Executive Summary / Key Takeaways

• Strategic Transformation Underway: Viasat is executing a pivotal transformation, shifting towards a more capital-efficient, multi-orbit communications and defense technology leader, driven by the imminent full deployment of its ViaSat-3 constellation and advanced multi-orbit solutions.
• Strong Growth in Key Franchises: The company is demonstrating robust performance in its Communication Services (CS) and Defense and Advanced Technologies (DAT) segments, particularly in aviation in-flight connectivity (IFC), government SATCOM, and information security/cyber defense, with record backlog in DAT.
• Path to Free Cash Flow and Deleveraging: Viasat has achieved positive free cash flow for three consecutive quarters and is prioritizing debt reduction, with plans to repay $300 million of Inmarsat term loan B debt in the near term, aiming for a long-term leverage ratio below 3x adjusted EBITDA.
• Technological Differentiation: Proprietary ViaSat-3 architecture, advanced multi-orbit resource management, and leadership in quantum-resistant encryption and space cybersecurity provide significant competitive advantages and drive higher-value service offerings like NexusWave.
• Fiscal 2026 as a Pivotal Year: Despite expected modest revenue growth and "flattish" adjusted EBITDA due to macro headwinds and pre-service ViaSat-3 costs, fiscal 2026 is critical for positioning the company for accelerated growth and sustained positive free cash flow in fiscal 2027 and beyond.

A New Era of Connectivity: Viasat's Strategic Evolution

Viasat, Inc., founded in 1986 and reincorporated in 1996, has evolved into a global provider of advanced communications technologies and services. The company operates through two primary segments: Communication Services (CS) and Defense and Advanced Technologies (DAT). Viasat's overarching strategy centers on leveraging its diversified portfolio, vertical integration, and the cross-deployment of technologies between government and commercial applications. This approach is underpinned by a foundational strength in proprietary satellite technology and strategic spectrum assets.

The industry landscape is rapidly transforming, driven by broad trends such as the AI-driven data center boom, increasing demand for quantum-resistant encryption, and the emergence of direct-to-device (D2D) connectivity. These macro forces create both significant opportunities and competitive pressures. Viasat's historical journey, marked by the commercialization of ViaSat-2 in fiscal year 2018 and the strategic acquisition of Inmarsat in May 2023, has shaped its current position. The company is now focused on enhancing capital efficiency and deleveraging its balance sheet, aiming to unlock substantial value for investors.

Technological Leadership: The Core of Viasat's Competitive Moat

Viasat’s competitive advantage is deeply rooted in its differentiated technology, particularly its multi-band satellite fleet and innovative multi-orbit solutions. The company operates a complementary fleet of 23 in-service or operational satellites across Ka-, L-, and S-bands, with an additional eight geostationary (GEO) satellites under development or in preparation for launch. This includes the high-capacity ViaSat-3 F2 and F3 Ka-band satellites.

The ViaSat-3 constellation represents a significant technological leap. Each new ViaSat-3 satellite is designed to enable more bandwidth capacity than Viasat's entire existing fleet, offering unique flexibility to aim bandwidth precisely where needed. For instance, ViaSat-3 F1, despite an antenna anomaly, is already serving approximately 2,000 commercial aircraft, handling tens of thousands of cumulative flights. It has demonstrated speeds of 130 megabits per second (Mbps) on a United (UAL) 737 MAX offering free Wi-Fi, showcasing its ability to dedicate satellite beams to individual planes. This capability allows Viasat to provide world-class passenger in-flight Wi-Fi experience and satisfaction, even on high-demand routes.

Viasat is also a pioneer in multi-orbit solutions, employing advanced resource management techniques to reduce costs and expand geographic coverage for its mobility and defense customers. Strategic partnerships with multiple GEO and non-GEO operators, such as the agreement with Telesat (TSAT) for LEO capacity, are designed to support next-generation services, achieve industry-leading resource utilization, and drive capital efficiency. This blend of LEO and GEO capacity enhances network redundancy, guarantees quality of experience, and offers flexible business models.

In the mobile satellite services (MSS) market, Viasat holds substantial, well-coordinated global L-band spectrum. This spectrum is critical for aviation, maritime, and land mobile safety services. The company's initiative to form Equitus with Space 42 and other operators aims to create shared infrastructure for modernizing L-band/MSS spectrum. This approach enables direct-to-device (D2D) connectivity, reduces costs for regional operators by sharing infrastructure, and aggregates spectrum for higher capacity. The European Space Agency's agreement with the Mobile Satellite Services Association (MSSA) further validates Viasat's vision for an open architecture, standards-based LEO constellation that augments existing D2D satellite services. This strategy is designed to reduce future capital outlays while enabling state-of-the-art networks.

