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SpaceX\u2019s recent IPO and Starship rocket test flight delivered two big data points that offer a realistic vision for the coming years \u2014 and one that may disappoint both the company\u2019s boosters and its critics.<\/p>\n
Hidden behind the fantastic expectations for AI enterprise profits and plans for a moon base is a more grounded reality: An expendable Starship could keep SpaceX in business, but doesn\u2019t achieve the cost reductions \u2014 or frontier business models \u2014 Elon Musk is betting on.<\/p>\n
SpaceX is many businesses, but right now only one is producing significant revenue. Starlink, its satellite communications network, is the tent pole of the firm\u2019s public offering. The top line is fairly incredible; SpaceX\u2019s connectivity business generated $11.4 billion in revenue last year, the bulk of the company\u2019s earnings.<\/p>\n
But underneath, you can see the capital expenditure treadmill that scared previous entrepreneurs away from this model. SpaceX needs to replace about a fifth of its satellites every year just to maintain its current level of service. It has invested more in its satellite business ($11.4 billion) since the beginning of 2023 than it has building Starship and its launch infrastructure ($8.4 billion).<\/p>\n
SpaceX\u2019s S-1 filing with the U.S. Securities and Exchange Commission predicts costs will continue growing, but expects that improvements to its technology will allow it to reduce them as a percentage of its revenue.<\/p>\n
Musk has said that Starship is the key to keeping Starlink\u2019s costs under control, even saying that SpaceX could go bankrupt without the vehicle\u2019s ability to replace those satellites cheaply. In that context, a note that stood out in SpaceX\u2019s S-1 was the first acknowledgment that full reusability of Starship isn\u2019t necessary to launch the new generation of Starlink satellites. But without full reusability, the cost will go up, making the business less attractive.<\/p>\n
\u201cIf this reusability is not achieved then the cost of launch on Starship may not be much lower than Falcon 9, even if the full 100 ton capability is realized (which is by no means a foregone conclusion),\u201d satellite market analyst Tim Farrar wrote in a note to clients last week. \u201cThe cost per launch may be as much as $100M (i.e. $1000 per kg) while tempo remains constrained by the rate at which second stages can be manufactured and first stages can be refurbished.\u201d<\/p>\n
Last week\u2019s test flight of the third version of Starship and its booster bore those concerns out. The newest rocket\u2019s maiden flight saw issues with a key capability for reusability \u2014 relighting the Raptor rocket engines on both the booster and Starship in order to make a controlled return to Earth. Starship did, however, deploy a set of dummy satellites and two test vehicles in space.<\/p>\n
That helps square SpaceX\u2019s prediction that it will begin launching a new generation of higher-throughput Starlink satellites 60 at a time, a twentyfold increase in capacity compared to a single Falcon 9 launch, later this year. At first glance a classic example of Musk\u2019s timelines, it may actually be an expectation that initial launches will expend the Starship. If so, SpaceX might not be able to count on as much free satellite cash as expected, and its plans to launch space data centers will become untenable until the rocket is reusable.<\/p>\n
At the same time, SpaceX\u2019s S-1 shows that Starlink\u2019s growth is slowing. <\/p>\n
SpaceX\u2019s total addressable market calculation is based on its ability to offer service to every fixed-broadband subscriber or mobile handset in the world. That\u2019s unlikely, though, because Starlink isn\u2019t competing on price with terrestrial fiber. The rest of the document suggests SpaceX continues to see direct-to-device as a complement, rather than a replacement, for terrestrial mobile providers.<\/p>\n
Starlink has just over 10 million subscribers, more than any other satellite communications network. But Farrar notes the rate of user growth fell over the course of the first quarter of 2026. Quilty Space, a space consulting firm, projected earlier this year that SpaceX would end the year with 16.8 million subscribers. That would require the company\u2019s quarterly growth rate to roughly double from where it is now, which may be difficult after recent price increases.<\/p>\n
Growth matters for SpaceX because its new Starlink users are paying less than previous ones. Starlink\u2019s average revenue per user has fallen from $99 in 2023 to $66 in the first quarter of 2026 \u2014 a change propelled by its expansion into new international markets where it can\u2019t charge as much as it does in developed economies. Without a fast-growing user base, each new satellite launched is making less money.<\/p>\n
Increased competition also threatens Starlink. Amazon\u2019s Leo network is approaching the scale required to put pressure on SpaceX, although it is waiting for the Federal Communications Commission to extend a deadline that requires it to launch 1,600 internet satellites by July. <\/p>\n
Data in the SpaceX filing presents a gloomy growth forecast for the company as well as rivals like Blue Origin. Farrar says that if SpaceX \u2014 much further ahead than any other company \u2014 is seeing slowing demand, that may signal the market for space broadband is smaller than the players anticipated.<\/p>\n<\/div>\n
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