Executive Summary

Q3 2025 revenue rose to $2.484M, up 171% YoY and up sequentially from $0.600M, while gross margin compressed to 43.4% on a shift toward lower-margin hardware; net loss improved to -$13.446M and EPS to -$0.61 vs -$2.93 in Q2 .
Liquidity strengthened: cash and equivalents ended Q3 at $32.198M, working capital at $1.104M (or ~$29.3M excluding warrant liabilities), and stockholders’ equity at $10.454M .
Strategic catalysts post-quarter: acquisition of Drone Nerds (profitable distributor with >$100M 2024 revenue) and $25M strategic investment from Unusual Machines that broaden the near-term revenue base and ecosystem alignment .
TriFan 600 milestones accelerated (FAA Tech Fam reviews, subscale flights, avionics selection) and management reiterated 2027 target for a piloted demonstrator; FAA type certification earliest 2030 remains the timeline driver .
No Wall Street consensus estimates were available via S&P Global for Q3 2025; estimate comparisons are not possible at this time (consensus unavailable via S&P Global).

What Went Well and What Went Wrong

What Went Well

Revenue recovery and pipeline activation: Q3 revenue rebounded as supply chain issues resolved and customers accelerated hardware purchases ahead of an IoT hardware wind-down; gross profit rose to $1.077M .
Program execution: Multiple FAA Tech Fam reviews completed; subscale Sparrow (1:15) and Kestrel (1:12) aircraft conducted initial flight operations validating key TriFan 600 design elements; Garmin G700 TXi cockpit selected .
Balance sheet reinforcement: $18.5M net September offering lifted Q3 cash to $32.198M and improved working capital; equity rose to $10.454M .

“Collectively, these developments reinforce our conviction in the TriFan 600 and our broader strategy to shape the future of the Vertical Economy.” — Scott Pomeroy, CEO .

What Went Wrong

Margin pressure: Gross margin declined to 43.4% vs 56.6% YoY and 80.5% in Q2 due to higher hardware mix; management does not expect Q3’s hardware surge to persist .
Operating expense intensity: Operating expenses rose to $15.886M, driven by stock-based compensation (+$6.350M in Q3) and higher G&A as the company scales public-company infrastructure .
Legal overhangs: Ongoing litigation (Xeriant and Auctus matters) progressed through discovery and motions, with outcomes uncertain; no accrual recorded due to inability to estimate losses .

Financial Results

Quarterly performance (Q1 → Q3 2025)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$0.484	$0.600	$2.484
Gross Profit ($USD Millions)	$0.335	$0.483	$1.077
Gross Margin %	69.2%	80.5%	43.4%
Net Loss ($USD Millions)	$(12.872)	$(20.858)	$(13.446)
Diluted EPS ($USD)	$(3.80)	$(2.93)	$(0.61)
Cash & Equivalents ($USD Millions)	$8.008	$20.046	$32.198

YoY comparison (Q3 2024 → Q3 2025)

Metric	Q3 2024	Q3 2025
Revenue ($USD Millions)	$0.918	$2.484
Gross Margin %	56.6%	43.4%
Net Loss ($USD Millions)	$(4.435)	$(13.446)
Diluted EPS ($USD)	$(33.40)	$(0.61)

Segment breakdown (Q3 2025)

Segment	Revenue ($USD Thousands)	Loss from Operations ($USD Thousands)
Industrial IoT	$2,484	$(963)
Commercial Aviation	$0	$(2,587)
Unallocated Costs	—	$(11,259)
Total	$2,484	$(14,809)

KPIs and capital metrics (Q1 → Q3 2025)

Metric	Q1 2025	Q2 2025	Q3 2025
Working Capital ($USD Millions)	~$0.012	~$2.375	~$1.104
Stockholders’ Equity ($USD Millions)	$13.929	$12.405	$10.454
Deferred Revenue ($USD Millions)	$0.808	$0.979	$0.737

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
FAA Type Certification (TriFan 600)	Earliest year for approval	Earliest 2030 (Q2 2025)	Earliest 2030 reaffirmed (Q3 2025)	Maintained
Piloted Demonstrator (TriFan 600)	Target year	Not specified in Q2 filings	2027 target articulated	New/Specified
Financial Guidance (Revenue/Margins/OpEx)	FY/Qtr	None	None	Maintained (no numerical guidance)
Capital Policy (PIPE covenant pricing floor)	Until shareholder approval	N/A	No new equity issuance below $2.50 until shareholder approval per PIPE terms	New covenant

Earnings Call Themes & Trends

(No Q3 earnings call transcript available; company scheduled a Town Hall with Q&A for Dec 2, 2025.)

