TipRanks Smart Growth Portfolio #51: Signal of State
Dear Investors,
Welcome to the 51st edition of the Smart Growth Portfolio and Newsletter, where we spotlight the infrastructure backbone behind next-gen connectivity. But first, here are some news and updates.
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Portfolio News
❖ Itron (ITRI) shares jumped after the company delivered a strong Q4 beat, showing that its profitability engine is accelerating even as headline revenue remains choppy.
Fourth-quarter revenue declined 7% year-over-year to $572 million, but still topped consensus expectations. The real story was margins. Gross margin expanded 580 basis points to 40.7%, while non-GAAP EPS surged 82% to $2.46, beating estimates by more than 12%. Adjusted EBITDA reached $99 million, or 17% of revenue, as a richer mix and growing software contribution more than offset lower hardware volumes.
The Outcomes revenue led overall growth, rising 23% to a record level, and annual recurring revenue climbed 20% to $368 million. Pipeline grew 27% year-over-year, and total backlog stands at $4.5 billion – nearly twice annual revenue – and the 12-month backlog is roughly $1.6 billion. Management noted that roughly 80% of near-term revenue is already covered by backlog, reinforcing visibility.
The biggest strategic shift is the creation of the new Resiliency Solutions segment following the Urbint and Locusview acquisitions. The segment is expected to contribute $65-$70 million in 2026 revenue at roughly 70% gross margins, significantly above the company average. While the acquisitions will dilute 2026 EPS due to lower interest income from the $850 million purchase, management expects accretion by late 2027. More importantly, they extend Itron across the full utility asset lifecycle, unlocking cross-sell potential across its 8,000-customer base.
For 2026, Itron guides revenue of $2.35-2.45 billion, roughly in line with consensus, and EPS of $5.75-6.25, with the midpoint well above expectations. Q1 guidance came in softer, reflecting timing and seasonality rather than demand deterioration.
Analysts responded positively. Baird upgraded the stock from Hold to Buy and raised its price target. Oppenheimer also hiked its PT, and CFRA reiterated a Buy, highlighting the durability of Itron’s margin transformation and recurring revenue model. Revenue growth may look modest in 2026, but the mix shift toward higher-margin, recurring grid intelligence solutions is clearly gaining traction. With grid modernization entering a structural investment cycle and software penetration rising, Itron appears to be building a more profitable and durable growth platform.
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❖ MKS Inc. (MKSI) delivered another strong quarter, posting 10% revenue growth and 20% EPS growth in Q4 as the semiconductor cycle continues to turn higher. With the stock up more than 130% over the past year, expectations were elevated – and while results exceeded consensus, the beat wasn’t dramatic enough to impress everyone, leading to a pullback despite solid underlying execution.
Q4 revenue came in at $1.3 billion, up 10% year-over-year, while full-year revenue reached $3.9 billion, also up 10%. EPS grew 20% for the year, and free cash flow rose more than 20%, with gross margin holding at a healthy 46.7% despite tariff headwinds. This is not a company scraping by in a weak cycle – it is executing into improving industry conditions.
Guidance reinforces that view. MKS sees Q1 revenue of $1.04 billion ± $40 million and EPS of $2.00 ± $0.28, both slightly above consensus. For 2026, management expects wafer fab equipment spending to grow 15-20%, and with exposure across roughly 85% of WFE applications, MKS is positioned to broadly participate in that ramp.
AI remains a meaningful tailwind. Electronics and Packaging revenue grew 20% year-over-year, driven by advanced packaging demand. AI-related chemistry sales doubled from 5% to 10% of total chemistry revenue, as AI boards require 15-40 layers versus roughly 10-12 for smartphones. That content shift supports both revenue growth and mix improvement.
Progress continues with its balance sheet. The company has paid down over $1 billion of debt since early 2024, refinanced to reduce annual interest expense by approximately $27 million, and brought net leverage down to 3.7x, while increasing its dividend by 14%. A new Malaysia facility coming online in the second half of 2026 adds capacity and supply chain resiliency ahead of the expected semi upcycle.
