SES AI Corporation Q2 FY2026 earnings call

Strategic Transition & Long-Term Priorities

• SES is transitioning from a traditional satellite operator to a leading integrated space solutions company, focused on mission-critical secure connectivity leveraging a multi-orbit network, ground infrastructure, software services, and a broad partner ecosystem.
• The company is executing on vertical integration, bringing critical payload manufacturing and testing capabilities in-house to strengthen technological leadership, accelerate innovation cycles, and reduce long-term costs.

Key Strategic Program Updates

• IRIS Square: Europe's largest sovereign secure connectivity constellation program, 1-to-1 contract negotiations for Rendezvous One are in final stages, aligned with SES's long-term strategy. Targeted operations are scheduled to start in 2030, and the program is complementary to SES's internal Neosphere LEO development roadmap.
• Upper C-band Clearing (US): The FCC released its final order establishing a clearing framework similar to the lower C-band program, with deadlines of December 2030 for the top 75 economic areas and June 2031 for remaining regions. Total incentive payments of $6.3 billion are available, with ~$5.6 billion allocated to SES contingent on on-time clearing. All transition costs are reimbursable, so no expected long-term impact to capital allocation, and SES has already contracted long-lead satellite items to meet deadlines.
• MUSE/Neosphere Program: Construction of the pilot production line at SES's new Luxembourg Space Campus is progressing on schedule: the first electronics production hall will be operational by mid-August 2026, with first printed circuit board production already started. Production and testing of Pathfinder 2 payloads will begin mid-September 2026 (Pathfinder 1 is already in-orbit testing). Neosphere is targeted for operational launch in 2030 to expand network capacity.
• Integration Synergy Delivery: H1 2026 delivered a 16% year-over-year reduction in staff costs and a 9% overall reduction in operating expenses, meeting synergy targets, with additional savings expected in H2.

H1 2026 Commercial Highlights

• Total new contracts and renewals of €1.2 billion were secured in H1, with a majority from high-growth segments, bringing total company gross backlog to €6.4 billion.
• Q2 2026 performance was softer than expected due to timing delays on several large contract awards (primarily in government/defense and aviation), seasonal weakness in ESA kit shipments, ongoing structural declines in media, and continued pressure in fixed data. Overall H1 performance remained in line with management expectations.

SES reported H1 2026 total revenue of €1.602 billion, fully consolidated with Intelsat post-acquisition, compared to SES standalone H1 2025. Total adjusted EBITDA was €725 million, a 47% year-over-year increase on a reported basis, with an overall margin of 45.2%.

1. Media Segment: H1 2026 revenue was €571 million, accounting for 36% of total company revenue. Reported year-over-year growth was 46.5%, while on a like-for-like basis revenue declined 10% year-over-year due to ongoing structural declines in mature markets and residual impact from a Brazilian customer bankruptcy earlier in the year. The segment remains highly profitable and cash-generative, with €402 million in new business and renewals secured in H1, supporting a total segment backlog of €2.9 billion.

2. Networks Segment: H1 2026 total revenue was €1.018 billion, representing 64% of total company revenue. Reported year-over-year growth was 89%, with a 1.5% like-for-like year-over-year decline as growth in mobility and government/defense offset declines in fixed data. The Networks segment has a total gross backlog of €3.5 billion, up €200 million from the end of Q1 2026, with €825 million in new business and renewals secured in H1:

   • Mobility: H1 2026 revenue was €421 million, up 169.9% reported and 5.1% like-for-like year-over-year, driven by aviation growth from a favorable Q1 2026 contract restructuring.
   • Government and Defense: H1 2026 revenue was €381 million, up 41.9% reported and 1.9% like-for-like year-over-year. Growth from strong European demand was partially offset by residual US DOGE budget reduction impacts from 2025 and timing delays on contract awards.
   • Fixed Data: H1 2026 revenue was €216 million, up 89.3% reported and down 16.6% like-for-like year-over-year, due to ongoing competitive market headwinds.

