Andre Madrid — Analyst, BTIG
Hey, good afternoon, everybody. Kevin, thank you so much for, you know, for everything. It's been a pleasure to work with you and best of luck with everything ahead.
Kevin McDonnell — EVP and CFO, AeroVironment
Thank you.
Andre Madrid — Analyst, BTIG
I wanted to start by maybe just talking about the long-term prospects of SCDE now with the absence of SCAR. I mean, how should we be thinking about growth at the business moving forward? Not even just growth, but if we break it down a little bit further, I mean, to the margins, I understand SCAR was, you know, a pretty big driver of what you guys were expecting to do in EBITDA this year for that segment. What else could be kind of, you know, carrying the weight here on out, you know, not just in 2026 but beyond?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Thanks, Andre, for the question. The situation with the Space Force and the SCAR program is evolving daily. I was in Albuquerque, New Mexico yesterday, met with the key decision-makers and the program leaders of the SCAR Badger program at Space Force. As you know, we started negotiations with the customer so we can resume the work. Unfortunately, we could not come to a mutually acceptable solution that allows us to have a win-win outcome moving forward by renegotiating and re-resuming the work. The customer had to choose to terminate for convenience, and we're entitled to our allowable legal costs incurred plus a profit fee.
We are more bullish than ever before that the phased array BADGER system and the technology that we have is best in class and needed badly for the needs of our country and for the constellation of geosynchronous satellites the U.S. military has. The urgency and the priority on that capability gap and the need for our solution is actually stronger and more urgent now than ever before. Space Force has directly told me that they're actually gonna invest more money in this area because we need it, as a country. Lastly, we're not gonna stop our efforts because we are a firm believer in developing the solution as a commercial item and basically applying our recipe that we've done for years. We're gonna continue to develop the capability. We believe we have at least a three to three and a half year head start on all competitors.
If Space Force is successful to recompete, great. We will be eligible to recompete and participate. Our ultimate goal is to basically able to sell the solution to them as a commercial item. We believe that's much more favorable for the customer and for AV financially and operationally. We do not expect the SCAR program to have a significant impact on our growth profile beyond this year. We're still gonna have a growth year this year. We're gonna have a record fourth quarter, record fiscal year performance, both on top line and profitability. We're positioned for strong growth next year and beyond. There are several other products and technologies within our Space and Directed Energy business that is in high demand and a transition to commercialization today.
That includes our LOCUST system, our directed gunsight, and our laser communication terminals, all of which are expected to grow rapidly over the next two to three years. We're very bullish in this segment. We're very confident about this acquisition in this segment, in this business in general. We are more than ever before committed to accelerating our progress. This is something that we've done several times in our history, and we have prevailed, and we've demonstrated a business success outcome, both for ourselves and value for our customers.
Andre Madrid — Analyst, BTIG
Got it. Really appreciate the color there, Wahid. Maybe on a different note.
You want, Andre, if we could pivot to, you know, the autonomous systems business. You look there, I mean, on the $990 million IDIQ that you guys have, you know, you've got a recent delivery order of $186 million. Over less than two years, you're already up to, you know, over $700 million, you know, in terms of, you know, on that vehicle. Have you been having discussions with the customer as to when that could potentially be, you know, upsized? Is that something that's in the cards, or is that something that comes up in conversations often?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Andre, the short answer is yes. We're actively talking to the customer. As I mentioned in my remarks, the customer just placed another contract and awarded us a contract for over $800 million for our family of products, including Switchblade family products, primarily for FMS sales, but it does give them a lot of flexibility. We have two large contract awards and platforms that the customer can buy under IDIQ, the customer does have the ability to increase the ceiling on these contracts, and the customer also has the potential option to extend the timeframe on these contracts. We've had that several times in our past, and I believe, to your point, we are reaching a point where they could consume more products than the ceiling allows today, and we're actively working those different options with the customer.
That's the reason why we feel so bullish to increase our production capacity and go beyond this fiscal year into even next fiscal year, in the fiscal year 2028, and build another factory that could produce another $2 billion worth of our products. We feel very strong about that momentum.
Andre Madrid — Analyst, BTIG
Got it. Really appreciate that. I'll leave it there. Thanks so much, everyone.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Thank you, Andre.
Louie DiPalma — Analyst, William Blair
Wahid, Kevin, and Denise, good afternoon. Kevin, congratulations. It was great working with you.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Thanks. Thanks, Louie.
