Quick Verdict
Innovative Aerosystems (Nasdaq: ISSC) posted Q3 fiscal 2026 revenue of $26.7 million (+10.7% YoY) and adjusted EPS of $0.33, crushing the $0.22 consensus estimate. These strong results reflect the performance outlined in the Innovative Aerosystems Q3 FY2026 Earnings report. Net income rose to $4.5 million ($0.25 diluted GAAP EPS) from $2.4 million a year ago, with gross margin expanding to 51.7%. Shares closed up 1.05% the following session after an initial pullback.
About Innovative Aerosystems
Innovative Aerosystems, formerly Innovative Solutions & Support, Inc. (Nasdaq: ISSC), is a Pennsylvania-based avionics manufacturer that rebranded from “Innovative Solutions and Support” in October 2025. Founded in 1988 by Geoffrey S. M. Hedrick and headquartered at 720 Pennsylvania Drive, Exton, PA, the company designs, manufactures, and services flight navigation systems, air data equipment, engine display systems, flight guidance and cockpit display systems for commercial, business, and military aviation markets.
As of mid-August 2026, ISSC traded around $23.00 per share with a market cap near $360 million (as of Aug 12) and roughly 133-147 employees. The stock carries a trailing P/E of approximately 21.9x and does not currently pay a dividend.
Top Financial Highlights
- Net sales of $26.7 million, up 10.7% year-over-year.
- Gross profit of $13.8 million, up 60.9% from $8.6 million a year ago.
- Gross margin expanded to 51.7% from 35.6% in the prior-year quarter — the fourth consecutive quarter above 50%.
- GAAP net income of $4.5 million, or $0.25 per diluted share, versus $2.4 million ($0.14/share) a year ago.
- Adjusted net income of $6.0 million, or $0.33 per diluted share, versus $2.9 million ($0.16/share) last year.
- EBITDA of $7.3 million; Adjusted EBITDA of $7.7 million, up 74.7% YoY.
- Product sales of $17.5 million, up from $16.6 million in the prior-year period.
- Service revenues of $9.2 million, up from $7.5 million a year ago.
- F-16 program revenue fell to $5.7 million from $12.6 million a year ago due to a manufacturing-transition pull-forward last year.
- Excluding F-16 and recent acquisitions, organic revenue growth exceeded 40%.
- Backlog of approximately $82.9 million as of June 30, up $5.5 million year-over-year.
- Operating cash flow of $15.5 million for the nine months ended June 30, 2026, up 50.4%.
- Free cash flow of $12.3 million for the first nine months, up 155% from $4.8 million.
- Net debt of $43.8 million, with net debt-to-trailing-twelve-month Adjusted EBITDA of 1.4x
- Guidance: Q4 fiscal 2026 revenue expected in the $28 million–$30 million range, with management reiterating confidence in a long-term $250 million revenue target
Beat or Miss?
| Metric | Reported | Estimated/Expected | Difference/Analysis |
| Revenue | $26.73 million | $23.98 million (consensus) | Beat by ~11.5% |
| EPS (Adjusted) | $0.33 | $0.22 (consensus) | Beat by $0.11, +37.5% surprise |
| Net Income (GAAP) | $4.5 million | N/A | Nearly doubled from $2.4 million YoY |
| Gross Margin | 51.70% | N/A | Up from 35.6% YoY |
What Leadership Is Saying
“During the third quarter, the IA team delivered another strong operational and financial performance driven by continued organic growth, improved margin realization, and free cash flow conversion… We are well-positioned for a solid finish to fiscal 2026 while building momentum into fiscal 2027.” — Shahram Askarpour, President and CEO
“Net income was $4.5 million, or $0.25 per diluted share during the third quarter, compared to net income of $2.4 million or $0.14 per share in the third quarter of last year.” — Jeff DiGiovanni, Chief Financial Officer
Historical Performance
| Category | Q3 FY2026 | Q3 FY2025 | Change (%) |
| Revenue | $26.7 million | $24.1 million | 10.70% |
| Net Income | $4.5 million | $2.4 million | 87.50% |
| Gross Profit | $13.8 million | $8.6 million | 60.90% |
| Operating Expenses | $7.8 million | $5.1 million | 52.90% |
Peer Comparison: Astronics Corporation
| Category | ATRO Q2 2026 | ATRO Q2 2025 | Change (%) |
| Revenue | $260.0 million | $204.7 million | 27.00% |
| Net Income | $35.1 million | $1.3 million | 2568.20% |
| Operating Income | $40.5 million | $4.8 million | 750.50% |
Fellow avionics/aerospace supplier Astronics (Nasdaq: ATRO) posted its own record quarter with sales up 27% to $260 million and raised full-year 2026 revenue guidance to $1.02–$1.04 billion, underscoring broad-based strength across the aerospace supply chain alongside ISSC’s growth.
How the Market Reacted?
ISSC shares closed at $23.00 on August 14, 2026, up 1.05% following the report, after trading near $20.13 with a roughly $360 million market cap just before the release. The stock has climbed about 21.4% year-to-date in 2026, reflecting sustained investor confidence in the company’s margin expansion and diversification beyond the lumpy F-16 program.
Analyst sentiment following the earnings beat and MarketBeat’s post-earnings coverage were described as broadly positive, citing accelerating organic growth, record gross margins, and a strengthening backlog. The market appears to be rewarding the “beat and reiterate” pattern — strong EPS and revenue surprises paired with confident forward guidance for Q4 and the long-term $250 million revenue target.
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