AeroVironment stock, the maker of unmanned aerial vehicles for the U.S. military, delivered an impressive "beat and raise" quarter last night, reporting both better earnings than expected and promising more of the same.

Heading into AV's fiscal Q2 2024, analysts had forecast the company would earn only $0.62 per share on sales of $171 millionJaipur Wealth Management. Instead, AV delivered $0.97 per share in profit, and reported sales of $181 million.

And then its stock crashed 10.8% (through 11:30 a.m. ET).Kanpur Stock

Yes, you read that rightSimla Wealth Management. This tiny defense contractor AeroVironment beat Wall Street's earnings predictions with a stick, and then went on to raise earnings guidance through the end of this year as well. (The low point of AV's new guidance range of $2.46 to $2.70 per share is actually above the midpoint of Wall Street's forecast, $2.45 per share). But investors are selling the stock anyway.

The question is, why?

Q2 sales surged 62% year over year. Profits grew 366% year over year. And CEO Wahid Nawabi says AV is seeing "increasing demand" for its products, driving guidance for $685 million to $705 million in revenue this year (a 29% jump), with positive profits greatly improved over last year's $7-plus-per share net loss.

Maybe I'm going blind, but I don't see a lot of bad news in any of that.

It's only after reading through AeroVironment's entire press release, that I think investors finally find the answer to the question: Might these numbers not be quite as good as they appear?Guoabong Investment

Way down in the press release, after all the prose and deep within the company's cash flow statement, we learn that all of AV's fabulous revenue growth and its impressive return to "profits" ended up generating $35.7 million in negative free cash flow through the end of the company's fiscal first half --  actually a worse result than the $24.1 million in positive free cash flow it had generated through fiscal H1 2023.

And I'm afraid what this means is that, despite the revenue growth and reported profits, AeroVironment stock is still currently on course to report its third straight year of negative free cash flowMumbai Wealth Management. And suffice it to say that a company that can't generate enough cash to fund its operations internally is probably a company that doesn't deserve a $3.5 billion market capitalization -- and a stock that doesn't deserve to be selling for more than $127 a share.