Louie DiPalma — Analyst, William Blair
Definitely. For my first question, how much revenue does AV expect to recognize from SCAR for fiscal 2026 when taking into account the termination fees and the other fees associated with ending the contract?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
We don't get into specific forecast for each product, but it's included in our guidance. We've factored that all in and, so, you know, we feel comfortable. Even though this was late-breaking news, we're very comfortable with the guidance for the year.
Louie DiPalma — Analyst, William Blair
Yeah. I was wondering from the perspective of investors are going to be wondering, you know, how they should be modeling fiscal 2027 if this contract ended. Is there a ballpark in terms of is it like 5% of total revenue, or is it less than 5%, or how should we be thinking about that for fiscal 2027?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
It'll be less than 5%. It's not insignificant amount next year. That was factored into you know all of our modeling for the goodwill impairment. That all stays intact. You know, I'd say it's less than $100 million.
Louie DiPalma — Analyst, William Blair
Great. Wahid and Kevin, you recently announced the $186 million Army order for the directed requirement involving the Switchblade 600 and the Switchblade 300. Four of your competitors have made contract announcements recently for the Army LASSO program and the Marine Corps Organic Precision Fires-Light. How has AV progressed with both of those programs, and what's the timing in terms of when you expect your awards and the timing for a potential production award? I think for LASSO, you are using your Switchblade 400. What's the sense of timing for those programs?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Louis, we're very actively engaged with the U.S. Army on several fronts on the Switchblade family products. First of all, you're absolutely right. We were just awarded a $186 million contract for production delivery, not prototypes, not early testing and evaluation, but production units of our second generation Switchblade 600 Block 2, and then also our Block 20 Switchblade 300. These are the initial two orders for the next generation of Switchblade 300 and Switchblade 600 products. In regards to the LASSO program, if you recall, a year plus ago, we were awarded multiple tranches of task orders by the U.S. Army for the directed requirements, which was essentially part of the LASSO program.
We were the only company who received those awards about a year to two years ago. Most of the other players didn't get anything at that time. It's actually a catch-up for the other players to stay in the game and receive some awards as part of the competition in order for the competition for the LASSO to be valid and fair. A. B, I must also say that our Switchblade 400 is purposely designed for the LASSO program. We've designed it from the ground up to be a very well-suited product for that capability. It is quite likely for both LASSO and OPF, Marine Corps, that there is more than one solution for the missions that they require to be part of the final selection of the portfolio of solutions they're gonna have. We feel very good about our options.
We had a program review with the Army this past week in our offices for a couple of days. We're doing really well. We're executing. We're performing. Our products performing really well. We're delivering products to them, and we continue to actually see increased demand from them. They are asking us to produce more because they're gonna buy more from us. That's the signal that we're getting from the U.S. Army. Exactly what this means for those competitors, I can't comment on that. That needs to be directed towards them. What I can tell you is that we're positioned quite well on these programs. We're focused on these. We believe we have the right solutions. We have been executing, we've been delivering, and we believe that we're gonna be a serious recipient of some orders in the long run.
Louie DiPalma — Analyst, William Blair
Great. One final one. Do you see the Iran war accelerating the timeline for your Freedom Eagle-1?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Absolutely yes, Louie. We have seen an unprecedented amount of requests and demand for proposals and quantity and ROMs, you know, rough order of magnitude quotes from both domestic U.S. customers as well as international customers, not just for the Freedom Eagle-1, but also for our suite of product line. The conflict in Ukraine is another example of how well we're positioned on the type of solutions that we've got that meets the desperate need of our customers, the U.S. military and our allies. You know, I just read a press release or report this week that Iran has launched close to 1,400 one-way attack drones into Ukraine alone in one week.
The need for LOCUST, the need for our RF jammers, the Titan series, the need for our one-way attack drones, such as Red Dragon, the need for a Freedom Eagle One, and the need for our JUMP 20 and P550 is starting to look better and better, and I expect all this to convert to some additional demand in fiscal year 2027 and beyond. I do believe that this is a good critical moment to showcase our capabilities. Also we're the only ones, or one of the very few that can actually produce in volume and deliver a battle-tested, proven technology or capability to our warfighters today. You know, most players are talking about production capacity two to three years from now. Manufacturing sites they're gonna build that's gonna produce whatever number later. We're doing that today across several of our product lines.
Jan Engelbrecht — VP and Senior Research Associate, Baird
Good afternoon, Wahid, Kevin, and Denise. Congrats on retirement, Kevin. I think I'll start with.
