Archer Aviation Inc. (ACHR)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related accompanying notes included elsewhere in this Quarterly Report and the audited consolidated financial statements as of and for the year ended December 31, 2025 set forth in our Annual Report. The following discussion includes forward-looking statements, which are based on our current expectations and beliefs concerning future developments and the potential effects of such developments on us. There can be no assurance that future developments affecting us will be those that we have anticipated. See the section titled “Special Note Regarding Forward-Looking Statements” in this Quarterly Report. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those set forth in Part I, Item 1A, “Risk Factors” in our Annual Report.

Overview

Headquartered in Silicon Valley, California, Archer is building an end-to-end advanced air mobility platform that delivers air taxis, unmanned aircraft systems (“UAS”), aviation-related physical artificial intelligence (“AI”) solutions, and other technologies to customers worldwide across the commercial aerospace and defense sectors.

Air Taxis

Midnight is our electric vertical takeoff and landing (eVTOL) aircraft purpose-built for air taxi operations. To prepare for commercial operations, we are working with aviation authorities, governments, and strategic partners in key U.S. and international markets to certify Midnight and build out air taxi networks. These networks will connect major population and business centers with key transportation hubs in select metropolitan areas, through partnerships with airline operators to integrate eVTOL flights into passenger journeys and collaborations with infrastructure partners to develop vertiports.

•In the U.S., we were recently selected as a partner in multiple winning applications under the White House-backed eVTOL Integration Pilot Program (eIPP). Through the program, we have the opportunity to begin early operations this year in several key states, such as Florida, Texas and New York. The eIPP paves the way for us to bring our technology directly to U.S. communities in parallel with our continued work to receive FAA type certification of Midnight. As part of our broader commercialization strategy in the U.S., we acquired control of the Hawthorne Airport located near Los Angeles International Airport, SoFi Stadium and Downtown Los Angeles. We plan for Hawthorne to serve as the operational hub for our Los Angeles network and an innovation hub for developing and commercializing next-generation AI-powered aviation technologies.

•Outside the U.S., through our Launch Edition program, we are offering aircraft, technologies, and services to governments and customers to support the commercialization of Midnight in select international markets, with the UAE leading the way. In the UAE, we have been working closely with the country’s federal aviation regulator, the GCAA, to establish the optimal regulatory pathway for commercial operations. Following hot weather flight testing last year, we are on track to deliver additional Midnight aircraft this year, in preparation for initial passenger operations and are working with strategic partners to build out a vertiport network across Abu Dhabi and the UAE.

Our commercial readiness progress is driving growing global demand across Europe, Middle East, Africa and Asia-Pacific for this new category of transportation.

UAS

We are also advancing the development of our hybrid-electric, autonomous vertical take-off and landing (“VTOL”) aircraft platform, called Halo, intended for dual use by both commercial and defense customers. As part of the defense opportunities with this aircraft, we are working closely with our strategic partner, Anduril Industries Inc. (“Anduril”), to ensure this platform meets their next generation vertical lift needs, which are based on what they believe is necessary to win programs of record with allied nations. For commercial customers, Halo is expected to be used primarily for cargo and rescue operations.

AI

We are also developing physical AI and autonomy technologies to support the advancement of our aircraft and the modernization of U.S. and international airspace and air traffic control systems . We recently announced our aviation-specific AI foundation model, ZEE, that is purpose-built to turn disparate data from ADS-B, ATC communication, maps and charts, aircraft state, terrain and weather into a unified intelligence layer that can help operators, airlines and pilots make better, more informed decisions with the goal of increasing safety and efficiency across the entire aviation system, from air taxis and UAS to commercial airlines and air traffic management.

Our Planned Lines of Business

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By maintaining an innovative and disciplined approach to new product and service development, manufacturing, and commercialization we believe that we can deliver advanced technologies and solutions to the aerospace and defense sectors that can service a broad range of industries and use cases. We intend to primarily operate in the following areas:

•Commercial: This is planned to primarily consist of the sale of our piloted, commercial aircraft, physical AI solutions and related technologies and services, as well as providing direct-to-consumer air taxi services.

