Air Industries Revenue Drops 6.6% in Q2

Air Industries Group (AIRI -8.31%), a supplier of precision components and assemblies for the defense and aerospace industries, released its Q2 2025 earnings report on August 14, 2025. The company reported GAAP revenue of $12.7 million, exceeding analyst expectations, with sales (GAAP) reaching $12.7 million versus the anticipated $12.0 million. However, GAAP EPS came in well below estimates at ($0.42) versus a consensus forecast of ($0.15), and profitability metrics fell steeply compared to the year-ago period. Management highlighted persistent cost and supply chain pressures, leading to a more cautious outlook for fiscal 2025 and a focus on renewed cost controls as near-term prospects remain challenged. Overall, increasing operating costs and margin pressure contributed to a comparatively weak financial performance.

Source: Air Industries Group. Note: Analyst estimates provided by FactSet.

Company Overview and Strategic Focus

Air Industries Group is a core supplier to the defense and aerospace sector, specializing in the manufacture of high-reliability components and complex assemblies. Its primary customers include major defense contractors such as Lockheed Martin, Northrop Grumman, and major programs like Sikorsky’s CH-53K heavy lift helicopter and Northrop Grumman’s E-2D Advanced Hawkeye aircraft. The company’s role as a Tier One and Tier Two supplier means it delivers directly to both major primes and, at times, the U.S. government, providing critical parts used in high-stakes applications where quality is paramount.

Recently, Air Industries Group has focused on capitalizing on its strong customer relationships and expanding its order backlog. Sustaining long-term agreements with leading defense contractors remains a top priority, as does delivering quality at a scale that supports program reliability. To mitigate industry pressures and drive performance, the company is relying on effective cost controls, investment in operations within the United States, and continuous regulatory compliance.

Second Quarter Performance: Results and Key Drivers

Net sales (GAAP) declined year over year, falling from $13.6 million in Q2 2024 to $12.7 million. Despite GAAP revenue surpassed estimates, the revenue figure came with a sizable contraction in gross profit, which dropped from $2.6 million to $2.0 million. This reflected both lower sales volumes and tighter margins—gross margin compressed from 19.5% in Q2 2024 to 16.0%. Management attributed these changes to delays in customer orders and longer lead times from subcontractors, which have lengthened the gap between receiving orders and being able to recognize revenue. These supply chain headwinds have become a persistent challenge for the aerospace manufacturing sector.

Operating income fell sharply, from $0.75 million in Q2 2024 to $0.008 million. The drop was largely due to a combination of operational deleveraging and higher operating expenses—most notably, a $0.1 million increase in quarterly costs. A significant portion of this was driven by non-cash stock compensation, which increased at a faster rate year to date and contributed $0.6 million in additional operating expenses in the first half of 2025. Adjusted EBITDA, a non-GAAP measure of profitability that excludes certain non-cash and financing costs, came in at $0.89 million, marking a 36.8% drop compared to the $1.41 million result in Q2 2024. The company recorded a GAAP net loss of $1.4 million for the first half of 2025, a substantial increase from a $0.4 million loss during the same period in 2024.

At the operational level, Air Industries Group's strong customer relationships remained intact. The company continued to supply critical military platforms, and its backlog reached a record level, last cited at $117.9 million—a 19.9% increase year over year as of December 31, 2024. According to management, the backlog’s size reflects ongoing demand and should offer support for revenue growth in fiscal 2026 and beyond. Importantly, there were no reports of customer order cancellations, with management emphasizing that, “Our backlog remains at record levels, reflecting sustained demand for our products.”

Management responded to weak profitability with immediate actions. This included a workforce reduction expected to decrease annual payroll by approximately $1.0 million, as well as a $4.0 million capital raise through an at-the-market equity offering in July 2025 to reinforce near-term liquidity. While these steps add financial flexibility, the company faces near-term pressure, as most of the benefit from the record backlog of $117.9 million as of December 31, 2024 is expected to be realized in future periods rather than immediately. Management cited the ongoing impact of stock compensation costs as a drag on results, with only partial mitigation from recent cost initiatives.

The bulk of product deliveries during the quarter continued to support military aircraft programs. Military end-use accounted for approximately 69.9% of net sales for FY2024, signaling that aircraft components and assemblies for critical defense platforms remain the largest product family for the company. These include major assemblies for programs such as Sikorsky’s CH-53K and Northrop Grumman’s E-2D, both key military aircraft. There have been delays in customer order timing and materials sourcing, but the company has not seen a reduction in customer demand for its primary products.

There were no material one-time events disclosed apart from the noted increase in non-cash stock compensation.

Looking Ahead: Guidance and Watch-list Items

Management revised its outlook for FY2025, now projecting that second-half results will be lower than the first half, though the fourth quarter is expected to be the period’s relative high point. No explicit revenue or earnings targets were provided for the coming quarters. In its comments, management reinforced that while operational and cost headwinds persist, the company’s record backlog and strong customer base support recovery prospects next year as delays in material and order flows subside. Investors are advised to monitor the pace at which backlog converts into revenue and to watch for the effects of the recent payroll reductions and capital raise on future profitability.

No formal numerical guidance was provided by management beyond these qualitative statements regarding the expected quarterly cadence.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.