How Archer Aviation Weathered 2025's Downturn While Positioning for 2026's Defense-Tech Rally

Market Headwinds Intensified Despite Broader Stock Rally

The broader equity market delivered robust gains in 2025, with the S&P 500 advancing 16.4% and the Nasdaq Composite climbing 20.4%. Yet Archer Aviation (NYSE: ACHR), an electric vertical take-off and landing (eVTOL) manufacturer, failed to participate in this rally. Instead, the company’s stock retreated 22.9% over the course of the year, marking a significant underperformance relative to market indices.

This divergence between Archer Aviation’s trajectory and the overall market reflects a confluence of sector-specific and company-level challenges. Within the competitive landscape of top 10 aircraft manufacturers and emerging aerospace innovators, Archer has faced particular scrutiny regarding its path to commercialization and regulatory approval.

Competitive Pressures and Operational Headwinds

The eVTOL specialist encountered mounting pressure from multiple directions throughout 2025. Most significantly, Joby Aviation emerged as the market’s preferred play in this emerging category, with its share price appreciating roughly 62% over the same period. Joby’s more advanced progress toward commercial deployment dimmed investor enthusiasm for Archer’s prospects.

Short-seller reports amplified negative sentiment. In May, Culper Research released findings suggesting that Archer had misrepresented testing progress and achievement of flight milestones to the investment community. Later in the year, Grizzly Research published similar criticisms, questioning the credibility of the company’s manufacturing ramp projections and overall timeline transparency.

Financial Performance Deterioration and Strategic Moves

Archer’s operational results underscored investor concerns. The company posted a net loss of $206 million in Q2—nearly doubling the prior-year quarter’s $106.9 million shortfall. Financial hemorrhaging continued into Q3, when Archer reported a net loss of $129.9 million, exceeding analyst expectations and expanding from the $115.3 million loss in the equivalent 2024 period.

Adding to valuation pressures, Archer announced a $650 million equity offering and simultaneously executed a $126 million all-cash acquisition of Hawthorne airport. These moves triggered fresh concerns among equity holders regarding dilution and capital allocation discipline.

External validation also wavered. When Stellantis, a key financial backer, announced the discontinuation of its hydrogen fuel-cell development initiatives in July, it sparked fears about the company’s broader appetite for growth-stage investments, including its Archer stake.

Defense Applications Reignite Investor Interest in 2026

The narrative has shifted markedly in 2026. As of the current trading period, Archer Aviation stock has rebounded 17.8%, capitalizing on renewed enthusiasm for defense-technology equities. The company’s partnership with Anduril to engineer hybrid-propulsion vertical takeoff and landing (VTOL) platforms for U.S. military applications has become a focal point for bullish investors.

While the Federal Aviation Administration (FAA) certification pathway for Archer’s Midnight eVTOL remains murky for commercial deployment, the potential defense sector applications of the underlying aviation technology have provided fresh momentum. Defense-tech assets broadly have attracted capital flows in the current market environment, and Archer is benefiting from this sector tailwind.

Gauging Investment Merit Moving Forward

Despite the stock’s recent recovery, prospective investors should exercise caution. Independent analyst teams continue to scrutinize whether Archer merits a place in core equity portfolios. The company’s unresolved regulatory standing, rising cash burn, and competitive disadvantage relative to more progressed peers like Joby remain material considerations. The 2026 rebound may reflect momentum in the defense-tech theme rather than fundamental resolution of Archer’s underlying challenges.

Investors evaluating aviation and aerospace exposure should weigh Archer’s speculative profile against more established opportunities in this evolving sector.