Gilat (GILT) Q3 2025: Commercial Segment Jumps 116% as Multi-Orbit Connectivity Adoption Accelerates
Gilat’s Q3 2025 saw a sharp step-up in commercial momentum, with next-generation connectivity platforms and aviation terminals driving a surge in orders and backlog. StellarBlue’s production ramp and AI-powered network management highlight Gilat’s push for technological leadership, though margin pressure and defense timing risks remain. Management raised full-year guidance, citing visible demand and a robust pipeline across commercial, defense, and public sector digital inclusion programs.
Summary
- Commercial Segment Outpaces Rest of Portfolio: Aviation and multi-orbit platforms are now the clear growth engines.
- AI Integration and Platform Wins Signal Tech Leadership: Gilat’s first-to-market AI network management and SkyEdge 4 traction deepen competitive moat.
- Margin Drag from StellarBlue Offset by Stronger Mix Elsewhere: Cost reductions and line-fit ramp are critical for 2026 profitability gains.
Performance Analysis
Gilat delivered a breakout third quarter, with total revenue up 58% year-over-year, driven by a 116% surge in commercial segment sales—now the company’s largest revenue contributor. This growth was fueled by demand for in-flight connectivity (IFC) platforms, particularly the SkyEdge 4 and StellarBlue Sidewinder ESA terminals. Commercial revenue reached $73 million, doubling its prior-year contribution and representing over 60% of total sales, while defense revenue fell to $24.1 million as legacy programs wound down and new awards ramped slowly.
Peru operations more than doubled revenue, reflecting $85 million in new public sector awards, which are expected to drive recurring service and upgrade revenues over multi-year periods. Gross margin declined to 30% GAAP (32% non-GAAP), pressured by the initial ramp of StellarBlue production and amortization of acquired intangibles. Adjusted EBITDA rose 46% to $15.6 million, with margin improvement in commercial and Peru segments offsetting defense investment and StellarBlue’s temporary drag. Cash generation was robust, with $28 million from operations and a $66 million capital raise bolstering liquidity.
- Commercial Segment Expansion: Aviation and multi-orbit ground platforms now anchor Gilat’s top-line growth, with IFC demand and SkyEdge 4 wins broadening the customer base.
- Defense Segment Lull: Revenue transition from mature to new programs created a temporary dip, but order flow and backlog signal a potential rebound as delayed government budgets normalize.
- Peru Digital Inclusion Projects: Large-scale upgrades and new awards are extending Gilat’s public sector runway, with multi-year maintenance and renewal cycles supporting future stability.
Overall, the quarter validates Gilat’s pivot toward high-growth commercial connectivity, though sustainable margin recovery will depend on execution in StellarBlue’s cost structure and timely defense order conversion.
Executive Commentary
"Our competitive edge across the satellite communication landscape and success in next-generation satellite programs is clearly translating directly into new orders and growing opportunities."
Adi Spadia, CEO
"We strengthened our balance sheet and liquidity during the last quarter... reflecting our strong performance and visibility into the remainder of the year, we're narrowing our guidance range and raising the guidance midpoints for both revenues and EBITDA."
Bill Binyamini, CFO
Strategic Positioning
1. Multi-Orbit Platform Leadership
Gilat’s SkyEdge 4, multi-orbit ground platform, is now central to the company’s commercial strategy, enabling flexibility across fixed broadband, mobility, and government applications. Recent $42 million and $60 million orders from global satellite operators, primarily for in-flight connectivity, underscore the platform’s market acceptance and scalability. The integration of AI-driven network management further differentiates Gilat, allowing customers to automate and optimize satellite operations—a first-mover advantage in intelligent Satcom solutions.
2. Aviation Connectivity and StellarBlue Integration
StellarBlue, Gilat’s aviation terminal business, is ramping production, with 350 aircraft now equipped and over 300,000 flight hours logged. The Sidewinder ESA terminal is gaining traction among leading airlines, though initial production costs are compressing margins. Management expects profitability from Q4 onward, with line-fit installations at Boeing and cost reductions key to restoring gross margin to the mid-30% range in 2026.