After the report, several analysts reiterated bullish views, citing strengthening AI tailwinds, rising NAND demand, and a multi-year wafer fab equipment upcycle. Mizuho and TD Cowen reaffirmed their Buy ratings and lifted their price targets on MKS to a Street-high $320, implying nearly 30% upside. Deutsche Bank, KeyBanc, Citi, Needham, Morgan Stanley, and CFRA also maintained Buy ratings while raising their targets. With accelerating AI content, broad WFE exposure, and improving balance sheet flexibility, MKS remains well positioned for continued growth – even if the stock experiences periodic volatility.
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❖ Applied Digital (APLD) saw its stock slide by over 18% in the past several days. While the pullback this week looks dramatic on the surface, it should be taken in context.
After soaring more than 220% over the past year, APLD was priced for momentum. So, when Nvidia disclosed in its latest 13F that it exited its roughly $177 million stake, the stock quickly dropped as investors digested the headline. Nvidia had been viewed as a strategic backer, and its departure naturally rattled sentiment. That said, Nvidia still retains indirect exposure to Applied Digital through its substantial ownership in CoreWeave, which holds warrants in APLD and remains a key tenant across Polaris Forge.
While sentiment matters – particularly in the short term – fundamentals matter more. Since Nvidia’s initial investment in 2024, Applied’s story has evolved meaningfully. The company has secured roughly $16 billion in non-cancellable lease commitments tied to its Polaris Forge campuses and is now moving forward with Delta Forge 1, a 430-megawatt AI Factory campus in the southern U.S. Roth Capital notes that another hyperscaler lease could be announced in the coming months, reinforcing demand visibility.
Beyond the signed leases, APLD has reported a development pipeline exceeding 9 gigawatts, including 4.3 gigawatts already under active development. Northland highlights a $5 billion facility with Macquarie that could unlock $20-25 billion in capital to fund these builds – a crucial lever in a capital-intensive industry.
Analysts largely characterized the selloff as headline risk with no change to the underlying story. Roth reiterated a Buy rating with a $58 price target and said it is “buying shares” into the weakness. Northland also maintained an Outperform rating, arguing that the company is strategically positioned to outperform peers in 2026.
Of course, a rapidly growing company is not without risks. Applied has embarked on a massive infrastructure rollout, with funding discipline, construction timelines, and tenant concentration remaining in focus as key swing factors. But even in the case of continued operational outperformance, volatility is inevitable after a blistering rally, meaning profit-taking shouldn’t come as a surprise.
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This Week’s Top Growth Pick: Gilat (GILT)
Gilat Satellite Networks Ltd. operates at the crossroads of connectivity and critical infrastructure, delivering satellite-based broadband and communication solutions to governments, enterprises, and service providers worldwide. The company designs and integrates advanced ground systems, in-flight connectivity platforms, and defense-grade communications that extend high-speed access far beyond traditional fiber footprints. As data demand pushes into remote regions, airborne platforms, and mobile environments, Gilat enables resilient, always-on links where terrestrial networks fall short. Its technology supports everything from commercial aviation and maritime fleets to emergency response and military operations – positioning the company within the growing ecosystem of satellite constellations, secure communications, and global digital expansion.
Source: Gilat Satellite Networks Ltd. Investor Presentation, February 2026
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Constellation Shift
Gilat was founded in 1987 in Israel, emerging as an early pioneer in VSAT (very small aperture terminal) satellite networking. For much of its history, the company supplied satellite ground systems to telecom operators and rural broadband projects, building a global footprint across Latin America, Asia, and Africa. Its Israeli roots, combined with decades of satellite engineering experience, positioned it naturally close to defense and government communications markets – a relationship that has grown far more strategic in recent years.
The past five years have marked a decisive pivot. In 2023, Gilat agreed to acquire the U.S.-based DataPath, which brought in field-proven, deployable military satellite communication systems used by the U.S. Department of Defense and allied forces. The acquisition materially deepened Gilat’s exposure to secure, mission-critical government programs and expanded its presence in the U.S. defense ecosystem.
