Viasat Inc (VSAT) Q2 2027 Earnings Call Transcript

Viasat reported Q2 FY2027 revenue of $1.2 billion, up 3% year over year, while adjusted EBITDA fell 4% to $370 million and net loss widened by $68 million to $129 million. Management raised FY2027 free-cash-flow guidance to more than $225 million and lowered CapEx guidance to $850 million–$900 million; backlog increased 7% to $4.2 billion, led by 20% growth in Defense and Advanced Technologies revenue. Communication Services revenue declined 3%, and management expects aviation revenue to decline in FY2028, with recent airline announcements eventually affecting 15%–20% of aviation revenue. Viasat said ViaSat-3 Flights 2 and 3 are in service and its strategic review committee remains active.

Analysis

The key underwriting question is whether VSAT can turn satellite capacity and DAT backlog into recurring cash flow before commercial-service erosion offsets it. The raised FCF outlook is constructive, but still needs scrutiny: capex remains substantial, capitalized interest is large, and cash conversion depends on backlog delivery and working-capital timing. A shift from payloads to turnkey spacecraft may expand contract value while adding delivery, integration, and working-capital risk; contract awards alone do not establish attractive margins.

The aviation exposure is a gradual revenue headwind, not an immediate cliff: management says customer announcements affect 15–20% of aviation revenue over time, while FY2028 revenue is expected below FY2027. That leaves room for replacement wins and ARPU growth, but creates a mismatch between near-term satellite-capacity optimism and the timing of airline deployments. Fixed broadband stabilization is also unproven; one quarter of Flight 2 service is not evidence of subscriber recovery. DAT is the strongest operating offset, though award-to-revenue conversion and margin durability matter more than backlog headlines.

Equatys and the strategic review offer optionality, not yet an investable base case: regulatory approvals, funding, constellation design, partner participation, and capital commitments remain unresolved. Rocket Lab’s role as a low-cost bus partner on PTS-G is a potential follow-on opportunity, but the disclosed relationship does not establish material revenue for Rocket Lab.

Over the next 1–3 months, watch backlog conversion, aviation order/install trends, fixed subscriber churn, and Equatys milestones. Over 6–18 months, the thesis hinges on DAT growth and lower capital intensity producing sustained deleveraging. The cautious read is that investors may over-credit capacity monetization and strategic optionality before economics are demonstrated.

Key Decisions for Investors

• VSAT: Avoid chasing a cash-flow-transition narrative; maintain a cautious/underweight bias until reported FCF is accompanied by lower net debt and evidence that fixed broadband churn is moderating. Reassess after the next 1–2 quarterly reports.
• Treat DAT backlog as a catalyst watch, not a standalone buy signal. Upgrade the thesis only if revenue and EBITDA conversion track management’s mid-to-high-teens growth outlook without renewed capex escalation or weaker consolidated EBITDA guidance.
• Monitor aviation separately from total communications revenue: track aircraft installations, backlog changes, customer replacement wins, and ARPU. A faster-than-expected decline or deterioration in aviation guidance would falsify the view that this is a manageable, phased headwind.
• RKLB: Keep on a watchlist for follow-on spacecraft-bus awards tied to Viasat’s turnkey programs; do not infer materiality from the PTS-G partnership alone. Verify contract value, scope, and timing in company disclosures before positioning.