Iridium (IRDM) Q2 2026 Earnings: Net Income Down 56% While Revenue Grew | Rocket Lab Merger
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Iridium Communications $IRDM earned $9.7 million in the quarter ended June 30, 2026, down 55.9% from $22.0 million a year earlier. Diluted earnings per share fell from $0.20 to $0.09. That is the kind of collapse that usually means a business is breaking.
Revenue in the same quarter went up 3.8%, to $225.2 million. Subscribers grew 6%. Interest expense fell. Depreciation was flat. Every line that describes the satellite business moved the right way. The entire profit decline traces to one expense line and one event: selling, general and administrative expense jumped 50% to $67.0 million, and the 10-Q gives the reason without hedging - $14.3 million of transaction costs tied to the merger agreement Iridium signed with Rocket Lab Corporation on June 28, 2026, and to its buyout of Aireon. Iridium's profit did not fall because the business weakened. It fell because the company spent the quarter selling itself.
Company Snapshot
Iridium operates a 66-satellite low-earth-orbit constellation providing global voice, data, and positioning services in places terrestrial networks do not reach: open ocean, polar regions, airways, remote land. It sells almost entirely through a wholesale network of roughly 120 service providers, 320 value-added resellers, and 100 value-added manufacturers. The U.S. government is its single largest customer, under a fixed-fee airtime contract. As of June 30, 2026 it had approximately 2,627,000 billable subscribers.
This analysis covers the Form 10-Q for the quarter ended June 30, 2026, filed July 22, 2026. All figures come from that filing unless attributed otherwise.
The Financial Story
| Q2 2026 | Q2 2025 | Change |
|---|---|---|
| Revenue $225.2M | $216.9M | +3.8% |
| SG&A $67.0M | $44.6M | +50.2% |
| Depreciation and amortization $53.9M | $52.8M | +1.9% |
| Operating income $34.0M | $50.3M | -32.3% |
| Interest expense, net $19.2M | $22.8M | -15.4% |
| Income tax expense $3.1M | $3.8M | -17.9% |
| Net income $9.7M | $22.0M | -55.9% |
Read that table as a search for the leak. Revenue rose $8.3 million. Cost of services actually fell $2.3 million. Depreciation, the line you would expect to punish a satellite operator, rose only $1.0 million on a $1.93 billion net fixed-asset base. SG&A rose $22.4 million. That single line is larger than the entire decline in operating income.
Now split the profit decline above and below the operating line, because for a company carrying $1.77 billion of term debt the distinction matters. Operating income fell $16.3 million. Everything below the operating line - interest, other expense, tax, and equity-method losses combined - moved in Iridium's favor by $4.0 million. Net interest expense alone fell $3.5 million, because the average borrowing rate came down and there was no revolver balance this year against $50.0 million last year. The two numbers reconcile exactly: minus $16.3 million above the line, plus $4.0 million below it, equals the $12.3 million decline in net income. None of this is a leverage story and none of it is a depreciation story. All of it is an operating-expense story, and the operating expense is legal and banking fees.
Strip out the $14.3 million of disclosed transaction costs and the quarter looks entirely different. Operating income would have been roughly $48.3 million against $50.3 million, down about 4% rather than 32%. Adding back depreciation, EBITDA before those transaction costs works out to about $102.2 million against $103.1 million a year ago - essentially flat. (That adjustment is our arithmetic on the filing's disclosed figure, not a company-reported non-GAAP measure.) The filing attributes the remaining SG&A increase to professional fees and to stock appreciation rights expense driven by the change in Iridium's own stock valuation, which it ties directly to the announcement of the Rocket Lab merger. In other words, nearly the whole $22.4 million traces to the deal, either as fees paid or as compensation marked up because the deal repriced the stock.