Kevin McDonnell — EVP and CFO, AeroVironment
Thank you.
Jan Engelbrecht — VP and Senior Research Associate, Baird
Yes. Yeah, sure. An update on the directed energy portfolio. Just some of the key programs and maybe milestones we should look out for the rest of calendar year 2026 and then 2027. Just some recent developments. There was a laser weapons test in Albuquerque this past weekend. You got an RFI from the Air Force for a new laser weapon system on Friday, last Friday. Any updates on your specific programs on FPIC, AMP or a JLTV, integration. How should we think about that? Because it does seem like we're getting closer to an important sort of time for laser weapons, especially if you just look at what's going on in Iran. Thanks, Wahid. Sorry.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
So, Jan, thank you for the comments and the question. It is really important for our investors and our audience to recognize that the situation that we saw three to four years ago in Ukraine, where it was a showcase of our loitering munitions, one-way attack reconnaissance drone, led to a significant shift in the market in terms of demand for those capabilities and higher rate production and more orders and more growth for us. I believe we're at an inflection point with both our RF counter-UAS systems as well as our directed energy LOCUST systems. I was in Albuquerque, our facility where we manufacture these systems, and our customers would love to have a lot more of them.
In fact, most of our customers are behind the eight ball, as an analogy, if I may use that, in terms of having systems in their hands. We are building systems currently, not only for that particular conflict today, but I believe that is going to transition into additional long-term demand in these categories. Which we are clearly not only the leader, but we're the only game in town that actually has a solution that works. It's been performing in the field today. It is actively involved and engaged in theaters, multiple theaters, and the customer is extremely satisfied with its performance. We have an unprecedented opportunity and position in the market, which we're really trying to scale production and go forward. Exactly how much that demand is and means for next year, I can't quantify right now.
It is going to be strong demand, and we expect that to eventually turn into a similar situation as it was in Ukraine, even if the conflict stops tomorrow. Because, you know, LOCUST was developed specifically for Group 1, 2, and 3 drone defense solution. It is the only directed energy solution that I know of in this size and range that achieves the mission outcome for our customers successfully. We're delighted about being able to help our customers.
Jan Engelbrecht — VP and Senior Research Associate, Baird
Perfect. Thanks, Wahid. Very helpful. Quick follow-up, if I may. In the event that this war with Iran is sort of drawn out or prolonged in the coming weeks, are there any systems? I mean, I imagine you're very well positioned, but any systems you wanna call out that could be fielded sort of on an accelerated basis by the DOD or sort of be part of this $50 billion emergency reconciliation munitions package that we heard about last week? Is there anything, sort of a few programs or platforms you can call out where you could see that happening?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Yes, Jan. In particular, I would highlight a very strong imminent demand for accelerated adoption of our one-way long-range attack drones, such as Red Dragon and its family. Our directed energy systems called Locust and our Titan series of RF detect and defeat solutions, as well as our reconnaissance drones such as JUMP 20 and P550. Those five products specifically, I expect those to have increased demand going into fiscal 2027 and then hopefully beyond.
Ken Herbert — Managing Director, RBC Capital Markets
Yeah. Good afternoon, Wahid, and congratulations, Kevin.
Kevin McDonnell — EVP and CFO, AeroVironment
Thanks, Ken.
Ken Herbert — Managing Director, RBC Capital Markets
Hey, maybe just to talk about the revised guide for Adjusted EBITDA. How much of that, and apologies if I missed it, but how much of that is SCAR and anything else that's moved to the right on the Adjusted EBITDA, and how we think about then bridging from fiscal 2026-2027 on the Adjusted EBITDA in terms of the margin potential upside.
Kevin McDonnell — EVP and CFO, AeroVironment
Well, I mean, some of it is obviously related to SCAR, some of it, which is basically a reduction in the revenue. Most of the EBITDA, you know, revised guidance is a result of the revenue, lower revenue guidance, and somewhat more R&D during the year. For, we... You know, in terms of expenses are right on track. Obviously, a little high, you know, we're higher than we would have probably done if we'd known the revenue was a little lower. The business model is definitely intact.
I think that as we look at the commercialization, as Wahid was talking about, of LOCUST and some of the other things in the Space and Directed Energy segment, that we expect to achieve higher gross margins next year than this year, which will drive, you know, accelerate or continued EBITDA growth probably greater than revenue next year.
