Viasat's Q2 2026 Earnings Call: Contradictions Emerge on Business Separation, ViaSat-3 Flight 2's Impact and Timeline, Ligado Litigation, and Spectrum Value

Date of Call: November 7, 2025

Financials Results

• Revenue: $1.1B, up 2% year-over-year

Guidance:

• Fiscal '26 revenue expected to be up low single digits year-over-year.
• Fiscal '26 adjusted EBITDA expected to be flattish year-over-year with quarter-to-quarter variability.
• Cash from operations expected to grow double digits for the year.
• Fiscal '26 CapEx expected ~ $1.2B ( ~$200M capitalized interest, ~$500M maintenance, ~$100M success-based, ~$250M ViaSat-3 completion; ~ $400M of spend within Inmarsat).
• Negative free cash flow expected in 2H due to ~$200M remaining pre-launch spend; positive free cash flow targeted for fiscal '27.
• Government shutdown may delay DAT awards up to $100M and impact DAT adjusted EBITDA by up to $20M.

Business Commentary:

* Improved Financial Performance: - Viasat's net loss improved to $61 million in Q2 FY '26, compared to a net loss of $138 million in Q2 FY '25. - This improvement was primarily due to favorable service revenue mix, lower depreciation and amortization, and reduced SG&A expenses.

• Segmental Growth:
• Revenue grew 2% year-over-year, with 3% growth in the Defense and Advanced Technologies segment and a 1% year-over-year increase in the Communication Services segment.

• Growth was supported by increased demand for secure communications, integration of commercial and defense dual-use technologies, and the upcoming launch of ViaSat-3 Flight 2.

• Backlog and Awards Increase:

• The company's backlog increased to a record $1.2 billion, up 31% year-over-year and 14% sequentially.

• This was driven by strong awards growth, including a large international dual-use satellite win, which reflects growing demand for advanced technologies in defense and security.

• Strategic Focus and Capital Efficiency:

• Viasat's free cash flow was $147 million for the trailing 12 months, driven by disciplined capital spending and efficient deployment of resources.
• The company continues to focus on capital efficiency, with plans to repay debt and optimize its capital structure to achieve a leverage ratio of 3x net debt adjusted EBITDA or lower.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted improvements: net loss narrowed to $61M from $138M, revenue grew 2% YOY, adjusted EBITDA of $385M (up 3%) with a 34% margin, TTM free cash flow of $147M and three consecutive quarters of positive free cash flow; management emphasized launch progress and backlog growth supporting future revenue.

Q&A:

• Question from Brent Penter (Raymond James & Associates, Inc., Research Division): I appreciate the comments on the split and some interesting comments there regarding government commercial dual-use and vertical integration opportunities as well as the debt silos. So can you just update us what inning are we in, in terms of evaluating that possibility? And maybe you could just elaborate on those comments regarding vertical integration and the debt side of things.
  Response: Continuously evaluating separation/vertical‑integration options, weighing trade‑offs between preserving competitive advantages and creating attractive investment vehicles; no definitive timeline provided.

• Question from Brent Penter (Raymond James & Associates, Inc., Research Division): Spectrum value, you all talked about it and it's clearly getting a lot of attention right now given some of the activity in the industry. Just focusing on your international spectrum, can you all remind us what exactly you own in terms of megahertz and priority rights. And given some of the existing businesses on that spectrum as well as now the JV with Space 42. How open are you all to alternative ways to monetize that spectrum and maximize the NPV there?
  Response: Viasat's ITU spectrum positions are public and globally extensive; management is open to monetization, coordination and shared‑infrastructure models but will prioritize responsible stewardship and regulatory/public‑interest obligations.

• Question from Brent Penter (Raymond James & Associates, Inc., Research Division): Final question for me on the topic of Equitus. Can you all just talk a little bit more about that project? And who you view as the ideal customer that this is going to be most appealing to? And I realize it's early, but any conversations you've had with other potential partners or customers? And then I would also appreciate any details you can give in terms of economics, CapEx and how we should think about that?
  Response: Equitus aims to deliver shared mobile‑satellite infrastructure for direct‑to‑device services enabling regional operators and sovereign customers to share costs and spectrum capacity; discussions with Space42, regional operators and ESA are underway; economics and CapEx are not yet defined.

• Question from Brent Penter (Raymond James & Associates, Inc., Research Division): Anything you can help us out with in terms of sizing CapEx there?
  Response: Too early to size CapEx; program variables and partner structures must be finalized before disclosing investment amounts.

