is an aerospace and defense company focused on developing and delivering advanced aviation and autonomous systems. Its portfolio includes unmanned aircraft systems, electric vertical takeoff and landing (eVTOL) aircraft, electronic-warfare technologies, avionics and related training services. The company’s unmanned systems are designed for applications such as intelligence, surveillance and reconnaissance, security, public safety and commercial operations. Its advanced air-mobility activities center on electric aircraft and associated technologies, while its electronic-warfare offerings support the detection, protection against and disruption of communications and other signals.
