Jim Cramer Questions AeroVironment's Momentum Amid Sector Shifts

AeroVironment (AVAV) is drawing fresh scrutiny from Jim Cramer, who acknowledged his longstanding support for the defense and aerospace drone manufacturer but now voices caution. Cramer highlighted the company’s 18% decline in share price over the last 12 months, contrasted with a 22% rise in Lockheed Martin (LMT) and a 15% increase in Raytheon Technologies (RTX), suggesting divergent market sentiment. Despite AVAV’s role in delivering tactical drones for U.S. military operations and its $1.9 billion in contract backlog as of Q4 2025, Cramer noted inconsistent revenue growth, with Q4 2025 earnings up only 3% YoY—well below the 12% average for its defense peers. The concern centers on execution and competitive positioning. While AVAV continues to secure contracts, including a $230 million Defense Department award in early 2026 for next-generation reconnaissance systems, the pace of delivery has lagged. In the same period, LMT reported 14% top-line growth, driven by F-35 production, while RTX delivered 10% growth fueled by missile defense systems. AVAV’s gross margin dipped to 41.7% in Q4, the lowest in two years, raising questions about cost control. Market reaction reflects the unease: AVAV’s forward P/E of 28.4 is at a premium relative to its growth trajectory, while LMT and RTX trade at 19.6 and 20.1, respectively. Analysts have adjusted their sentiment, with 12 out of 17 revising price targets downward in the past quarter. The stock remains in the ‘Hold’ range, though institutional ownership has declined by 4.3% since year-end 2025. Cramer’s remarks underscore broader investor caution in the defense sector amid shifting procurement priorities and supply chain uncertainties. While AVAV remains a key player in unmanned aerial systems, the lack of sustained momentum suggests a potential recalibration in expectations.