Inventory rose 76.4%. That is the oddest number in AeroVironment's latest three-month report, and it matters because sales rose only 5.7% to $480.5 million.
The reported results look stronger on the surface: gross profit climbed 31% to $124.6 million, the operating loss narrowed to $10.9 million, and operating cash flow swung from a $123.7 million outflow to a $13.5 million inflow. A business that sold a little more suddenly kept a lot more of each dollar.
One accounting detail supplies part of that improvement. AeroVironment says the cost of sales ratio fell because purchase-accounting expenses declined, and those expenses are non-cash marks rather than current-period cash spending.
"As a percentage of revenue, cost of sales decreased from 79% to 74% primarily due to decreased amortization and other non-cash purchase accounting expenses, resulting in gross margin increasing from 21% to 26%."
AeroVironment, 10-Q, September 10, 2026
That change lifted gross margin by 5 percentage points, to 25.9%. It is a real change in reported profit, but not five points of newly generated cash. The quarter's operating cash flow improved anyway, though the balance sheet shows where some of the cash story moved next.
Inventory reached $410.8 million, up from $232.9 million a year earlier. Cash fell 59.4% to $278.4 million, while capital spending nearly doubled to $44.0 million. Accounts receivable went the other way, down 7.6% to $183.1 million, so the inventory build is the clearest working-capital change in the comparison. AeroVironment does not disclose its cause in the supplied filing receipts.
The business mix also pulled in opposite directions. Autonomous Systems generated $346.0 million of revenue, while Space, Cyber and Directed Energy revenue fell to $134.5 million from $169.4 million. Management attributes the latter segment's adjusted-EBITDA decline to lower revenue and fewer add-backs, while the larger segment's adjusted EBITDA benefited from a $60.7 million revenue increase and lower R&D.
"The increase in AxS segment adjusted EBITDA was primarily due to an increase in revenue of $60.7 million and a decrease in R&D of $7.6 million, partially offset by an increase in cost of sales of $25.2 million and a decrease in adjusted EBITDA add backs of $34.6 million for depreciation, amortization, cloud computing related amortization, stock-based compensation, and acquisition related expenses."
AeroVironment, 10-Q, September 10, 2026
There is another less visible claim on the improvement: diluted shares rose 6.3% to 49.8 million. That does not explain the margin rebound, but it means the narrower per-share loss, negative 10 cents versus negative $1.44, came with more shares in the denominator.
So the filing presents a business with better reported margins and newly positive operating cash flow, alongside a much larger inventory position, heavier capital spending, lower cash, and a non-cash accounting factor in gross profit. AeroVironment's next three-month report will give the cleanest comparison for whether the $410.8 million inventory balance has moved materially from this starting point.
The next comparison point is AeroVironment's inventory balance: $410.8 million in the latest 10-Q.