What Happened?

Shares of aerospace and defense company Mercury Systems (NASDAQ:MRCY) jumped 21.6% in the pre-market session after the company reported a strong quarter, with revenue, EBITDA, and EPS all surpassing expectations by a wide margin. Sales grew 13% year-on-year, supported by increased bookings and a book-to-bill ratio of 1.09, signaling sustained demand​. Revenue guidance for the next quarter was also ahead of expectations. 

Zooming out, we think this was a very good quarter with some key areas of upside, especially considering the skittishness around the sector as a result of the new administration and potential headwinds to revenue from DOGE's efficiency efforts.

Is now the time to buy Mercury Systems? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Mercury Systems’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. Moves this big are rare for Mercury Systems and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 6 months ago when the stock gained 21.9% on the news that the company reported strong second-quarter earnings results. Mercury Systems blew past analysts' revenue, EPS, and free cash flow expectations. Its backlog, an indicator of future sales, also outperformed Wall Street's estimates. Zooming out, we think this quarter featured some important positives.

Mercury Systems is up 17.6% since the beginning of the year, and at $49.77 per share, has set a new 52-week high. Investors who bought $1,000 worth of Mercury Systems’s shares 5 years ago would now be looking at an investment worth $614.98.

Today’s young investors likely haven’t read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.