Gilat lands Nelco partnership in India, but margin and cash conversion tests remain critical

What happened

Gilat Satellite Networks announced a multimillion-dollar order from Nelco to deploy its SkyEdge IV platform in India, adding to its growing order pipeline. However, the DeepValue report highlights that despite strong revenue growth, GAAP gross margins contracted to 28% in Q4 2025 and operating cash flow was negative, underscoring the disconnect between top-line expansion and profitability. The stock trades at elevated multiples (P/E 43x, EV/EBITDA 13.4x), pricing in continued growth and margin normalization that has yet to materialize. While the Nelco deal provides incremental revenue visibility, it does not address the core debate: whether higher Sidewinder ESA deliveries can convert into sustained margin improvement and positive cash generation. Until evidence proves otherwise, the risk of execution slippage, persistent negative cash flow, and further dilution remains elevated.

Implication

The Nelco partnership is a positive order flow signal, but does not alter the core thesis that Gilat must demonstrate margin expansion and positive operating cash flow. Until gross margins sustainably exceed 32% and operating cash flow turns positive, the risk/reward remains unfavorable given the crowded narrative and repeated dilution. Re-assessment window is 3-6 months.

Thesis delta

The Nelco order is an incremental revenue win but does not resolve the margin and cash conversion concerns. The thesis remains dependent on delivery execution and margin improvement over the next two quarters. No change to WAIT rating.