Executive Summary / Key Takeaways

• Gilat Satellite Networks Ltd. ($GILT) is undergoing a significant transformation, strategically focusing on high-growth segments like defense and in-flight connectivity (IFC) through targeted acquisitions and technological innovation.
• The company's recent Q2 2025 results demonstrated strong top-line growth, with revenues increasing 37% year-over-year to $105 million, and adjusted EBITDA rising 17% to $11.8 million, despite initial ramp-up losses from the Stellar Blu acquisition.
• Gilat's core investment thesis is underpinned by its leadership in multi-orbit ground segment technologies, including advanced Electronically Steered Antennas (ESAs) and virtualized SkyEdge IV platforms, which are critical enablers for next-generation satellite networks.
• Revised 2025 guidance projects robust revenue growth of 46% at the midpoint ($435M-$455M) and adjusted EBITDA growth of 22% at the midpoint ($50M-$53M), reflecting improved visibility and strong business momentum.
• Key risks include the successful integration and profitability ramp-up of Stellar Blu, geopolitical tensions impacting defense spending, and the inherent project-based nature of large satellite communication contracts.

A New Orbit for Growth: Gilat's Strategic Evolution

Gilat Satellite Networks Ltd. stands at the forefront of a rapidly evolving satellite communications industry, leveraging over 35 years of expertise to deliver broadband solutions globally. The company's strategic journey has culminated in a focused approach to capitalize on burgeoning opportunities in defense and commercial connectivity, underpinned by significant technological advancements and a streamlined operational structure. This strategic pivot positions Gilat to capture substantial value in a market increasingly reliant on resilient, high-performance satellite communication.

The global satellite communication market, valued at approximately $23.1 billion in 2024, is projected to grow at a robust Compound Annual Growth Rate (CAGR) of 12.3% from 2025 to 2034, driven by the escalating need for internet access in remote areas and critical government and defense operations. Within this expansive landscape, the defense SATCOM sector alone is forecast to expand from $5.23 billion in 2025 to $14.31 billion by 2035, at a CAGR of 10.6%. Similarly, the in-flight internet market, valued at $1.9 billion in 2024, is expected to reach $4.2 billion by 2034, growing at a CAGR of 6.6%. These trends highlight a fertile ground for Gilat's specialized offerings.

Gilat's foundational strength lies in its differentiated technology, particularly its multi-orbit ground segment solutions. The company's SkyEdge IV platform is designed for Very High Throughput Satellites (VHTS) and Non-Geostationary Orbit (NGSO) constellations, offering the scalability, flexibility, and reliability essential for next-generation satellite networks. A significant technological leap is the development of virtualization capabilities for SkyEdge IV, enabling operators to transition to cloud-native, software-defined environments. This innovation empowers greater agility and interoperability with advanced satellites, elevating Gilat's market positioning towards higher-value, software-centric solutions with improved margins. While the full financial impact of this virtualization is expected to materialize towards late 2027, it represents a strategic shift towards software-like margins over traditional hardware.

The company's Electronically Steered Antenna (ESA) technology, particularly the Sidewinder ESA from its Stellar Blu subsidiary, is another critical differentiator. The global ESA market is experiencing remarkable growth, projected to expand from $284 million in 2024 to over $3.1 billion by 2032, at a CAGR of 41.8%. Gilat's Sidewinder ESA is recognized for its superior "Size, Weight, and Power" (SWaP) and cost efficiency, making it a leading multi-orbit ESA terminal available in the market. This technology is crucial for the burgeoning IFC market, where demand for seamless connectivity and free Wi-Fi is accelerating. Gilat is also expanding the Sidewinder's application to adjacent aviation markets, including ISR military, defense, and VVIP, and is working towards Boeing (BA) OEM offerability by early 2026.

Strategic Realignment and Operational Momentum

Gilat's strategic evolution culminated in a new organizational structure effective January 1, 2025, segmenting operations into Gilat Defense, Gilat Commercial, and Gilat Peru. This realignment is designed to sharpen focus and allocate resources more effectively to the company's primary growth engines.

