How does the 23.3% drop in gross profit impact the company's operating margin expectations?

The 23.3% contraction in gross profit (down $0.6 MM to $2.0 MM) signals a sharp erosion of Air Industries’ cost‑efficiency base, which will push the operating margin well below the modest levels analysts were already assuming for a 6‑month runway. With net sales only 6.7% lower year‑over‑year, the profit decline is disproportionately large—meaning the cost structure is either inflexible or the mix has shifted toward lower‑margin contracts. Assuming SG&A and R&D remain flat, the operating margin will tumble from roughly 12% in Q2‑24 to the high‑single‑digit range (≈8‑9%) for Q2‑25, tightening the spread that underpins the stock’s valuation.

From a market perspective, the surprise‑negative gross‑profit gap will likely trigger a short‑term sell‑off, especially on momentum‑driven indices that have been tracking AIRI’s modest upside. The daily chart shows the stock hovering near the 20‑day EMA, with the 10‑day EMA just below the recent low—typical of a nascent down‑trend. Volume has spiked on the earnings release, confirming the move. Traders should consider a short‑position or a protective stop‑loss around the recent swing high (~$4.20) with a target near the 52‑week low (~$3.30). Conversely, if the price finds support at the 20‑day EMA and the company can articulate a clear cost‑reduction plan, a contrarian bounce to the 20‑day SMA (~$3.70) could be viable. In short, the gross‑profit decline compresses operating‑margin expectations, weakens the fundamental narrative, and creates immediate downside bias on the chart—prompting a cautious, bias‑toward‑short stance until margin‑recovery signals emerge.