Ken Herbert — Managing Director, RBC Capital Markets
Okay. Thanks, Kevin. Maybe just an update on the Switchblade now that you officially have the 400 in the product family. How do we think about capacity on that program? It sounds like that franchise obviously continues to be very well viewed by the customer set. What's maybe the mix of 300, 400, 600? Where's capacity, and how do you see that scaling in the next six to 12 months? Thank you.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
You're welcome, Ken. I continue to see a lot of potential and growth in revenue for our Switchblade 300 Block 20 and Switchblade 600 Block 2, which we just did our initial shipments to the U.S. Army. I think the demand for those two products, irrespective of the LASSO program of record or the U.S. Marine Corps' OPF program of record, is going to be very robust, both domestically and internationally. We do not intend to reduce those or slow those down. I think we're gonna continue to see demand for that, and it's gonna continue to grow. Switchblade 400 is purposely developed for the future longer-term growth and adoption of this family. It's primarily developed for the two key things. One is to be able to capture the LASSO program of record.
Two is it's designed in such a way that it could be actually mounted on a variety of different platforms much easier. Future helicopters, future airplanes, future ground vehicles are all, future drones, larger drones, are all potential recipients of the Switchblade 400 variants in the long run. That's gonna be about a year plus later based on the program adoption cycles that we see. The reason why we're increasing our production even further with the Salt Lake City facility is because I believe that beyond fiscal year 2027, we're gonna continue to see demand in these categories, in these products. The mix will shift eventually more towards 400, but not anytime soon.
Rocco Barbero — VP of Aerospace and Defense Equity Research, JPMorgan
Hey, good afternoon. This is Rocco on for Seth.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Yes.
Rocco Barbero — VP of Aerospace and Defense Equity Research, JPMorgan
First, thanks for all the help, Kevin. It's been great working with you.
Kevin McDonnell — EVP and CFO, AeroVironment
Thank you.
Rocco Barbero — VP of Aerospace and Defense Equity Research, JPMorgan
Was the SCAR contract split between the cyber and mission systems and space and directed energy subsegments in SCDE? If not, what kind of weight on cyber mission systems revenue in the quarter?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
That revenue is actually part of that entire segment, and the SCAR program is under the space, not the directed energy piece. I'm sorry, the space and directed energy, not the cyber piece. The cyber security and cyber and mission systems, that business is separate, and it's not affected by the SCAR program. It's primarily the other side of the segment too, or business, which is the space and directed energy.
Kevin McDonnell — EVP and CFO, AeroVironment
Right. I mean, even though it's down year-over-year in that segment, but most of that was planned because of some programs that had gone away before we even acquired BlueHalo. You know, obviously, we're just doing a pro forma versus the prior year. There's parts of that business that's doing very well on orders, but it's not necessarily showing up in revenue right now.
Rocco Barbero — VP of Aerospace and Defense Equity Research, JPMorgan
Right. That makes sense. I guess if we're looking at SCDE moving on in Q4 without SCAR, should we be thinking about the segments being able to see growth in Q4 versus the pro forma numbers? What are the main growth drivers we should think about in the segment?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Long term, I'll let Kevin answer the first part of the question. Long term, we expect our space and cyber business to actually be a significant growth in revenue drivers for the next few years. There are several products, as I mentioned, and technologies that we're at the cusp of transitioning into a commercial item and scaling its production. We did the first one, which was our RF Titan series from BlueHalo, but that's in segment two, segment one. However, the products that are in segment two, which is essentially the LOCUST systems, the laser communication terminals, and the directed energy, also the gunsight. The gunsight, the laser gunsight system, these are just transitioning to production. They should be significant growth drivers in fiscal year 2027 and beyond.
We expect that segment to grow quite aggressively over the next several years as part of the portfolio.
Kevin McDonnell — EVP and CFO, AeroVironment
We do expect Q4 to be strong. I mean, obviously, the actual Space business is gonna take a hit with the SCAR program. The other businesses, like Directed Energy, we expect to have a very strong fourth quarter.
Jonathan Siegmann — Managing Director, Stifel
Thank you, Wahid and Kevin and Denise.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Thank you, Jon.
Jonathan Siegmann — Managing Director, Stifel
Just on SCAR, I know we've been talking a lot about it. Can you just talk a little bit about what success looks like in the recompete? Is it splitting share with somebody else? Is it selling more units at less of a price? Is it having a different role in the contract? Then also an idea of when we might hear something on how you guys make out in that recompete. Thank you.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Sure. Jon, we intentionally work with our customers to find a win-win solution on the current contract the way it's structured. We couldn't do that. Success will look like as follows. We wanna develop this product on AV's R&D dollars as a commercial item because we believe the market opportunity for this is massive. It's in the billions of dollars globally, besides just the Space Force. We also know that the need for this capability gap has not gone away, and it's stronger. If we had a commercial off-the-shelf solution available today, I'm a firm believer that the Space Force and many other customers would be procuring them as a commercial item, as a commercial product with more favorable pricing and more favorable profit profile.
