BlackSky hit by U.S. budget cuts, but international demand lifts outlook

WASHINGTON — Satellite imagery company BlackSky said Nov. 6 that revenue fell short of expectations in the third quarter as U.S. government spending slowed following the Trump administration’s proposed cuts to a key intelligence contract. But executives said growing international demand for Earth-observation data is helping offset the downturn and could soon make foreign sales the company’s largest source of revenue.

The administration’s fiscal 2026 budget proposal includes a one-third reduction to the National Reconnaissance Office’s commercial imagery procurement, a move that has rippled through companies like BlackSky that rely heavily on government intelligence contracts. The cuts specifically affect the Electro-Optical Commercial Layer (EOCL) program — an NRO initiative to buy satellite imagery from commercial providers.

BlackSky reported $19.6 million in third-quarter revenue, missing analyst expectations and down from the previous quarter. Chief Executive Brian O’Toole told analysts the reduction stemmed from adjustments to the company’s EOCL contract “to reflect the potential baseline budget submitted by the administration.”

EOCL funding has been reduced, “but I’m not sure I would deem it a significant reduction at this point,” O’Toole said. “The budget is not final, and we have seen marks from multiple committees to restore funding.”

Congress is still working through appropriations as the government enters its sixth week without funding, leaving agencies shuttered and the 2026 defense budget unresolved.

Despite the domestic headwinds, BlackSky is seeing a sharp uptick in overseas business. The company said international sales now account for about half of total revenue, up from 40% a year ago. O’Toole said foreign demand is “outpacing our U.S. government business” and that the company expects international sales to exceed U.S. sales for the first time in 2026.

Most international customers are undisclosed, though India and Indonesia are among those working with BlackSky to bolster national Earth observation and intelligence capabilities. The company’s backlog stands at $322.7 million, roughly 90% of which is tied to international contracts.

Demand for Gen-3 imagery

The surge in foreign demand is being driven by interest in BlackSky’s new Gen-3 satellites, which offer 35-centimeter resolution, short-wave infrared sensors capable of imaging through smoke and haze, and inter-satellite laser links that enable rapid retasking for time-sensitive defense missions.

“Over 90% of our backlog is related to international contracts for Gen-3 capabilities,” O’Toole said. “Countries around the world are accelerating their investments in space-based intelligence solutions.”

Two Gen-3 satellites have launched this year aboard Rocket Lab rockets from New Zealand, with a third awaiting launch after a faulty component delayed deployment. BlackSky currently operates two Gen-3 and 11 Gen-2 satellites, and aims to have at least 12 Gen-3 satellites in orbit by the end of next year.

The company reaffirmed its 2025 revenue target of $105 million to $130 million, driven largely by growth overseas. Still, the uncertainty around U.S. government budgets — and the EOCL contract — remains a near-term challenge.

“Although we experienced near-term impacts of the fiscal year 2026 budget on the EOCL program, we are seeing congressional support,” O’Toole said. “We expect to have better visibility once the final budget is approved.”