Executive Summary / Key Takeaways

• Strategic Pivot to Capital Efficiency: Viasat is undergoing a significant transformation, shifting from a capital-intensive satellite operator to a more agile provider of multi-orbit, high-capacity connectivity solutions. This involves leveraging its own advanced ViaSat-3 constellation, strategic third-party partnerships, and innovative L-band direct-to-device (D2D) initiatives to reduce future capital outlays and enhance returns.
• Robust Defense & Advanced Technologies (DAT) Growth: The DAT segment is a standout performer, exhibiting strong double-digit revenue growth driven by high-assurance encryption, cybersecurity, and space mission systems. This segment's differentiated technology and exposure to critical government and emerging dual-use markets represent a significant, potentially undervalued, asset.
• Path to Sustained Free Cash Flow: Following a period of elevated capital expenditures for the ViaSat-3 constellation, Viasat anticipates a sustainable positive free cash flow inflection in the second half of fiscal year 2026. This is supported by moderating CapEx, improved operating cash flow, and the anticipated $568 million Ligado settlement payments.
• Deleveraging as a Top Priority: Reducing its substantial debt load is a primary capital allocation objective, with a long-term target of achieving a net leverage ratio below 3x EBITDA. The company is actively pursuing debt repayments, including the Inmarsat 2026 term loan B, and exploring portfolio optimization to accelerate this process.
• Competitive Differentiation through Integrated Solutions: Viasat differentiates itself by offering integrated, end-to-end multi-orbit solutions across aviation, maritime, and government sectors. Its focus on dynamic beam-forming, open architecture standards, and customer-centric business models positions it strongly against both traditional GEO and emerging LEO competitors.

The Dawn of a New Era: Viasat's Strategic Transformation

Viasat, Inc., a global communications and defense technology company, stands at a pivotal juncture, transforming its operational and financial profile to capitalize on the burgeoning demand for ubiquitous, high-speed connectivity. Founded in 1986 and reincorporated in Delaware in 1996, Viasat has evolved from a satellite hardware provider to an integrated services powerhouse. Its strategic trajectory has been significantly shaped by key historical events, including the successful launch of ViaSat-2 in fiscal year 2018, the strategic divestiture of its Link-16 tactical data link business for $1.96 billion in January 2023, and the landmark acquisition of Inmarsat in May 2023. These moves have laid the groundwork for a diversified portfolio of communication services and defense technologies, anchored by a complementary fleet of 23 in-service or operational satellites spanning Ka-, L-, and S-bands.

The company's overarching strategy is to drive multi-year accelerated growth and sustained cash flow by enhancing earnings and significantly decreasing capital intensity. This involves a dual focus: maximizing the value of its high-capacity satellite infrastructure and expanding its Defense and Advanced Technologies (DAT) segment. Viasat aims to achieve this through technological differentiation, strategic partnerships, and a disciplined approach to capital allocation, all while navigating a complex competitive landscape.

Technological Edge: The Core of Viasat's Competitive Moat

Viasat's competitive advantage is deeply rooted in its differentiated technology, particularly its high-capacity satellite architecture and advanced networking capabilities. The ViaSat-3 constellation, despite initial anomalies with F1, embodies this technological leadership. The ViaSat-3 F1 satellite, integrated into the fleet covering the Americas in late July 2024, has already demonstrated its dynamic beam-forming technology, serving over 60,000 flights to date and delivering high-performance, often free, Wi-Fi. This technology allows Viasat to dynamically allocate bandwidth to specific geographic locations and individual platforms, ensuring high speeds and reliability even in congested areas. Management emphasizes that this capability is crucial for mobility applications, where "not all gigabits or all terabits are the same," highlighting the value of bandwidth delivered precisely where and when needed.

The company's R&D initiatives extend beyond its GEO constellation. Viasat is actively developing multi-orbit resource management techniques, integrating capacity from its own fleet with third-party LEO and GEO satellites. This hybrid approach, exemplified by the NexusWave maritime service and the partnership with Telesat (TSAT) for LEO Ka-band capacity, aims to deliver superior, resilient, and cost-effective connectivity. NexusWave, a fully managed multi-layer service combining Global Xpress Ka-band, LEO, coastal LTE, and L-band, has demonstrated download speeds up to 340 Mbps and upload speeds up to 80 Mbps, with network availability consistently exceeding 99.9%. This integrated solution offers tangible benefits like enhanced performance, extended geographic coverage, and improved capital efficiency by optimizing resource utilization across diverse orbital assets.