Because typically, we take more risk on R&D upfront, and then we sell the product at a higher margin once it becomes commercialized. That is precisely our strategy. While we're doing that, Space Force is gonna try to recompete this and see if there's better qualified product or more than one product that can meet their needs. Because the need for this is actually increasing, not decreasing. They have indicated to me directly that funding for this actually is gonna increase, not decrease, over the next three to four years. Our intent is, as we develop our commercial product, to then provide a commercial solution to the U.S. Space Force and be able to sell it to them when they're procuring it. That's the decision that we made jointly with the Space Force that I believe is a win-win for both parties.
It achieves their objective, and it achieves our objective, what we wanna do long term. Obviously, we're not happy that we're taking a hit on the short term, but it is a very good option for us long term, and we're committed to it. My personal commitment and confidence in this solution set is stronger than before, and I believe if we had a commercial offering today, we would be selling it now. It does not exist, and we wanna go faster, not slower.
Kevin McDonnell — EVP and CFO, AeroVironment
We've already had inquiries from other customers for the product, so.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
As well.
Kevin McDonnell — EVP and CFO, AeroVironment
Right.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
That's right.
Jonathan Siegmann — Managing Director, Stifel
Is it conceivable you could be selling this revised product as early as maybe fiscal 2027, or is this more of a longer-term development effort?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Most likely we're redoing that based on the requirements. You know, one of the challenges is to get our customers to agree to a reset of requirements that we lock in, lock down. Most likely it'll be more of a contributor in fiscal year 2028 than 2027 in terms of significant revenue contribution to the overall portfolio. There are other items in the space business that's gonna contribute revenue, but most likely not the BADGER systems the next fiscal year.
Samantha Stiroh — Equity Research Associate, Bank of America
Hi, this is Samantha Stiroh on for Ron today. We're just wondering, are there other programs under OTAs that could be at risk? The programs you highlighted as in transition, are these programs of record, or are they still under OTA as well?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Samantha, this is the only program that I know of today. Obviously, we have a large portfolio of programs that is very long, small and medium sizes and large. This is the only one that I know of right now that is in this situation. It's not just because it's OTA. It's primarily because of the circumstances of the customer and their need to go to a commercial model and the capability gap and the desire that we would like to transition there too. The other products or technologies that we have, we're already transitioning anyway, and there's not a program of record for those today. We're competing for some, but we expect those to be successful in the models that we want. This would be the only one, to my knowledge today, of this size and magnitude that we're talking about.
Samantha Stiroh — Equity Research Associate, Bank of America
Got it. Thank you. When you talked about the mix shift pushing margins down for the combined BlueHalo AVAV, do we see that turn more positive, or do we expect it to be structurally lower for the near future?
Kevin McDonnell — EVP and CFO, AeroVironment
We think as we become more commercial items in the Space and DE business, that'll drive both the adjusted gross margins, but more importantly, the Adjusted EBITDA margins higher over time. You know, it's before the merger, we had about 18% Adjusted EBITDA margins. You know, BlueHalo, much of their business was more like a traditional defense contractor. The opportunity is significant to take a lot of the things that they were working on with different customers and make them more commercially available. LOCUST is just one of them. The gun sights product is. We're very optimistic on that. It's getting a lot of traction. Also the Wasp product, which is kind of a derivative of Badger for existing ground stations, is also showing some traction.
We're very optimistic as we take these things to commercial markets, it'll be significant growth and improve the gross margins and the EBITDA margins.
Trevor Walsh — Analyst, Citizens
Hey, team. Thanks for taking the questions. Wahid, maybe just a clarification. For the programs that you called out within space and directed energy, specifically the LOCUST, the laser comms and the laser gun sights, as you take those to more of a commercialized approach, I'm assuming that doesn't mean that you're necessarily retooling those from a technology perspective to make them more cost similar to what's happening with Badger? Or is it just more the go-to-market and just that more of just as you kind of move them to just a different phase of their cycle, if you will?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
It's more, Trevor, a go-to-market business model and strategy than the programs. The reason why the BADGER was both is because we already had a contract that was a cost-plus contract, and terms and conditions of that contract basically constrained us from being able to go to a commercial model. We had an opportunity to renegotiate that with the Space Force, and now we're moving more expeditiously towards that model. Most of it, no, there's not really any change in the technology. We have very compelling, differentiated solutions and technology. We're trying to change the business model and the go-to-market strategy with our customers in the market on how we price these, how we offer this, and how we actually want to build the business going forward and scale it.
