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Applied Energetics Stock Falls as Q3 Revenues Drop and Losses Widen
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Shares of Applied Energetics, Inc. (AERG - Free Report) have declined 12.1% since the company reported its third-quarter 2025 results, a sharper drop than the S&P 500 Index’s 1.9% decrease over the same period. Over the past month, the stock has fallen 18.1%, while the broader index edged up 0.1%, underscoring a period of pronounced underperformance for the defense-technology company.
In the third quarter, Applied Energetics posted revenues of $108,984, significantly below the $747,720 recorded a year earlier, representing an 85% decline. The steep drop came after certain government contracts became unfunded, forcing the company to suspend work despite the contracts remaining active. The cost of revenues fell 89%, but the company still reported a wider net loss of $3.97 million compared with a loss of $2.38 million in the prior-year quarter. Operating expenses surged, particularly general and administrative costs, reflecting higher payroll, stock-based compensation and expanded business development activity. Loss per share widened to 2 cents from 1 cent.
Applied Energetics Inc. Price, Consensus and EPS Surprise
Beyond headline revenues and EPS, several operating metrics deteriorated year over year. The gross profit fell to $55,575 from $239,011, reflecting reduced contract activity. Total operating expenses increased 54% to $4.03 million, driven by a combination of higher staffing levels, consulting fees and research investments. Research and development expenses rose more than sixfold to $455,850, aligned with management’s stated goal of accelerating internal development to offset reduced government funding. Selling and marketing expenses also more than doubled, reaching $196,326 due to increased demonstrations of the company’s laser technologies and heightened business development outreach.
Cash flow metrics continued to reflect pressure. The company generated negative operating cash flow of $6.6 million during the first nine months of 2025 compared with a $3.7 million use of cash in the prior-year period. Capital expenditures rose sharply to $1.18 million from $55,435 a year earlier, driven by equipment purchases tied to new development capabilities. Management funded these outflows principally through $9 million of equity proceeds and option exercises.
AERG: Management Commentary
Management emphasized both the challenges and progress made during the period. Applied Energetics highlighted continued advancements in its ultrashort pulse (USP) laser systems, including surpassing the one-gigawatt peak-power threshold during the summer — an achievement the company views as a major milestone in demonstrating the scalability of its directed-energy technologies. Leadership reiterated confidence in the company’s ability to expand its patent portfolio and engage with defense, scientific and commercial partners.
However, the commentary also acknowledged funding-related headwinds. Two previously funded Department of Defense contracts were suspended after government customers indicated no additional funds were available. While these stops reduced near-term revenue visibility, management stated that it continues to pursue alternative funding sources and remains committed to internal development efforts to maintain momentum in laser advancements.
Factors Influencing AERG’s Headline Numbers
The dramatic contraction in revenues and a wider quarterly net loss stemmed principally from the suspension of government funding on two ongoing contracts. Although these agreements remain active, work cannot progress until funding is restored. As a result, much of the labor and material costs that previously would have been recorded as the cost of revenues were instead expensed as research and development, pushing R&D expenses sharply higher.
General and administrative expenses were affected by strategic hiring, increased stock-based compensation and expansion of laboratory space. Selling and marketing costs rose due to customer demonstrations, business development travel and activities associated with the newly established Battle Lab, where the company integrates and tests USP technologies with partner systems.
View
Management indicated that the recent equity raise, combined with the current cash balance and anticipated future contract revenues, should provide sufficient liquidity for near-term operating needs. Despite this, the filing again included a going-concern warning, reflecting uncertainty around revenue timing and government budgetary constraints.
Other Developments at AERG
Applied Energetics reported several organizational and operational developments during the quarter. It appointed David Spence, Ph.D., as chief product officer, adding seasoned leadership in advanced laser technologies. The company also expanded its board of directors and board of advisors and formalized new audit and compensation committees.
Additionally, the company completed contract work with the University of Rochester Laser Energetics Laboratory and continued collaboration with Kord Technologies on integrating its USP systems with the FIREFLY high-energy laser platform. Legal proceedings continued in a long-running malpractice case involving former counsel, with the court recently denying summary-judgment motions and scheduling further pre-trial activity.
