Gilat Satellite Networks' Q3 2025 Earnings Call: Contradictions Emerge on Stellar Blu Margins, Production, Peru Revenue Linearity, and Defense Division Growth

Date of Call: November 12, 2025

Financials Results

• Revenue: $117.7M, up 58% YOY (Q3'25 vs $74.6M in Q3'24); organic QoQ growth 19%
• EPS: GAAP diluted EPS $0.14, up from $0.12 in Q3'24; non-GAAP diluted EPS $0.19, up from $0.14 in Q3'24
• Gross Margin: GAAP gross margin 30%, compared to 37% in Q3'24; non-GAAP gross margin 32% vs 38% in Q3'24
• Operating Margin: GAAP operating income $7.5M (~6.4% operating margin) vs $6.7M (~9.0%) in Q3'24; GAAP operating expenses $27.2M vs $20.9M prior year

Guidance:

• Revenue guidance narrowed to $445M–$455M (midpoint ~47% YOY growth)
• Adjusted EBITDA guidance narrowed to $51M–$53M (midpoint ~23% YOY growth)

Business Commentary:

* Revenue Growth and Strategic Investments: - Gilat Satellite Networks Ltd. reported revenue of $117.7 million for Q3 2025, a 58% increase year-over-year. - The growth was driven by solid organic growth and strong new orders in next-generation satellite programs, along with a confidence vote from institutional investors with a $66 million private placement.

• Commercial Business Performance:
• The Commercial segment's revenue reached $73 million in Q3 2025, up 116% year-over-year.

• Growth was fueled by the in-flight connectivity (IFC) vertical, with significant orders from leading global satellite operators and airlines.

• Defense Segment Dynamics:

• Gilat Defense reported revenue of $24.1 million in Q3 2025, down from $31 million in Q3 2024.

• The decrease reflects a transition from mature programs to new initiatives, but notable orders were secured that are expected to convert to revenues in coming quarters.

• Peru Project Expansion:

• Revenue from Gilat Peru reached $20.6 million in Q3 2025, more than double the $9.8 million in Q3 2024.
• This increase was driven by higher revenues from new upgrade projects and increased equipment deliveries, supporting Peru's digital inclusion goals.

Sentiment Analysis:

Overall Tone: Positive

• Management: "The third quarter of 2025 was a strong quarter... revenues reached $117.7 million, a 58% increase year-over-year. Adjusted EBITDA was $15.6 million, 46% above the same quarter last year." CFO: "We're narrowing our guidance range and raising the guidance midpoint for both revenues and EBITDA."

Q&A:

• Question from Ryan Koontz (Needham & Company): I wanted to ask about Stellar Blu and how we should think about that trajectory? Where are we now on gross margins at this point in time? And what sort of improvements you think you can make in gross margin over the coming quarters? And as well as I also want to ask about the product cycle for this version of Sidewinder. How long do you think that lasts before you really need kind of a next-generation product in production?
  Response: Production is ramping and currently behind target margins; expect significant gross-margin improvement next year as line-fit orders and cost reductions scale; working on Ku/Ka/LEO-capable next-gen variants.

• Question from Ryan Koontz (Needham & Company): On the Peru front, you talked about the $85 million in orders. Is most of that incremental to your ongoing kind of maintenance contract there? Or is that also a renewal of that maintenance ongoing rate?
  Response: The $85M are incremental upgrade awards on top of existing Pronatel work (not simple renewals) and include multi-year maintenance; more RFPs and projects are expected.

• Question from Ryan Koontz (Needham & Company): Any impact you're seeing on bookings or product acceptance from the shutdown in the last 45 days?
  Response: There are order delays (not cancellations) due to the shutdown that may shift some bookings into later quarters of 2026, but management does not expect material impact to current guidance.

• Question from Ryan Koontz (Needham & Company): Any impact from FX from the shekel versus dollar in the quarter?
  Response: No meaningful FX impact in the quarter; exposures are hedged and any effect would likely materialize in H2 2026.

• Question from Louie Dipalma (William Blair): How many Stellar Blu Sidewinder aircraft are online now? I believe last quarter, you indicated there were 225 planes flying with the system. And I was also wondering, how is the antenna performing in the field in terms of connecting with the OneWeb constellation. Is the performance similar to what Starlink is achieving?
  Response: About 350 aircraft connected with >300k flight hours; OneWeb performance ~200 Mbps depending on satellites and is viewed as at least comparable to Starlink by customers.

• Question from Louie Dipalma (William Blair): You discussed on the earnings call two different SkyEdge IV orders that you won that were each worth more than $40 million. Are you able to provide the applications for these awards? And are there others in the pipeline just because these awards seem much larger than your traditional SkyEdge IV?
  Response: Those large SkyEdge IV awards are primarily for in‑flight connectivity to expand existing global operator deployments.

• Question from Louie Dipalma (William Blair): But for those orders, they don't -- they're not on the same planes as the Stellar Blu Sidewinder, right?
  Response: They can be on the same aircraft; Sidewinder is multi‑orbit and can host multiple modems (e.g., Gilat and OneWeb).

• Question from Louie Dipalma (William Blair): What is the timing of when the factory installations with Boeing will start?
  Response: Expect some certifications before year‑end enabling installations early next year, with full factory installations toward mid‑2026.

• Question from Louie Dipalma (William Blair): The $120 million Stellar Blu backlog earn‑out milestone — do you expect that milestone to be hit?
  Response: In advanced negotiations for a large order with a decent chance to hit the earn‑out by mid‑December, subject to commercial and gross‑profit conditions.

