Gilat's $39M Sidewinder Orders Bolster Backlog But Fail to Address Core Margin and Cash Concerns

What happened

Gilat Satellite Networks announced $39 million in new orders for its Sidewinder ESA terminals, highlighting continued demand for its multi-orbit in-flight connectivity technology. This follows Q4 2025 results where the company delivered approximately 190 terminals but saw gross margin compress to 28% and operating cash flow turn negative at -$6.3 million. The DeepValue master report indicates the stock's current price embeds FY2026 growth expectations, yet critical evidence of margin recovery and positive cash conversion remains absent. Key risks from the report include supplier constraints, execution delays on other orders like SkyEdge IV, and potential further equity dilution despite recent private placements. While this order flow supports revenue visibility, it does not directly alleviate profitability pressures that underpin the 'WAIT' rating.

Implication

For investors, this news confirms ongoing demand for Sidewinder terminals, which should help meet FY2026 revenue guidance of $500M-$520M. However, without gross margin rising above 32% from the current 28%, earnings growth may stall, and negative operating cash flow could necessitate further dilution. The DeepValue report advises waiting for two consecutive quarters of gross margin >32% and operating cash flow >$10M before considering an upgrade from the 'WAIT' rating. Investors should closely monitor Q2 and Q3 2026 results for delivery cadence and cash metrics, as misses could trigger a bear case scenario with implied value near $11.80. Ultimately, while orders are positive, the investment thesis hinges on execution efficiency, not just order announcements, in a crowded market with dilution overhangs.

Thesis delta

The new $39 million orders align with Gilat's expected growth trajectory but do not shift the core investment thesis, which remains dependent on margin recovery and cash conversion. Investors should maintain a cautious stance until operational metrics improve, as per the report's upgrade conditions, with no material change to the 'WAIT' rating.