Iridium Revenue Jumps 8 Percent in Q2

Iridium Communications (IRDM 1.72%), a global provider of satellite communications, released its Q2 2025 earnings on July 24, 2025. The company reported GAAP revenue of $216.9 million, beating analyst estimates of $214.1 million by 1.3%. However, Earnings per share (EPS, GAAP) came in at $0.20, falling short of the $0.24 consensus estimate and down from last year's $0.27. The quarter saw a solid top-line performance, but profits declined year over year. Management also lowered its full-year 2025 service revenue growth outlook to a range of 3% to 5% and raised its quarterly dividend. Overall, the quarter offered mixed signals: stable core operations, challenges in equipment sales, and softened government and broadband activity.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Recent Focus

Iridium Communications delivers satellite-based voice and data services worldwide using a network of 66 low Earth orbit (LEO) satellites. Its global system is unique for covering even remote and polar regions with real-time connectivity and low latency. The company serves commercial markets in maritime, aviation, IoT (Internet of Things), and government sectors, with critical applications in defense, logistics, and emergencies.

Recent strategies for Iridium center on maintaining strong government contracts, notably its multi-year Enhanced Mobile Satellite Services (EMSS) contract with the U.S. Department of Defense. The company is investing in new growth categories such as direct-to-device (D2D) satellite connectivity and satellite-based position, navigation, and timing (PNT) services following its acquisition of Satelles. Key success factors remain its strong relationships with government, steady service revenue, and leveraging its fixed-cost satellite infrastructure for scalable service growth.

Quarter Highlights: Financial and Operational Insights

The company reported GAAP revenue of $216.9 million, up 8.0% from a year ago and above analyst expectations. Most of this growth was driven by commercial IoT services, which posted $44.8 million in revenue, an increase of 8%. This segment benefited from a 5% rise in IoT subscribers and a stronger contract with a key partner. Commercial voice and data revenue was steady at $56.8 million. Broadband services declined 6% in revenue, and broadband subscriber count fell 3%, reflecting a shift to using Iridium as a companion service alongside terrestrial networks and some customer loss to competitors.

Government services brought in $26.8 million, a 1% increase, driven by a contractual rate step-up with the U.S. government, despite government subscriber numbers declined 9.9% from Q2 2024 to 128,000. The company explained that its government revenue is secured by fixed-price contracts, such as the EMSS contract with the U.S. government, which means subscriber declines do not immediately affect revenue. However, Fewer government voice and data users (down 22%) may signal future risk if this trend continues. The next scheduled rate increase for the EMSS contract will lift annual government revenue to $110.5 million for the contract year beginning September 15, 2025.

Equipment revenue fell 15%, indicating persistent cautious procurement and possible macroeconomic or geopolitical pressures. Management expects equipment sales to remain flat compared to 2024. In contrast, Engineering and support revenue surged 62%, driven mainly by increased U.S. government project work. This line tends to be opportunistic and is not considered a steady growth engine.

On the product side, Iridium made progress testing its direct-to-device (D2D) satellite service, targeting large-scale IoT applications. Management expects meaningful revenue from D2D to start in 2026, primarily through IoT connectivity roaming revenues as standard chipsets reach the market. Progress on position, navigation, and timing (PNT) offerings continued, with management highlighting new use cases after its Satelles acquisition. Aviation and maritime applications, particularly those delivered via Iridium Certus terminals (a broadband device series), are being rolled out, with the largest expected revenue gains from these new products coming in 2026 and later.

During the quarter, The company declared a quarterly cash dividend of $0.15 per share for Q3 2025, representing a full-year dividend increase of 5.5%. This continues its pattern of annual dividend hikes. In addition, Iridium repurchased approximately 2.6 million shares at a cost of $65.0 million, and $295.3 million remains authorized for future buybacks as of June 30, 2025, through December 2027.

Looking Forward: Guidance and Watchpoints

Management revised its outlook for full-year 2025 service revenue, now expecting growth of 3% to 5%, down from the previous forecast of 5% to 7%. The company maintained its operational EBITDA (non-GAAP) target range of $490 to $500 million for full-year 2025, signaling that cost controls can help offset some revenue softness. The company also projects net leverage to remain below 4.0 times operational EBITDA (non-GAAP) through 2026.

Key issues to monitor in coming quarters include the pace of recovery in equipment sales, ongoing subscriber churn in government and commercial broadband segments, and the timing of revenue contributions from new D2D and PNT products. Management highlighted possible cost risks related to tariffs, especially for equipment sourced from Thailand, estimating these could represent up to $7 million per year if higher tariffs are enacted, as discussed in Q1 2025. Investors should watch for stabilization in commercial broadband, continued uptake in IoT connections, and how successfully Iridium executes on its new product roadmaps amid evolving competition in satellite connectivity.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.