• Question from Sebastiano Petti (JPMorgan Chase & Co, Research Division): As we think about your global portfolio, I think in the Space42 announcement, it said that you'd be able to -- capable of supporting well over 100 megahertz of harmonized MSS spectrum. Is that accurate as it pertains to Viasat global harmonized spectrum?
  Response: Yes—the referenced ~100 MHz reflects the combined harmonized MSS spectrum capacity of Viasat plus Space42.

• Question from Sebastiano Petti (JPMorgan Chase & Co, Research Division): As you prepare for service launch targeted within 3 years, when should we begin to hear more about partners, MVNOs, additional investors or milestones to anticipate over the next quarters and years?
  Response: Expect progressive updates over coming quarters and years as Space42 discussions are definitized and partner/investor/MVNO transaction details are formalized.

• Question from Sebastiano Petti (JPMorgan Chase & Co, Research Division): Any help thinking about backlog growth and how that backlog will monetize over time beyond book‑to‑bill ratios?
  Response: We focus on book‑to‑bill and franchise KPIs (aviation, government SATCOM, maritime); backlog underpins future work and Flight‑2 capacity will enable monetization, but no additional formal conversion metrics were provided.

• Question from Michael Crawford (B. Riley Securities, Inc., Research Division): On HaloNet, is that something that's going to take a year or two to get off the ground because LEO sensors would have to relay via GEO and then to a gateway, and how do you envision the architecture and timing?
  Response: HaloNet targets multiple markets (launch telemetry, LEO→GEO sensor relays, C2/tasking) to reduce latency and enable shared sensor/relay infrastructure; market paths vary by application and timing differs by use case.

• Question from Michael Crawford (B. Riley Securities, Inc., Research Division): You have this great cryptographic and encryption franchise, how does the advent of quantum computing affect those?
  Response: Quantum computing is accelerating demand for quantum‑resistant cryptography and data‑center cryptos, driving modernization, higher performance and more demand for our encryption products.

• Question from Michael Crawford (B. Riley Securities, Inc., Research Division): How are you accounting for the $420M cash received on Halloween and the $100M additional cash on March 31?
  Response: Lump‑sum proceeds will largely be recorded to deferred revenue and recognized over contract lives; interest will be recorded as interest income (EBITDA neutral); further details to be provided in Q3.

• Question from Michael Crawford (B. Riley Securities, Inc., Research Division): So you're going to recognize $520M of deferred revenue over 80 years?
  Response: Some proceeds will be deferred revenue and some will be interest income; exact recognition terms are being finalized and will be disclosed in upcoming filings—no confirmation of an 80‑year schedule.

• Question from Ryan Koontz (Needham & Company, LLC, Research Division): How should we think about pent‑up demand and timing for Communication Services backlog given Flight‑2 capacity; what percentage of that backlog is dependent on F2?
  Response: Much of the demand unlocked by Flight‑2 appears as higher ARPA/usage (aviation, maritime, consumer) rather than backlog; backlog covers contracted items (e.g., aircraft installs) while capacity enables incremental recurring revenue.

• Question from Ryan Koontz (Needham & Company, LLC, Research Division): [indiscernible]
  Response: Management emphasized that capacity availability drives continued franchise growth across aircraft, vessels and residential subscribers.

• Question from Ryan Koontz (Needham & Company, LLC, Research Division): Any updated thoughts on how the aviation environment is evolving?
  Response: Aviation is seeing greater IFEC penetration and streaming demand; carriers seek differentiation beyond free WiFi, so monetization strategies and product differentiation will be increasingly important.

• Question from Colin Canfield (Cantor Fitzgerald & Co., Research Division): On spectrum valuation and precedent transactions (e.g., SpaceX/EchoStar), how do you think about ViaSat's spectrum value, preference for cash vs equity, and carrying arbitrage on the balance sheet?
  Response: We value spectrum by its ability to deliver services consistent with license obligations and public interest; we're open to coordination/transactions but won't speculate on specific deal structures—decisions will prioritize customer/regulatory fit and shareholder value.

• Question from Colin Canfield (Cantor Fitzgerald & Co., Research Division): Regarding defense demand beyond the U.S., how are you seeing Europe and other regions accelerating demand and how will that unfold multi‑year?
  Response: Sovereignty concerns are driving global defense demand for resilient, cybersecure terminals and capabilities; customers may pursue shared infrastructure or GEO/other solutions—discussions are ongoing as nations balance sovereignty, cost and capability.

• Question from Xin Yu (Deutsche Bank AG, Research Division): You have spend and spectrum in Europe that comes up for renewal in 2027—what do you plan to do and do you expect to retain it?
  Response: European S‑band reallocation is underway; Viasat submitted applications and believes it meets build commitments and stewardship requirements—EU allocation process expected over the next 1–2 years.

