Executive Summary / Key Takeaways

• Archer Aviation is transitioning from prototype development to piloted flight testing and early commercial/defense deployments, targeting urban air mobility and next-generation defense applications with its Midnight eVTOL and a planned hybrid VTOL aircraft.
• The company has secured significant strategic partnerships with industry leaders like United Airlines (UAL), Stellantis (STLA), Anduril, and Palantir (PLTR), providing capital support, manufacturing expertise, defense market access, and advanced software capabilities.
• Archer's "Launch Edition" program in international markets like the UAE and Ethiopia aims to generate early revenue, gain operational experience, and de-risk commercialization ahead of full FAA type certification.
• Financially, Archer maintains a strong liquidity position, exceeding $1 billion (approximately $2 billion after a June 2025 raise), providing runway to fund operations and manufacturing ramp-up despite ongoing quarterly cash burn around $100 million.
• Key milestones achieved include commencing piloted flight testing, resolving a critical FAA issue paper (2105G), starting production at the Georgia manufacturing facility, and delivering the first Midnight aircraft to the U.S. Air Force.

Archer Aviation Inc. is at the forefront of a burgeoning aerospace sector aiming to redefine urban transportation and defense capabilities through electric vertical takeoff and landing (eVTOL) aircraft. Founded in 2018, Archer's mission is centered on making urban air mobility an everyday reality, initially focusing on its Midnight aircraft designed for passenger transport. The company operates within a competitive landscape that includes other dedicated eVTOL developers like Joby Aviation (JOBY) and Eve Holding (EVEX), as well as larger aerospace firms like Boeing (BA) and specialized players like AeroVironment (AVAV) with interests in electric or vertical flight.

Archer's overarching strategy is to pursue the most efficient path to market through a combination of technological innovation, strategic partnerships, and a multi-pronged approach to deployment across commercial and defense sectors. This strategy is underpinned by a capital-light manufacturing model and a focus on leveraging existing infrastructure and operational expertise where possible. While still in a pre-revenue stage, Archer's recent progress signals a critical transition from research and development towards initial operational phases.

Technological Foundation and Strategic Differentiation

Archer's core technology revolves around its Midnight eVTOL aircraft, a scaled-up design from its earlier Maker prototype. Midnight is designed to support a pilot plus four-passenger payload, a configuration Archer believes will become an industry standard for urban air mobility economics. A key technological differentiator is Midnight's proprietary 12-tilt-6 configuration, featuring 12 rotors (six tilting, six fixed) and a fixed wing. This design provides redundancy, allowing the aircraft to complete a flight even during a propulsion system shutdown, as demonstrated in testing. The fixed wing also enables efficient forward flight and provides glide capability, enhancing safety.

The company made a deliberate shift from pouch cells used in Maker to aviation-specific cylindrical cells for Midnight's battery pack, developed in partnership with Molicel. This decision was driven by concerns over the safety and reliability of available pouch cells and a strategic preference for non-Chinese suppliers. The use of a cylindrical cell also aligns Archer with other industry players like Beta, facilitating the sharing of test and reliability data, which can potentially accelerate certification efforts. While specific quantitative performance metrics like energy yield percentages or manufacturing cost advantages for Midnight's technology over alternatives are not detailed, the strategic intent is clear: to build a safe, reliable, and scalable aircraft optimized for the target payload and mission profile, leveraging proven components where possible.

Beyond the Midnight eVTOL, Archer is actively developing a next-generation hybrid electric VTOL aircraft in partnership with Anduril, targeting defense applications. This new platform leverages core powertrain and software innovations from the Midnight program but incorporates a hybrid powertrain for extended range, suitable for longer helicopter missions or cargo transport. This dual-use potential for both civil and defense applications is seen as a significant opportunity.

Furthermore, Archer is investing in advanced software capabilities, partnering with Palantir to build an AI foundation for aviation systems. This initiative aims to develop software for manufacturing optimization, operations management, movement control, and route planning. While not yet a significant revenue source, software is viewed as a critical component for scaling operations and a potential new revenue stream, contributing to the broader goal of modernizing the aviation ecosystem.

For investors, Archer's technological approach and strategic partnerships represent a multi-faceted attempt to build a competitive moat. Leveraging Tier 1 aerospace suppliers for components (like Safran (SAFRY), Garmin (GRMN), Honeywell (HON)) reduces development risk compared to vertically integrated approaches. The partnership with Stellantis provides access to world-class manufacturing expertise, de-risking the production ramp. The exclusive partnership with Anduril positions Archer to target potentially large defense programs of record, offering a diversified revenue stream and a "flywheel" effect where defense learnings can benefit civil applications and vice-versa. The AI software initiative aims to create a scalable operational backbone and potentially monetize internal capabilities.

