AeroVironment Shares Rebound on Renewed Space Force Contract Talks for SCAR Program
ARLINGTON, Va. — Shares of AeroVironment (NASDAQ: AVAV) climbed 6.5% in Tuesday trading after the company confirmed it remains in active discussions with the U.S. Space Force to amend a key contract for the Satellite Communications Augmentation Resource (SCAR) program. The rebound offered some relief to investors following a 17% plunge the previous day.
The defense technology firm stated it is negotiating a firm-fixed-price contract amendment to deliver ground stations for SCAR. Discussions were temporarily paused as both parties work to align on a commercialized product solution with an accelerated delivery schedule. AeroVironment emphasized its commitment to the program, highlighting ongoing investments in expanded manufacturing capacity in Albuquerque, New Mexico, to support its Space and Directed Energy platforms, including SCAR-related production.
Monday's sharp decline was triggered by a Raymond James downgrade after the Space Force disclosed plans to reopen competition for the SCAR program—a contract originally valued at approximately $1.4 billion for AeroVironment. Analyst Brian Gesuale warned the move could erase $1 billion to $1.4 billion from the company's $2.8 billion backlog, downgrading the stock from Strong Buy to Underperform.
However, not all analysts viewed the sell-off as justified. Jefferies' Greg Konrad maintained a Buy rating, arguing the reaction was overdone. He noted the Space Force's intent to introduce new vendors and bolster supply chain resilience for surge production needs, rather than a complete abandonment of incumbent contractors.
The SCAR program is designed to enhance military satellite communications capabilities. The Space Force's move to recompete portions reflects a broader Pentagon strategy to diversify suppliers and ensure competitive pricing and innovation in critical space infrastructure.
AeroVironment is scheduled to report its Q3 fiscal 2026 results after market close on March 10, 2026, which will provide further insight into the financial impact of the SCAR negotiations and its overall portfolio health.
Market Voices
"This rebound shows the market overreacted to the recompete news. Long-term, AeroVironment's expertise in tactical communications keeps them in a strong position," said Michael Torres, portfolio manager at Horizon Strategic Capital.
"The Space Force is clearly trying to squeeze costs and spread risk. AeroVironment shouldn't celebrate yet—this 'amendment' could just be a polite step toward losing a huge chunk of revenue," argued Dr. Lena Shaw, defense analyst at The Geopolitical Risk Group, offering a more critical take.
"It's a volatile situation, but the confirmed talks are a positive sign. The Albuquerque expansion shows they're preparing for future work, SCAR or not," noted David Chen, an independent aerospace consultant.