Eutelsat Shares Surge on Strong Satellite Internet Performance

Eutelsat FR0010221234

Investors sent shares of French satellite operator Eutelsat sharply higher on Friday, with the stock advancing nearly 12 percent. The rally followed the company?s release of its half-year results, which highlighted a faster-than-anticipated acceleration in its space internet strategy, even as its traditional television segment continues to contract. The figures have sparked a debate on whether the company can successfully pivot into a profitable technology-focused enterprise.

A key driver behind the positive market reaction was a significantly strengthened balance sheet. Eutelsat successfully reduced its leverage ratio from a concerning 3.92x to a more solid 2.0x. This improvement was achieved through a combination of a successful capital increase and government-guaranteed loans. Net debt now stands at 1.3 billion euros, providing the company with greater financial flexibility to fund the expansion of its next-generation satellite fleet.

Low Earth Orbit Segment Ignites Growth

The standout performer in the earnings report was the Low Earth Orbit (LEO) business unit, which is central to the company's strategic shift. Revenue in this future-oriented segment soared by 59.7 percent during the first half of the year, reaching 110.5 million euros. This now contributes one-fifth of the group?s total revenue.

The "Connectivity" division, which provides in-flight internet among other services, is a primary beneficiary of this momentum, posting overall growth of almost 12 percent. A strong indicator of rising demand for mobile connectivity is the firm?s growing order book for aircraft antennas, which has now surpassed 1,500 units.

Legacy Challenges and Strategic Shifts

In contrast, the traditional video broadcasting business remains a persistent challenge. Revenue in this segment declined by 12.3 percent to 266.5 million euros. This drop is attributed to the ongoing structural transformation of the media industry, compounded by revenue losses from sanctions against Russian broadcasters.

Management is adapting to these market realities with strict cost controls and strategic adjustments:

• Confirmed Investment: The order for 440 next-generation LEO satellites from Airbus has been confirmed, a move deemed critical for maintaining long-term competitiveness against rivals like Starlink.
• Cost-Cutting Measure: Plans for the Flexsat Americas satellite have been scrapped, resulting in expected savings of more than 100 million euros.
• Financing Setback: A planned sale of ground infrastructure assets was blocked by a veto from the French state, creating a shortfall of 550 million euros in anticipated proceeds.

For the current fiscal year, Eutelsat reaffirmed all its financial targets. The company continues to anticipate LEO-related growth of approximately 50 percent. Furthermore, it raised its long-term margin forecast for the fiscal year 2028/29 to around 65 percent, signaling confidence in the profitability of its new strategic direction.