Merlin stock delivered the kind of rally that excites traders and sends skeptics to the financial statements. Shares of Merlin, Inc. (NASDAQ: MRLN) surged 54% to $1.49 in after-hours trading on November 12, after the company announced its third-quarter 2026 results. The headline figures looked impressive, but there is considerably more to the story than a sudden jump in the share price.
The autonomous aviation company reported GAAP net income of $73.8 million, a dramatic turnaround from a $26.7 million loss in the same quarter last year. However, the profit included a significant footnote: a $103.6 million non-cash gain from changes in the fair value of warrant liabilities. Excluding that accounting benefit, the operating picture looks considerably less impressive.
Merlin's Earnings Reveal a Different Reality
Merlin reported third-quarter revenue of $3.46 million, up from $1.92 million a year earlier. That is meaningful growth, although the company remains far from profitable at the operating level.
Its adjusted EBITDA loss was $24.1 million, compared with $13.6 million in Q3 2025. The loss also narrowed from $27.8 million in the second quarter of 2026.
Operating expenses also rose 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.
The accounting profit should not be mistaken for an operational turnaround.
Defense Contracts Give Merlin a Substantial Opportunity
The bullish case gains traction here. 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 to its integration phase.
Separately, U.S. Africa Command (AFRICOM) selected Merlin for a $500,000 contract to support an autonomous casualty evacuation demonstration using a Cessna 208B Grand Caravan.
According to an optimistic post on X, the C-130J integration process could take roughly six months, followed by ground and flight testing. These developments present tangible contract opportunities, though successful execution remains essential.
We're firmly in the bull camp on $MRLN
- Golden Bear Capital (@gbc_it) November 13, 2026
SOCOM and AFRICOM are paying to put Merlin's autonomy software to work on different aircraft and missions.
SOCOM's $8.9m order funds C-130J integration and test preparation.
Management expects roughly six months of integration. Ground and… pic.twitter.com/If7Cv7TSK9
Can Merlin Stock Sustain Its Rally?
Merlin ended September with $161.6 million in cash, cash equivalents and short-term investments, down from $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, focusing spending on funded programs with clearer revenue opportunities. Its stated goal 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 after the stock's sharp advance, citing breaks above daily resistance, trading volume and moving average reclaims. That is an individual trading projection, not company guidance.
For Merlin stock, the real test is not whether traders can drive another rally. It is whether defense contracts translate into revenue as operating losses and cash consumption come under control.