Underneath, the operating business is doing what it has done for years: growing slowly and reliably. Total billable subscribers reached approximately 2,627,000, up 144,000 or 6% year over year. Commercial IoT drove it, adding 167,000 subscribers to 2,091,000, a 9% increase, though IoT average revenue per user slipped to $7.64 from $7.83 - growth bought at a slightly lower price. Commercial voice and data went the other way: 402,000 subscribers against 415,000, but revenue up 3% to $58.4 million because ARPU rose to $49 from $46 on price increases taken in the second half of last year. Commercial broadband was the one soft spot, revenue down 8% to $11.7 million as ARPU fell to $243 from $260 on wider use of lower-priced companion plans. Government service revenue was $27.6 million against $26.8 million even though government billable subscribers fell from 128,000 to 118,000 - which sounds contradictory until you read the contract terms. Iridium's Enhanced Mobile Satellite Services contract pays a flat $110.5 million per year regardless of subscriber count or usage. Government subscriber counts are close to irrelevant to government revenue. That is worth knowing before reading a headline about either number.
Cash generation held up. Operating cash flow was $185.8 million for the first half against $190.7 million a year earlier, and capital expenditures of $51.8 million left roughly $134.0 million of free cash flow. Cash rose to $184.2 million from $96.5 million at year-end. But that cash build has a specific cause, and it is the most under-appreciated fact in the filing: Iridium repurchased zero stock in the first half of 2026, against $136.1 million in the first half of 2025 and $407.7 million across all of 2024. The Q1 filing disclosed that repurchases had been paused in the fourth quarter of 2025 to increase financial flexibility. This filing goes further - on June 28, 2026, in connection with the Rocket Lab transaction, the board terminated the share repurchase program outright. Iridium has retired roughly $1.25 billion of stock since February 2021 and taken diluted share count from about 121.2 million in Q2 2024 to 108.5 million now. That engine is switched off. The dividend continues at $0.15 per share quarterly, up from $0.14, costing $32.7 million in the first half.
What Actually Happened
On June 28, 2026, Iridium agreed to be acquired by Rocket Lab Corporation. Each share converts into $27.00 in cash plus a number of Rocket Lab shares set by an exchange ratio with a collar: 0.4000 if Rocket Lab's ten-day volume-weighted average price is $67.50 or below, $27.00 divided by that price if it sits between $67.50 and $112.50, and 0.2400 if it is $112.50 or above. Inside the collar, the stock leg is worth exactly $27.00 and the total is exactly $54.00. Outside it, Iridium holders take Rocket Lab's price risk. The board approved unanimously, every director holding shares signed a voting agreement, and closing is targeted for mid-2027 - roughly a year away - subject to a stockholder vote, Hart-Scott-Rodino clearance, FCC consent to transfer control of telecommunications authorizations, foreign investment and satellite approvals, and an effective Form S-4. If Iridium walks, it owes a $223.6 million termination fee.
Seven weeks earlier, on May 13, 2026, Iridium had agreed to buy the remaining 60.5% of Aireon Holdings it did not own, the operator of the world's only space-based ADS-B air traffic surveillance system, whose payloads already ride on Iridium's satellites. That closed July 2, 2026 for approximately $366.7 million: half cash, half a $183.4 million non-interest-bearing seller loan due one year after closing. Iridium fully drew its $100.0 million revolving facility on July 1 to fund the cash half. So the quarter that reported a 56% profit decline was the quarter Iridium bought a company, agreed to be bought by another, and stopped buying back its own shares.
Valuation
Iridium closed at $45.96 on July 27, 2026 for a market capitalization of about $4.87 billion (stockanalysis.com, July 27, 2026). Against $1.59 billion of net debt from the filing - $1,774.7 million of term loan less $184.2 million of cash - that is an enterprise value near $6.46 billion, or roughly 14.5x FY2025 EBITDA of $446.2 million (FY2025 operating income of $236.0 million plus $210.2 million of depreciation and amortization). Note this excludes the post-quarter Aireon debt and Aireon's earnings, which are not yet consolidated.
The unusual thing about valuing Iridium today is that the filing hands you the answer. Rocket Lab closed at $66.94 on July 27, 2026 (Yahoo Finance) - 56 cents below the $67.50 collar floor, which is precisely the level where Iridium holders stop being protected against Rocket Lab's share price. Below it, the ratio locks at 0.4000 and every dollar Rocket Lab falls costs an Iridium holder forty cents.
| Rocket Lab 10-day VWAP | Exchange ratio | Stock leg | Cash leg | Total per IRDM share |
|---|---|---|---|---|
| $50.00 | 0.4000 | $20.00 | $27.00 | $47.00 |
| $66.94 (July 27 close) | 0.4000 | $26.78 | $27.00 | $53.78 |
| $67.50 to $112.50 | $27.00 / price | $27.00 | $27.00 | $54.00 |
| $150.00 | 0.2400 | $36.00 | $27.00 | $63.00 |
At Rocket Lab's July 27 price the deal is worth $53.78. Iridium trades at $45.96 - about 15% below deal value, or a 17% gross return if it closes there. That spread is the market pricing roughly a year of waiting, the regulatory gauntlet, and the unhedged Rocket Lab equity leg. It is not a small spread for a signed, board-approved, unanimously recommended transaction.