Path to Market and Operational Progress

Archer's path to market is multi-pronged, focusing on both regulatory certification and early operational deployments. In the United States, the company is progressing through the FAA's rigorous type certification process. Key milestones achieved include the finalization of Midnight's airworthiness criteria in May 2024, making Archer one of only two eVTOL companies to reach this stage. The FAA has accepted approximately 15% of the final compliance verification documents required for certification as of May 2025. A significant industry-wide issue paper related to controlled emergency landings (Rule 2105G) has been resolved, and Archer believes its current design is compliant, removing a potential hurdle.

In parallel with type certification, Archer has secured operational approvals, including an FAA Part 135 certificate in June 2024, enabling it to operate an eVTOL airline once Midnight is certified. The Powered-Lift SFAR, establishing operational rules for eVTOLs, was signed into law in October 2024, providing regulatory clarity for phased rollout. Archer also received FAA Part 141 certification for its pilot training academy in February 2025, allowing it to train pilots for its future operations.

Recognizing that full FAA certification timelines can be lengthy, Archer is pursuing an "Launch Edition" commercialization program in international markets with forward-thinking regulators. The UAE has emerged as a key early market, with strong government support from the Abu Dhabi Investment Office and a partnership with the GCAA to establish an expedited regulatory framework. Abu Dhabi Aviation, the region's largest helicopter operator, is the first Launch Edition customer, planning to deploy Midnight aircraft later this year. Ethiopian Airlines is the second Launch Edition customer. This program aims to deploy a handful of aircraft in early adopter markets to gain operational experience, demonstrate capabilities, and generate early revenue, potentially ahead of U.S. launch. Archer plans to deliver the first piloted aircraft for the UAE program later this summer for region-specific testing (e.g., high temperature performance) before commencing passenger flights.

In the U.S., Archer is developing planned air taxi networks in major cities like New York City, Los Angeles, San Francisco, and Miami, leveraging partnerships with United Airlines and Southwest Airlines (LUV) and focusing on utilizing existing aviation infrastructure like airports and helipads to minimize upfront investment.

Manufacturing is ramping up to support these deployment plans. The high-volume manufacturing facility (ARC) in Covington, Georgia, was completed on time and on budget (~$65 million cost) in December 2024 and commenced production in Q1 2025. This facility is designed to produce up to 650 aircraft annually at scale. Archer's goal is to build up to 10 Midnight aircraft in 2025, with a target production rate of two aircraft per month exiting the year. The partnership with Stellantis is crucial here, with an agreement in principle for Stellantis to fund up to $400 million in manufacturing labor and CapEx in exchange for Archer equity, significantly de-risking the production ramp and supporting Archer's capital-light strategy.

The defense segment is also showing tangible progress. Archer's contracts with the U.S. Air Force (AFWERX) have grown to a maximum value of $148 million, and the first Midnight aircraft was delivered to the USAF in August 2024 for exploring various use cases. The exclusive partnership with Anduril to develop a hybrid VTOL targeting a program of record is a major strategic focus, leveraging Archer's core technology for a potentially large defense market opportunity. Recent acquisitions of an IP portfolio and a composite manufacturing facility are intended to accelerate defense capabilities.

Financial Performance and Outlook

As a pre-revenue company focused on development and scaling, Archer continues to incur significant operating losses and negative cash flow. For the three months ended March 31, 2025, the net loss was $93.4 million, compared to $116.5 million in the prior-year period. Operating expenses totaled $144.0 million in Q1 2025, a slight increase from $142.2 million in Q1 2024. Research and development expenses increased by 24.2% year-over-year to $103.7 million, driven by increased personnel and material costs for technology development. General and administrative expenses decreased by 31.3% to $40.3 million, primarily due to lower stock-based compensation related to founder awards, partially offset by increases elsewhere. Other income, net, saw a significant increase to $42.0 million, mainly due to changes in the fair value of warrant liabilities. Interest income, net, increased to $8.7 million due to higher cash balances.

Cash used in operating activities was $94.6 million in Q1 2025, and cash used in investing activities was $10.0 million (primarily for property and equipment purchases), resulting in total cash used in operations and investing of $104.6 million. This aligns with management's estimated quarterly cash burn of around $100 million, excluding the buildout of the Georgia facility.

Archer's liquidity position is a key strength. The company exited Q1 2025 with $1.03 billion in cash and cash equivalents, its highest ever quarter-end balance. This was bolstered by a $300 million equity raise in Q1 2025. Following an additional $850 million raise in June 2025, Archer's total liquidity stands at approximately $2 billion. Management believes existing cash is sufficient to fund operations for at least the next 12 months. The potential funding of up to $400 million from Stellantis for manufacturing labor and CapEx further enhances the long-term capital runway.

For Q2 2025, Archer anticipates an adjusted EBITDA loss between $100 million and $120 million, reflecting continued investment in engineering, manufacturing, and commercial activities. Capital expenditures are expected to increase by $15 million to $20 million in Q2 2025 compared to Q1, aimed at strengthening market leadership position. Looking ahead to 2025, core engineering and SG&A expenses are expected to be flat to down, while supplier non-recurring engineering and Archer CapEx are anticipated to decrease after heavy investment in 2024. Direct material costs for aircraft builds are expected to increase with production ramp but are targeted to be offset by customer financing and arrangements. Commercial flight operations and MRO costs are also expected to be largely covered by customer agreements.