Within the Defense and Advanced Technologies (DAT) segment, Viasat is at the forefront of critical innovations. The company is a leader in quantum-resistant cryptography, a technology vital for refreshing secure systems in the U.S. and globally to counter the threat of quantum computing. Its expertise in cybersecurity for space addresses the single mode of failure inherent in large constellations. Viasat is also developing a next-generation high-assurance, high-speed Ethernet Data Encryptor (EDE) for government cloud data centers. In Space and Mission Systems (SMS), Viasat is involved in technology insertions, NASA services, intersatellite links, and international projects like the European Space Agency's Moonlight program for lunar relay communications. These technological differentiators are not merely features; they are fundamental to Viasat's ability to offer superior services, command pricing power, and secure its market position against competitors.

Competitive Dynamics and Strategic Positioning

Viasat operates in a highly competitive satellite communications market, facing both direct and indirect rivals. Direct competitors include established players like EchoStar Corporation (SATS), Iridium Communications Inc. (IRDM), Globalstar, Inc. (GSAT), and SES S.A. (SESFY). Indirect competition comes from terrestrial fiber optics, 5G network operators, and emerging low-Earth orbit (LEO) constellations such as SpaceX's Starlink.

Viasat's proprietary satellite technology, particularly its Ka-band systems and multi-orbit capabilities, provides a significant edge. The ViaSat-3 architecture, with its ability to dynamically allocate bandwidth to individual platforms, offers superior performance in data-heavy environments compared to more generalized offerings from some rivals. This translates into stronger customer loyalty and enhanced pricing power in specialized markets like aviation and energy. Viasat's global network effects further foster recurring revenue from long-term contracts, differentiating it from Iridium's IoT focus by offering more comprehensive solutions. The company's emphasis on ultra-secure IP connectivity and analytics-driven services also provides a unique value proposition, particularly in defense and specialized commercial sectors.

However, Viasat faces vulnerabilities. Historically, its satellite services have been capital-intensive, a challenge the company is actively addressing through capital efficiency initiatives and shared infrastructure models like Equitus. While Viasat leads in innovation speed for analytics-driven services, it may lag in cost efficiency and scale for broader consumer markets compared to some competitors. Supply chain dependencies for satellite components also pose a risk, potentially impacting costs and service delivery.

Viasat strategically positions itself by focusing on open architecture and standards-based solutions, particularly in the D2D market. This approach, championed through the MSSA, aims to prevent vendor lock-in and foster interoperability among multiple satellite and terrestrial networks, reducing costs and expanding market reach. This contrasts with some competitors who pursue proprietary, vertically integrated LEO constellations requiring substantial capital investment. Viasat's strategy of leveraging its licensed MSS spectrum for public safety missions while exploring D2D applications also highlights a balanced approach to value creation.

Financial Performance and Liquidity: A Turning Point

Viasat's recent financial performance reflects a company in transition, balancing investment for future growth with a concerted effort towards improved profitability and cash generation. For the second quarter of fiscal year 2026 (ended September 30, 2025), Viasat reported total revenues of $1.14 billion, a 2% increase year-over-year. The net loss significantly improved to $61 million from $138 million in the prior year period, driven by a favorable service revenue mix, lower depreciation and amortization, and reduced selling, general, and administrative (SG&A) expenses. Adjusted EBITDA increased by 3% year-over-year to $385 million, yielding a 34% adjusted EBITDA margin.

The Communication Services segment saw revenues increase by 1% to $837 million, with adjusted EBITDA growing 6% to $337 million. This was primarily fueled by a 15% rise in aviation services revenue, reflecting an 11% increase in commercial aircraft in service and higher average revenue per aircraft. Government SATCOM also grew 9%. While maritime revenue declined 3%, NexusWave installations were up 40% sequentially, signaling a potential turnaround. The fixed services and other segment experienced a 16% decline in revenue, as capacity was reallocated to higher-value mobility services.

The Defense and Advanced Technologies segment demonstrated revenue growth of 3% to $304 million. Awards in this segment reached a record $1.2 billion, up 31% year-over-year and 14% sequentially, underscoring strong secular demand. Information security and cyber defense product revenues increased by 14%, driven by high-assurance encryption products. However, DAT adjusted EBITDA decreased by $9 million, impacted by lower development funding in Space and Mission Systems and higher R&D investments.

