Merlin Stock Jumps 54% as Defense Contracts Fuel Bullish Outlook Despite $24M Loss

Merlin stock just delivered the kind of rally that get traders excited and skeptics reaching for the financial statements. Shares of Merlin, Inc. (NASDAQ: MRLN) surged 54% to $1.49 in after hours trading on November 12, following its third quarter 2026 earnings announcement. The headline numbers looked impressive. However, there’s considerably more to this story than a sudden stock price explosion.

The autonomous aviation company reported $73.8 million in GAAP net income, a dramatic turnaround from its $26.7 million loss during the same quarter last year. But that profit came with a rather significant footnote: a $103.6 million non cash gain from changes in the fair value of warrant liabilities. Strip away that accounting benefit, and the operational picture looks considerably less spectacular.

Merlin’s Earnings Reveal a Different Reality

Merlin reported third quarter revenue of $3.46 million, compared with $1.92 million a year earlier. That’s meaningful growth, although the company remains far from profitability at the operating level.

Its adjusted EBITDA loss reached $24.1 million, compared with $13.6 million in Q3 2025. Interestingly, the loss improved from $27.8 million in the second quarter of 2026.

Operating expenses also climbed substantially. Research and development expenses reached $14.7 million, while general and administrative expenses totaled $12.9 million. The company recorded an operating loss of approximately $31.5 million.

Clearly, the accounting profit  shouldn’t be mistaken for an operational turnaround.

Defense Contracts Give Merlin Something Substantial

Here’s where the bullish argument gets interesting. Merlin secured an $8.9 million task order from U.S. Special Operations Command (USSOCOM) for the next phase of its C-130J autonomous flight program. The work advances the aircraft autonomy program into its integration phase.

Separately, U.S. Africa Command (AFRICOM) selected Merlin for a $500,000 contract supporting an autonomous casualty evacuation demonstration using a Cessna 208B Grand Caravan.

According to an optimistic X post, the C-130J integration process could take roughly six months, followed by ground and flight testing. These developments offer tangible contract opportunites, although successful execution remains essential.

Can Merlin Stock Sustain Its Rally?

Merlin ended September with $161.6 million in cash, cash equivalents and short term investments, against $183.9 million at the end of June. The company reported no debt.

Management now intends to bring 2027 operating expenses meaningfully below 2026 levels, concentrating spending on funded programs with clearer revenue opportunites. Its stated objective is to support operations into 2029 without additional capital raises.

Meanwhile, bullish sentiment on X has intensified. One trader floated a $2.80 price target following the stock’s sharp advance, citing daily resistance breaks, trading volume and moving average reclaims. That’s an individual trading projection, not company guidance.

For Merlin stock, the real test isn’t whether traders can push another rally. It’s whether defense contracts translate into revenue while operating losses and cash consumption come under control.