Archer Aviation Inc. (ACHR) Earnings

Management highlights

### Announcement of Strategic Boeing Transaction - Archer agreed to acquire three Boeing-owned companies (Wisk Aero, In-Situ, SkyGrid) in exchange for Boeing taking a strategic equity stake in Archer, with closing expected by the end of 2025. - The transaction transforms Archer from a pure-play eVTOL air taxi company to a diversified aerospace and defense firm with a physical AI product portfolio spanning commercial air taxis, Group 2-5 unmanned aircraft systems, aviation-specific AI, and autonomous flight technology stacks. - Management expects the transaction will not structurally increase overall cash burn, due to synergies and positive free cash flow from In-Situ. ### Midnight AirTaxi Program Progress - The Midnight program remains a top investment and strategic priority, with substantial operational progress in Q2: multiple piloted aircraft flew almost daily (often multiple flights per day), including the first intercity flights in California. - Archer remains the only OEM in the industry to have exited policy and entered the fourth and final phase of FAA type certification for Midnight, with a fully accepted means of compliance. The FAA approved Archer's quality management system this quarter, enabling FAA for-credit conformity testing across all aircraft components, which is ongoing in 2025. - Upcoming milestones: start flight operations in the LA area out of Hawthorne Airport in the coming months, then commence initial operations under the White House's EIPP program in Texas later in 2025. Over 150 piloted test flights have been completed to date, with flights reaching over 50 miles and transitioning between airports. - Archer co-launched ACES (American Consortium for Electric Skyways) alongside Beta and Macquarie to develop commercial air taxi infrastructure. ### Diversified New Business Line Updates - **Halo Thunder (Dual-Use UAS):** A clean-sheet Group 5 autonomous UAS platform developed in partnership with Anduril, targeting both defense programs of record and commercial use cases (logistics, search and rescue, offshore energy, humanitarian aid). The platform leverages core technology from Midnight (batteries, electric motors, flight control software) with a new hybrid system to enable heavier payloads, longer range, and higher speed than Midnight. First flight is targeted for 2026, with customer deliveries planned for 2029 and scaling starting in 2030. - **Z (Aviation-Specific AI Foundation Model):** Archer introduced Z, the world's leading aviation-specific foundation model, designed to create a unified intelligence layer for aviation data across cockpits, air traffic control, and airline operations. The goal is for Z-based solutions to be revenue-generating and profitable as early as 2026, with significant scaling starting in the second half of 2027. Z will be paired with SkyGrid air traffic management technology from the Boeing acquisition to deliver next-generation air traffic management products. - In-Situ brings an immediate base of profitable revenue and 2 million hours of autonomous flight data across its 4,000+ built Group 2/3 UAS, which will accelerate Archer's autonomy development across all platforms.

Guidance

- For Q3 2025, Archer maintains its adjusted EBITDA loss guidance range of $170 to $200 million, consistent with the prior quarter's range. - Post-acquisition close and integration, management expects total company cash burn to remain relatively flat compared to current levels, driven by positive free cash flow from In-Situ, disciplined cross-platform synergy leveraging, and aligned development timelines for Midnight and Halo that avoid overlapping peak investment periods. - Midnight air taxi is on track to complete full transition testing by the end of 2025, with initial EIPP operations starting in Texas in late 2025 as previously guided. - Halo Thunder is guided to achieve first flight in 2026, with customer deliveries targeted for 2029. - Z AI solutions are guided to become revenue-generating and profitable by the second half of 2026, with significant scaling starting in the second half of 2027. - The Boeing acquisition transaction is guided to close by the end of 2025 as currently planned.

Segment performance

Archer Aviation reported Q2 2025 total revenue of $5 million, a 213% increase quarter-over-quarter, driven by expanded operations at Hawthorne Airport in Los Angeles. Prior to the announced Boeing acquisition, 100% of Q2 revenue came from the AirTaxi (Midnight) segment, with no revenue generated from the Halo Thunder UAS or Z AI segments in the quarter. Post-acquisition (expected to close by end of 2025), In-Situ (one of the three acquired Boeing businesses) is projected to contribute over $200 million in annual revenue, and will become a profitable, positive free cash flow segment immediately after closing. The new expanded portfolio will have four core operating segments going forward: 1) Midnight AirTaxi (currently the only revenue-generating existing segment, 100% of current revenue), 2) Halo Thunder UAS (pre-revenue, in development), 3) Aviation AI (Z, pre-revenue, in development), 4) In-Situ ISR Drones (projected to contribute ~$200 million annual revenue post-close, profitable), plus Wisk autonomy technology and SkyGrid air traffic management integrated across all segments.

Risks & headwinds

- Forward-looking statements (including all product development timelines, revenue projections, cash burn targets, and acquisition close timing) are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations, as detailed in Archer's SEC risk factor disclosures. - FAA certification for commercial autonomous air taxi operation depends on regulatory readiness that is outside of Archer's control, which could delay deployment of autonomous technology in the Midnight segment. - The planned acquisition of Wisk, In-Situ, and SkyGrid has not yet closed, and integration planning remains in early stages, creating uncertainty around the timing and magnitude of expected synergies and revenue contributions. - Commercial air taxi market scaling is difficult to predict in terms of timing and growth rate, which creates revenue uncertainty for the Midnight segment. - Development of new aerospace and defense products carries inherent technical risks that could delay milestones or increase costs beyond current projections.

Analyst Q&A

• Q: What are the core technical and operational synergies of the Boeing acquisitions, how will you prioritize the eVTOL business alongside the new defense drone business, and what is the most exciting opportunity from the deal? /

  A: The portfolio strategy balances the large but longer-term TAM of the civil passenger eVTOL market with faster time-to-revenue pathways in defense. Revenue and cash flow from defense and In-Situ will enable Archer to reach profitability sooner, reduce equity dilution, and support continued investment in Midnight. The acquisitions add immediate profitable revenue, a large library of mature autonomous flight technology, and an established go-to-market presence that Archer did not have prior to the deal. Midnight remains a core priority, with defense acting as a complementary growth driver rather than a replacement.

• Q: Where does In-Situ fit into Archer's long-term portfolio, and what are its key revenue growth drivers? /

  A: In-Situ currently generates annual revenue of over $200 million from existing Group 2-4 ISR drone products, and will provide immediate positive free cash flow post-close that can offset investment in other Archer programs. The macro environment has driven strong growing demand for ISR drones, with customers requesting new capabilities that will allow In-Situ to expand its product portfolio and grow revenue substantially over time, making it a core long-term pillar of Archer's diversified business.

• Q: What needs to happen for the Z AI platform to hit management's target of being profitable and revenue-generating by next year? /

  A: Z is an aviation-specific foundation model that creates a unified intelligence layer from currently siloed aviation data, supporting three core product areas: pilot applications, air traffic management, and airline operations. It can run on cloud or fully offline edge infrastructure, and Archer is already in early discussions and initial deployments with government agencies and industry partners. The company plans to roll out these commercial products to the market, where it has already seen strong customer interest, to generate revenue and hit the profitability target in 2026.

• Q: How will management contain cash burn after the acquisitions and new platform launches? /

  A: The acquired businesses have complementary architectures and overlapping core capabilities with existing Archer programs, creating immediate cost synergies. Many defense programs provide R&D funding to offset development costs, and In-Situ generates positive free cash flow immediately post-close. Management's goal is to maintain a broadly similar overall cost structure to the pre-acquisition base, keeping cash burn contained.