Gilat Defense: Securing the Future

The Gilat Defense division, integrating expertise from Gilat, DataPath (acquired in 2023), and Wavestream, is strategically positioned to address the increasing global demand for secure, mission-critical SATCOM solutions. Geopolitical tensions are driving governments worldwide to increase defense spending, creating a robust market for Gilat's rapid-deployment and battlefield connectivity solutions. In Q2 2025, the Defense segment generated $20 million in revenue. The division secured over $8 million in orders for Gilat DataPath systems from the Israeli Ministry of Defense and was awarded a contract for field and technical services for the U.S. Army, with an initial order exceeding $7 million and options potentially reaching $70 million over five years. Gilat is significantly investing in R&D and sales and marketing for this division in 2025, launching new products like the GLT modem, Aquarius Pro DS modem, and a 2.6-meter DataPath terminal, aiming for substantial booking increases in 2025 and revenue growth from 2026 onwards.

Gilat Commercial: Connecting the Skies and Beyond

The Gilat Commercial division, with the acquisition of Stellar Blu Solutions in January 2025 as a cornerstone, is driving growth in broadband satellite communication networks, cellular backhaul, and particularly in-flight connectivity. Q2 2025 revenues for this segment surged 59% year-over-year to $69.1 million, with Stellar Blu contributing approximately $36 million. Stellar Blu's Sidewinder ESA terminal has seen over 225 deployments and accumulated more than 150,000 flight hours, "exceeding expectations for performance, reliability and user experience." The successful testing and certification of Sidewinder ESA by Panasonic (PCRFY), a major IFC service provider, further validates its market leadership.

Despite a strong outlook, Stellar Blu's production ramp-up has faced challenges due to a specific component, leading to slower-than-expected deliveries and impacting the first earn-out milestone. However, management anticipates a "material improvement in the margin of the product" towards the end of 2025 and early 2026 as internal solutions and vendor collaborations address these issues. Stellar Blu is expected to contribute $120 million to $150 million in revenues for the full year 2025 and achieve a 10% adjusted EBITDA margin run rate in the second half of the year. The division also secured a $40 million contract for a virtualized SkyEdge IV platform and over $47 million in orders from Tier 1 satellite operators for multi-orbit ground segment technologies in Q2 2025.

Gilat Peru: Bridging the Digital Divide

Gilat Peru remains a vital component of the company's strategy, focusing on digital and social inclusion through end-to-end telco solutions for the Peruvian government. This segment generated $15.9 million in revenue in Q2 2025. The division received a significant boost with over $60 million in new orders from Pronatel in Q2 2025 for upgrading regional network infrastructure, which will bring high-speed internet to nearly 800 public institutions across 280 localities. These awards, previously delayed, are expected to significantly ramp up Peru's revenues in 2025. With approximately 80% of Peru's business comprising recurring, highly profitable revenues, the segment provides a stable base, and its expertise is being leveraged for similar digital inclusion projects globally.

Financial Performance and Outlook

Gilat's financial performance in the first half of 2025 reflects the early successes of its strategic initiatives. In Q2 2025, revenues reached $105 million, a 37% increase year-over-year. Adjusted EBITDA grew 17% to $11.8 million, or $13.3 million excluding Stellar Blu's ramp-up losses, representing a 32% organic increase. While GAAP gross margin decreased to 30.4% in Q2 2025, primarily due to Stellar Blu's lower initial margins and amortization of intangibles, the shift to a virtualized SkyEdge IV platform is expected to yield "software kind of margins" in the long term.

The company's liquidity remains solid, with $65.4 million in cash, cash equivalents, and restricted cash as of June 30, 2025, and $5.5 million net of loans. A $100 million credit line secured in January 2025, with $60 million utilized for the Stellar Blu acquisition, provides financial flexibility. The recent private placement of 7.06 million Ordinary Shares at $9.35 per share, generating approximately $65.0 million in net proceeds, further strengthens the balance sheet.

