A $475-million paper loss and a 26 per cent drop in revenue headlined Telesat’s second quarter on Thursday, as the company raised its capital spending forecast to pay for a recently announced 44 per cent expansion of its Lightspeed network.
LEO, LEO, LEO
Telesat’s survival rests entirely on its low Earth orbit (LEO) constellation. It is extracting cash from its aging Geostationary (GEO) satellites to fund operations until Lightspeed, its next-generation broadband network, enters service in early 2028.
The company had promised investors it could secure government and enterprise contracts to justify the multi-billion-dollar build. It did. The $2.7 billion Enhanced Satellite Communications Project – Polar (ESCP-P) contract, signed with Canada’s Defence Investment Agency in early August, guarantees 15 years of revenue.
That commitment funds a hardware expansion. Telesat will add 69 satellites to the initial 156-spacecraft constellation, ensuring continuous global coverage with heavy emphasis on the Arctic.
The GEO numbers
Revenue for the second quarter fell to $79.5 million, down from $106.1 million a year earlier. The decline stems from ongoing non-renewals in its direct-to-home broadcast business and lower demand from fixed enterprise customers.
The company posted a net loss of $558.6 million. Adjusted EBITDA — what is left of revenue after the direct cost of operations, before interest, taxes and depreciation — dropped to $22.0 million from $58.7 million last year.
Despite the headwinds, the GEO segment managed to grow its backlog to $900 million during the second quarter, driven by a five-year extension on a major broadcast video contract. This provides much-needed cash flow visibility as the company navigates its transition.
The valuation gap
The net loss on the income statement masks a commercial victory. The bulk of the deficit comes from a $475 million non-cash charge tied to the rising value of government warrants in the Lightspeed project.
The Canadian and Quebec governments hold warrants for backing the constellation’s financing. As Lightspeed secures contracts and expands, its enterprise value rises. Accounting rules force Telesat to record that growing equity claim as a financial liability, turning a project milestone into a paper loss.
“The warrants are now valued at more than $1.3 billion, reflecting the expansion of the constellation to 225 satellites and our ability to accelerate the execution of our plan,” chief financial officer Donald Tremblay told analysts Thursday.
The defence pipeline
The ESCP-P contract delivers secure Military Ka-band (Mil-Ka) connectivity to the Canadian Armed Forces. Telesat modified the constellation’s design earlier this year, dedicating 500 megahertz of capacity to the frequencies allied rely upon.
That single deal pushed Telesat’s LEO backlog, the work already under contract but not yet delivered, to $5.6 billion. Management expects more defence deals to follow as NATO allies modernize their space architectures.
“If someone had told me in 2008 it would take 18 years, I would have been surprised,” chief executive officer Dan Goldberg said of the long-gestating Canadian procurement. “But I do not expect the opportunities that we have in the pipeline for Lightspeed to take 18 years, because given the nature of the world right now, the customers that we are talking to, they want this capability as soon as we can bring it.”
The defence focus complements a growing commercial book. Northwestel signed a five-year contract in April to deliver broadband across Nunavut, and Viasat previously committed to routing commercial aviation traffic through the Lightspeed network.
Operations are scaling to meet the early 2028 service entry date. Telesat has already secured nearly all the launch capacity required for the 225-satellite constellation. The company expects to sign an agreement for its final SpaceX Falcon 9 rocket in the near future, locking in the deployment schedule.
The terrestrial network is also taking shape. Telesat has more than eight landing stations actively under development globally, including sites in Canada, Australia, and a commissioned facility in France operated by Orange.
While competitors race toward direct-to-device cellular service, Telesat is deliberately looking elsewhere. Goldberg noted that while the company might opportunistically support direct-to-device networks, its architecture is built for heavy enterprise and government transport.
Instead, Telesat is pitching the constellation’s optical inter-satellite links for space relay services. Because the laser links meet U.S. Space Development Agency standards, Lightspeed satellites can seamlessly pass data to and from other allied spacecraft.
“When you hear others talk about data centers in space, that is another opportunity,” Goldberg said. “If there are data centers in space, it needs to be connected back to the Earth. And so when we think about space relay, it covers a pretty wide range of applications that we are quite bullish on.”
Maturing debt notes in December
The immediate hurdle is not in space, but on the balance sheet. Telesat must refinance roughly $2.3 billion in GEO debt before those notes begin to mature in December.
To protect the new network, Telesat transferred 62 per cent of the Lightspeed equity into an unrestricted subsidiary last year, shielding it from legacy bondholders. Those lenders sued in January, alleging fraudulent conveyance. When asked on the call if the company was considering a Chapter 11 bankruptcy filing to resolve the standoff, Goldberg flatly denied it.
“Our focus is strongly on refinancing the debt prior to the maturities, achieving a consensual outcome,” Goldberg said. “That is the focus. We are spending a lot of time and a lot of energy to achieve that outcome.”
$ millions Q2 2026 Q1 2026 Q2 2025 Revenue 79.5 87.1 106.1 Geostationary segment revenue 78.1 85.6 105.7 Lightspeed segment revenue 1.4 1.4 0.4 Adjusted EBITDA 22.1 35.1 58.7 Adjusted EBITDA margin 27.8% 40.4% 55.3% Geostationary segment adjusted EBITDA 43.1 55.2 74.8 Net income (loss) (558.6) (150.9) 75.5 Attributable to Telesat Corporation shareholders (165.8) (45.5) 21.0 Diluted earnings (loss) per share, $ (10.89) (3.04) 1.38 Telesat Lightspeed investment 165 171 — Operating cash flow (75.5) 3.6 — Free cash flow (234.8) (114.1) — Cash and cash equivalents 383.2 522.7 — — of which held in Telesat GEO 160.8 — — Current indebtedness 2,742.7 — — Net debt 3,410.9 3,122.1 — Backlog 2,000 1,900 —
The company recently secured a $166 million ($US 120 million) term loan for a non-guarantor subsidiary, providing a crucial cash buffer for the legacy business. It also expects $261 million ($US 189 million) in U.S. Federal Communications Commission incentive payments for clearing C-band spectrum ahead of terrestrial wireless auctions.
Telesat maintained its full-year guidance for the GEO segment, expecting revenue of about $310 million. Meanwhile, capital spending on Lightspeed will jump to roughly $1.4 billion this year to cover the expanded manufacturing run, fully covered by the Canadian government’s milestone payments.
What to watch
Investors had not been reading any of this as trouble. Telesat closed at a 52-week high on Aug. 12, nearly triple where the shares sat a year earlier, with almost half that gain arriving in the session after the Arctic award.
On Thursday, the day the results landed, the shares closed down 14 per cent.
Three dates decide whether they are right. The first Lightspeed launches are due before the end of this year. The Arctic milestone payments begin this quarter. And in December, the first of the geostationary debt comes due, against $160.8 million of cash in the business that owes it and a refinancing that has been under discussion since last fall.