Gogo Reports Robust Q4 Growth but Overvaluation and Leverage Risks Persist

What happened

Gogo announced fourth-quarter 2025 revenue of $230.6 million, up 67% year-over-year, with service revenue rising 61% to $191.9 million, hitting the high end of its full-year guidance. The company highlighted expectations for Gogo Galileo and 5G networks to ramp in 2026 and provided forward financial guidance. However, these positive results are tempered by severe overvaluation, with shares trading approximately 65% above a conservative DCF estimate of $2.90. High leverage remains a critical concern, with net debt/EBITDA at 11.6x and interest coverage of only 1.2x, limiting financial flexibility. Execution risks tied to 5G, Galileo, and LTE deployments, along with ongoing litigation, underscore the fragility of the investment case despite revenue momentum.

Implication

Gogo's Q4 revenue growth validates operational strength but does not address core financial vulnerabilities, including elevated debt levels and tight interest coverage that constrain resilience. The 2026 guidance relies heavily on successful 5G and Galileo rollouts, which have historical delays and carry material execution uncertainty in a competitive landscape. With shares priced at a significant premium to intrinsic value and high valuation multiples (P/E ~88x), there is limited margin of safety for setbacks in technology deployments or adverse legal outcomes. Recurring revenue and robust RPO provide some stability, but the balance sheet's strain and dependency on flawless execution keep equity risk elevated. Therefore, investors should maintain a defensive stance, prioritizing monitoring of deleveraging progress and network milestones before considering any position.

Thesis delta

The Q4 results confirm revenue growth but do not alter the fundamental bearish thesis centered on overvaluation and leverage. Execution on 5G and Galileo remains pending, and without evidence of meaningful deleveraging or risk reduction, the POTENTIAL SELL stance is unchanged, as the stock's premium pricing still fails to justify the high operational and financial risks.