Due Diligence Capital Notes

AST SpaceMobile holds $3.03 billion in cash, has signed commercial agreements with AT&T, Verizon, Vodafone, Rakuten, and several other major carriers, and just finished deploying what it describes as the largest phased array antenna ever put into commercial low Earth orbit. By any surface-level reading, the company looks poised for its defining moment.

Then you open the income statement. SpaceMobile Service revenue — the direct-to-device satellite connectivity revenue that is the entire point of the company — stands at exactly zero dollars. Meanwhile, in April 2026, a $155–160 million satellite tumbled back into the atmosphere after a launch vehicle deposited it in the wrong orbit. This is where I find myself spending a lot of time thinking about ASTS right now: a company sitting on a genuinely novel technology, backed by the world's largest carriers, surrounded by billions in freshly raised capital, and still not earning a single dollar from the product it was built to sell. Understanding that paradox is the whole game.

What "Remaining Performance Obligations" Actually Tells You

The financial term that best captures ASTS's current position is remaining performance obligations (RPO) — the total contracted revenue a company is legally required to deliver to customers in the future, but cannot yet recognize on its income statement because the service hasn't actually been rendered. Think of it like a deposit you've collected for a catering job: the money is in your account, the menu is agreed upon, but you cannot book it as revenue until the food lands on the table.

As of March 31, 2026, ASTS has approximately $1.2 billion in remaining performance obligations. That figure comes directly from signed agreements with MNOs — mobile network operators, the carriers like AT&T and Verizon who pay AST to add satellite connectivity to their existing customer networks. The company itself confirms: "Revenue allocated to remaining performance obligations, which includes contract liabilities and amounts that will be invoiced and recognized as revenue in future periods, was approximately $1.2 billion as of March 31, 2026." But only about 8.4% of that sum is expected to be recognized in the next twelve months. The revenue runway is long, and the commercial network needs to be fully operational before those dollars start flowing.

This is the structural reality of building a new satellite constellation from scratch. You need satellites in orbit, ground infrastructure installed, regulatory approvals in each country, and seamless integration with carrier networks — all before you can start sending invoices. ASTS is constructing a factory while simultaneously signing contracts with customers who want what the factory will eventually produce.

Building the Factory: The Constellation As It Stands Today

Here is where the engineering story gets genuinely impressive, even as the financial picture remains uncomfortable.

Block 1 BlueBird satellites — ASTS launched five Block 1 BlueBirds in September 2024. These are the proof-of-concept vehicles, carrying phased array antennas roughly one-third the size of the Block 2 generation. They have been used primarily for testing and for generating the engineering services revenue that has started appearing in quarterly filings.
Block 2 BB6 — the milestone — On February 10, 2026, ASTS successfully deployed its first Block 2 satellite, BB6. The key specification is the antenna: up to approximately 2,400 square feet of phased array — a type of antenna that uses hundreds of individual radiating elements to electronically steer a beam without physically moving parts, enabling a single satellite to simultaneously track and serve multiple handsets across a wide geographic footprint. ASTS describes this as "the largest phased array ever deployed in a LEO for commercial use, which is more than three times larger than the phased array of the Block 1 BB satellites and designed to deliver up to 10 times the bandwidth capacity." That last clause matters enormously for economics: commercial viability requires bandwidth, and bandwidth at LEO scale requires big antennas.
Block 2 BB7 — the setback — On April 19, 2026, sister satellite BB7 was lost. The 10-Q describes it plainly: "The Company's Block 2 BB7 satellite was placed into a lower than planned orbit by the upper stage of the launch vehicle. While the satellite separated from the launch vehicle and powered on, the altitude was too low to sustain operations with its on-board thruster technology and was de-orbited." The rocket's upper stage misfired; the satellite ended up in the wrong orbit; the onboard thrusters couldn't compensate. The satellite was functional — it powered on — but it was stranded below a survivable altitude. ASTS expects a Q2 2026 write-off (a permanent reduction in the asset's balance sheet value to zero because it no longer has recoverable value) of $155–$160 million, with partial insurance recovery still being negotiated and as yet unquantified.
Satellites under construction — Despite the BB7 loss, ASTS carries $1.32 billion on its balance sheet in satellites under construction and advance payments. The production line is running. The question is how many more launch failures the capital structure can absorb before the build plan needs to be revisited.

The Capital Structure: Expensive Optimism

How does a company with zero service revenue fund a $1.32 billion construction backlog plus ongoing operating expenses? With aggressive financial engineering, and ASTS has been quite creative.

In February 2026, the company issued $1.075 billion in 2036 2.25% Convertible Notes — debt instruments that pay 2.25% annual interest but can be converted into ASTS shares at a pre-agreed price if the stock appreciates enough. The logic for bond buyers is familiar: you accept a below-market interest rate in exchange for equity upside if the company's shares rise substantially. This is structurally similar to the playbook Strategy (MSTR) has used to tap fixed-income markets for Bitcoin purchases — except here the underlying asset being built is satellite infrastructure rather than digital currency.