Trevor Walsh — Analyst, Citizens
Got it. Super helpful. Kevin, maybe just one quick follow-up for you, just piggybacking on the guide and just maybe a more directed question. If I just look at the midpoint from where you had the FY 2026 guide to where you've got it now, it's about a $75 million shift down. Is it fair to assume that, you know, let's call it a strong majority of that sum is SCAR related or maybe, you know, even more even split of SCAR and the other programs that you alluded to? Just trying to get a sense of kinda what the full range of that impact was.
Kevin McDonnell — EVP and CFO, AeroVironment
Well, I mean, you know, this has been a tough year in many ways. I mean, you've had all the government funding delays and the pushing of things to the right, some of the things that usually drive our margins higher. To be honest, we've been somewhat capacity constrained on the things that really we could have probably shipped this year that we now are in the process of building capacity for. When you put that all together, at the end of the day, we hit the midpoint of, you know, both the guidances. You know, obviously, we're hopeful that we'll be well into the over $1.9 billion range on the revenue as our original guidance said. You know, it just drives that EBITDA margin down because of the volume and the mix.
It's really the volume that drives down the number. You know, we're very, you know, optimistic about next year, seeing the activity that's coming in. The money is starting to flow, seems like to the different forces, different branches, and then down to the programs, then the war. That activity is significant and likely to drive our growth higher than this year for next year.
Austin Bohlig — Analyst, Needham & Company
Hey, guys. Thanks for taking my question. First one just has to do with your guys' updated full year revenue guidance. If you're just looking at the autonomous segment, obviously demand trend seems to be strengthening. How has that changed compared to the beginning of the year when you gave this guidance, when you kinda back out the SCAR opportunity?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Austin, we don't go into that level of detail for the future forecasts. We'll provide our forecast for that later. What I can tell you is that the demand on systems are quite strong. We had three primary drivers that led to a quota that we're not satisfied with, I'm not happy with, and I'm holding myself accountable more than anyone else for that. We are committed to actually deliver on our fourth quarter. We've had a long history and track record of being successful and growing and delivering value to our shareholders. We had a miss because of two external issues and one internal issue. As I described in my remarks, the demand, the fundamental underlying demand for our systems never been stronger in my tenure at AV for 16 years.
Both in our autonomous systems segment as well as in the space and cyber business, we've got strong long-term growth opportunities here. We're committed to those. We're gonna have a great still year, growth year, as Kevin mentioned earlier in his remarks, and we're gonna be positioned really well for fiscal 2027. You know, we are committed to performing and delivering, you know, value and results to our shareholders. In Q4, we're gonna see strong growth, but unfortunately, there's not a lot of time because of the timing delays. We can't convert all that to revenue that quickly. There's only so much that our customers can take and how fast we can put through the factories and get them sold off to our customer satisfaction and keep the quality where we would like to be at 100%, great quality.
It's going to go into Q1 and beyond, and I think it's gonna be a growth year again next year for us.
Kevin McDonnell — EVP and CFO, AeroVironment
You know, there's nothing wrong with this year. I mean, $1.9 billion of revenue, you know, putting these two companies together and facing all those challenges and still be able to accomplish that with all the government funding turmoil and things like this and SCAR. You know, I'm very proud of that, hitting that target. The EBITDA will be within, say, 90% of what our original guidance was. So there's nothing to be ashamed about this year. You know, it's still the leading biggest defense technology company out there in terms of EBITDA, in terms of revenue, any metric you wanna have. You know, I think it's overall, in all, it was a great first year of this merger.
Austin Bohlig — Analyst, Needham & Company
Okay, my second question has to do with LRR. That line item in the budget got a significant increase, which includes SRR, MRR, and LRR. Do you guys have a sense of kinda like what the allocation might be for you guys in LR or related to LRR in total?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Austin, we have not received any specific sort of a breakdown of how the funding is gonna be allocated to those categories. Well, what I do know and what we are certain about is that our customer is in desperate need to acquire more of these solutions as quickly as possible. We've had our manufacturing ready review with the customer for P550. They just gave us an initial order, which I described on my earnings remarks comments. I expect the P550 and LRR to be a significant growth driver in fiscal year 2027. For that specific reason, we're actually ramping up production even more.