For the standalone case, take FY2025 free cash flow of $299.8 million (operating cash flow $400.1 million less capital expenditures $100.3 million), the $1.59 billion of net debt, and 106.0 million shares outstanding per the 10-Q cover.
| Case | Free cash flow | Terminal growth | Discount rate | Implied per share |
|---|---|---|---|---|
| Bear | $250M | 1.0% | 9.5% | ~$13 |
| Base | $300M | 2.5% | 8.5% | ~$33 |
| Bull | $340M | 3.5% | 8.0% | ~$59 |
| At 12x FY2025 EBITDA | - | - | - | ~$36 |
| At 14x FY2025 EBITDA | - | - | - | ~$44 |
| At 16x FY2025 EBITDA | - | - | - | ~$52 |
Implied value under stated assumptions. Not a price target and not investment advice.
The honest conclusion is uncomfortable for anyone who wants a clean answer. A standalone base case lands near $33, well under both the market price and the deal. The deal at $54.00 implies roughly 16.4x FY2025 EBITDA; today's $45.96 implies about 14.5x. Nobody buying Iridium at $45.96 is buying a satellite operator on its cash flows. They are buying a merger spread with a Rocket Lab equity kicker attached, and the standalone business is the downside case if the deal breaks.
Risks
The concentrated risk is the deal itself. If it fails, the filing warns the stock could fall to the extent its price reflects an assumption the merger completes - and on this arithmetic, a good deal of it does. Iridium would also have burned real money on professional fees for no benefit, and under specified circumstances owes $223.6 million. Meanwhile the merger's interim covenants restrict acquisitions, indebtedness, capital expenditures, contract changes, dividends and equity issuance, and prohibit soliciting a competing bid - so Iridium spends a year with limited strategic freedom whatever happens.
The second risk is one the market seems to be ignoring: the EMSS contract expires in September 2026. That is the fixed $110.5 million per year of government airtime revenue, about 12.7% of FY2025's $871.7 million, and it runs out in roughly two months. The government can unilaterally extend six months at the same rate, and the filing says discussions on a new contract have begun with an expected signature by March 2027 - but as of this filing there is no successor contract in hand. Third, leverage. The $1,774.7 million term loan carries SOFR plus 2.25%, and the interest rate cap on $1.0 billion of notional expires in November 2026; every 25 basis points of SOFR above the cap adds $1.9 million of annual interest on the unhedged portion. The filing already states it expects interest expense to rise following the $100.0 million revolver draw. Fourth, competition: the MD&A names SpaceX's announced plans to acquire spectrum for global direct-to-device services among its listed challenges, alongside broader satellite direct-to-device broadband. And fifth, Aireon adds an aviation-safety-critical business with its own regulatory, liability and air-traffic-volume exposures, newly consolidated and not yet reflected in any reported quarter. The filing reports no material pending legal proceedings beyond routine litigation.
The Bottom Line
The 56% profit decline is real and it is also the least informative number in the filing. The satellites are fine, subscribers are growing 6%, service revenue is growing, cost of services is falling, and stripping the disclosed deal costs leaves EBITDA essentially flat year over year. What changed is that Iridium stopped being a standalone capital-returns story - buyback terminated, a year of restrictive covenants ahead - and became a merger-arbitrage instrument with an unhedged Rocket Lab equity leg. Watch three things: whether Rocket Lab holds above $67.50, whether the EMSS contract gets replaced on comparable terms, and whether the regulatory conditions clear on the mid-2027 timeline. The operating results are now the least important variable in the stock.
Every figure above is pulled from Iridium's SEC filings via RoboSystems, which gives you queryable, structured access to the XBRL data behind every public company's filings. Run your own screens at robosystems.ai. New customers get 50% off your first month with code ROBO50.