AIRO Group (NASDAQ:AIRO) reported first-quarter 2026 revenue that declined from the prior year, while management said the results were in line with internal expectations and reaffirmed its full-year revenue growth outlook as the company shifts more of its focus toward drones.
On the company’s earnings call, Executive Chairman Chirinjeev Kathuria described 2025 as a “foundational year” and said the first quarter represented another step in building infrastructure to support growth as a newly public company. He said AIRO is refining its strategic focus around opportunities that align customer demand, operational timelines and long-term value.
Kathuria said the company is “repositioning the business to focus on the drone market” as part of a strategy to diversify its product portfolio. He pointed to several recently introduced platforms, including the RQ-70, which he said complements the RQ-35 with extended range, higher payload capacity, upgraded sensors and a competitive price point. He also highlighted the JC-250 and JX-250 drone aircraft, which are designed to achieve more than 1,000 miles of range and 16 hours of endurance in an intelligence, surveillance and reconnaissance configuration.
Revenue Falls, Loss Widens in First Quarter
Chief Financial Officer Mariya Pylypiv said AIRO generated first-quarter 2026 revenue of $8.9 million, compared with $11.8 million in the first quarter of 2025. She said the decrease was expected and modestly ahead of internal expectations, citing timing-related customer shipments and expected variability in the business.
Gross profit was $2.4 million, representing a gross margin of 26.6%, compared with gross profit of $6.9 million and gross margin of 58.8% in the year-earlier period. Pylypiv said the year-over-year margin decline was not reflective of underlying demand and was driven by a first-quarter revenue mix shift toward drone upgrades.
Operating loss widened to $17.2 million from $3.1 million a year earlier. Net loss was $15.5 million, compared with $2 million in the first quarter of 2025. EBITDA was negative $14.3 million, versus positive $2.7 million in the prior-year period, while adjusted EBITDA was negative $12.8 million, compared with approximately breakeven a year earlier.
Pylypiv said the weaker profitability reflected lower revenue, higher cost of sales and higher operating expenses tied to post-IPO investments that management had previously discussed. She said the company remains disciplined on cost controls while investing in infrastructure to support demand.
Drone Backlog Exceeds $150 Million
Management said demand remains stable, with drone backlog exceeding $150 million as of April 30. Pylypiv said the figure was stable compared with the amount reported on the fourth-quarter call and that AIRO expects the majority of the backlog to convert to revenue within the next 12 months.
She noted that the backlog excludes U.S. backlog, which she said could provide upside once included. The company defines the backlog as orders it reasonably expects to convert over the next 12 months.
Pylypiv said the company expects a record second half of 2026 and, more specifically, a record fourth quarter, providing momentum into 2027. She also said AIRO expects 2027 revenue growth to outpace what it has projected for 2026, with additional outperformance tied to U.S. demand.
Guidance Reaffirmed Despite Quarterly Variability
AIRO reiterated its full-year 2026 revenue growth guidance of 15% to 25% year over year. Pylypiv said management is “extremely confident” in achieving the guided range and believes the company has an opportunity to outperform it.
The company expects the first quarter to be the low point for the year on both the top and bottom lines. Pylypiv said AIRO expects an approximate 40-60 split between first-half and second-half revenue, with the third quarter sequentially lower than the second quarter, based on current visibility into large drone order deliveries.
AIRO also initiated full-year 2026 adjusted EBITDA guidance in the negative mid- to high-teens dollar range. Pylypiv said the majority of the EBITDA loss is expected in the first half of the year, with first-quarter performance in line with or modestly better than the second quarter.
The company expects low single-digit gross margin compression compared with fiscal 2025, largely driven by the first-quarter mix shift toward drone upgrades. Pylypiv said pure drone deliveries are expected to be the leading driver of revenue in the second quarter and the remaining quarters, which management expects to favorably impact margins.
Blue UAS Certification Remains a Key Milestone
Chief Executive Officer Joe Burns said AIRO is reaffirming its timeline to achieve Blue UAS certification in the second quarter of 2026. He called the certification a key milestone that could expand the company’s addressable market by enabling it to support the U.S. Department of Defense and accelerate domestic adoption.
Burns said the company has experience fully assembling RQ-35 Heidrun drones at its manufacturing facility in Phoenix, Arizona. In response to an analyst question, he said AIRO has invested heavily in the Phoenix factory and feels confident in obtaining final Blue UAS certification after completing required process steps.
Burns said the RQ-35 Heidrun remains AIRO’s core platform, while the company is preparing to introduce additional platforms, including the RQ-70 Dainn. He said the RQ-70 is intended to address a distinct operational profile with significantly extended flight range, higher payload capacity and upgraded sensor options.
He also said AIRO is integrating artificial intelligence across its products. Burns said the company is already marketing and selling the AI-enabled full-stack RQ-35 Heidrun, and that onboard AI supports real-time identification and classification of enemy assets and threats, navigation, situational awareness, mission execution and autonomy.
Portfolio Review and Capital Allocation
Burns said AIRO is evaluating strategic alternatives for its training business, including maintaining the current approach. He said CDI remains a valuable asset with long-term potential, but described it as an asset-heavy operation whose role is being assessed as AIRO scales other segments.
In avionics, Burns said Aspen performed in line with top-line expectations for the quarter, though margins were affected by upgrade-related pricing programs and the timing of operating expenses. He said AIRO continues to see consistent demand for Aspen products and sees opportunities to integrate Aspen Avionics more deeply into its drone business over time.
Burns said AIRO’s balance sheet, with $54.2 million in cash as of March 31 and little debt, gives the company flexibility. He said AIRO continues to evaluate acquisitions that could be accretive within 12 months and strategically enhance its drone and avionics platforms. He also said management sees a disconnect between the company’s stock price and the underlying value of the business, and views share repurchases as an attractive and flexible way to return capital at current levels.
During the question-and-answer session, Burns said proposed Bullet and Nord joint ventures are still moving through regulatory issues and have not yet been finalized. He said AIRO is also evaluating other partnerships with strategic alignment. Asked about the Drone Dominance program, Burns said AIRO is currently involved as a subcontractor and expects more phases of the program to emerge in the near future.
About AIRO Group (NASDAQ:AIRO)
We are a technologically differentiated aerospace, autonomy, and air mobility platform targeting 21st century aerospace and defense opportunities. We leverage decades of industry expertise and connections across the drone, aviation, and avionics markets to provide leading solutions to the aerospace and defense market. We offer connected and diversified solutions providing operational synergies across our segments and are powered by an international footprint as well as supplier and public sector relationships.
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