Shares of Applied Energetics, Inc. (AERG Quick QuoteAERG - Free Report) have risen 10.2% since the company reported its earnings for the first quarter of 2025. This compares favorably to the S&P 500 index’s 1.1% gain over the same period. Over the past month, the stock has surged 72.6%, significantly outperforming the S&P 500’s 15.4% increase, suggesting strong investor enthusiasm amid developments in the company’s ultrashort pulse laser technology and national security initiatives.

AERG’s Revenues Rise, Losses Widen

Applied Energetics posted a notable 56.3% year-over-year increase in revenues, reporting $209,753 for the quarter ended March 31, 2025, up from $134,235 in the prior-year period. The revenue boost was attributed to a new contract initiated in June 2024, though management noted that certain defense contracts faced funding pauses by late April.

Despite stronger top-line performance, the company’s net loss widened 18.9% to $3.11 million compared to $2.61 million in the same quarter last year. The loss per share remained flat at zero on a diluted basis due to an increase in the weighted average number of common shares outstanding.

Other Key Business Metrics of AERG

The gross profit turned positive at $145,839, reversing a gross loss of $140,197 in the prior-year quarter. This shift stemmed from a sharp 76.7% reduction in the cost of revenues, which declined to $63,914 from $274,432.

However, operating expenses swelled significantly. General and administrative expenses rose 12.6% year over year to $2.61 million, driven in part by higher stock-based compensation and professional fees. Selling and marketing costs more than quadrupled to $318,784 from $75,560, while R&D expenses surged nearly fourfold to $323,047, reflecting intensified efforts to enhance its laser capabilities.

Cash on hand improved materially, increasing from $164,812 at year-end 2024 to $4.29 million as of March 31, 2025, largely due to a $6 million equity raise completed during the quarter.

Management Commentary

In the earnings filing, management emphasized its strategic push to advance the development and integration of its ultrashort pulse laser (USPL) systems. Applied Energetics transitioned to the next phase of its collaboration with Kord Technologies, integrating its USPL tech into Kord’s Firefly High Energy Laser Weapon System. This move is expected to boost the company’s capacity for full-system demonstrations and field deployment readiness.

Management also highlighted the opening of its new 26,800-square-foot Battle Lab, a facility designed to support laser development, integration and testing. The lab is envisioned as a core driver of near-term growth and a platform for on-demand demonstrations to potential defense customers.

Factors Influencing AERG’s Headline Numbers

While revenue growth was an upside, it was tempered by funding disruptions in two government contracts. In late April, the Office of Naval Research advised Applied Energetics to pause work on a $1.99 million Navy contract and a $1.46 million USMC contract due to a lack of funds. Although these contracts were still active as of March 31, the company ceased recording related revenues amid collection uncertainties.

Simultaneously, the sharp increase in R&D and marketing spending weighed on profitability. These investments were deemed necessary to position the company for forthcoming DoD opportunities despite broader federal budget constraints introduced by the newly formed Department of Government Efficiency.

Guidance Provided by AERG

Applied Energetics expressed cautious optimism that its innovative laser systems, particularly in directed energy applications, would continue to attract interest and support from defense customers. While acknowledging uncertainty surrounding federal appropriations, the company reiterated its intention to maintain internal R&D momentum and pursue additional contract opportunities across military and commercial domains.

Other Developments at AERG

During the quarter, Applied Energetics made substantial progress on strategic initiatives. In addition to its collaboration with Kord Technologies, the company continued advancing work under a $1.15 million U.S. Army contract related to infrared laser countermeasures. It also saw the conversion of a prior Navy grant into a $1.22 million formal contract, though work under this agreement has similarly paused due to funding constraints.

On the capital side, the company completed a $6 million private placement in March 2025, issuing 8.01 million shares, including pre-funded warrants. Additionally, Applied Energetics issued 80,000 shares to consultants and 30,000 shares via stock option exercises.