In parallel, GILT advanced its mobility ambitions. Through Stellar Blu Solutions – whose momentum accelerated in 2024-2025 – the company pushed into electronically steered antenna systems for in-flight connectivity, aligning with the aviation industry’s shift toward flat-panel, multi-orbit satellite communications.
Technology innovation has been central to this evolution. Gilat invested heavily in multi-orbit capabilities, enabling terminals and ground infrastructure to operate seamlessly across GEO, MEO, and LEO1 constellations. It also introduced a next-generation, AI-enhanced network management system designed to automate bandwidth allocation, optimize traffic routing, and improve real-time visibility across complex satellite networks. This move toward software-defined, intelligent ground systems elevated Gilat’s role from hardware supplier to network orchestrator.
Strategic partnerships reinforced that evolution. Gilat secured multi-year contracts with leading satellite operators and integrators, as well as defense and homeland security agencies in Israel, the U.S., and allied countries. Collaborations around electronically steered antennas and flat-panel technology placed the company inside the fast-growing in-flight connectivity and mobility ecosystems. Meanwhile, Gilat Peru – the company’s long-standing subsidiary operating rural broadband infrastructure under government programs – continued expanding its public-sector footprint, reinforcing GILT’s position as a trusted provider in national connectivity initiatives.
Together, defense integration, multi-orbit innovation, AI-driven network management, and aviation mobility platforms have reshaped Gilat into a global satellite communications player embedded in government, defense, and next-generation connectivity ecosystems.
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1 – GEO – geostationary Earth orbit satellites positioned ~36,000 km above Earth, providing wide coverage with higher latency; MEO – medium Earth orbit satellites operating at mid-range altitudes, balancing coverage and latency; LEO – low Earth orbit satellites flying closer to Earth, offering lower latency and higher throughput but requiring larger constellations.
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Source: Gilat Satellite Networks Ltd. Investor Presentation, February 2026
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Full Spectrum Command
Gilat operates at the ground layer of the satellite economy – designing, manufacturing, and managing the systems that connect satellites to aircraft, militaries, telecom towers, and entire regions. Its business is organized into three divisions: Commercial, Defense, and Peru. Commercial now represents roughly two-thirds of revenue, Defense about one-quarter, and Peru the balance – a mix that reflects both scale and diversification.
The Commercial division rests on two pillars. The first is in-flight connectivity (IFC), where Gilat, through Stellar Blu, supplies electronically steerable antennas and ground infrastructure that enable airlines to deliver high-speed broadband across GEO and LEO constellations. Over 420 aircraft are already live on its ESA terminals, serving more than one million passengers weekly. With Boeing line-fit certification targeted for the first half of 2026 and deliveries expected to begin in the third quarter, Gilat is positioning itself for factory-level integration – a move that would increase switching friction and extend platform longevity once programs scale.
The second pillar is satellite-based cellular backhaul and enterprise networking. GILT has historically held a leading global share in satellite modem shipments for 4G/LTE backhaul and maintains a deep installed base across Africa, Latin America, and Asia-Pacific. Its SkyEdge platforms support telecom operators extending coverage into rural and underserved regions. Multi-orbit compatibility ensures these deployments remain relevant as networks migrate toward 5G and NGSO2 architectures. This installed base provides recurring software upgrades, managed services, and expansion cycles – forming the backbone from which newer growth engines are expanding.
Defense is one of the company’s core sovereign growth engines. Through Gilat DataPath and Wavestream, it delivers transportable terminals, secure modems, high-power amplifiers, and encrypted network systems for the U.S. Department of Defense, Israel’s Ministry of Defense, and increasingly European sovereign programs. Recent contracts mark its first direct engagement with a European Ministry of Defense and expansion into Earth Observation downlink systems. The portfolio now spans the full ground segment stack – from antennas and SDR modems to AI-enabled network management – embedding GILT inside mission-critical architectures with high technical barriers and long procurement cycles. Being selected by multiple allied defense ministries signals not just demand, but institutional trust in Gilat’s technology at the sovereign level – a credential that few mid-cap satellite equipment providers can claim.
