Viasat (VSAT) Q2 2027 earnings review
Viasat raises cash and defense plans, but commercial internet shrinks
Viasat's military hardware business is accelerating and satellite construction costs are falling, while its commercial internet business loses subscribers. Total revenue at the satellite communications operator grew 3% from a year ago, as a 20% jump in defense sales offset shrinking home and maritime broadband revenue. Chief executive Mark Dankberg confirmed that both ViaSat-3 satellites entered commercial service, allowing the company to cut its full-year capital spending plan by $100 million and raise its free cash flow outlook.
| Revenue | $1,180M +3.4% from a year ago |
|---|---|
| Defense segment revenue | $365.5M +20.1% from a year ago; full-year outlook raised |
| Communication Services revenue | $814.5M -2.6% from a year ago; full-year outlook cut |
| Full-year free cash flow outlook | Raised to >$225M from ~$180M after a $100M capital spending cut |
⚖️ Verdict: 🟢 Bullish
The story got better because Viasat retired its biggest satellite deployment risk and proved its record defense backlog can turn into rapid sales growth. Those two milestones lifted the full-year defense and free cash flow plans. The bad news: customer losses in home broadband, shipping and commercial aviation forced Viasat to cut its commercial services revenue outlook to flat and trim the top end of its cash profit plan.
The question now is whether the two new satellites can stop commercial subscriber losses and lift cash profit in the second half. Supporters see the new bandwidth restoring growth, while skeptics argue low-Earth-orbit rivals will keep taking share and leave cash profit flat. Third-quarter broadband and airline unit counts will provide the first full-quarter test.
🐂 Bull Case
Defense Hardware Sales Jumped 20% and Raised the Plan
Defense and Advanced Technologies (DAT), Viasat's military hardware and encryption unit, is carrying the company's growth. Chief executive Mark Dankberg said the division is "moving upmarket from providing components or modules to mission systems", including complete satellites. Last year the unit missed its mid-teens growth target, so investors needed proof that its record order book would turn into actual sales.
This quarter delivered that proof, as easier comparisons against last year's patent-licensing drop allowed hardware shipments to show through. Viasat lifted its full-year growth forecast for the defense unit from the mid-teens to the mid-to-high teens, and Dankberg plans for about $2.0 billion in full-year segment contract awards.
- Defense segment revenue: $365.5 million, up 20.1% from a year ago
- Information security and cyber defense products: a record $120.5 million, up 27.0%
- Tactical networking products: a record $97.0 million, up 30.7%
- Defense backlog: a record $1.45 billion, up 19.8% from a year ago and up $46 million from last quarter
What to watch: defense revenue growth over the second half of the year. By our math, the raised full-year outlook requires about 25% growth from a year ago in the second half, which will test whether Viasat can ship hardware fast enough to avoid repeating last year's shortfall.
New Satellites Entered Service and Lowered Spending Plans
After years of construction delays, Viasat's two newest high-capacity satellites are finally working for customers. "Both ViaSat-3 (VS-3) Flight 2 and Flight 3 entered service and are performing as expected," Dankberg wrote, covering the Americas and Asia-Pacific regions. Because "the capital-intensive VS-3 phase is behind us", the satellite operator cut its full-year capital spending plan by $100 million.
Lower satellite bills are already lifting cash generation and trimming debt. Second-quarter free cash flow rose 14.2% from a year ago to $78.3 million, and Viasat raised its full-year free cash flow outlook from about $180 million to more than $225 million. Net debt fell by about $700 million from a year ago to $4.80 billion, reducing net debt to 3.2 times annual cash profit.
What to watch: capital spending in the second half of the year. By our math, the new $850 million to $900 million full-year outlook leaves about $449 million of spending for the second half, down from $581 million in the same period last year.
🐻 Bear Case
Legacy Broadband Losses Still Outrun Aviation Gains
Communication Services, Viasat's commercial internet division, is shrinking as low-Earth-orbit rivals take customers. Dankberg said users on the new ViaSat-3 satellites see bandwidth consumption "comparable to that claimed for LEO service". Yet customer counts fell across home internet, shipping and commercial airlines this quarter, forcing Viasat to cut its full-year segment revenue outlook from low-single-digit growth to flattish.
- Communication Services revenue: $814.5 million, down 2.6% from a year ago
- Fixed services and other revenue: $120.5 million, down 22.6%, as US home broadband subscribers dropped from 115,000 last quarter to 100,000
- Maritime service revenue: $108.7 million, down 7.6%, with connected ships falling by 300 from last quarter to 12,600
- Commercial aviation: revenue rose 8.3% to $325.8 million, but active aircraft slipped from 4,530 last quarter to 4,490
The drop in active airliners cuts against the idea that aviation can easily offset home broadband losses while new satellites ramp up. Viasat is now relying on higher revenue per plane rather than fleet growth.
What to watch: US fixed broadband subscriber counts and active commercial aircraft next quarter. A halt in home subscriber losses now that ViaSat-3 Flight 2 is live over the Americas would show the new satellite can defend market share.
Higher Research Costs Cut Into Cash Profit
Even though total revenue grew 3.4% from a year ago, Viasat's operating profit and cash profit both fell. Operating income dropped from $35.8 million a year ago to $7.1 million, reducing the operating margin by 2.5 percentage points. Adjusted EBITDA — earnings before interest, taxes, depreciation, amortization and one-offs — fell 3.8% to $369.9 million, trimming that margin by 2.4 percentage points to 31.4%.
Three cost lines drove the squeeze. Cost of revenues rose 1.6 percentage points of sales to 67.9% as lower-margin defense hardware grew while high-margin home internet shrank. Independent research and development — internal spending on new multi-orbit and space projects — rose 1.4 percentage points of revenue to 5.1% ($59.8 million), and stock-based employee pay rose 1.1 points to 2.9% ($34.2 million).
