Gilat (GILT) Q2 2025: Stellar Blue Adds $36M, Driving 59% Commercial Growth and Guidance Raise
Stellar Blue’s integration and a surge in commercial orders powered Gilat’s revenue growth and narrowed guidance upward, marking a pivotal quarter for its multi-orbit strategy. The quarter’s results underscore Gilat’s expanding role in defense and digital inclusion, while ramping production and margin improvements at Stellar Blue are set to shape earnings in the second half. Investors should watch for further large-scale contract wins and the operationalization of virtualized ground platforms as Gilat pivots toward software-defined satellite infrastructure.
Summary
- Stellar Blue Integration Accelerates: Acquisition contributed $36 million in Q2 revenue with ramping deliveries and margin improvement underway.
- Commercial Segment Surges: 59% YoY growth driven by major virtualized platform wins and $47 million in tier-one operator orders.
- Guidance Tightened and Raised: Improved backlog visibility and contract momentum support higher full-year revenue and EBITDA outlook.
Performance Analysis
Gilat delivered a transformative Q2, with total revenue reaching $105 million, up 37% YoY, propelled by the first full quarter of Stellar Blue, which contributed $36 million. The commercial segment, now 66% of total revenue, surged 59% YoY, reflecting both the Stellar Blue impact and robust demand for Gilat’s next-generation ground segment platforms. Defense revenues held steady at $20 million, while Peru posted a 14% YoY increase to $15.9 million as delayed public sector orders resumed. The quarter’s gross margin compressed to 30.4% (GAAP), primarily due to lower Stellar Blue margins during ramp, but excluding Stellar Blue, adjusted EBITDA rose 32% YoY, demonstrating underlying margin resilience.
Operating leverage improved as the company absorbed higher opex from Stellar Blue and increased R&D for defense and software-defined platforms, yet still expanded operating income and net income materially. Cash flow from operations was positive, and days sales outstanding improved, reflecting better collections and order timing. Management’s narrowed guidance range for both revenue and EBITDA signals increased confidence in pipeline conversion and execution, supported by a robust backlog and new multi-year contract awards.
- Commercial Momentum: $40 million virtualized SkyEdge 4 platform win and $47 million in tier-one operator orders highlight platform adoption and multi-orbit relevance.
- Defense Visibility: Over $8 million in Israeli Ministry of Defense orders and a new $70 million US Army field services contract underpin long-term defense growth.
- Stellar Blue Ramp: Losses narrowed from $3.5 million to $1.5 million sequentially, with positive EBITDA targeted for H2 as production bottlenecks resolve.
Gilat’s mix shift toward recurring software and platform sales is beginning to show in margin trends, though Stellar Blue’s production ramp remains the key swing factor for profitability in the near term.
Executive Commentary
"The second quarter not only showed strong performance, but also validated our growth strategy across each of our growth engines. Our priorities in 2025 remain on capturing the growing opportunities emerging from our acquisition of StellarBlue earlier this year, and investing in Gilad Defense to better position to drive revenue growth in 2026. These drivers, along with our strong presence in VHTS and NGSO constellations, continue to fuel our growth and strengthen our market leadership."
Avi Stavia, Chief Executive Officer
"We're narrowing our guidance range and raising the guidance midpoints for 2025 revenue and EBITDA. Revenue is now expected to be between $435 million and $455 million, representing year-over-year growth of 46% at the midpoint. The adjusted EBITDA is expected to be between $50 and $53 million, representing year-over-year growth of 22% at the midpoint."
Gil Benyamini, Chief Financial Officer
Strategic Positioning
1. Stellar Blue: Aviation IFC Scale and Margin Inflection
Stellar Blue, Gilat’s in-flight connectivity (IFC) terminal business, is now central to commercial segment growth, with a $120–$150 million revenue target for 2025. Ramp bottlenecks are easing as component certification nears completion, and management expects positive EBITDA in H2, with a 10% EBITDA margin possible by year-end. The business model is shifting toward higher-margin, recurring software-enabled services as production stabilizes and cost reduction initiatives take hold.
2. Virtualization and Multi-Orbit Platform Adoption
The $40 million SkyEdge 4 virtualization contract signals a shift toward cloud-native, software-defined ground infrastructure, enabling capex-light deployments and new recurring revenue models. While most customers still prefer capex purchases, Gilat is positioning for future platform-as-a-service and subscription-based models, which will drive margin expansion and stickier customer relationships over time.
