Viasat's FY26 Outlook: Navigating Modest Growth Amid Strategic Transformation

In an era of heightened scrutiny over corporate capital discipline and debt management, Viasat (NASDAQ: VSAT) has positioned itself at a pivotal juncture. With the full deployment of its ViaSat-three satellite constellation nearing completion and a renewed focus on free cash flow generation, the company is primed to shift from a high-growth, capital-intensive phase to a phase of sustained profitability. This transition, however, hinges on executing its $1.3 billion FY2026 CapEx plan, managing its $7.5 billion debt burden, and capitalizing on structural tailwinds in aviation and maritime connectivity. Let’s dissect the catalysts and risks to determine whether Viasat’s shares are undervalued and ready for a rebound.

The CapEx Pivot: Prudent Spending for Long-Term Gains

Viasat’s FY2026 CapEx plan marks a significant shift from its historic capital intensity. At $1.3 billion, this figure is nearly $300 million lower than FY2025-FY2026 projections from just a year ago, driven by operational efficiencies such as reduced third-party satellite leasing and voluntary cost-cutting programs. Crucially, only $250 million is earmarked for completing the ViaSat-three constellation, signaling that the bulk of its satellite-related investments are behind it.

This disciplined approach is critical. By scaling back capital spending, Viasat is freeing up cash to pay down debt while avoiding overextension. The remaining CapEx will focus on network integration and ground infrastructure, ensuring the ViaSat-three system maximizes its potential. With over 2,000 planes already serviced by Flight One and Flights Two and Three on track for deployment, the company is well-positioned to leverage its technological edge in high-speed aviation broadband.

Debt Reduction: The Path to Deleveraging

Viasat’s debt mountain—$7.5 billion—remains its largest overhang. However, the company has outlined a clear playbook to tackle this liability:
1. Cash Utilization: With $1.6 billion in cash at FY2025’s end and another $443 million of debt retired in Q1 2025, Viasat is already making progress. The $300 million MRSAT Term Loan B is slated for repayment by FY2026’s end.
2. Strategic Asset Sales: The pending review of its Defense and Advanced Technology (DAT) segment could unlock proceeds directed toward debt reduction. Even a modest $300–$500 million windfall here would accelerate deleveraging.
3. Litigation Outcomes: While the Legato bankruptcy case introduces uncertainty, Viasat’s confident stance suggests it may ultimately sidestep material losses.

By FY2027, Viasat aims to reduce its net debt/EBITDA ratio to 4.5x, down from a current 6.0x, a level that would significantly improve its credit profile and reduce refinancing risks.

The Free Cash Flow Inflection Point: When Growth Meets Discipline

The linchpin of Viasat’s valuation recovery is its free cash flow (FCF) trajectory. Management has declared FY2026’s second half as the “inflection point” for FCF growth, driven by:
- Operating Cash Flow: A 30% jump to $900 million in FY2025 sets a strong base. FY2026’s double-digit growth is achievable as ViaSat-three’s capacity unlocks revenue in U.S. fixed broadband and aviation.
- Reduced CapEx: The $1.3 billion spend is ~$500 million below FY2025 levels, directly boosting FCF.
- Margin Improvements: Over the next three years, operational efficiencies (e.g., network synergies, antenna cost reductions) could add 200 basis points to margins.

Even with headwinds like $60 million in higher bandwidth costs and $25 million in annual tariffs, the company’s cost-saving initiatives—such as the $40 million savings from FY2025’s voluntary retirement program—should offset these pressures. By FY2027, FCF could surpass $500 million, a meaningful step toward self-sustaining debt reduction.

Operational Strength: Aviation and Maritime as Growth Anchors

Viasat’s two most promising segments—aviation and maritime—are underappreciated catalysts:
- Aviation: With 4,030 aircraft under service (+10% YoY) and a 1,600-aircraft backlog, this segment is a cash engine. The Amara multi-network solution and ViaSat Era antennas (combining GEO and LEO capacity) are critical to retaining customers over rivals like Starlink. Even if macroeconomic pressures slow near-term growth, long-term demand for in-flight Wi-Fi is structural.
- Maritime: The NexusWave terminal is scaling rapidly, with 100 active installations and 500 orders pending. This low-cost, high-margin product targets the booming offshore energy and shipping sectors, offering a clear path to recurring revenue.

Risks to Consider

• Aviation Delays: OEM production bottlenecks and airline cost-cutting could slow aircraft deliveries, delaying service revenue.
• Legato Litigation: If the bankruptcy court rules against Viasat, it could force an unexpected cash outlay.
• Regulatory Scrutiny: Rising competition and compliance costs in global markets may pressure margins.

Conclusion: A Buy at Current Levels

Despite these risks, Viasat’s strategic transformation is real. The company is methodically reducing debt while positioning itself to capitalize on its technology leadership. With a $1.3 billion CapEx plan that prioritizes efficiency, a debt reduction roadmap backed by ample cash, and a free cash flow inflection point on the horizon, the stock’s current valuation—trading at ~6x FY2026 EBITDA—appears undemanding.

Investors should view dips as buying opportunities. The aviation and maritime markets are growing, and Viasat’s technology is uniquely suited to capture share. By FY2026’s end, a deleveraged balance sheet and robust FCF should finally allow the stock to reflect its true worth. Buy Viasat here—this is a turnaround story with teeth.