3. Defense and Public Sector Resilience
While defense revenue declined as legacy programs sunset, new orders from the U.S. Army, Department of Defense, and Israeli Ministry of Defense are building backlog. The pipeline is robust, but timing remains sensitive to government procurement cycles, as evidenced by order delays linked to U.S. budget disruptions. Gilat’s project-based defense business model means revenue recognition will remain lumpy, but strategic investments in R&D and marketing are aimed at capturing future growth.
4. Digital Inclusion and Global Replicability
Gilat Peru’s $85 million in new awards for broadband expansion highlights the enduring value of public sector connectivity programs. The company is leveraging its operational expertise in Peru to pursue similar digital inclusion initiatives globally, with additional RFPs and renewals expected in coming quarters. These projects provide multi-year revenue visibility and help diversify the business beyond commercial and defense cycles.
Key Considerations
Gilat’s Q3 marks a strategic inflection, as commercial and public sector engines offset temporary defense softness and margin headwinds from new product ramps.
Key Considerations:
- Commercial Mix Shift: The commercial segment now dominates revenue, with IFC and SkyEdge 4 adoption driving both scale and customer diversification.
- StellarBlue Margin Recovery Path: Profitability hinges on successful line-fit ramp and sustained cost reduction; margin inflection is forecast for 2026.
- Defense Order Timing Risk: U.S. and allied government procurement delays could cause revenue lumpiness, though backlog remains healthy.
- Balance Sheet Strength: $155 million in cash and a reinforced equity base provide flexibility for further R&D, M&A, or working capital needs.
- AI and Platform Innovation: Early AI integration and virtualized ground platforms may create a durable competitive advantage in a rapidly evolving Satcom landscape.
Risks
Key risks include continued margin drag from StellarBlue if cost reductions lag, as well as delayed defense order conversion due to government budget cycles. Public sector project timing, especially in Peru, remains subject to political and administrative uncertainties. Currency exposure is hedged in the near term, but could reemerge in 2026. Execution on product roadmap and backlog conversion will be critical to sustaining growth and margin improvement.
Forward Outlook
For Q4 2025, Gilat guided to:
- Revenue between $445 million and $455 million for the full year
- Adjusted EBITDA between $51 million and $53 million for the full year
Management raised guidance midpoints, citing:
- Accelerating commercial demand, especially for IFC and SkyEdge 4 platforms
- Robust pipeline in defense and additional large public sector RFPs expected, particularly in Peru
Takeaways
Gilat’s Q3 2025 demonstrates the company’s successful pivot toward high-growth commercial connectivity, offsetting defense and margin volatility with visible platform adoption and public sector expansion.
- Commercial Momentum: IFC and multi-orbit platforms are now the core of Gilat’s growth story, with backlog and order flow supporting sustained expansion.
- Margin Watch: Execution on StellarBlue cost and line-fit ramp will determine whether margin recovery materializes as forecast.
- Pipeline and Backlog Signals: Investors should monitor defense order timing, Peru RFP releases, and AI-driven platform wins as indicators of future upside.
Conclusion
Gilat enters year-end with commercial and public sector engines firing, strong balance sheet flexibility, and a clear roadmap for margin recovery. Execution on cost, backlog, and new platform delivery will be decisive for 2026 trajectory.
Industry Read-Through
Gilat’s results highlight a broader industry pivot toward multi-orbit, software-defined, and AI-enabled Satcom solutions, with commercial aviation and public sector digital inclusion emerging as high-growth verticals. Competitors in satellite ground infrastructure, IFC, and public connectivity should expect intensifying competition as operators demand more flexible, intelligent, and scalable platforms. The margin pressure seen in new product ramps is a cautionary signal for peers pursuing similar integrations, while Gilat’s ability to leverage Peru’s public sector playbook globally may set a template for others seeking recurring government and institutional revenue streams.