Management projects achieving a target gross margin of 40% to 50% on direct aircraft sales at a production volume of 250 units (assuming a $5 million ASP), believing this volume level could enable positive operating margin depending on other expense investments.

Competitive Landscape and Positioning

Archer operates in a highly competitive and rapidly evolving eVTOL market. Key direct competitors include Joby Aviation (JOBY), AeroVironment, Boeing, and Eve Holding (EVEX).

Joby Aviation (JOBY) is a prominent competitor also focused on urban air taxis. While both companies are pre-revenue and incurring significant losses, Archer's 1-year stock performance (130.34%) has significantly outpaced Joby's (51.23%), suggesting stronger market momentum.

Archer's Midnight aircraft, at 6,500 lbs, is positioned as potentially the largest eVTOL to have successfully transitioned, designed specifically for the pilot + 4 passenger payload seen as critical for economics. Archer's strategy relies heavily on partnerships for manufacturing (Stellantis) and operations (United, Abu Dhabi Aviation), contrasting somewhat with Joby's more vertically integrated approach.

AeroVironment operates in the broader UAV/eVTOL space and stands out among direct competitors for its positive financial performance, reporting positive operating income and gross profit, albeit with a different primary focus (military/commercial drones) than Archer's initial passenger UAM target. While AVAV demonstrates established profitability and diversified revenue, Archer's focus on the emerging passenger eVTOL market and its specific technological design (e.g., quieter operations) represent a different market approach.

Boeing is a global aerospace giant with vast resources and market share in traditional aviation. While involved in electric aircraft ventures, Boeing's scale and legacy business present a different competitive dynamic. Archer aims to be more agile and focused on the specific urban air mobility niche, leveraging its dedicated eVTOL design and partnerships to potentially move faster in this emerging segment, although it lacks Boeing's established financial stability and supply chain dominance.

Eve Holding, an Embraer (ERJ) spin-off, is another direct competitor in the urban air mobility space. Like Archer and Joby, Eve is pre-revenue and incurring losses. Archer's recent growth trajectory has been stronger than Eve's, and Archer's multi-faceted approach encompassing defense and software alongside commercial UAM provides broader potential avenues for growth and revenue diversification compared to Eve's primary focus on commercial eVTOL development.

Archer's strategic positioning emphasizes its technological design optimized for the target mission, a capital-light manufacturing approach leveraging Stellantis's expertise, a multi-market deployment strategy (U.S., UAE, Launch Edition countries), and diversification into defense and software. While facing intense competition and the inherent challenges of pioneering a new industry, Archer aims to differentiate through execution speed, strategic partnerships, and a focus on scalable, certifiable solutions. The Launch Edition program allows Archer to potentially gain operational experience and generate revenue earlier than competitors solely focused on FAA certification timelines.

Risks and Challenges

Despite significant progress, Archer faces substantial risks. The primary risk remains achieving full FAA type certification for the Midnight aircraft on a commercially viable timeline. While progress is being made and key issue papers are being resolved, the certification process for a novel aircraft type is complex and subject to potential delays, as acknowledged by analysts. Any significant delays could impact deployment schedules and increase capital requirements.

Execution risk is high, particularly in scaling manufacturing at the new Georgia facility and successfully standing up commercial operations in initial markets. While the partnership with Stellantis mitigates some manufacturing risk, achieving the target production rates efficiently remains a challenge. Successfully integrating into existing airspace and infrastructure in dense urban environments also presents operational and regulatory hurdles.

Market adoption and consumer acceptance of eVTOL air taxi services are still unproven at scale. While initial demand from partners and early adopter markets is promising, the long-term viability depends on factors like cost, convenience, safety perception, and public acceptance of noise levels and flight paths.

Maintaining sufficient liquidity to fund operations until significant revenue is generated is critical. While recent capital raises have bolstered the balance sheet, the company continues to burn cash at a substantial rate. Future financing may be required, potentially leading to further shareholder dilution.

Conclusion

Archer Aviation is navigating a pivotal phase, transitioning from the drawing board and prototype testing to piloted flights and initial deployments. The company's strategic approach, centered on the Midnight eVTOL, key partnerships with industry heavyweights like United, Stellantis, Anduril, and Palantir, and a multi-market commercialization strategy including the Launch Edition program, positions it to potentially be an early mover in the emerging eVTOL market.

While significant financial losses and cash burn are expected to continue as the company invests heavily in certification, manufacturing, and initial operations, the recent capital raises have substantially strengthened its balance sheet, providing crucial runway. The progress on FAA certification, the commencement of piloted flight testing, the operationalization of the Georgia manufacturing facility, and the tangible steps in the defense segment underscore the company's execution against its strategic plan. The investment thesis hinges on Archer's ability to continue executing on its ambitious technical, regulatory, manufacturing, and commercial milestones, leveraging its partnerships and technological foundation to overcome inherent industry challenges and capture a meaningful share of the future air mobility market.