Iridium (IRDM)

Satellite communications provider reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 6.7% year on year to $226.9 million. Its GAAP profit of $0.35 per share was 37.2% above analysts’ consensus estimates.

Company Overview

With a constellation of 66 low-earth orbit satellites providing coverage to every inch of the planet, Iridium Communications (NASDAQ:IRDM) operates a global satellite network that provides voice and data services to customers in remote areas where traditional telecommunications are unavailable.

Satellite telecommunication is generally buoyed by rising global demand for connectivity in costly-to-connect and remote areas. IoT (Internet of Things) expansion and government-backed space and defense initiatives also help. As advancements in low Earth orbit (LEO) technology happen, companies in the space will have more favorable competitive positions, which could lead to further partnerships with mobile network operators to extend coverage. On the other hand, headwinds include high capital expenditures for satellite deployment as well as regulatory hurdles related to spectrum allocation. Competition from larger players like SpaceX’s Starlink and Amazon’s Kuiper could also intensify over time, especially if tech advancements lead to better unit economics and financial prospects.

Iridium's main competitors in the mobile satellite services market include Viasat, Globalstar, ORBCOMM, and Thuraya. In the broader satellite communications industry, it also competes with geostationary satellite operators and emerging low-earth orbit constellations focused on broadband services.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $871.7 million in revenue over the past 12 months, Iridium is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, Iridium’s 8.6% annualized revenue growth over the last five years was solid. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Iridium’s annualized revenue growth of 5.1% over the last two years is below its five-year trend, but we still think the results were respectable.

This quarter, Iridium reported year-on-year revenue growth of 6.7%, and its $226.9 million of revenue exceeded Wall Street’s estimates by 1.7%.

Looking ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

Iridium has been an efficient company over the last five years. It was one of the more profitable businesses in the business services sector, boasting an average operating margin of 15.7%.

Analyzing the trend in its profitability, Iridium’s operating margin rose by 20 percentage points over the last five years, as its sales growth gave it immense operating leverage.

This quarter, Iridium generated an operating margin profit margin of 30.9%, up 5.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Iridium’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Iridium, its two-year annual EPS growth of 185% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Iridium reported EPS of $0.35, up from $0.21 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Iridium’s full-year EPS of $1.14 to shrink by 11%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Iridium has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging an eye-popping 36.2% over the last five years.

Taking a step back, we can see that Iridium’s margin dropped by 2 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Iridium historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.4%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Iridium’s ROIC has increased over the last few years. This is a good sign, and we hope the company can continue improving.

Iridium reported $88.53 million of cash and $1.81 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $497.1 million of EBITDA over the last 12 months, we view Iridium’s 3.5× net-debt-to-EBITDA ratio as safe. We also see its $89.6 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Iridium beat analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. Investors were likely hoping for more, and shares traded down 3.5% to $19.01 immediately following the results.

Updated: December 3, 2025 at 11:32 PM EST

When considering an investment in Iridium, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Iridium doesn’t top our investment wishlist, but we understand that it’s not a bad business. To kick things off, its revenue growth was solid over the last five years. And while Iridium’s cash profitability fell over the last five years, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits.

Iridium’s P/E ratio based on the next 12 months is 13.9x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $29.75 on the company (compared to the current share price of $17.10).