•Defense: This is planned to primarily consist of the sale of next-generation UAS, physical AI solutions and related technologies and services for defense applications.

To date, we have not generated significant revenue from these planned areas. We will use our cash and cash equivalents for the foreseeable future as we continue to develop our aircraft, related technologies, manufacturing operations and urban air mobility (“UAM”) operations, and work to commercialize both the commercial and defense sectors of our business.

Proposed Acquisition of Wisk, Insitu and SkyGrid

On August 9, 2026, we entered into a definitive Equity Purchase Agreement (the “Purchase Agreement") with The Boeing Company (”Boeing”) to acquire all of the equity interests of Wisk Aero LLC, an autonomous aviation company, SkyGrid, a digital airspace integration and air traffic management platform, and Insitu, Inc., a manufacturer of unmanned aircraft systems and AI-enabled technologies, together with certain of their respective related entities (collectively, the “Target Companies” and such acquisition, the “Acquisition”) for total consideration consisting of (i) shares of our Class A common stock representing approximately 19.75% (subject to closing adjustments) of our shares outstanding immediately prior to the closing date of the Acquisition (the “Acquisition Closing Date”) and (ii) two warrants, each covering $100.0 million of Class A common stock, with the first warrant, with an exercise price of $13.00 per share, exercisable during the period beginning on the first anniversary through the third anniversary of the Acquisition Closing Date, and the second warrant, with an exercise price of $17.88 per share, exercisable during the period beginning on the first anniversary through the fourth anniversary of the Acquisition Closing Date. Under the terms of the Purchase Agreement, completion of the Acquisition is subject to agreed upon closing conditions, including regulatory clearances and required consents.

For additional detail on the Acquisition, see the Current Report on Form 8-K filed on August 10, 2026, and Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

Components of Results of Operations

Revenue

We continue to design, develop, certify, and bring up manufacturing of our aircraft and do not expect to begin generating significant revenues until we complete the design, development, certification, and manufacturing ramp-up of our aircraft, as well as the development of related technologies and services.

We began generating revenue from the leasing of space at Hawthorne Airport in the fourth quarter of 2025. Lease revenue is recognized on a straight-line basis over the lease term, beginning on the lease commencement date. In the second quarter of 2026, we also began generating FBO revenue from aviation fueling, ground handling, and related services at Hawthorne Airport. We expect revenue from both our hangar and FBO operations to increase as we bring additional spaces into service and expand FBO service offerings at Hawthorne Airport.

Operating Expenses

Cost of Revenue

Cost of revenue primarily consists of master ground lease payments to the City of Hawthorne, fuel and supplies costs associated with FBO operations, amortization of operating rights, depreciation and other operating costs. Master ground lease payments are accounted for in accordance with ASC 842, Leases. Fuel and supplies costs are recognized as incurred upon delivery of services. Amortization of operating rights associated with the Hawthorne FBO acquisition is recognized on a straight-line basis over their respective estimated useful lives. All other costs are recognized as incurred. We expect cost of revenue to increase as FBO operations scale and we bring additional spaces into service.

Research and Development

Research and development activities represent a significant part of our business. Our efforts focus on the design and development of our aircraft and certain systems within it. As part of those activities, we continue to work closely with U.S. and international regulators towards our goal of commercialization. Research and development expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees focused on research and development activities, costs associated with developing and building prototype aircraft, associated facilities and

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IT infrastructure costs, and depreciation. We expect research and development expenses to increase significantly as we progress towards commercialization and manufacturing.

We cannot determine with certainty the timing, duration or the costs necessary to complete the design, development, certification, and manufacturing bring up due to the inherently unpredictable nature of our research and development activities. Development timelines, the probability of success, and development costs may differ materially from expectations.

