Gilat CEO: "Defense Revenues Will Double Within Four Years"

Gilat’s (NASDAQ: GILT) earnings last week were largely positive. While the company missed revenue expectations for the quarter, reporting $78 million compared to analysts' estimates of $82.7 million, it beat on the bottom line, posting earnings per share of $0.15 versus the expected $0.11. The guidance was also strong—Gilat forecasts 2025 revenue of $415-455 million, exceeding analysts’ estimates of $391.6 million.

Gilat previously disclosed that between $120-150 million of its revenue will come from Stellar Blu, its latest acquisition, which initially raised investor concerns. However, the stock has since recovered and now trades above its level before the acquisition was announced in June. The Stellar Blu business will account for roughly one-third of Gilat’s operations and serve as a key growth driver. Now, Gilat is highlighting another rapidly expanding segment—defense.

In 2023, Gilat’s defense revenue was just $20 million out of a total $266 million. The sector wasn’t a core focus, but the company recognized its potential and acquired DataPath late in the year, expanding its exposure. In 2024, DataPath contributed $50 million, bringing Gilat’s total defense revenue to $98 million—a remarkable jump. Even excluding DataPath, Gilat’s organic defense growth was substantial, climbing from $20 million to $48 million, more than doubling year-over-year.

Recognizing this momentum, Gilat is now establishing a dedicated defense division within the company. This unit will integrate DataPath, Gilat Wavestream, and additional defense-related activities. It will be led by Gilad Landsberg, who brings over 20 years of defense experience, including a decade at Rafael, where he rose to head the Advanced Precision Strike Systems Division.

Gilat Stock Jumps as the Company Doubles Down on Defense

Gilat’s market cap now stands at ₪1.52 billion ($420 million), with the stock trading at a 12.5x multiple on expected 2025 earnings and 11x forward earnings for 2026. In a conversation with Bizportal, CEO Adi Zfadia discussed the growing defense sector, which he expects to double within four years, the company's competitive advantages, and an update on Stellar Blu’s performance.

How do you view Gilat’s latest results?

"Overall, the results were strong. We reported $305 million in revenue and an EBITDA of $42 million, which is the highest in at least 25 years. All business segments performed well, especially defense and in-flight connectivity."

How significant is defense in Gilat’s overall business, and how fast is it growing?

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"We identified defense as a high-growth sector. For many years, it wasn’t a core focus. Toward the end of 2023, we acquired DataPath, which specializes in integrating satellite products for the U.S. defense sector. This was the fastest way to enter a $1.2-$1.3 billion market, where 70% of the demand comes from the U.S. Department of Defense. DataPath generates about $50 million annually, though with relatively modest profitability.

"In 2024, our defense revenue jumped from $20 million to $98 million. A big part of that was the DataPath acquisition, but even if you strip that out, our organic defense revenue more than doubled, from $20 million to $48 million—up 240%.

"In 2025, we expect around 10% growth in the defense segment. Growth in this field depends on securing new projects, which take time to generate revenue, so we expect some variability rather than linear growth. Next year, we’re investing heavily—not just in R&D but also in expanding sales channels. We've made a significant leap in 2024, and we’re building on that momentum."

What activities will be included in the new defense division?

"DataPath and Gilat Wavestream, both of which we own, will be part of this division, along with our amplifier business and other defense-related products. When Stellar Blu starts selling to the defense sector, it will also be integrated into this division."

How much will this accelerate defense growth at Gilat?

"I expect that three to four years from now, new defense orders will be more than double what we received in 2024. As for actual revenue, it will depend on the types of projects, but we definitely anticipate doubling our defense revenue within four years. This is a major growth driver for us."

In four years, will defense be a core pillar of Gilat’s business?

"It won’t be the biggest revenue driver, primarily because Stellar Blu’s commercial aviation business is very large. However, defense will become a much bigger portion of our overall business than it is today. This is a sector we’re committed to expanding—just look at how fast we grew in 2024. We see huge potential here."

What differentiates Gilat from competitors in the defense space?

"We have strong integration capabilities. We take commercial products and adapt them for defense applications. This is a major industry trend—defense agencies are increasingly leveraging commercial investments in technology rather than developing custom solutions from scratch.

"Our new defense systems align with this approach. We add security features, integrate advanced amplifiers, and offer specialized modems tailored for defense use. Our partnerships with SES and Intelsat, which have their own defense divisions, also open doors for us.

"We’ve also hired a new managing director for DataPath with extensive defense experience, further strengthening our position. We’re building U.S.-based R&D teams to be closer to defense customers and develop solutions tailored to their needs. We plan to compete aggressively for major defense contracts as they come to market."

You previously forecasted that Stellar Blu would generate $25-30 million in Q4. Did they meet expectations?

"We haven’t formally reported their Q4 results yet since they weren’t under our ownership at the time. However, when we file our 20-F report in late March, we’ll include pro forma financials. That said, I can confirm that they were roughly in line with our expectations. Their production ramp-up has been excellent, and they delivered exactly the number of units we anticipated. They’re on the right track."

When you announced the Stellar Blu acquisition, investors initially reacted negatively due to the large price tag relative to Gilat’s cash reserves at the time. The stock has since rebounded. Do you think that initial reaction was excessive?

"Absolutely. The market’s reaction in June was overblown. But since then, the stock has fully recovered and then some, so I think the mispricing has corrected. Investors now better understand the strategic value and potential of the acquisition."

What are Gilat’s key growth drivers for the coming years?

"In-flight connectivity—where Stellar Blu operates—is a huge growth engine. The expansion of satellite constellations in medium and high orbits is another key driver.

"We’re also competing for massive government contracts, like the EU's satellite program, and we qualify as a European company since we have over 100 employees in Europe.

"We’re in the running for major deals with Amazon Kuiper, OneWeb, and IRIS, any of which could transform the scale of Gilat. Alongside our expanding defense business, these will be the major growth engines for us in the coming years."