Unlocking Defense Stock Value: AeroVironment vs Palantir in 2025
Explore why AeroVironment offers a compelling defense stock alternative to Palantir in 2025, blending strong growth, diversified revenue, and attractive valuations amid rising U.S. defense spending.
Key Takeaways
- AeroVironment offers strong growth with diversified defense tech revenue.
- Palantir’s valuation is historically high, posing risk despite rapid growth.
- Lockheed Martin and other defense giants provide stable alternatives with AI focus.
- AeroVironment’s $4.1B BlueHalo acquisition broadens its defense footprint.
- Rising U.S. defense budgets favor companies like AeroVironment and Lockheed Martin.
In the fast-evolving world of defense stocks, investors face a choice between meteoric growth and solid value. Palantir (PLTR) dazzled markets with a 130% gain year-to-date in 2025, fueled by its AI prowess and government contracts. Yet, its sky-high valuation—trading at over 120 times sales—casts shadows of risk. Enter AeroVironment (AVAV), a defense technology powerhouse quietly building momentum with a diversified portfolio and a more attractive valuation. With a transformative $4.1 billion BlueHalo acquisition and a 40% revenue jump in Q4 fiscal 2025, AeroVironment is staking its claim across air, land, sea, space, and cyber domains. This article unpacks why savvy investors should consider AeroVironment over Palantir, weaving in insights on Lockheed Martin’s steady leadership and the broader defense sector’s AI-driven future.
Comparing Growth and Valuation
Palantir’s 2025 performance reads like a thriller: revenue topped $1 billion for the first time in Q2, surging 48% year-over-year, with U.S. revenue up 68%. Its stock has been the S&P 500’s star, climbing 130% year-to-date after a 340% jump in 2024. Yet, this dazzling ascent comes with a catch—Palantir trades at a price-to-sales ratio exceeding 120, making it the priciest stock in the index by a wide margin. This premium valuation is a double-edged sword; while it reflects investor excitement, it also exposes shareholders to sharp corrections if growth slows or sentiment shifts.
On the flip side, AeroVironment offers a different narrative. Despite comparable growth prospects, AVAV trades at significantly lower earnings multiples, appealing to value-conscious investors. Its fiscal 2025 revenue reached $821 million, growing organically by 14% even with reduced Ukraine-related sales. The company’s Q4 revenue jumped 40% year-over-year to $275 million, signaling strong momentum. This blend of solid growth and reasonable valuation positions AeroVironment as a compelling alternative to Palantir’s high-flying but riskier profile.
Diversifying Defense Domains
AeroVironment’s $4.1 billion acquisition of BlueHalo has been a game-changer, transforming it into a diversified defense technology leader. Now spanning air, land, sea, space, and cyber domains, the company has reduced its concentration risk, with no single mission area expected to contribute more than 30% of fiscal 2026 revenue. This diversification is like spreading your bets across multiple winning horses rather than banking everything on one.
This broad footprint is backed by over 50 years of battlefield experience and nearly $2 billion invested in research and development over the past decade. AeroVironment’s portfolio includes software-defined hardware solutions such as Switchblade loitering munitions, unmanned aircraft systems, and cybersecurity platforms. This multi-domain approach not only cushions the company against sector-specific downturns but also aligns perfectly with the U.S. government’s expanding defense priorities.
Capitalizing on Defense Budget Growth
The U.S. defense budget is on an upswing, with $25 billion earmarked for missile-defense systems and $13.4 billion for autonomous platforms. AeroVironment’s core competencies sit right at this intersection, positioning it to reap significant benefits. Its Loitering Munition Systems segment alone generated $352 million in annual revenue—an 83% increase driven by strong Switchblade demand domestically and internationally.
Moreover, AeroVironment secured $1.2 billion in total bookings and reported a backlog of $726 million, up 82% year-over-year. These figures reflect a robust pipeline and growing customer confidence. International sales now account for 52% of total revenue, spanning 100 allied nations, with eight countries placing Switchblade orders totaling $250 million in fiscal 2025. This global reach amplifies AeroVironment’s growth runway beyond U.S. borders.
Innovation Driving Future Revenue
Innovation is AeroVironment’s engine. In fiscal 2025, the company launched three groundbreaking products: the AI-driven P550 autonomous unmanned aircraft system, the JUMP-20X vertical takeoff maritime system, and the Red Dragon one-way attack drone. These cutting-edge solutions directly address critical military priorities and are expected to generate hundreds of millions in backlog over the next two to three years.
This pipeline reflects a company not resting on past laurels but actively shaping the future of defense technology. The management’s confidence is palpable, with 70% visibility into fiscal 2026 guidance—a higher level than historical ranges—underscoring a strong growth trajectory amid favorable defense spending cycles.
Lockheed Martin: Stability Meets Innovation
While AeroVironment offers growth with value, Lockheed Martin (LMT) stands as a beacon of stability and industry leadership. As the world’s leading defense contractor, Lockheed boasts dominant platforms like the F-35 fighter, advanced missiles, hypersonics, and next-generation space programs. Its revenue is largely secured by long-term U.S. government and allied contracts, providing high cash flow stability and visibility.
Lockheed is also aggressively integrating AI, autonomous systems, cybersecurity, and combat cloud technologies, competing with specialized data analytics firms like Palantir. Trading at price-to-earnings ratios near historical sector averages, LMT offers a dividend yield above 2.5%, blending growth with income. For investors wary of Palantir’s valuation risks, Lockheed Martin presents a balanced defense play combining innovation with proven contract security.
Long Story Short
Choosing between defense stocks like Palantir and AeroVironment boils down to balancing dazzling growth with grounded value. Palantir’s AI dominance and explosive revenue gains are impressive but come with a valuation that could wobble if momentum fades. AeroVironment, with its diversified defense tech portfolio, robust backlog, and strategic acquisitions, offers a compelling alternative that’s both growth-oriented and reasonably priced. The expanding U.S. defense budget, especially in missile defense and autonomous platforms, sets the stage for AeroVironment’s innovations to shine. Meanwhile, stalwarts like Lockheed Martin provide stability and dividend income, blending tradition with AI advancements. For investors craving a defense play that mixes innovation with prudence, AeroVironment’s story is one worth watching closely. The relief of owning a stock with both growth potential and valuation sanity is a rare find in today’s market frenzy.