3. Defense: Expanding Global Footprint and Multi-Year Awards
Gilat Defense is leveraging synergies across its Datapath and Wavestream units to broaden its solution set, securing multi-year contracts with both Israeli and US defense agencies. The new $70 million US Army field services program and continued Israeli Ministry of Defense wins demonstrate the division’s role as a stable, long-cycle growth engine with increasing relevance amid rising global defense spending.
4. Digital Inclusion: Peru as a Replicable Model
Gilat Peru’s $60 million in new public sector orders and its ongoing role in upgrading national infrastructure highlight the company’s expertise in digital inclusion. With several large RFPs pending, Peru serves as a template for expanding into other underserved regions, supporting both social impact and recurring service revenue.
5. Software Margin Expansion Pathway
Management emphasized that the shift to software-centric sales, especially in SkyEdge 4, is already increasing the software-to-hardware ratio in deals, setting the stage for multi-year margin uplift as the business transitions away from legacy hardware deployments. The full impact will materialize over the next two to three years as more customers adopt virtualized platforms.
Key Considerations
This quarter marks a structural pivot for Gilat, combining M&A-driven scale with a strategic realignment toward software, aviation IFC, and defense. Investors should weigh the durability of order momentum, the pace of Stellar Blue’s margin recovery, and the timing of digital inclusion project awards in Peru.
Key Considerations:
- Stellar Blue Execution: Margin progress and production ramp are tracking to plan, but depend on timely certification and cost reduction delivery.
- Virtualization Adoption: Early wins validate Gilat’s platform strategy, but customer migration to recurring models remains gradual.
- Defense Pipeline: Multi-year awards and global expansion support long-term visibility, but program timing and geopolitical risk must be monitored.
- Peru Order Flow: Large RFPs and delayed awards create near-term revenue catalysts, but execution risk remains as projects scale.
- Software Margin Trajectory: The mix shift to software and services is critical for sustained EBITDA growth beyond 2025.
Risks
Key risks center on execution of the Stellar Blue ramp, including component sourcing and certification delays, as well as the pace of margin recovery. Defense order timing and geopolitical volatility could disrupt visibility, while the transition to software-defined platforms may face adoption hurdles or pricing pressure. Large public sector projects, particularly in Peru, carry inherent execution and payment risks.
Forward Outlook
For Q3 and Q4, Gilat expects:
- Continued improvement in Stellar Blue production and profitability, with positive EBITDA targeted in H2.
- Incremental large orders in both defense and commercial segments, including further Peru project wins.
For full-year 2025, management raised and narrowed guidance:
- Revenue: $435–$455 million (46% YoY growth at midpoint)
- Adjusted EBITDA: $50–$53 million (22% YoY growth at midpoint)
Management cited improved backlog visibility, contract momentum, and a robust pipeline as drivers of the guidance increase:
- Recent large awards will carry over into 2026, supporting multi-year growth.
- Stellar Blue’s cost reduction and internal production shift are expected to unlock margin expansion by year-end.
Takeaways
Gilat is entering a new phase of scale and margin potential, anchored by aviation IFC, defense, and software-centric platforms. Execution on Stellar Blue’s ramp and digital inclusion projects will be decisive for near-term results, while the virtualization strategy offers a credible pathway to multi-year margin expansion.
- Stellar Blue Ramp is Central: Margin improvement and delivery acceleration are critical for H2 profitability and full-year targets.
- Platform Strategy Validated: Virtualized SkyEdge 4 wins confirm Gilat’s relevance in the evolving multi-orbit, software-defined satellite market.
- Multi-Year Growth Visibility: Backlog strength and contract awards provide line of sight into 2026, with software margin uplift as a key long-term lever.
Conclusion
Gilat’s Q2 marks a decisive step toward a higher-growth, higher-margin business model, with the integration of Stellar Blue and a pivot to software platforms at the forefront. Sustained execution on ramp-up, cost control, and digital inclusion will determine the pace and durability of the company’s margin expansion as the satellite communications market evolves.
Industry Read-Through
Gilat’s results signal accelerating demand for software-defined, multi-orbit satellite ground infrastructure, with virtualization and recurring revenue models gaining traction among tier-one operators. The company’s defense and digital inclusion momentum reflect broader industry tailwinds as governments and public sector agencies invest in resilient, high-capacity connectivity. Competitors and adjacent players should note the emerging importance of cloud-native platforms, the operational complexity of aviation IFC, and the necessity of global scale to address multi-region projects and defense requirements.