Gilat Satellite Networks (NASDAQ: GILT) has seen its stock surge 13% over the past two days as the company deepens its exposure to the defense sector. Last month, Gilat announced it was ramping up its defense-focused activities, establishing a dedicated defense division that will include DataPath, Gilat Wavestream, and newly acquired Stellar Blu, once the latter begins selling to the defense market. The division will be led by Gilad Landsberg, who brings over 20 years of experience in the defense industry, including a decade at Rafael, where he advanced from an engineering role to heading the unit responsible for advanced precision-strike systems.

The defense sector is a natural expansion target for Gilat, given its expertise and industry connections. Defense contracts tend to be long-term and stable, as they are primarily awarded by government agencies and military organizations. Gilat sees immense potential in this market, with CEO Adi Sfadia telling Bizportal that he expects "defense revenues to double within four years."

In 2023, Gilat’s defense-related revenue totaled only $20 million out of its $266 million total revenue. Historically, defense was not a core focus, but the company identified growth potential and acquired DataPath toward the end of the year, significantly increasing its exposure to the sector. DataPath generated $50 million in revenue in 2024, pushing Gilat’s total defense revenue to $98 million for the year—a remarkable surge. Even excluding DataPath’s contribution, Gilat’s organic defense revenue more than doubled from $20 million to $48 million.

Riding the Wave of Defense Stock Gains

Investors are responding positively to Gilat’s strategic shift, with some now viewing it as a full-fledged defense company. The stock’s recent rally coincides with a broader surge in defense stocks, driven by increasing European defense spending.

• Gilat CEO: "We’re Not Investing for a Quick Flip – We See Real Synergy"
• Gilat CEO: "Defense Revenues Will Double Within Four Years"
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Just yesterday, defense stocks surged after Germany announced plans to lift its 'debt brake,' a constitutional limit on fiscal deficits, to ramp up military investments. The German government is setting up a massive $1 trillion defense fund for the next decade.

This shift follows growing concerns among European nations that U.S. support may decline under a potential second Trump presidency. Countries like the UK are already preparing, with plans to raise defense spending to 2.5% of GDP by 2027, up from the current 2.3%. UK Prime Minister Keir Starmer has also hinted at a further increase to 3% in the years ahead.

Drone Startup Investment and New Military Contract

Alongside broader market trends, Gilat has made key moves to solidify its defense presence. Last week, the company announced an investment in a drone detection startup. The investment, valued at approximately $3.5 million, is part of a seed funding round. Although relatively small, the deal signals Gilat’s commitment to expanding beyond satellite technology.

"We’re not looking for a quick return on this investment—there’s real synergy here," Sfadia told Bizportal. "Our focus in defense is not just satellites. We have an integration company in the U.S., UAV solutions, and more. We see this investment as closely aligned with our core business, and within 3-4 years, it should contribute to both revenue and profitability."

Additionally, yesterday Gilat secured a $6 million military contract in the Asia-Pacific region. The company will provide satellite communications for a military client, supporting both fixed installations and mobile forces. While the contract size isn’t enormous, it marks an important milestone—it’s the first order received by Gilat’s newly established defense division.

"We continue to expand our defense business in the U.S. and internationally," said Gilad Landsberg, head of Gilat’s defense division. "We’re proud to support the growing needs of military forces in the Asia-Pacific region with our advanced satellite communication technology. This contract strengthens our position as a trusted provider of secure, resilient SATCOM solutions for mission-critical operations."

Earnings and Outlook

Gilat closed Q4 with $78.1 million in revenue, a 3% increase from $75.6 million in Q4 2023, though slightly below analyst expectations of $82.67 million. Net adjusted earnings came in at $8.5 million (15 cents per share), up from $6.5 million (11 cents per share) a year earlier, beating analyst expectations of 13 cents per share.

Looking ahead, Gilat projects 2025 revenue between $415 million and $455 million, with adjusted EBITDA of $47 million to $53 million. Analysts had forecast $391.6 million in revenue, meaning Gilat's guidance suggests stronger-than-expected growth.

Gilat’s stock is currently valued at 1.52 billion NIS after climbing 27% over the past year.