• Question from Xin Yu (Deutsche Bank AG, Research Division): If Flights 2 and 3 are fully in service, can you dimension the potential growth bump or sales uplift?
  Response: Flights 2+3 would roughly triple bandwidth; monetization depends on service mix and geography—management sees significant runway for mobility growth but did not provide a quantified sales uplift.

Contradiction Point 1

Strategic Evaluation of Business Separation

It involves the company's strategic evaluation of separating its government and commercial businesses, which can have significant implications for its organizational structure and future growth.

Can you update us on the separation of your government and commercial businesses and discuss dual-use opportunities and vertical integration? - Brent Penter (Raymond James & Associates)

2026Q2: We are continuously evaluating and working on these options. The focus is on the benefits of dual-use and vertical integration, exemplified by Europe's IRIS² project. We are weighing the benefits of a spin-off versus strategic partnerships. - Mark Dankberg(CEO)

What are the pros and cons of splitting companies' businesses, and what is Viasat's approach to splitting its business? - Richard Hamilton Prentiss (Raymond James & Associates, Inc., Research Division)

2026Q1: We consider the synergies of keeping businesses together and the capital needs of each unit. For example, tactical datalink was divested due to decreased synergy. Increasing convergence between cybersecurity and space also presents opportunities for shared infrastructure. - Mark Dankberg(CEO)

Contradiction Point 2

Impact of ViaSat-3 Flight 2 on Revenue

It involves the company's expectations regarding the revenue impact of ViaSat-3 Flight 2, which is a significant investment in satellite technology and can influence future growth and financial performance.

What about pent-up demand and timing for ViaSat-3 Flight 2? - Ryan Koontz (Needham & Company)

2026Q2: We don't expect backlog to increase due to Flight 2, but rather from organic growth and capacity increases. Revenue will be reflected in service usage rather than direct backlog recognition. - Mark Dankberg(CEO)

Can you provide an update on the backlog and capacity evolution? - Ryan Boyer Koontz (Needham Company, LLC, Research Division)

2026Q1: Our backlog grew 12% year-over-year, which is the third consecutive quarter of double-digit growth. Much of this growth was driven by international customers. The backlog ended the quarter at $7 billion, which is the highest level in more than 3 years. And to give you some context, it's only 30% of our expected capacity of ViaSat-3. - Garrett Chase(CFO)

Contradiction Point 3

ViaSat-3 Flight 2 Launch Timeline

It directly impacts the expected timeline for the launch of ViaSat-3 Flight 2, which is crucial for the company's capacity expansion and service growth.

Can you update us on the evaluation of separating your government and commercial businesses and discuss dual-use opportunities and vertical integration? - Brent Penter(Raymond James & Associates)

2026Q2: We expect to launch ViaSat-3 Flight 2 in time to complete the global ViaSat-3 constellation coverage by the end of calendar 2023. - Mark Dankberg(CEO)

Can you provide an update on the strategic review of the Defense and Advanced Technologies segment? What gives you confidence in the early 2026 timeline for ViaSat-3 Flight 2? - Sebastiano Petti(JPMorgan)

2025Q4: We expect delivery to launch sites this summer, with a potential slip into early 2026. - Mark Dankberg(CEO)

Contradiction Point 4

Ligado Litigation and Proceeds

It involves the anticipated proceeds from Ligado litigation, which could impact the company's financial strategy and debt reduction plans.

When will partnerships with MVNOs or investors for Equitus and Space42 be announced? - Sebastiano Petti(JPMorgan Chase & Co)

2026Q2: Our focus is on reducing leverage to 3x, the point where debt costs flatten and equity value is maximized, primarily through free cash flow generation. - Gary Chase(CFO)

Can you outline the Ligado timeline and scale, and how the proceeds will be allocated? - Ric Prentiss(Raymond James & Associates, Inc.)

2025Q4: Proceeds, if any, will likely be used for debt repayment. - Mark Dankberg(CEO)

Contradiction Point 5

Spectrum Value and Strategic Options

It involves the strategic value and options related to the company's spectrum resources, which are crucial for future growth and investment decisions.

Can you update on the evaluation of separating government and commercial businesses and discuss dual-use opportunities and vertical integration? - Brent Penter (Raymond James & Associates)

2026Q2: We are continuously evaluating and working on these options. The focus is on the benefits of dual-use and vertical integration, exemplified by Europe's IRIS² project. We are weighing the benefits of a spin-off versus strategic partnerships. - Mark Dankberg(CEO)

Are there DAT businesses synergistic with the satellite portfolio? - Sebastianto Petti (JPMorgan)

2025Q3: Most DAT technologies are synergistic with satellites. Decisions on asset dispositions will balance the value of these synergies with capital allocation needs. - Mark Dankberg(CEO)