• Management reiterates its full-year 2026 financial outlook, expecting stable full-year revenue and stable adjusted EBITDA year-over-year, with significantly stronger performance in the second half compared to H1.
• Full-year 2026 capital expenditure is maintained at ~€700 million (excluding C-band clearing costs), with capex expected to remain front-loaded. C-band related capex for 2026 is projected to be €100-150 million, all of which is fully reimbursable over time.
• O3b mPower satellites 11, 12, and 13 are on track to launch in Q3 2026.
• Management expects H2 2026 revenue growth to be back-loaded, with Q4 expected to be meaningfully stronger than Q3, driven by ramp-up of the awarded US PTSG government contract and closure of the IRIS Square Rendezvous One contract.
• Capital allocation guidance is unchanged: net proceeds from C-band clearing will first be prioritized to reduce net leverage to a target of 3.0x or below. Once the leverage target is met, at least a majority of any remaining exceptional cash flows will be allocated to shareholder returns, consistent with prior guidance.

• Quarterly performance is subject to variability driven by contract timing, milestone-based revenue recognition for large government and defense programs, and seasonal fluctuations in aviation ESA kit shipments.
• Fixed data continues to face persistent competitive market headwinds, with no near-term expectation of a reversal in current revenue decline trends.
• Launch market uncertainty: SpaceX's planned retirement of Falcon 9 in favor of Starship introduces some industry-level execution risk, though SES has already secured all required launches for near-term programs (C-band, early IRIS Square, Neosphere) and maintains relationships with alternate launch providers.
• Large strategic programs (IRIS Square, C-band clearing) have multi-year timelines, with proceeds from C-band clearing not expected to be received until 2030-2031, creating long-term execution uncertainty around meeting clearing deadlines and receiving full incentive payments.

Q: H1 2026 had a stronger Q1 and softer Q2. How is H2 growth expected to phase between Q3 and Q4, and can management commit to a clear plan for C-band proceeds to give investors more visibility than waiting 4+ years for payouts? / A: H2 growth will be back-loaded, with Q4 meaningfully stronger than Q3. Most large defense contract revenue, including the PTSG award which contributed nothing in H1, will ramp gradually in Q3 and see a large boost in Q4 based on contract milestones. The delayed large aviation contract could also land in Q4. For C-band, SES already moved quickly to contract long-lead satellite manufacturing, locking in existing proven technology to meet deadlines. The FCC framework includes accelerated expense reimbursement, and the 2030 deadline is 4 years out, not 5, with opportunities to potentially accelerate clearing. If accelerating access to proceeds delivers a net benefit to shareholders, management will explore options including collateralization, but will focus on hitting initial milestones first.

Q: Is SES actively working to accelerate C-band clearing, how close is IRIS Square Rendezvous One to closing, and will it contribute to H2 2026 results? / A: SES has every incentive to clear C-band as quickly as possible, and is already working to accelerate the process, with incentives for satellite manufacturers for early delivery. Mobile network operators also have strong incentives to accelerate deployment to support 5G/6G, so SES is open to discussions for accelerated clearance with sweeteners, but nothing is finalized yet. IRIS Square Rendezvous One is very close to finalization, likely within days, with Poland recently joining the program with a €430 million investment. Once closed, it will drive a revenue ramp in H2 2026 as milestone delivery begins.

Q: Is the majority of H2 2026 growth already contracted, and has the SpaceX IPO disclosure changed SES's view of its competitive market position? / A: The vast majority of expected H2 2026 growth is already contracted, including the PTSG award and most media renewals, with only a small number of late closing contracts pending. The SpaceX IPO disclosure held few surprises for SES. Starlink's disclosed strategy reinforces SES's own multi-orbit integrated solutions focus, as SES does not aim to compete directly with Starlink in mass-market low-cost broadband, and is focused on higher-value mission-critical sovereign and enterprise connectivity, leaving SES confident in its strategic positioning.

Q: How is the ESA terminal aviation ramp progressing, when will service revenue from installed terminals ramp, and what tax rate should be assumed for C-band proceeds? / A: Q2 had fewer ESA installations than Q1, which was expected, and installations will ramp through H2. Service revenue ramps gradually as terminals are installed, but there is an ongoing offset from offboarding lost airline customers while onboarding new customers, limiting near-term net service revenue growth. For taxes, management is working to optimize the structure of C-band proceeds to minimize tax, and the current market consensus of a 10% tax rate is a reasonable assumption for planning.