Iridium (IRDM)

Satellite communications provider missed Wall Street’s revenue expectations in Q4 CY2025, with sales flat year on year at $212.9 million. Its GAAP profit of $0.23 per share was in line with 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.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

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 sales grew at a solid 8.4% compounded annual growth rate over the last five years. 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 recent performance shows its demand has slowed as its annualized revenue growth of 5% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

We can dig further into the company’s revenue dynamics by analyzing its number of subscribers, which reached 2 million in the latest quarter. Over the last two years, Iridium’s subscribers averaged 10.1% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen.

This quarter, Iridium missed Wall Street’s estimates and reported a rather uninspiring 0% year-on-year revenue decline, generating $212.9 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 1.5% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies 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 adjusted operating margin of 16.7%.

Analyzing the trend in its profitability, Iridium’s adjusted operating margin rose by 19.5 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q4, Iridium generated an adjusted operating margin profit margin of 25.9%, up 1.5 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 a good sign and shows it’s at an inflection point.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Iridium’s EPS grew at an astounding 204% compounded annual growth rate over the last two years, higher than its 5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Iridium’s earnings to better understand the drivers of its performance. Iridium’s adjusted operating margin has expanded over the last two yearswhile its share count has shrunk 19.7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q4, Iridium reported EPS of $0.23, down from $0.31 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Iridium’s full-year EPS of $1.06 to grow 15%.

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% over the last five years.

Taking a step back, we can see that Iridium’s margin dropped by 7.3 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Iridium’s free cash flow clocked in at $75.11 million in Q4, equivalent to a 35.3% margin. The company’s cash profitability regressed as it was 2.5 percentage points lower than in the same quarter last year, which isn’t ideal considering its longer-term trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared 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 5.5%, 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. Over the last few years, Iridium’s ROIC has increased. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Iridium reported $96.5 million of cash and $1.76 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 $495.3 million of EBITDA over the last 12 months, we view Iridium’s 3.4× net-debt-to-EBITDA ratio as safe. We also see its $88.25 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.

We struggled to find many positives in these results. Its revenue missed and its EPS was in line with Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $22.19 immediately following the results.

Updated: February 12, 2026 at 11:34 PM EST

Before deciding whether to buy Iridium or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Iridium doesn’t top our investment wishlist, but we understand that it’s not a bad business. First off, its revenue growth was solid over the last five years. And while its 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. On top of that, its expanding adjusted operating margin shows the business has become more efficient.

Iridium’s P/E ratio based on the next 12 months is 15.2x. This valuation multiple is fair, but we don’t have much faith in the company. 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 $28.13 on the company (compared to the current share price of $22.19).