After that raise, the balance sheet as of March 31, 2026 looks like this:

Cash and cash equivalents: $3.03 billion (total cash including restricted: $3.46 billion)
Total debt: $3.02 billion across four convertible note tranches plus equipment and bridge loans — the new 2036 2.25% notes at $1.075B, the 2036 2.00% notes at $1.150B, the 2032 2.375% notes at $325M, and additional instruments
Total assets: $6.05 billion
Accumulated deficit: $1.02 billion
Total stockholders' equity: $2.66 billion

The headline: ASTS has essentially borrowed its entire cash balance. Net cash versus net debt is approximately flat. This is not a company sitting on pristine reserves — it is a company that has successfully convinced the bond market to lend it $3 billion on the thesis that direct-to-device satellite connectivity is worth building at scale.

The dilution trajectory also deserves honesty. Class A shares outstanding stood at 298,746,383 as of May 7, 2026, with total shares across all classes at 388,124,572. In Q1 2026 alone, the Class A count grew by roughly 13 million shares through RSU vesting, employee stock programs, and note-to-equity conversions (when bondholders exercise their right to swap debt for shares). Some conversion features can trigger at prices as low as approximately $26.99 per share. Every such conversion dilutes common shareholders. This is acceptable if the per-share enterprise value is growing faster than the share count — but that arithmetic requires the commercial network to actually start generating revenue.

Revenue: Where Things Actually Stand

The Q1 2026 revenue picture is instructive in its proportions. Total revenue was $14.7 million — roughly 20 times Q1 2025's $718,000, which is real progress. Of that $14.7 million, $13.4 million came from products (primarily gateway equipment sold to MNO partners building out ground infrastructure ahead of commercial launch) and $1.3 million from services. Engineering services costs for the quarter ran to $84.1 million. Net operating cash outflow was $48.1 million. Capex was $261.6 million. Net loss attributable to common stockholders was $191.0 million, or $(0.66) per share.

SpaceMobile Service revenue — actual subscription and usage fees for satellite connectivity — remains zero.

The $1.2 billion RPO is the counter-argument to that zero-revenue narrative: the contracts are signed, the money is reserved, the carriers are buying hardware in preparation. But recognizing those obligations as revenue requires the network to be commercially live, the service to be functioning, and regulatory clearances to be in place market by market. Until then, every passing quarter costs roughly $48 million in operating cash burn plus $260-plus million in capex — and those figures aren't shrinking while the constellation is still being assembled.

You can verify all of these figures in the AST SpaceMobile 10-Q for Q1 2026 filed May 11, 2026 on SEC EDGAR.

What Could Break This Thesis

I want to be specific about the failure modes rather than gesturing at vague "execution risk."

Continued launch failures erode the capital cushion faster than expected. BB7's loss consumes $155–$160 million in a single quarter. With $261 million in quarterly capex and a $1.32 billion construction backlog, a pattern of launch failures — across New Glenn, Falcon 9, or any other vehicle — could force ASTS back to capital markets at unfavorable terms, or compel a redesign of the constellation timeline. Each launch carries embedded risk that no amount of engineering on the satellite itself can eliminate.
Zero service revenue means zero evidence that consumers will actually pay. Every monetization thesis for ASTS is currently forward-looking. If integration with AT&T and Verizon proves more complex or expensive than modeled — or if consumers don't pay for satellite fallback connectivity at a price that generates real margin — the $1.2 billion RPO could look very different. The carriers have signed agreements, but carrier agreements are not the same as consumer adoption curves.
Dilution compounds as convertible notes convert at low strike prices. With conversion features potentially triggering at prices around $26.99 per share, $3.02 billion in total convertible debt represents substantial embedded equity dilution. Layered on top of ATM equity sales, RSU vesting, and employee stock programs, the per-share enterprise value needs to grow significantly just to keep existing shareholders from falling behind.
Regulatory and spectrum complexity across dozens of markets. Direct-to-device satellite service requires spectrum coordination with terrestrial carriers in every country where it operates. A shift in FCC policy, a spectrum dispute in a key international market, or delays in regulatory clearance across Europe, Latin America, or Africa would directly delay revenue recognition against those $1.2 billion in performance obligations.

Conclusion

ASTS is one of the few companies I follow that is genuinely attempting to build something that has never existed at commercial scale: a global satellite network that works with the unmodified phone in your pocket, integrated directly into the carriers you already pay. The addressable market — the billions of people in areas where terrestrial coverage fails — is both real and enormous.

But the honest position for an investor in May 2026 is this: you are buying a construction project, not yet a business. The revenues are contracted but unearned. The satellites are being built but some are being lost. The cash is real but so is the $3 billion in debt that funded it. BB6 represents a genuine engineering achievement — a 2,400-square-foot phased array operating in LEO is not a routine accomplishment. The path from that satellite to a cash-generating commercial network, however, still requires flawless execution across launch logistics, MNO integration, regulatory approvals, and consumer uptake across multiple continents.

What I'm watching most closely in the coming two quarters: whether ASTS recognizes its first dollar of actual SpaceMobile Service revenue, and how the insurance recovery on BB7 resolves. Those two data points, more than quarterly revenue beats on equipment sales, will tell me whether the factory is finally starting to produce.