Gilat's management has revised its full-year 2025 guidance, narrowing the revenue range to $435 million to $455 million, representing a 46% year-over-year growth at the midpoint. Adjusted EBITDA guidance was also narrowed to $50 million to $53 million, indicating a 22% year-over-year growth at the midpoint. This upward revision reflects improved visibility and strong business momentum across its divisions. Analyst forecasts project Gilat's annual revenue growth rate of 26.09% to surpass the US Communication Equipment industry's average forecast of 8.3%.

Competitive Landscape and Strategic Positioning

Gilat operates in a competitive landscape with direct rivals such as Viasat (VSAT), EchoStar (SATS), and Iridium Communications (IRDM), as well as indirect competition from fiber-optic networks, 5G wireless providers, and emerging LEO constellations like Starlink.

Gilat's competitive advantage stems from its specialized, cost-effective hardware for emerging markets and its comprehensive, end-to-end solutions. While Viasat emphasizes broader global coverage and integrated services, Gilat's agility and modular equipment design can offer greater efficiency in targeted deployments. Against EchoStar, which focuses on consumer-facing broadband, Gilat differentiates through its business-to-business segments and comprehensive project management, potentially leading in operational execution for complex deployments. Iridium specializes in global mobile satellite communications, but Gilat's fixed network versatility and ability to bundle hardware and services provide a strong offering for stationary applications and integrated projects.

The company's technological edge, particularly with the Sidewinder ESA's superior SWaP and cost, positions it favorably in the rapidly growing IFC market. The shift to free Wi-Fi in aviation is a significant growth catalyst, and Gilat's technology helps its customers compete effectively. In the defense sector, Gilat's integrated offerings from DataPath and Wavestream, combined with its new GLT modem and enhanced security features for SkyEdge IV, allow it to meet the stringent requirements of military communications. The company's focus on virtualization for SkyEdge IV also positions it at the forefront of cloud-native ground infrastructure, a trend expected to drive significant market growth.

However, Gilat faces vulnerabilities, including potential dependencies on a few large customers and challenges in rapidly scaling operations, which could impact revenue stability. The slowdown in the cellular backhaul market, with fewer new RFPs, also presents a headwind. The company is mitigating these risks by diversifying its customer base, investing in R&D, and proactively adjusting its raw material sourcing to counter global macroeconomic uncertainties and tariffs.

Risks and Challenges

Several factors could impact Gilat's investment thesis. Geopolitical tensions, particularly the ongoing war and hostilities in Israel, pose a direct risk to operations and forward-looking statements. The successful integration and profitability ramp-up of Stellar Blu is critical; delays in production and higher initial costs have already impacted the first earn-out milestone. While the second earn-out related to new orders has a "very good chance" of being met, achieving profitability targets remains key. The project-based nature of large defense and infrastructure contracts can lead to revenue lumpiness and delays, as seen in Peru. Furthermore, the competitive landscape is dynamic, with rivals and emerging technologies like Starlink constantly evolving.

Conclusion

Gilat Satellite Networks is strategically transforming itself to capitalize on the robust growth in defense and multi-orbit commercial satellite communications. Through targeted acquisitions like Stellar Blu and DataPath, coupled with continuous innovation in areas like Electronically Steered Antennas and virtualized ground segment platforms, Gilat is building a formidable competitive moat. The company's strong Q2 2025 performance and raised full-year guidance underscore its operational effectiveness and the successful execution of its growth strategy.

While challenges such as Stellar Blu's production ramp-up and geopolitical risks exist, Gilat's focus on high-value, high-margin solutions, its strong backlog, and a healthy pipeline of opportunities position it for sustained growth. The company's technological leadership in multi-orbit connectivity and its expanding presence in mission-critical defense applications are key drivers for long-term value creation, making Gilat a compelling investment in the evolving satellite communications landscape.