In the L-band segment, Viasat is spearheading an open architecture, standards-based approach to non-terrestrial network (NTN) roaming and direct-to-device (D2D) connectivity. By leveraging 3GPP standards and promoting multi-tenant infrastructure through the Mobile Satellite Services Association (MSSA), Viasat aims to significantly reduce capital and operating costs for D2D services. This strategy, demonstrated in a South American automotive D2D trial, seeks to expand the addressable market for L-band services beyond traditional safety applications into emerging 5G new radio markets, offering cost-effective and secure connectivity for mobile phones, cars, and drones. This approach contrasts with competitors pursuing proprietary, high-capital LEO constellations, positioning Viasat as a proponent of a more sustainable and interoperable space ecosystem.

The Defense and Advanced Technologies (DAT) segment also showcases Viasat's technological prowess. Its information security and cyber defense business is a leader in high-assurance encryption products, including Type 1 and HAIPE-compliant solutions. This segment is experiencing an upgrade cycle driven by the need for quantum-resistant encryption and surging demand for secure cloud data centers, especially with the rise of AI and data fusion applications. Viasat's KG-142 products have seen record awards, and the company is developing next-generation Ethernet Data Encryptors (EDE) for government cloud data centers. In space and mission systems, Viasat is partnering with Blue Origin for NASA's Communications Services Project (CSP) to demonstrate its InRange launch telemetry relay service, utilizing its global L-band network for real-time data transmission during launch, a critical capability as NASA transitions from its TDRS system. These technological differentiators contribute directly to Viasat's competitive moat, enabling premium service offerings, driving market share in high-value segments, and supporting long-term growth.

Competitive Arena: Differentiating in a Dynamic Market

Viasat operates in a highly competitive satellite communications market, facing both direct rivals like EchoStar Corporation (SATS), Iridium Communications (IRDM), and Globalstar, Inc. (GSAT), as well as indirect threats from terrestrial 5G and fiber providers.

Against EchoStar, which has a strong presence in consumer and enterprise broadband, Viasat differentiates through its focus on high-value, customized solutions and superior data throughput for applications like in-flight entertainment. While EchoStar benefits from a streamlined operational model and broad coverage, Viasat's proprietary high-capacity satellites offer greater efficiency in data transmission, allowing it to command premium pricing in specialized segments.

Compared to Iridium, a leader in global mobile satellite communications with its LEO constellation, Viasat excels in broadband capacity and integrated services. Iridium's strength lies in low-latency mobile and emergency services, but Viasat's multi-orbit strategy, combining GEO and LEO, aims to offer both high throughput and low latency, particularly for high-demand mobility applications. Viasat's focus on bundling services, such as broadband with IoT analytics, provides a unique value proposition, though Iridium's focused operational model has historically yielded stronger net margins.

Globalstar competes in niche markets like IoT and asset tracking with cost-effective, low-data solutions. Viasat, in contrast, offers more robust broadband offerings with significantly higher performance for data-intensive applications. While Globalstar's lean operations allow for lower pricing in basic services, Viasat's technological advantages in bandwidth and service integration position it for higher-value markets, though it must address cost structure to compete effectively in price-sensitive segments.

Indirect competitors, such as Verizon (VZ) and AT&T (T), pose a threat by offering terrestrial 5G and fiber-optic broadband. These alternatives provide lower-latency options in urban areas, potentially impacting Viasat's market share in consumer broadband. However, Viasat's multi-orbit strategy and D2D initiatives are designed to augment terrestrial networks, extending connectivity to underserved areas and specialized mobile applications where terrestrial networks are insufficient.

Viasat's competitive advantages, including its proprietary satellite technology, global network effects, and strong partnerships in aviation and defense, enable it to secure long-term contracts and maintain customer loyalty. Its focus on open architecture standards and multi-tenant infrastructure for L-band D2D also aims to reduce capital intensity and foster broader industry adoption, creating a more favorable competitive environment.

Financial Performance and Outlook: A Path to Deleveraging and Growth

Viasat's recent financial performance reflects a company in transition, balancing growth in strategic areas with the significant investments required for its next-generation satellite fleet. For the three months ended June 30, 2025 (Q1 Fiscal Year 2026), Viasat reported total revenues of $1.17 billion, a 4% increase year-over-year. This growth was primarily driven by a robust 15% increase in the Defense and Advanced Technologies (DAT) segment, reaching $343.7 million, and a flat performance in Communication Services at $827.4 million.

Within Communication Services, aviation services revenue surged 14% year-over-year to $292.9 million, fueled by a 9% increase in commercial aircraft in service (totaling 4,230 commercial aircraft and 2,050 business jets). Government SATCOM also grew 4% to $191.8 million. These gains were largely offset by a 13% decline in fixed services and other revenue to $174.7 million, as bandwidth was strategically reallocated to higher-value IFC business, and a 5% decline in maritime services to $117.8 million due to L-band migration.

The DAT segment's strong performance was led by an 84% increase in information security and cyber defense product revenues to $102.1 million and a 20% rise in space and mission systems products to $88.0 million. This was partially offset by declines in tactical networking and advanced technologies due to lower IP licensing revenue compared to a strong prior year period.