• Question from Christopher Quilty (Quilty Space): Revenues were down sequentially for IFC/Stellar Blu; is that timing or seasonality? Should we expect revenues to continue to ramp and is there seasonality in Q4?
  Response: Some quarterly variability from one‑time avionics; production issues resolved and Q4 production should ramp to ~70–80 units/month with further increases next year.

• Question from Christopher Quilty (Quilty Space): You had originally talked about 100 a month earlier this year. Is that the target for '26?
  Response: Yes, ~100 units/month is the target for 2026, subject to backlog and orders.

• Question from Christopher Quilty (Quilty Space): Stellar Blu backlog at acquisition was about 1,000 units; will backlog be up or down exiting the year given recent large orders?
  Response: Backlog is roughly flat to the acquisition level today; if the pending large order closes, backlog should be higher exiting the year.

• Question from Christopher Quilty (Quilty Space): You originally targeted exiting the year with 10% EBITDA; since you raised EBITDA guide, where across the portfolio did you make up the difference for Stellar Blu coming up short?
  Response: Commercial (especially IFC) and Peru outperformed expectations and offset Stellar Blu margin drag; Defense is being invested in for future growth.

• Question from Christopher Quilty (Quilty Space): Cellular backhaul — was this a one good quarter or is the trend gathering steam?
  Response: Cellular backhaul contribution was small this quarter; the primary Commercial growth driver remains IFC.

• Question from Christopher Quilty (Quilty Space): On the third earn‑out tied to strategic wins, have any closed and are you on track?
  Response: No strategic deals closed yet; ongoing discussions could materialize but timing is uncertain; strategic deals would materially expand addressable market.

• Question from Christopher Quilty (Quilty Space): The private placement 6‑K — were the terms the same at close?
  Response: Yes; the company received $66M net of just under $1M in costs.

• Question from Christopher Quilty (Quilty Space): What was the closing share count and was CapEx elevated this quarter?
  Response: Share count a bit above 64M; CapEx was slightly higher year‑over‑year but within planned levels and not due to a one‑off.

• Question from Christopher Quilty (Quilty Space): Stellar Blu dragged gross margins below 30% this quarter — do you expect to get back to mid‑30% gross margin by 2026?
  Response: Yes; management expects mid‑30s gross margin as backlog amortization (~2% drag) reverses in H1'26 and as line‑fit volumes and cost reductions take effect.

Contradiction Point 1

Stellar Blu Gross Margins Trajectory

It involves differing expectations for Stellar Blu's gross margin trajectory, which is crucial for financial forecasting and investor expectations.

What is the current status of Stellar Blu's gross margins and trajectory for improvement? - Ryan Koontz (Needham & Company, LLC)

2025Q3: Stellar Blu is progressing with production, but gross margins are below target due to higher costs in the first phase. Expect improvement next year with line fit orders and cost reductions. - Adi Sfadia(CEO)

What are the key factors behind the improved guidance, and will new initiatives extend into 2026? - Michael Louie D DiPalma (William Blair & Company L.L.C.)

2025Q2: Margins are ramping up gradually, with a shift from low-rate production to regular production. Expectations for margin improvements will be seen towards the end of this year and into next year. - Gil Benyamini(CFO)

Contradiction Point 2

Stellar Blu Revenue Ramp-up

It involves differing expectations for Stellar Blu's revenue ramp-up, which is critical for revenue projections and investor expectations.

Why did Stellar Blu's sequential revenue decline, and is Q4 seasonality expected? - Christopher Quilty (Quilty Space Inc.)

2025Q3: Stable production; expect revenue ramp-up in Q4. Production capacity to reach 80 units/month. - Adi Sfadia(CEO)

What are your expectations for the production ramp-up at Stellar Blu, how is the margin profile evolving, and can you provide an update on the virtualization win for SkyEdge IV? - Ryan Boyer Koontz (Needham & Company, LLC)

2025Q2: Production ramp-up at Stellar Blu is progressing, with better results expected in Q3 and Q4. We are seeing improvements in the certification stages and expect a ramp-up in delivery capability. - Adi Sfadia(CEO)

Contradiction Point 3

Peru Revenue Linearity

It involves differing expectations regarding revenue linearity and key market performance, which impacts financial forecasts and shareholder expectations.

Are the $85 million Peru orders incremental or part of ongoing contracts? - Ryan Koontz(Needham & Company, LLC, Research Division)

2025Q3: $85 million awards in Peru are upgrades for new projects, not renewals of existing contracts. Additional projects and RFPs are expected in the coming quarters, with delivery before the election year. - Adi Sfadia(CEO)

How should we expect revenue linearity in Peru over the next few quarters? - Louie DiPalma(William Blair)

2025Q1: So Peru linearity is a bit challenging. So we do expect Peru revenue run rate to be $45 million to $50 million. This quarter it was relatively low because several large projects that are about to be renewed, the renewal was delayed, and we expect to have it hopefully in Q2 and if not in early Q3. - Adi Sfadia(CEO)

Contradiction Point 4

Defense Division Investment and Growth Expectations

It highlights differing perspectives on the investment and growth expectations for the defense division, which is a strategic area for the company.

What was the impact of Stellar Blu on EBITDA guidance? Where did the shortfall originate? - Christopher Quilty (Quilty Space Inc., Research Division)

2025Q3: Defense sector is on track with increased investment. - Adi Sfadia(CEO)

What are the current trends in the defense sector and potential future contract awards? - Louie DiPalma (William Blair & Company L.L.C., Research Division)

2024Q4: We are investing at a higher level in the defense sector than we did in the previous year. - Adi Sfadia(CEO)