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AeroVironment (AVAV) has been getting crushed this week, down roughly 22% from recent highs after news broke on March 2 that the Space Force was reopening the SCAR contract to competitive bidding. Before March 10 earnings, I wanted to lay out what we actually know, because I think the narrative has compressed several distinct developments into one undifferentiated "AVAV bad" story.
Here's the full picture:
**The SCAR situation: what we actually know**
SCAR (Satellite Communications Augmentation Resource) is a $1.4 billion Space Force program originally awarded to BlueHalo, which AeroVironment acquired in May 2025. A stop-work order was issued in January 2026. On March 2, Space Force formally reopened competitive bidding.
On March 3, AeroVironment issued its own statement: the contract is temporarily paused while both parties negotiate a firm-fixed-price amendment. Management said they're still negotiating and are confident in their delivery capability. They're also investing $30M+ to expand manufacturing in Albuquerque specifically for SCAR-related production.
Raymond James did a rare triple-downgrade (Strong Buy → Underperform), citing SCAR as \~50% of total backlog. That's the scary number. But Jefferies and BTIG both pushed back, maintaining Buy ratings with $390-$415 targets and noting SCAR is only \~5-8% of FY2026 revenue guidance of $1.95-2.0B. Those are very different numbers telling very different stories about the risk.
**The GENESIS contract: what happened (March 5)**
AeroVironment won a $97.4M, three-year Army contract for GENESIS, a next-generation Hardware-in-the-Loop test environment for missile defense and EO/IR sensor validation at Redstone Arsenal. This is Army Aviation and Missile Technology Consortium work, not Space Force, not Switchblade. It's a new customer domain: missile defense testing.
The market ignored it. But it matters for a few reasons: it's a three-year relationship with a new Army customer, it demonstrates capabilities beyond the drone-centric AVAV perception, and it shows the DoD is actively awarding work while the SCAR negotiation continues.
**What happens March 10**
Q3 FY2026 earnings after market close, conference call at 4:30 PM ET. This is the first time management speaks publicly about SCAR since the stop-work order. Three scenarios:
Bull: SCAR amendment confirmed or retained. The $1.4B stays in some form. Stock likely recovers significantly.
Base: Negotiations still ongoing, guidance maintained, GENESIS and Switchblade performing. Market continues to wait.
Bear: SCAR formally awarded to a competitor, guidance cut meaningfully. That's when the thesis genuinely breaks.
**My read**
The market is pricing a high probability of the bear scenario. I'm not sure that's right. Management's behavior (active negotiations language, manufacturing expansion in Albuquerque specifically for SCAR production, new Army contract awarded same week) doesn't look like a company preparing to lose a $1.4B program. It looks like a company trying to renegotiate contract terms that the Pentagon has decided need to change across the board (cost-plus to firm-fixed-price).
The risk is real. Single-contract concentration at 50% of backlog is legitimately problematic. But there's a difference between a contract being renegotiated and a contract being lost, and I don't think the market is distinguishing between the two clearly right now.

Happy to discuss the scenario framework or the backlog math. Anyone else watching this one into March 10?

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