Hybrid Satellite Network Will Enable Global Digital Connectivity

Key Takeaways

• LEO expansion, government contracts, and unique GEO/LEO positioning could drive revenue outperformance, increased customer stickiness, and long-term margin gains versus peers.
  
• Operational focus on next-gen terminals and regulatory advantages may support global growth, premium pricing, and monetization of rising demand for high-bandwidth connectivity.
  
• Declining core video revenues, rising competition, high capital needs, and mounting regulatory costs threaten Eutelsat's revenue stability, profitability, and future financial flexibility.

Catalysts

Operates telecommunication satellites.

• While analyst consensus already expects robust LEO-driven revenue growth from next-gen constellation deployment and large government contracts, this may still underappreciate the step-change in EBITDA margins and operating leverage possible as legacy GEO declines are replaced by structurally higher LEO revenue share and rising multi-year government and defense deals.
  
• Analysts broadly agree that the strategic capital raise and passive infrastructure sale will enable LEO expansion, but this could unlock even faster revenue acceleration-management now targets reaching full global LEO coverage by 2026 with over 44 ground gateways, which could enable a first-mover premium as governments and enterprises rush to secure reliable, low-latency access on a global scale, driving revenue and backlog far above consensus.
  
• Eutelsat's status as the only significant non-US LEO operator with a global hybrid GEO/LEO offering, strongly supported by the French and UK governments, positions it to win a disproportionate share of future European and allied sovereign digital infrastructure contracts, potentially resulting in revenue and customer stickiness well above peers.
  
• Management's operational focus on next-generation terminals-including specialized government/military, aviation, and maritime hardware-and rapid licensing in 180+ countries sets the stage to monetize the explosive demand for always-on, high-bandwidth connectivity in remote, underserved, and mobile environments, powering both top-line growth and premium pricing.
  
• Industry consolidation and regulatory tailwinds are likely to lead to a much more favorable pricing environment for established players like Eutelsat-this, combined with the scaling of software-defined satellites and AI-driven network management, could enable sustained margin expansion and reduced per-bit delivery costs over the long term.

Eutelsat Communications Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Eutelsat Communications compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Eutelsat Communications's revenue will grow by 4.3% annually over the next 3 years.
• Even the bullish 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 6.7% in 3 years.
• If Eutelsat Communications's profit margin were to converge on the industry average, you could expect earnings to reach €94.9 million (and earnings per share of €0.2) by about September 2028, up from €-1.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 44.5x on those 2028 earnings, up from -1.3x today. This future PE is greater than the current PE for the GB Media industry at 11.5x.
• 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 9.98%, as per the Simply Wall St company report.

Eutelsat Communications Future Earnings Per Share Growth

Risks

• The persistent and accelerating decline of Eutelsat's traditional video broadcasting segment, down 6.5% year-on-year and expected to continue in the coming years due to structural shifts toward streaming and OTT platforms, poses a risk to the company's largest revenue source and undermines overall earnings reliability.
  
• Rapid advances in terrestrial and fiber-optic broadband, especially in developed markets, are leading to reduced demand for satellite connectivity, which could negatively affect both revenue growth and future market share for Eutelsat's B2B and B2C connectivity businesses.
  
• Heavy capital expenditure requirements for ongoing LEO constellation expansion, including an anticipated €1 billion to €1.1 billion CapEx for fiscal year 2025-2026 and the need to finance hundreds of new satellites, combined with a high net debt-to-EBITDA ratio of 3.88 times, are likely to pressure free cash flow, net margins, and financial flexibility for future innovation or market responses.
  
• The satellite industry is experiencing intensifying competition from newer, more technologically advanced LEO constellations such as Starlink and Amazon Kuiper, which could erode Eutelsat's market share and pricing power, ultimately impacting revenue growth and profitability over the long term.
  
• Non-recurring operating and integration costs, alongside recent impairments totaling over €700 million related to GEO goodwill and satellite assets, as well as heightened regulatory and geopolitical risks (including additional Russian sanctions affecting revenues and compliance-driven channel removals), are increasing operating expenses and heightening risks to net income and return on equity in future periods.

Valuation

• The assumed bullish price target for Eutelsat Communications is €6.7, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Eutelsat Communications's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 bullish analysts, you'd need to believe that by 2028, revenues will be €1.4 billion, earnings will come to €94.9 million, and it would be trading on a PE ratio of 44.5x, assuming you use a discount rate of 10.0%.
• Given the current share price of €2.94, the bullish analyst price target of €6.7 is 56.2% higher.
• 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.