Viasat's liquidity and capital structure are a key focus. The company generated $69 million in free cash flow in Q2 FY26, contributing to $147 million on a trailing 12-month basis, marking three consecutive quarters of positive free cash flow.

As of September 30, 2025, Viasat held $1.20 billion in cash and cash equivalents and $1.30 billion in working capital. The company's net leverage stood at approximately 3.5x trailing 12-month adjusted EBITDA, a slight improvement year-over-year and sequentially.

A significant development is the anticipated receipt of $568 million from Ligado Networks in fiscal year 2026, including a $420 million lump sum payment received in October 2025. These proceeds are earmarked for debt reduction, with plans to repay the remaining $300 million under the original Inmarsat term loan B facility, which is expected to save approximately $23 million in annual cash interest payments. Viasat also intends to upstream $400 million to $500 million in cash from its Inmarsat debt silo to the Viasat level to manage capital spending. The long-term target is to achieve a leverage ratio below 3x net debt adjusted EBITDA.

Outlook and Risks: Charting the Course Ahead

Viasat's outlook for fiscal year 2026 projects low single-digit revenue growth and "flattish" adjusted EBITDA year-over-year, with an expected range of plus or minus 1% from fiscal year 2025's $1.547 billion. This guidance reflects a transitional year, where significant investments and macro headwinds are expected to temper immediate financial expansion, while positioning the company for accelerated growth in subsequent years.

Key assumptions underpinning this outlook include approximately $60 million in additional third-party bandwidth expenses and $80 million in operating costs to prepare the ViaSat-3 ground network for service entry. The company also anticipates more normalized, and thus lower, intellectual property licensing revenue from TrellisWare compared to fiscal year 2025. Capital expenditures for fiscal year 2026 are projected to be around $1.2 billion, including $200 million in capitalized interest, $500 million for maintenance, $100 million for success-based initiatives, and $250 million for the completion of the ViaSat-3 constellation. Approximately $400 million of this spend will occur within Inmarsat. Due to the concentration of ViaSat-3 related CapEx in the second half of fiscal year 2026, the company expects negative free cash flow during that period, but has guided to positive free cash flow for fiscal year 2027.

Operationally, Viasat expects continued growth in its aviation and government SATCOM sub-segments, despite macro headwinds such as OEM delivery delays and increased aircraft out-of-service rates. Maritime revenue is anticipated to resume year-over-year growth by the end of fiscal year 2026, driven by the NexusWave service. The U.S. fixed broadband business is expected to stabilize by year-end with the entry into service of ViaSat-3 Flight 2, enabling growth beyond fiscal year 2026. The DAT segment is projected to achieve another year of double-digit revenue growth, with information security and cyber defense meaningfully outpacing overall segment growth. Furthermore, Viasat expects to boost overall margins by an incremental 200 basis points or more over a three-year horizon through integration efficiencies.

Several risks could impact this outlook. The recent scrub of the ViaSat-3 Flight 2 launch, while temporary, highlights the inherent risks in satellite deployment. A potential U.S. government shutdown could delay DAT awards by up to $100 million and impact DAT adjusted EBITDA by up to $20 million in Q3 FY26. Ongoing Ligado Networks litigation introduces uncertainty, with potential payments currently excluded from financial guidance. Macroeconomic factors, including tariffs and airline industry challenges, could continue to exert pressure. The company also faces risks in accurately estimating costs for long-term government contracts and managing capacity constraints on existing satellites prior to new launches.

Conclusion

Viasat stands at a pivotal juncture, transforming its business model to capitalize on a new era of global connectivity and defense technology. The company's core investment thesis is anchored in its technological leadership, particularly the high-capacity ViaSat-3 constellation and innovative multi-orbit solutions, which are set to unlock significant growth opportunities in high-value markets like aviation IFC and government SATCOM. This technological edge, combined with a strategic focus on capital efficiency and deleveraging, positions Viasat for a sustained period of improved financial health.

While fiscal year 2026 presents a transitional phase with modest headline growth and continued investment, the underlying operational momentum and strategic initiatives are building a strong foundation. The anticipated positive free cash flow in fiscal year 2027, coupled with aggressive debt reduction plans, signals a clear path to enhanced shareholder value. Viasat's ability to execute on its multi-orbit strategy, leverage its unique spectrum assets, and expand its defense technology franchises will be critical in reinforcing its competitive standing and realizing its long-term growth ambitions.