Gogo Q2 2026 Earnings: Military Growth Was Offset by Business Aviation Weakness

Gogo (NASDAQ: GOGO) reported Q2 2026 revenue of $222.8 million, down 1.4% from $226.0 million a year earlier, while diluted EPS swung to a loss of $0.01 from earnings of $0.09. Military/government service revenue grew 40%, but business aviation contracted, and higher delivery costs contributed to weaker operating profit despite positive free cash flow.

Core Financial Results

The modest revenue decline was spread across both service and equipment sales, which fell 1.4% and 1.7%, respectively. Profitability deteriorated more sharply because service and equipment costs increased even as revenue declined.

Operating income fell approximately 18%, while higher other expenses and a larger income tax provision contributed to the swing from a $12.8 million profit to a $2.0 million net loss. Adjusted EBITDA, a non-GAAP measure, included $3.2 million of ongoing litigation expense.

Military/Government Growth Was Offset by Business Aviation Weakness

Service revenue showed a clear split between Gogo’s two primary markets. Military/government revenue increased to a record $39.9 million, supported by demand for secure airborne connectivity, while business aviation service revenue declined by $14.0 million year over year.

The product mix was also shifting from legacy ATG offerings toward satellite broadband. Satellite service and equipment revenue increased, but ATG service and equipment revenue declined substantially.

Total ATG aircraft online fell 15% year over year to 5,731, and ATG units sold declined 27% to 297. In contrast, Galileo aircraft online reached 184, up 66% from the previous quarter, while quarterly Galileo shipments increased 17% sequentially to 108. Gogo also sold 138 5G units, up from 52 in Q1, although only 38 5G aircraft were online at quarter-end.

The military/government segment also secured a $7.5 million multiyear contract with NOAA’s Aircraft Operations Center. Separately, additional FAA and EASA certifications expanded the range of aircraft eligible for Galileo installations.

Rising Delivery Costs Compressed Profit, While Financing Outflows Reduced Cash

Cost of service revenue rose 7.4% and equipment costs increased 12.4%, despite lower revenue in both categories. Revenue less the disclosed costs of service and equipment, before depreciation and amortization, declined to approximately $93.6 million from $107.0 million. The corresponding margin fell to approximately 42.0% from 47.3%.

The net-loss swing also reflected total other expense rising to $22.9 million from $19.0 million. Interest expense increased to $17.6 million, the change in the Satcom Direct earn-out liability resulted in a $7.2 million charge, and the income tax provision rose to $8.8 million.

Quarterly operating cash flow and free cash flow remained positive, but cash and cash equivalents fell to $63.1 million from $103.5 million at the end of Q1. Gogo made a $40.0 million Satcom Direct earn-out payment and a $21.1 million HPS term-loan principal payment during the quarter; both were excluded from free cash flow. Management identified disciplined execution and debt reduction as its highest financial priorities over the next several quarters.

2026 Guidance

Gogo updated its full-year guidance, with the most explicit disclosed change being a higher litigation-cost assumption. Adjusted EBITDA guidance now includes $22 million of ongoing litigation expense, compared with $8 million in the previous guidance.

Management expects Galileo and 5G to ramp during the second half of 2026. With first-half free cash flow of $2.4 million, achieving the full-year range places substantial weight on stronger second-half cash generation.

Risks Investors Should Monitor

• Continued business aviation and ATG contraction: Business aviation service revenue fell 8%, ATG service revenue declined approximately 19%, and total ATG aircraft online decreased 15%. Further contraction could outweigh military/government growth.
• Margin and litigation pressure: Service and equipment costs rose faster than revenue, while the litigation expense embedded in 2026 guidance increased by $14 million from the prior assumption.
• Execution of the technology transition: Gogo expects Galileo and 5G to ramp in the second half, but the current online bases remain limited. Delayed installations or slower service activation would restrict their contribution.
• Cash demands and leverage: Cash declined following earn-out and debt payments, while the balance sheet carried $814.1 million of long-term debt plus a $2.5 million current portion at quarter-end.
• Dependence on FCC reimbursement: The net capital expenditure outlook assumes $45 million of FCC reimbursement, making the timing and receipt of those funds important to cash flow.

Summary

Gogo’s second quarter showed that military/government connectivity and satellite broadband are becoming more important, but they have not yet fully offset weakness in business aviation and legacy ATG offerings. Rising delivery costs, litigation expense and other non-operating charges pressured profitability, while positive free cash flow was outweighed by earn-out and debt payments. The main items to monitor are the second-half Galileo and 5G ramp, stabilization in business aviation, margin performance and the cash generation required to meet full-year guidance.