Consolidated adjusted EBITDA for Q1 FY26 was $408 million, a 1% increase year-over-year, resulting in a 35% adjusted EBITDA margin. While Communication Services adjusted EBITDA grew 5% to $322 million, DAT adjusted EBITDA declined by $9 million to $87 million, primarily due to higher SGA costs, increased IRD for next-gen encryption, and a less favorable mix of high-margin IP licensing revenue compared to the prior year.

Viasat's liquidity position as of June 30, 2025, included $1.2 billion in cash and cash equivalents and $1.3 billion in working capital. Total outstanding indebtedness stood at $6.7 billion. The company generated $258.5 million in operating cash flow in Q1 FY26, a significant $107.4 million increase year-over-year, and achieved $60 million in positive free cash flow for the quarter, bringing its trailing 12-month free cash flow to $88 million. This marks a critical step towards its goal of sustained positive free cash flow.

Fiscal Year 2026 Outlook and Guidance:
Viasat anticipates fiscal year 2026 revenue to be up low single digits year-over-year, with flattish adjusted EBITDA growth (plus or minus 1% from FY25's $1.547 billion). This outlook factors in approximately $60 million in additional third-party bandwidth expense, $80 million in operating costs for ViaSat-3 ground network readiness, and lower IP licensing revenue from TrellisWare. These headwinds are expected to be largely offset by growth in aviation, government SATCOM, and DAT franchises, along with $40 million in reduced operating costs from a fiscal 2025 voluntary retirement program.

Capital expenditures for fiscal year 2026 are projected to be approximately $1.2 billion, a $100 million improvement from prior guidance, including $250 million for the completion of the ViaSat-3 constellation and $400 million for Inmarsat. This reduction in CapEx, combined with improved operating cash flow, is expected to drive a sustainable positive free cash flow inflection in the second half of fiscal year 2026. The guidance does not include the anticipated $568 million Ligado settlement payments, which are subject to bankruptcy court approval and represent potential upside. These payments, expected in fiscal year 2026, are earmarked for debt repayment, including the $300 million Inmarsat 2026 term loan B. Viasat aims to achieve a long-term net leverage ratio below 3x EBITDA, emphasizing deleveraging as a top priority.

Risks and Challenges

Despite a clear strategic direction and promising technological advancements, Viasat faces several material risks. The most prominent include potential delays in the ViaSat-3 F2 and F3 satellite deployments. While Flight 2 is expected to ship by September 2025 and be in-service by late calendar year 2025, and Flight 3's in-service date has shifted to early calendar year 2026 due to a less capital-intensive launch configuration, any further delays could impact revenue ramp-up and cash flow generation. The company's history with ViaSat-3 F1 and I-6 F2 anomalies in fiscal year 2024 underscores the inherent risks in satellite construction and launch.

Macroeconomic headwinds, such as slow OEM aircraft delivery rates and increased grounded aircraft, continue to pressure the aviation segment. The U.S. fixed broadband business remains challenged by capacity constraints and subscriber declines, with stabilization dependent on ViaSat-3 F2's entry into service. Furthermore, the Ligado settlement, while significant, remains subject to bankruptcy court approval, introducing an element of uncertainty regarding the timing and receipt of anticipated payments.

Viasat's substantial debt load, though actively managed, represents a financial vulnerability. While the company is prioritizing deleveraging, achieving its long-term target of below 3x EBITDA will require sustained free cash flow generation and potentially further portfolio optimization. Competition from both traditional satellite operators and emerging LEO constellations, like Starlink, continues to intensify, particularly in the IFC and fixed broadband markets. Regulatory issues, such as spectrum allocation and potential interference from high-power satellite transmissions, also pose ongoing challenges.

Conclusion

Viasat is executing a transformative strategy, repositioning itself for accelerated growth and enhanced financial stability. The company's core investment thesis hinges on its ability to monetize its advanced multi-orbit satellite fleet, particularly the upcoming ViaSat-3 launches, and to leverage the robust growth of its Defense and Advanced Technologies segment. Viasat's technological leadership in dynamic beam-forming, multi-orbit resource management, and next-generation encryption provides a strong competitive moat, enabling it to deliver differentiated, high-value services across aviation, maritime, and government markets.

The path to sustained positive free cash flow and significant deleveraging in fiscal year 2026 is clear, supported by moderating capital expenditures and strategic debt repayments. While challenges from satellite deployment risks, macroeconomic pressures, and intense competition persist, Viasat's commitment to open architecture standards and capital efficiency in emerging markets like D2D demonstrates a forward-looking approach. Investors should closely monitor the successful deployment and ramp-up of ViaSat-3 F2 and F3, the finalization of the Ligado settlement, and the continued execution of its deleveraging strategy as key indicators of Viasat's ability to unlock substantial long-term value.