Elon Musk’s SpaceX is no stranger to the stratosphere, and neither is its coming initial public offering.
Investor interest in the IPO, expected this summer, has been climbing toward a record $2 trillion valuation as more details emerge about revenue opportunities such as direct-to-cell service and data centers in space. The offering seems like a bet on science fiction to generate enough sales from space to support such a sky-high price tag. After all, this is a company that first launched a rocket into orbit less than 20 years ago.
The promise of a large commercial space market has been unlocked by drastically lower launch costs, and SpaceX is at the center of this revolution. What investors will be buying is rapid growth, big profit margins and, most important, a competitive moat that is only growing larger.
Unlike Musk’s other ventures, SpaceX doesn’t face much competition — yet. Tesla Inc., the electric vehicle producer that made Musk a billionaire, is struggling as Chinese EV makers pump out cars that match or surpass Telsa on features and are much less expensive. In fact, one of the biggest risks would be a move by Musk to have SpaceX acquire the lagging electric-car producer. Another risk is for SpaceX to drain its resources supporting xAI, Musk's AI company that SpaceX acquired in February, and lose its momentum and its focus on the space opportunities.
SpaceX’s revolutionary Falcon 9 rocket, which lands a spent booster on a drone barge for reuse (but not the payload vehicle), paved the way for a commercial space industry by slashing the cost of launches, which have become routine. In fact, SpaceX fired off Falcon 9s carrying satellites in Florida and California on the same day last week and is on track to set another launch record in 2026.
SpaceX’s competitive advantage is only going to grow when the third version of the company’s Starship becomes operational. The massive rocket has much bigger payload capacity than Falcon 9 and is fully reusable, with both the booster and the payload vehicle designed for recapture on a drone ship or on the launch pad with the now famous mechanical chopsticks.
Also giving a boost to SpaceX’s fortunes is a stumble by Jeff Bezos’ Blue Origin, arguably the nearest challenger to SpaceX. The company, which was founded two years before SpaceX but is far behind and still in startup mode, did successfully launch its New Glenn rocket for a third time on April 19 and was able to recapture the booster on a drone ship. The mission, though, failed to place a satellite built by AST SpaceMobile Inc. in the proper orbit, which means the satellite will fall to Earth and burn up in the atmosphere. That dealt a blow to Blue Origin’s reputation as a reliable launch partner. It was also a serious setback to AST SpaceMobile, which is seeking to compete in the direct-to-device market using fewer, larger satellites in low Earth orbit. Shares of AST SpaceMobile plunged 5% the day after the launch.
As for the legacy space companies, Boeing Co. and Lockheed Martin Corp. have invested in single-use rockets that are reliable but limited on the ability to win launch customers because of much higher costs. Even if the companies pivot toward reusable technology, they may be too late to the game.
A long list of startups are pursuing reusable rockets, including Rocket Lab Corp., Stoke Space Technologies and Relativity Space. But rocket science is difficult, and these startups are either behind schedule or struggling financially. There have been early flameouts as well, including Richard Branson’s Virgin Orbit or Astra Space Inc., which went public and then was taken private after shares plummeted following several launch failures.
The launch advantage, which will grow when Starship is making regular flights, is only the foundation of SpaceX’s competitive moat. It has enabled SpaceX’s Starlink unit, which provides satellite internet service, to assemble an unmatched network of more than 10,000 low-Earth-orbit satellites and scoop up customers.
Starlink ended last year with 9.2 million subscribers, and its consumer business generated the largest share of revenue at about 56%, according to Quilty Space, an industry consulting firm. Maritime, enterprise and aviation customers each contributed around 10% of Starlink’s business. Government, through Starshield, accounted for 16% of revenue, Quilty Space said.
SpaceX captures profit at each stage of its business because it’s fully integrated, making its own rockets, satellites, ground gateways and customer kits for receiving the broadband internet signal. SpaceX’s sales are expected to rise to $20 billion in 2026, and earnings before interest, taxes, depreciation and amortization are estimated at $14.2 billion, an extraordinarily high 71% Ebitda margin.
SpaceX is now looking to dominate an emerging technology that provides satellite phone service nearly anywhere on earth. For now, SpaceX is partnering with mobile network carriers to include the remote coverage in existing service plans. It’s clear that Musk wants to offer a stand-alone mobile-phone service after paying $20 billion for wireless spectrum in two deals last year with EchoStar Corp., the struggling satellite TV company.
Amazon.com Inc., Bezos’ e-commerce and cloud-computing giant that’s seeking to build its own satellite network in low Earth orbit, followed SpaceX’s lead with its own spectrum deal, announcing last week that it would pay $11.6 billion for Globalstar. Amazon, like other competitors, faces structurally higher launch costs than Starlink, which puts them at a disadvantage from the start.
After cracking the code on how to make money from space with high-speed mobile internet and pursuing the direct-to-device market, SpaceX offers investors an additional and potentially huge upside with Musk's bet on a stretch technology such as data centers in space. The company has all the tools — low-cost launches and in-house production capabilities — to dominate that business, if the concept works. This has attracted even traditionally cautious investors such as Fidelity.
The math on data centers in space can work with Starship’s lower launch costs, Karin Fronczke, chief of global private equity investments at Fidelity, said during a Bloomberg TV interview in March. Fidelity first invested in SpaceX in 2015 when Falcon 9 had only 13 launches under its belt and didn’t have any Starlink satellites in orbit, Fronczke said. Last year, SpaceX made 165 commercial launches, which was more than half of worldwide trips to space.
“There are ambitions to do more on the wireless-carrier front,” Fronczke said about the reasons for SpaceX’s high valuation. “The cherry on top would be the future of orbital data centers.”
There’s little US regulatory risk to SpaceX’s dominance of commercial space because the US needs a champion to keep ahead of China, which had 91 orbital launches last year, according to Jonathan’s Space Report. The biggest risks lie with SpaceX dedicating too much of its cash to xAI — the company entered an agreement earlier this week that gives it the right to buy AI startup Cursor for $60 billion or pay $10 billion for their collaboration — or a move to purchase Tesla.
Otherwise, SpaceX’s substantial competitive moat will only grow deeper and wider.
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