I think we're going to be most likely receiving, based on my understanding and reading the market and the customer interest, you know, healthy, significant growth in our P550 product line in terms of revenue next fiscal year and orders.
Nicholas Labbadia — Equity Research Associate, UBS
Good evening, Wahid, Kevin, and Denise. Zooming out a bit.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Good evening.
Nicholas Labbadia — Equity Research Associate, UBS
And, as UAS, loitering munitions, one-way attack drones, and many of your other technologies continue to evolve, you know, daily on the modern battlefield, how do you balance meeting the current demand surges that you're seeing from the customer with the risk of building excess inventory, given the pace of advancements in the space and how quickly some technologies are becoming obsolete?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Thank you for asking that question because it's an important one. We really watch that very carefully to make sure that we do not have built inventory excessively that then can become obsolete or not useful for our customers. The situation is such that the customers today, and most likely in the foreseeable future, will take all the demand that we can build on the categories that we are talking about, the UAS, loitering munition, one-way attack, RF counter UAS, et cetera, et cetera, and directed energy. We're scaling these things based on really, really solid anticipated demand that we see in fiscal 2027 and fiscal 2028, number one.
Number two, the second point I wanna make is that the system, the products are designed such a way that we can make upgrades and improvements to them in a modular fashion quite quickly. The situation in the battlefield could change. When it does change, we make adjustments, we make improvements, and we roll those out on the existing platforms and even on our existing systems and architecture. It is not a very large change and risk in that regard. Lastly, throughout the last three to four years, we've learned a lot from the Ukraine conflict. You know, we're heavily involved with 12 of our different products and thousands. There's not a lot that the adversary can throw at us that can, you know, surprise us. We're staying ahead of that.
We've been staying ahead of that, and I think that's a recipe that we know how to execute on quite well compared to everyone else. I feel pretty good about that. At the same time, our customers are really, really asking us to keep ramping up. There is not only a shortage in terms of what they can use today, there's a shortage in terms of stockpiling and filling their magazines for the future because, you know, the world is not a safe place. This looks like it's going to continue for a while, and we're positioned quite well.
Clarke Jeffries — Analyst, Piper Sandler
Hello. Thank you for taking the question. Well, Wahid, Kevin, you know, maybe to put the funding turmoil in the rear view mirror, I mean, we're now here with the new budget. There were reports last week that there might be an appetite to pull forward some of the reconciliation funding. Is it too early for you to see some of that contract activity or some of the new sort of process start to proceed with the budget underway? Maybe paint us a picture of the next six to nine months on how some of this spending authority plays out. Do you expect the peak of the sort of contract activity to happen between now and September? Or, you know, how do you expect it to play out? And then one follow-up.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Clarke, I do expect an uptick in contracting and awards for us in the Q1 and Q2 timeframe, primarily because of the budgets. I'm in Washington, Capitol Hill, and Pentagon regularly. We have a team very focused on tracking the funding and the approval of this money. While it's authorized and appropriated, it still has to come in from the OMB to the Pentagon and to specific accounts within the services in order for the program offices to be able to execute on those contracts. They are priming the pump. They are working with us. We're tracking it very closely. I see really positive signs. I can't, you know, predict it exactly to the right quantity, but I think that the momentum is moving in the right direction.
I think you're right that in Q1 and Q2, we should see an uptick, primarily because the next budget cycle starts out after that, and the government budgeting cycle ends towards Q2, roughly.
Clarke Jeffries — Analyst, Piper Sandler
Perfect. Just a follow-up. You know, I think we've touched on a lot of coverage of the Badger program and the commercialization and others of the SCDE programs. I just wanted to specifically ask what commercialization might look like for the Badger program. You know, how does that change your current, you know, manufacturing lines or the capacity plans you may have? Does the commercialization look like a retool of that technology to bring the capability more in line with what the off-the-shelf offering would look like? I'd just love a little more detail on commercialization for Badger going forward.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Sure. Let me add some color there, Clarke. We understand the capability gap. We understand that our C2, the command and control systems for all of our military and intelligence satellites needs to be upgraded and overhauled. Phased array is going to be one of the key solutions in that problem statement. We have about a three, three and a half year head start than anyone else. We also understand what it takes to actually have a solution that works. In fact, we've demonstrated some of that already. As long as we can narrow down the requirements with the customer to a definitive crisp level, we're gonna go ahead and lock down the design, and we're going to convert that into a product that we can produce and deliver to our customers. That'll take about a year or so timeframe.