General and Administrative

General and administrative expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees associated with administrative services such as finance, legal, human resources, information technology, associated facilities and IT infrastructure costs, depreciation, and amortization expense. We expect our general and administrative expenses to increase as we hire additional personnel and consultants to support our operations and comply with applicable regulations.

Other Income (Expense), Net

Other income (expense), net consists of miscellaneous income and expense items, including the change in fair value of our warrant liabilities.

Interest Income, Net

Interest income, net primarily consists of interest income from our cash and cash equivalents and short-term investments in marketable securities, net of interest on debt.

Results of Operations

The following table sets forth our condensed consolidated statements of operations for the periods indicated:

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related accompanying notes included elsewhere in this Annual Report. Refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations located in our Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 28, 2025, for a comparison of our results of operations for the years ended December 31, 2024 and 2023. The following discussion includes forward-looking statements, which are based on our current expectations and beliefs concerning future developments and the potential effects of such developments on us. There can be no assurance that future developments affecting us will be those that we have anticipated. See the section titled “Special Note Regarding Forward-Looking Statements” in this Annual Report. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those set forth in Part I, Item 1A, “Risk Factors” in this Annual Report.

Overview

Archer is developing the technologies and aircraft to power the future of advanced aviation. We are building a platform to deliver advanced aircraft, technologies and services to customers worldwide across commercial and defense sectors.

Midnight is our eVTOL aircraft purpose-built for air taxi operations globally. To prepare for commercial operations, we are working with aviation authorities, governments, and strategic partners in key U.S. and international markets to certify Midnight and build out air taxi networks. These planned networks will connect major population and business centers with key transportation hubs in select metropolitan areas through partnerships with airline operators to integrate eVTOL flights into passenger journeys and collaborations with infrastructure partners to develop vertiports.

•In the U.S., we have applied to participate in the eIPP, a White House initiative to accelerate air taxi deployments in American cities. We have partnered with cities across California, Florida, Texas, Georgia, and New York on multiple applications to launch initial air taxi operations under the eIPP later this year. As part of broader commercialization strategy in the U.S., we recently acquired control of the Hawthorne Airport located near Los Angeles International Airport and Downtown Los Angeles. We plan for the airport to serve as the operational hub for our Los Angeles network and an innovation hub for developing and commercializing next-generation AI-powered aviation technologies.

•Outside the U.S., through our Launch Edition program, we are offering aircraft, technologies, and services to governments and customers to support the commercialization of Midnight in select international markets with the UAE leading the way. In the UAE, we have been working closely with the country’s federal aviation regulator, the GCAA, over the past year to establish the optimal regulatory pathway for commercial operations. Following hot weather flight testing last year, we are on track to deliver additional Midnight aircraft this year in preparation for initial passenger operations and are working with strategic partners to build out a vertiport network across Abu Dhabi and the country.

Our commercial readiness progress is driving growing global demand across Europe, Middle East, Africa and Asia-Pacific for this new category of transportation.

We are also advancing a dual-use hybrid-electric, autonomous vertical take-off and landing (“VTOL”) aircraft platform for both defense and commercial customers. Through our strategic partnership with Anduril Industries Inc. (“Anduril”), this aircraft platform is intended to meet the vertical lift needs of the U.S. and its Allies for decades to come. For commercial customers, that aircraft can be tailored for cargo and medical evacuation.

We are currently scaling production of our aircraft and electric powertrain at our "golden manufacturing lines" in Silicon Valley and our high-volume facility in Georgia to support certification and early commercial deployments.

We are also developing artificial intelligence (AI) and autonomy technologies to support the advancement of our air traffic control system from concept to a scalable reality.

Our Planned Lines of Business

By maintaining an innovative and disciplined approach to new product and service development, manufacturing, and commercialization we believe that we can deliver advanced aviation technologies and solutions that can service a broad range of industries and use cases. We intend to operate in the following areas:

•Commercial: This is planned to consist of the sale of our commercial aircraft and related technologies and services, as well as providing direct-to-consumer air taxi services in select metropolitan areas worldwide.

