LEO Expansion And European Contracts Will Transform Connectivity

Key Takeaways

• Strong momentum in LEO satellite services, expanding government contracts, and the OneWeb merger position Eutelsat for growth and improved revenue visibility.
  
• Investment in LEO infrastructure and rising demand for high-speed connectivity are set to drive long-term profitability and transform the company's revenue mix.
  
• Persistent video revenue decline, heavy investment needs, and intense LEO competition threaten growth and profitability amid operational, regulatory, and integration risks.

Catalysts

Operates telecommunication satellites.

• Substantial growth in LEO (Low Earth Orbit) revenues-up over 80% year-on-year, now representing 15% of group revenues, and management expects continued 50%+ annual growth, underpinned by expanding global digitalization, increased data transmission needs, and multi-year government contracts; this is poised to accelerate future revenue growth and improve long-term visibility.
  
• Execution of multi-year contracts with major European governments (€1 billion contract with the French Armed Forces, deals with the UK, Germany, and Ukraine), along with increasing demand for secure, sovereign satellite services, positions Eutelsat as a trusted partner in Europe's drive to bridge the digital divide and invest in digital infrastructure, which supports earnings stability and increased backlog.
  
• Strategic merger with OneWeb and rapid LEO network deployment, including full global coverage by 2026 and a pipeline of next-generation satellites, strengthens Eutelsat's ability to cross-sell in higher-growth verticals (government, mobility, B2B connectivity), enhancing future revenue mix and margin profile.
  
• Significant capital increase (€1.5 billion) fully backed by core shareholders and governments is set to reduce leverage (targeting net debt/EBITDA of 2.5x by FY26) and accelerate investments in LEO infrastructure, which should unlock additional operational efficiency and support higher EBITDA margins long term.
  
• Rising demand for high-speed, low-latency connectivity solutions to support mobility, IoT, cloud integration, and OTT/streaming-especially in underserved markets-will expand Eutelsat's addressable market, enabling long-term top-line growth and margin expansion as legacy GEO video revenue becomes a smaller share of group revenues.

Eutelsat Communications Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Eutelsat Communications's revenue will grow by 2.5% annually over the next 3 years.
• Analysts are not forecasting that Eutelsat Communications will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Eutelsat Communications's profit margin will increase from -87.0% to the average GB Media industry of 6.8% in 3 years.
• If Eutelsat Communications's profit margin were to converge on the industry average, you could expect earnings to reach €91.3 million (and earnings per share of €0.19) by about August 2028, up from €-1.1 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.2x on those 2028 earnings, up from -1.4x today. This future PE is greater than the current PE for the GB Media industry at 11.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.54%, as per the Simply Wall St company report.

Eutelsat Communications Future Earnings Per Share Growth

Risks

• Revenue from Eutelsat's core video segment (50% of total revenues) is in structural decline, dropping 6.5% year-on-year, with management guiding for this trend to continue as legacy linear TV business matures and faces increasing displacement from OTT and on-demand streaming-this directly threatens long-term revenue growth and overall profitability.
  
• The group is undertaking significant capital expenditure (€1–1.1 billion annual CapEx projected for 2025–2026) to renew and expand its LEO constellation, creating heavy investment requirements and increasing net debt (already at 3.88x EBITDA pre-capital increase); any delays, execution missteps, or failure to achieve projected LEO market share could lead to insufficient returns on investment and margin pressure.
  
• The rapid ramp-up of LEO connectivity revenues is expected to offset, but not yet surpass, declining GEO revenues over the near to medium term, creating a risk of stagnating topline growth if LEO adoption is slower than forecast or if price competition intensifies, compressing ARPU and group margins before the high-cost investments are recovered.
  
• Intensifying competition from new entrants, especially SpaceX/Starlink and Amazon Kuiper in LEO satellite services, poses long-term threats to Eutelsat's customer acquisition, market share, and pricing power-potentially eroding future revenues and profitability in the fastest-growing satellite market segment.
  
• The company's profitability is further exposed to regulatory and geopolitical risks (e.g., sanctions resulting in removal of Russian channels, environmental regulation on satellite fleets), currency volatility (as 50%+ of revenues are USD-denominated), and the necessity to successfully integrate OneWeb and extract intended synergies-any setbacks here could negatively impact net income, cash flow stability, and the achievement of projected EBITDA margins.

Valuation

• The analysts have a consensus price target of €3.244 for Eutelsat Communications based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €6.7, and the most bearish reporting a price target of just €1.2.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.3 billion, earnings will come to €91.3 million, and it would be trading on a PE ratio of 22.2x, assuming you use a discount rate of 9.5%.
  
• Given the current share price of €3.16, the analyst price target of €3.24 is 2.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.