What to watch: Adjusted EBITDA in the second half of the year. Viasat trimmed the top of its full-year cash profit outlook to about flat, which by our math still requires 5.6% growth from a year ago across the second half.
Equatys Joint Venture Adds Unclear Funding Needs
Viasat wants to build a direct-to-device business that connects standard mobile phones to satellites, which supporters view as a way to unlock the value of its mobile spectrum rights. In September the company signed a binding deal with Space42 to form a shared network company called Equatys. The agreement calls for "up to $1 billion in combined equity commitments from Space42 and Viasat", and Viasat expects to serve as the prime technology contractor.
The catch is that Viasat did not disclose how much of that $1 billion it must pay itself, or when. Meanwhile, $600 million of senior notes came due within a year, lifting current debt on the balance sheet from $57.8 million in March to $659.1 million in September, while the board's strategic review of the business Portfolio gave no timeline for a decision.
What to watch: the quarterly filing's commitments footnote and future funding announcements for Equatys. A large cash commitment from Viasat would compete directly with its goal of paying down debt.
👓 Other Themes
Geopolitical Demand for Secure Military Networks
Military modernization in Europe and the United States is boosting Viasat's hardware orders. The company said NATO defense upgrades drove international sales of its TrellisWare tactical radios and network control stations, while US Department of War programs and AI cloud data centers lifted demand for high-speed space and ground encryption gear.
💲 Other KPIs
Firm backlog — signed customer orders not yet filled — grew 7.2% from a year ago, slowing from 18.9% growth in the first quarter. By our math, backlog dipped by $51.3 million from last quarter because new contract awards fell 24.0% to $1,137.8 million, or down 10.0% by our math when excluding last year's $234 million SouthPAN government contract.
Viasat's net loss more than doubled from $61.4 million ($0.45 per share) a year ago to $128.7 million ($0.93 per share), and widened from a $51.7 million loss in the first quarter. Alongside higher research and stock-pay expenses, income tax expense jumped to $40.8 million from $10.9 million a year earlier. Excluding one-offs, net loss was $44.9 million ($0.32 per share).
Basic and diluted shares rose 2.6% from 135.1 million a year ago and increased from 137.1 million in the first quarter. Viasat does not run a share buyback program, as it directs cash toward debt reduction, while employee stock compensation rose 69.8% from a year ago to $34.2 million.
🔮 Guidance
Unchanged. Viasat still plans for revenue to rise around 5% this fiscal year. After 1.1% growth across the first six months, that full-year midpoint leaves about 8.9% growth from a year ago for the second half by our math. The satellite group expects record defense backlog and new ViaSat-3 capacity to drive the second-half pickup.
Raised. Management lifted its growth plan for the defense unit after second-quarter sales rose 20.1%. Because first-half segment sales grew only 7.6% due to a first-quarter dip, reaching a 16.5% full-year midpoint requires about 24.9% growth in the second half by our math. Last year, Viasat guided mid-teens growth for this division and delivered 9.8%.
Cut. Viasat lowered its commercial services outlook after segment revenue fell 1.5% across the first half. By our math, finishing the year flat requires second-half segment sales to grow about 1.5% from a year ago, relying on aviation growth and the new ViaSat-3 satellites to offset home broadband declines.
Cut slightly at the top end. The plan now calls for cash profit excluding one-offs to finish about flat against last year's $1,550.1 million, trimming the prior "up slightly" upside. Because first-half Adjusted EBITDA fell 5.3% to $751.1 million, a flat full year requires 5.6% growth from a year ago in the second half by our math.
Cut by $100 million. With both ViaSat-3 satellites now in commercial service, the company lowered its full-year capital spending range to a midpoint of $875 million, down 13.2% from last year's $1,007.8 million by our math. After spending $425.6 million in the first half, the midpoint leaves about $449.4 million for the second half.
Raised by at least $45 million. The lower capital spending budget flows straight into free cash flow, which excludes non-recurring settlement payments. Viasat generated $150.3 million of underlying free cash flow across the first half, so clearing the $225 million floor requires at least $74.7 million across the second half by our math.
Unchanged. Viasat continues to expect full-year operating cash flow excluding settlement lump sums to match last year's $1,185 million. Underlying operating cash flow was $576.0 million in the first half ($291 million in Q1 and $285 million in Q2), leaving about $609 million for the second half by our math.
Unchanged. Viasat ended fiscal 2026 with net debt at 3.1 times trailing 12-month Adjusted EBITDA, and the ratio stood at 3.2 times in both the first and second quarters of fiscal 2027. Reaching a slight full-year reduction requires positive second-half free cash flow and the expected rebound in second-half cash profit.
❓ Key Questions
How much capital must Viasat contribute to Equatys?
The binding agreement with Space42 calls for up to $1 billion in combined equity commitments for the Equatys joint venture, but Viasat has not disclosed its own dollar share or funding schedule alongside its $4.8 billion net debt load.
Why did active commercial aircraft fall this quarter?
Commercial airlines in service slipped from 4,530 in the first quarter to 4,490 in the second quarter. Investors need to know how many planes disconnected for competing low-Earth-orbit services and what the current aircraft installation backlog is.
What is the status of the overdue $100 million Ligado payment?
Last quarter's filing noted a $100 million lump-sum payment from Ligado that was due in March 2026 remained unpaid pending certain matters. The shareholder letter did not mention whether those matters are closer to resolution.
How will Viasat handle the $659 million in current debt?
Current portion of long-term debt jumped from $58 million in March to $659 million in September as 2027 notes moved inside the one-year window. Management has not stated whether it will pay those notes down with cash or refinance them.