At the end of that, we will have a product just like a Switchblade or just like a Puma or just like a JUMP 20 with a whole bunch of different features and functions and a price tag and a lead time that our customers can procure. We do not have to engage in a contract where they have to actually watch over us on how we develop the solution and how much progress we make every day on that design effort. It is all gonna be within our control. We want that because it allows us to go fast. It allows us to design the best solution for our customer. Success would look like that in the next 12-18 months, and I believe that the need continues to actually grow rather than shrink. The urgency in our customer is increasing, not decreasing.
It is a very high priority for the U.S. Space Force to solve this problem and address the problem with a solution. We are well ahead of everyone else. We just need to get it done and deliver the solution as a commercial item.
Michael Leshock — Analyst, KeyBanc Capital Markets
Hey, good afternoon. I wanted to follow up on your commentary on the conflict in Iran, and particularly the Switchblade portfolio. Given that the industry has evolved since the start of the Russia-Ukraine war, and there have been some new entrants into the UAS market, how might the possibility of boots on the ground in Iran be similar or different versus several years ago? Then what do you view as the biggest differentiators of the Switchblade family from other competitive offerings?
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
We have several competitive differentiators than anyone else, right? We're already battle-proven. We're already relevant. We've already validated that it works against those kinds of threats. The type of drones you see such as Shahed and others that Iran is firing, we have faced those already in the battlefields of Ukraine, and we're also the one that could produce them today reliably and at scale. Lastly, you know, as the enemy lines move, our systems are gonna be more relevant because of the ranges that you have to reach and hit and the offensive side. On the defensive side, we've got the best solutions in the market that is actually working today, right? Both in the RF detect and defeat jammers, the Titan. I mean, literally, we can't make those fast enough.
We are ramping production as fast as humanly possible while keeping the quality high. I wanna emphasize, we wanna make sure that our product is always of highest quality when it gets to our customers' hands. That is how we built our reputation, and we're not gonna compromise on that. Lastly, I wanna mention the LOCUST directed energy. The number of drones and one-way attack drones that Iran is firing at us and our allies in the region is quite overwhelming, right? We need solutions such as LOCUST to be able to fight this economically and protect us. Our ships, our bases, civilian sites, critical infrastructure, oil refineries, power plants, the grid, all of these things need to be protected. They are all phenomenal candidates for our solutions.
I expect that demand to increase probably more than even the supply that we have. I think we're gonna get a very good share of this demand if there were boots in the ground or if there was no boots in the ground.
Austin Moeller — Analyst, Canaccord Genuity
Hi. Good afternoon, Wahid and Kevin. We'll miss you here, Kevin.
Kevin McDonnell — EVP and CFO, AeroVironment
Thank you.
Austin Moeller — Analyst, Canaccord Genuity
I guess just to start off on BADGER. I mean, the system was designed to be modular and built out of tiles. How difficult will it be, I guess, to reformulate it into a more commercial solution with a smaller form factor since that's what the Space Force has indicated they wanted? I guess you said, I think on the last question, that you think it'll take 12 months to produce a product.
Wahid Nawabi — Chairman, President, and CEO, AeroVironment
Yeah. Austin, about 80%-90% of what we've already developed and designed is going to be applicable to the modifications that we wanna make. The modifications are essentially to do two things, to simplify the solutions and its manufacturing processes, A, and B, to make it more cost-effective, so we can actually achieve the overall program objectives for the customer, which is fair, right? Those two things mean that almost 80%+ of what we've done in the tile architecture of the phased array of the Badger is reusable, if not more.
What we're trying to do is to reduce the parts count, simplify the design, shrink it to a smaller size, reduce its complexity, make it more of a viable commercial product while utilizing 90% or so plus of the existing development and architecture, and design that we've already done. It's not really. We don't have to invent new technologies or new designs to achieve that. Really, those risk factors have already been burned out. Now is the time to execute on transitioning to production and lower costs and reliability so we can scale.
Denise Pacioni — Head of Investor Relations, AeroVironment
Thank you once again for joining today's conference call and for your interest in AV. As a reminder, an archived version of this call, SEC filings, and relevant news can be found under the investors section of our website. We hope you enjoy the rest of your evening, and we look forward to speaking with you again following next quarter's results.