Peru demonstrates a third model: national digital-inclusion infrastructure. Gilat designs, upgrades, and operates broadband networks for nearly 1,000 public institutions, combining satellite and fiber deployments. The approach is turnkey and replicable, positioning the company to pursue similar government-led connectivity programs worldwide.
The addressable markets are substantial. The global satellite ground segment and mobility markets collectively measure in the tens of billions of dollars annually, with mid-to-high single-digit growth expected as multi-orbit constellations, defense spending, aviation connectivity, and rural 5G expansion accelerate. Gilat’s share remains modest relative to the full opportunity, but its installed base, sovereign credibility, and AI-enabled control layer provide a foundation to grow from – embedding the company deeper and wider across commercial aviation, telecom infrastructure, and defense communications.
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2 – NGSO (Non-Geostationary Orbit) includes LEO and MEO constellations that provide lower latency than GEO satellites. Multi-orbit systems allow operators to combine GEO and NGSO capacity on the same ground platform, reducing infrastructure replacement as networks evolve.
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Source: Gilat Satellite Networks Ltd. Investor Presentation, February 2026
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Amplifying the Curve
Gilat closed 2025 with perspective-shifting acceleration, reframing its growth trajectory. Fourth-quarter revenue reached $137.0 million, up 75% year-over-year, capping a full year of $451.7 million in revenue, up 48% from 2024. Organic growth for the year was 6%, while Q4 organic growth reached 28%, as major commercial and defense programs advanced from the ramp phase into meaningful revenue contribution. GILT has surpassed analyst consensus on adjusted EPS and revenue in each of the past three quarters, reinforcing a pattern of consistent execution driving growth.
Segment dynamics reinforce the growth story. Commercial revenue in Q4 rose 103% year-over-year to $75.1 million, driven primarily by in-flight connectivity. Defense grew 14% to a record $33.3 million, with order bookings jumping by over 35% and a new Earth Observation expansion with a $10 million direct-downlink order. Meanwhile, Gilat Peru contributed $28.5 million to revenue, reflecting the ramp of regional upgrade projects. The segment closed over $85 million in agreements for upgrades across four regional networks; projects are ahead of schedule. Management reports a growing backlog and expects additional large tenders and follow-on orders in 2026.
The mix shift toward aviation and sovereign programs explains both the top-line surge and the short-term margin compression. Even so, underlying profitability improved year-over-year. Fourth-quarter adjusted EBITDA climbed 50% year-over-year to $18.2 million, while full-year adjusted EBITDA rose 26% to $53.2 million – showing operating leverage even during a heavy integration year. Non-GAAP diluted EPS reached $0.20, up 33% year-over-year and well above the consensus.
At the GAAP level, earnings were $0.13 per diluted share versus $0.21 last year, reflecting temporary margin pressure rather than structural weakness. Gross margin compressed to 28% from 40%, with non-GAAP gross margin at 31% versus 40%, primarily due to Stellar Blu’s production ramp and $2.9 million of acquisition-related amortization. Operating expenses increased as the company absorbed integration costs, but these are scaling investments tied to growth programs. Importantly, Gilat has been consistently profitable on a non-GAAP basis for years and returned to sustained GAAP profitability beginning in 2023. The current margin dip appears tied to execution timing and manufacturing scale – positioning earnings to expand as IFC ramps normalize and mix improves.
Cash generation and balance sheet strength stand out. GILT generated approximately $21 million in operating cash flow in 2025 and ended the year with $185.4 million in cash and equivalents, or roughly $183.4 million net of loans, after repaying a $60 million acquisition loan in December. Shareholders’ equity reached $500 million. In an industry often characterized by heavy leverage, Gilat enters 2026 with almost no debt and substantial financial flexibility.