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
FAA Engagement & Certification	FAA accepted type cert application (Mar 17); structures Tech Fam; Fort Worth CBO assigned	Multiple Tech Fam reviews across structures, propulsion, flight performance; monthly FAA engagement	Steadily advancing
Subscale Flight Testing	Lab, CFD, prototyping (Q2)	Sparrow (1:15) and Kestrel (1:12) initial flights validated aero/stability models; TriHawk prep	Accelerating execution
Avionics & Supplier Integration	Drive systems suppliers selected (Q2)	Garmin G700 TXi cockpit selected; broad supplier integration	System architecture maturing
Supply Chain	Middle East conflict disrupted Israeli supplier; delayed hardware deliveries (Q2)	Conditions improved; customers pulled forward hardware purchases; margin mix impact	Near-term normalization
AI/Technology Initiatives	Design/CFD, RTLS (Q2)	Valkyrie Vanguard Platform; $2M convertible note; applied AI and advanced materials integration	Expanding AI footprint
Regulatory/Legal	Xeriant litigation initiated; Chardan arbitration settlement (Q2)	Xeriant discovery orders; Auctus motion outcomes; continued defense	Active litigation management
Ecosystem & Revenue Base	Core IoT recurring/software, exploring IoT hardware wind-down (Q2)	Acquired Drone Nerds; $25M UMAC investment; expanding UAS enterprise revenue	Diversifying and scaling

Management Commentary

“The third quarter marked one of the most significant periods of technical and strategic progress… completed subscale flight operations… secured an avionics system… expanded our innovation ecosystem…” — Scott Pomeroy, CEO .
“We closed an $18.5 million (net) public offering… enhanced our balance sheet… position XTI for measurable near-term progress as we work toward the TriFan 600 piloted demonstrator in 2027.” — Scott Pomeroy .
“With the acquisition of Drone Nerds, the strategic investment from UMAC, the launch of the Vanguard Platform… we are building a multi-dimensional vertical flight company…” — Scott Pomeroy .

Q&A Highlights

No earnings call Q&A this quarter; management scheduled a Town Hall for investors and analysts on Dec 2, 2025, with prepared remarks and Q&A to follow .
Any guidance clarifications are expected to be addressed in the Town Hall format (no Q3 call transcript available) .

Estimates Context

Wall Street consensus for Q3 2025 revenue and EPS via S&P Global was unavailable; therefore, beat/miss analysis vs consensus cannot be performed at this time (consensus unavailable via S&P Global).

Key Takeaways for Investors

Revenue momentum returned in Q3 ($2.484M), driven by supply chain normalization and customer hardware pull-forward; margin compression reflects mix shift and is unlikely to persist per management commentary on hardware wind-down .
Operating losses remain substantial; however, Q3 net loss improved sequentially vs Q2 as scale and financing costs moderated; ongoing equity incentives lift G&A in the near term .
Liquidity is robust (cash $32.198M; working capital ~$1.104M; ~$29.3M excl. warrants), with recent financings and warrant exercises bolstering capital for program execution .
Strategic expansion into drones (Drone Nerds acquisition) and UMAC’s $25M investment adds near-term operating business with >$100M 2024 revenue and aligns with U.S. domestic sourcing tailwinds amid intensifying bans on Chinese drones .
Certification timeline remains the key long-term driver: 2027 demonstrator target and earliest 2030 type certification guide expectations for commercialization pacing .
Legal matters (Xeriant, Auctus) are actively managed; while outcomes are uncertain with no accruals, Court orders have compelled discovery adherence and clarified procedural status (e.g., denial of stay/dismiss in Auctus case) .
Near-term stock catalysts likely include Town Hall disclosures (Dec 2), integration updates for Drone Nerds, and continued FAA progress; monitor mix shifts back toward higher-margin software and services in IoT .

XTI Aerospace, Inc. (XTIA)·Q3 2025 Earnings Summary