SpaceX’s Starlink Internet Continues to Operate at a Loss

SpaceX’s Starlink Internet Continues to Operate at a Loss

Despite its rapid expansion, SpaceX’s Starlink satellite business is reportedly spending more than it earns. Insiders familiar with the company’s financials indicate that Starlink has occasionally incurred losses of hundreds of dollars per ground terminal shipped, challenging claims by CEO Elon Musk and other executives that the business is profitable.

Starlink, which offers space-based internet services to over 2.6 million customers, often excludes the significant costs associated with launching satellites into space when presenting financial figures to investors. These insiders describe SpaceX’s accounting practices as more artistic than precise, suggesting that the business isn’t genuinely profitable on an operational basis.

Private companies like SpaceX are not required to disclose their financials publicly and often manipulate their numbers during fundraising. While many operate on external financing while consuming cash, insiders claim that Starlink’s profitable quarters have been less frequent than Musk implied when he announced “breakeven cash flow” on his social media platform, X, last year.

When questioned about Musk’s statements at a recent Washington conference, SpaceX CFO Bret Johnsen stated, “I can’t provide exact figures, but our satellite business is currently generating positive cash flow and is in profitable territory.”

Similar to how Musk’s electric car company, Tesla Inc., disrupted the automotive industry, SpaceX is revolutionizing the rocket and satellite market. The company has reduced rocket launch costs with reusable boosters, primarily produced in-house. With Starlink now comprising the majority of active satellites globally, SpaceX’s prominence is growing.

In December, SpaceX was valued at approximately $180 billion, placing it alongside corporate giants like Verizon Communications Inc. and General Electric Co. The company has become integral to the US government’s space program and is a significant player in national security, partly relying on Starlink for revenue.

SpaceX believes that there’s a limit to the profitability of rocket launches. Musk envisions the rapidly expanding satellite business as the financial backbone for his ambitious goal of colonizing Mars. Some investors estimate that Starlink will contribute over half of SpaceX’s revenue in 2024.

Gwynne Shotwell, SpaceX’s President, highlighted Starlink’s potential customer base, stating, “While there are around 150 rocket customers globally, Starlink has eight billion potential users.”

However, an influx of users, particularly in urban and suburban areas, has strained Starlink’s system, causing performance issues. Mark Giles, a lead analyst at Ookla, which monitors Starlink speeds and internet performance, noted that the system’s speed declined in 2022 as user numbers increased. Speeds have since improved, especially in less populated regions.