Gilat Q2 Call Touts Defense, IFC Strength but Margin Questions Linger

What happened

Gilat’s Q2 earnings call emphasized a stronger second half for its defense segment, record deliveries of in-flight connectivity terminals, and the transformative potential of the Comtech acquisition, according to a Zacks recap. Management pointed to sustained demand in both defense and commercial mobility, reinforcing the revenue momentum narrative. However, the call did not address the persistent drag on Commercial gross margins from the Stellar Blu Solutions integration, which fell to 27% in fiscal 2025, nor did it provide concrete updates on regulatory approvals for the Comtech deal. The upbeat tone aligns with the company’s pattern of highlighting order flow while leaving investors to gauge margin recovery and deal risk on their own. Consequently, the update leaves the investment thesis unchanged: demand signals are real but profitability improvements remain unconfirmed.

Implication

Investors should continue to monitor for evidence that commercial margins are recovering from the 27% FY2025 low and that the Comtech transaction is progressing through HSR and CFIUS reviews; only then can the stock command a higher multiple. The call’s focus on record IFC terminal deliveries suggests the Sidewinder conversion clock is still ticking, but until unit economics improve, the bull case remains deferrable.

Thesis delta

No material shift; the earnings call reaffirms demand but does not resolve the core margin and deal-execution uncertainties that underpin the WAIT rating. The thesis still requires observation of commercial segment gross margin improvement and visible regulatory progress for Comtech.