•Defense: This is planned to consist of the sale of next-generation aircraft and related technologies for defense applications. Our initial product is intended to be the hybrid-electric VTOL aircraft discussed earlier that we are jointly developing with Anduril. Our team is advancing opportunities around at how we can bring the proprietary technologies we’ve built for our commercial aircraft to defense applications, such as our electric battery pack and

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electric engines. In November 2025, we announced our first deal for third-party adoption of these technologies in the defense sector, with Anduril and EDGE Group choosing to use our electric powertrain to power their Omen autonomous air vehicle. We have also been continuing to advance our partnership with the DoD, which started in 2021, on a series of projects through the USAF’s AFWERX program with the goal of helping the AFWERX Agility Prime program assess the transformational potential of the vertical flight market and related technologies for DoD purposes.

To date, we have not generated significant revenue from these planned areas. We will use our cash and cash equivalents for the foreseeable future as we continue to develop our aircraft, related technologies, manufacturing operations and UAM operations, and work to commercialize both the commercial and defense sectors of our business.

Components of Results of Operations

Revenue

We continue to design, develop, certify, and bring up manufacturing of our aircraft and do not expect to begin generating significant revenues until we complete the design, development, certification, and manufacturing ramp-up of our aircraft, as well as the development of related technologies and services.

We began generating lease revenue from the leasing of hangar space at Hawthorne Airport in the fourth quarter of 2025. The lease income is recognized as earned over each monthly lease period beginning on the lease commencement date. We expect revenue to increase as we develop and bring additional hangar spaces into service and expand offerings.

Operating Expenses

Cost of Revenue

Cost of revenue primarily consists of master ground lease payments to the City of Hawthorne, utilities, property taxes, and insurance associated with the leased hangar space. Master ground lease payments are accounted for in accordance with ASC 842, Leases, while utilities, property taxes, and insurance are recognized as incurred. We expect cost of revenue to increase over time as operations expand.

Research and Development

Research and development activities represent a significant part of our business. Our research and development efforts focus on the design and development of our aircraft, including certain of the systems that are used in it. As part of those activities, we continue to work closely with U.S. and international regulators towards our goal of commercialization. Research and development expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees focused on research and development activities, costs associated with developing and building prototype aircraft, associated facilities and IT infrastructure costs, and depreciation. We expect research and development expenses to increase significantly as we progress towards commercialization and manufacturing.

We cannot determine with certainty the timing, duration or the costs necessary to complete the design, development, certification, and manufacturing bring up due to the inherently unpredictable nature of our research and development activities. Development timelines, the probability of success, and development costs may differ materially from expectations.

General and Administrative

General and administrative expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees associated with administrative services such as finance, legal, human resources, information technology, associated facilities and IT infrastructure costs, depreciation, and Technology and Dispute Resolution Agreements (as defined in Note 7 - Commitments and Contingencies in the accompanying notes to our consolidated financial statements) expense. We expect our general and administrative expenses to increase as we hire additional personnel and consultants to support our operations and comply with applicable regulations.

Other Income (Expense), Net

Other income (expense), net consists of miscellaneous income and expense items, including the change in fair value of our warrant liabilities.

Interest Income, Net

Interest income, net primarily consists of interest income from our cash and cash equivalents and short-term investments in marketable securities, net of interest on debt.

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Results of Operations

The following table sets forth our consolidated statements of operations for the periods indicated:

(1) Includes stock-based compensation expense as follows:

Comparison of the Year Ended December 31, 2025 and 2024

Revenue

Revenue increased by $0.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024 as we began generating revenue from the sublease of hangar space following the acquisition of Hawthorne Airport.

Cost of Revenue

Cost of revenue increased by $0.3 million or the year ended December 31, 2025, compared to the year ended December 31, 2024. This primarily consists of master ground lease payments, ut

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