One of the key takeaways from AST SpaceMobile’s (AST) second-quarter earnings report is that the company looks poised to launch its cellular-based broadband networks rather quickly and inexpensively. These attributes, along with the strength of the firm’s technology, should enable it to become very successful over the longer term.
Also noteworthy are the company’s huge overall potential and the continuing, remarkable progress of its government business which can become quite gigantic.
However, AST does face significant risk. Therefore, only risk-tolerant investors who are looking for a high-tech growth play should consider buying its shares at this point.
A Relatively Fast, Cheap Path to Service Launches
AST reported that it intends to launch “45 to 60 satellites into orbit by 2026.” CEO Abel Avellan stated on its Q2 earnings held on August 11.
Using these satellites, AST intends to provide intermittent service in the U.S. by the end of this year, while it is targeting such capabilities in the UK, Canada and Japan in Q1 of 2026. Also importantly, the CEO stated that AST, which already has six satellites in orbit, only requires “approximately 90 satellites for continuous global coverage” and plans to send a new satellite into orbit every one or two months between now and the end of 2026.
Given this launch cadence and the number of satellites that AST needs, it should be able to offer service in many countries by the end of 2027.
Meanwhile, Avellan reported that “other systems (require) tens of thousands of satellites” in order to provide global coverage. In addition to enabling AST to kick off its service in many countries in relatively short order, the superior efficiency of its technology will allow it to begin providing a great deal of coverage relatively cheaply. And since other companies will need to launch an enormous number of satellites to offer a similar service, AST shouldn’t face too much competition for many years.
Tremendous Potential and a Government Business With a Very High Ceiling
As I’ve noted in past columns, “AST has developed a space-based cellular broadband network that can provide coverage to everyday consumer smartphones.” It appears to be the only company that enables satellites to provide the full array of connectivity services, (including voice, text, data and video) to unmodified smartphones.
Of course, this achievement, which should ultimately enable AST to provide these services in many countries without relying on cell phone towers, should prove to be quite valuable for the firm. Indeed, the company’s first-mover advantage in this area has already enabled it to sign partnership deals with more than 50 telecom companies, including Verizon (VT), AT&T (T), Japan’s Rakuten Mobile, and India’s Vi. And showing their faith in AST and its technology, Verizon, AT&T and Vodafone have all invested significant amounts of money in the firm.
AST won two additional contracts from Washington in Q2, raising its total number of deals with the federal government to eight. And Avellan reported that there is “growing demand (from the government) for both (the) communications and non communications applications” of AST’s tevhnology. Additionally, he stated that the company’s technology can be utilized by drones, which would presumably meaningfully enhance their ability to communicate with their handlers. Finally, the CEO reported that AST can sell its technology to the close allies of the U.S. like the Five Eyes.
Reading between the lines, it’s clear that the Pentagon is very interested in extensively using AST’s technology, making it likely that America’s allies will also eventually be interested in incorporating its system into their militaries. In a previous article, AST “has been included in the Defense Department’s ‘Proliferated Low Earth Orbit (PLEO) Satellite-Based Services’ program, which has a $13 billion budget.”
Risks Posed by AST
Asked how many users in each location can use broadband services with AST’s technology, Avalon did not answer directly. He stated that the “number of users per (satellite) cell, that depends on the density of the cell. We basically manage that capacity dynamically and that change(s) as per we add more satellites.”
So there’s some risk that the number of consumers who can use the system will be lower than anticipated. However, I doubt whether Verizon, AT&T, and Vodafone would have poured large amounts of funds into AST and spent extensive time working with it if its system wasn’t going to be quite profitable for them. And since AST and the telecom companies with which it’s partnering will each get 50% of the profits from their joint offerings, AST itself should be very profitable.
Also reducing the risk posed by the user capacity issue is Avalon’s indication that the company can increase the capacity by adding more satellites.
Finally, AST’s high valuation poses some risk, as its market capitalization is nearly $18 billion, while it only anticipates revenue of $50 million to $75 million for the second half of 2025. Consequently, if the firm stumbles, AST stock could fall sharply. However, its long-term outlook looks quite bright.
*This article is intended to be informational only; it is not financial advice.