Looking ahead, management expects Defense to lead revenue growth in 2026, expanding at about 22%, while Commercial revenue is seen growing by roughly 16%. Peru is slated to be a temporary drag with an approximately 11% year-over-year decline as projects shift from construction to operations. Overall company revenue is guided to reach $500-520 million, implying roughly 13% year-over-year growth at the midpoint, with adjusted EBITDA of $61-66 million, or about 19% growth at the midpoint.
Margin recovery remains a near-term watchpoint. But with revenue accelerating, EBITDA expanding, and leverage minimal, Gilat enters 2026 with clear earnings momentum.
Source: Gilat Satellite Networks Ltd. Investor Presentation, February 2026
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Signal Amplitude
Gilat operates within a narrow slice of the communications infrastructure market – focused on satellite ground systems, mobility terminals, and sovereign defense networking rather than satellite ownership or terrestrial broadband. Its most relevant public peers reflect that positioning. Comtech represents the closest structural comparison, as a fellow provider of satellite ground equipment and government-driven SATCOM systems. Kratos, particularly through its satellite ground and space communications segment, offers a higher-end defense benchmark for software-defined, mission-critical architectures. KVH Industries provides a size-aligned mobility hardware reference, with exposure to satellite terminals and recurring service models. Together, these names frame the most appropriate valuation and performance context for GILT within the satellite ground-segment ecosystem.
Stocks in this loosely connected satellite-defense group performed very differently over the past year, as the market rewarded operational turnarounds and structural winners while throwing a premium at nearly anything tied to next-gen defense amid rising global tensions. Kratos – effectively the defense growth story in this set – surged more than 260%, fueled by large sovereign contract wins and its positioning in mission-critical ground systems. Comtech’s 150%+ move reflects a classic rebound from distress, rallying off depressed levels as restructuring risks eased. KVH, by contrast, is up just 7%, constrained by its smaller scale, narrower mobility focus, and lack of meaningful defense exposure.
GILT gained nearly 90% over the past year – and that’s after a roughly 33% post-earnings drop. Despite explosive top-line growth, the temporary dip in GAAP profitability during the Stellar Blu ramp spooked investors in an already jittery market, particularly after a strong run-up. The stock has since begun to stabilize, and analysts still see roughly 34% upside. Gilat may not be a once-in-a-cycle breakout story, but it is increasingly viewed as a quality growth name with expanding defense exposure and a credible path toward multiple expansion.
Meanwhile, the stock trades at valuations that look reasonable relative to peers – despite outperforming them on several key operating metrics. Even after the recent pullback, Gilat’s gross margin remains higher than Kratos’ and broadly in line with Comtech’s, while its EBITDA and net profit margins – along with return on assets and return on equity – are the strongest in the group. Revenue and EBITDA growth, both historical and projected, are also superior, and its three-year free cash flow compound annual growth rate stands well above that of its peers.
Yet the market has not assigned it a premium multiple. GILT still trades meaningfully below Kratos across valuation metrics. Its EV/EBITDA and EV/Sales sit closer to Comtech’s range, while naturally exceeding KVH’s more challenged profile. The only metric where Gilat commands a clear premium versus both Comtech and KVH is Price/Sales – reflecting its stronger growth mix and improving earnings trajectory, not speculative excess.
If GILT delivers on its 2026 guidance and operating leverage begins to show through, the multiple leaves clear room for re-rating. The setup increasingly points to a compelling risk-reward profile as the company moves into its next phase.
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To Sum It All Up
Gilat is evolving from a niche satellite equipment vendor into a scaled ground-segment platform embedded across sovereign defense networks, commercial aviation connectivity, and national broadband programs. Its technology spans terminals, modems, high-power amplifiers, and increasingly software-defined, AI-enabled network management – positioning it at the center of multi-orbit architectures as global connectivity becomes more security-driven. Growing defense budgets and aviation upgrades provide structural demand, while long procurement cycles and technical certifications create durable competitive barriers. As production ramps mature and mix shifts toward higher-value programs, operating leverage has room to improve. The market has recognized the growth acceleration, yet valuation still reflects a traditional hardware narrative. Continued execution should support gradual multiple expansion as Gilat advances into its next phase.
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Smart Growth Portfolio
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