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Applied Energetics Stock Falls as Q3 Revenues Drop and Losses Widen
Shares of Applied Energetics, Inc. (AERG - Free Report) have declined 12.1% since the company reported its third-quarter 2025 results, a sharper drop than the S&P 500 Index’s 1.9% decrease over the same period. Over the past month, the stock has fallen 18.1%, while the broader index edged up 0.1%, underscoring a period of pronounced underperformance for the defense-technology company.
In the third quarter, Applied Energetics posted revenues of $108,984, significantly below the $747,720 recorded a year earlier, representing an 85% decline. The steep drop came after certain government contracts became unfunded, forcing the company to suspend work despite the contracts remaining active. The cost of revenues fell 89%, but the company still reported a wider net loss of $3.97 million compared with a loss of $2.38 million in the prior-year quarter. Operating expenses surged, particularly general and administrative costs, reflecting higher payroll, stock-based compensation and expanded business development activity. Loss per share widened to 2 cents from 1 cent.
Applied Energetics Inc. Price, Consensus and EPS Surprise
Applied Energetics Inc. price-consensus-eps-surprise-chart | Applied Energetics Inc. Quote
Other Key Business Metrics of AERG
Beyond headline revenues and EPS, several operating metrics deteriorated year over year. The gross profit fell to $55,575 from $239,011, reflecting reduced contract activity. Total operating expenses increased 54% to $4.03 million, driven by a combination of higher staffing levels, consulting fees and research investments. Research and development expenses rose more than sixfold to $455,850, aligned with management’s stated goal of accelerating internal development to offset reduced government funding. Selling and marketing expenses also more than doubled, reaching $196,326 due to increased demonstrations of the company’s laser technologies and heightened business development outreach.
Cash flow metrics continued to reflect pressure. The company generated negative operating cash flow of $6.6 million during the first nine months of 2025 compared with a $3.7 million use of cash in the prior-year period. Capital expenditures rose sharply to $1.18 million from $55,435 a year earlier, driven by equipment purchases tied to new development capabilities. Management funded these outflows principally through $9 million of equity proceeds and option exercises.
AERG: Management Commentary
Management emphasized both the challenges and progress made during the period. Applied Energetics highlighted continued advancements in its ultrashort pulse (USP) laser systems, including surpassing the one-gigawatt peak-power threshold during the summer — an achievement the company views as a major milestone in demonstrating the scalability of its directed-energy technologies. Leadership reiterated confidence in the company’s ability to expand its patent portfolio and engage with defense, scientific and commercial partners.
However, the commentary also acknowledged funding-related headwinds. Two previously funded Department of Defense contracts were suspended after government customers indicated no additional funds were available. While these stops reduced near-term revenue visibility, management stated that it continues to pursue alternative funding sources and remains committed to internal development efforts to maintain momentum in laser advancements.
Factors Influencing AERG’s Headline Numbers
The dramatic contraction in revenues and a wider quarterly net loss stemmed principally from the suspension of government funding on two ongoing contracts. Although these agreements remain active, work cannot progress until funding is restored. As a result, much of the labor and material costs that previously would have been recorded as the cost of revenues were instead expensed as research and development, pushing R&D expenses sharply higher.
General and administrative expenses were affected by strategic hiring, increased stock-based compensation and expansion of laboratory space. Selling and marketing costs rose due to customer demonstrations, business development travel and activities associated with the newly established Battle Lab, where the company integrates and tests USP technologies with partner systems.
View
Management indicated that the recent equity raise, combined with the current cash balance and anticipated future contract revenues, should provide sufficient liquidity for near-term operating needs. Despite this, the filing again included a going-concern warning, reflecting uncertainty around revenue timing and government budgetary constraints.
Other Developments at AERG
Applied Energetics reported several organizational and operational developments during the quarter. It appointed David Spence, Ph.D., as chief product officer, adding seasoned leadership in advanced laser technologies. The company also expanded its board of directors and board of advisors and formalized new audit and compensation committees.
Additionally, the company completed contract work with the University of Rochester Laser Energetics Laboratory and continued collaboration with Kord Technologies on integrating its USP systems with the FIREFLY high-energy laser platform. Legal proceedings continued in a long-running malpractice case involving former counsel, with the court recently denying summary-judgment motions and scheduling further pre-trial activity.