When analysts and investors talk about the SpaceX (SPCX) market debut, they are, in large part, talking about Starlink. The satellite internet service has grown from an engineering project into the dominant revenue machine, supercharging the world's most valuable private company turned instant public behemoth. In the company's IPO prospectus filed on May 20, SpaceX revealed it lost nearly $2.6 billion last year, but that was due to its AI efforts.
But SpaceX's Connectivity segment, which includes its Starlink satellite service, earned around $7.2 billion in adjusted EBITDA, up a healthy 86.% year over year. Competitors in the satellite internet space are either way off or work only in commercial applications, such as aviation. Amazon's (AMZN) Leo service isn't available yet.
However, CEO Andy Jassy promises it will be up and running at some point this year — a tough order considering Amazon has only a handful of satellites in orbit.On April 14, Amazon announced it is buying satellite company Globalstar (GSAT), enabling Leo to add direct-to-device services to its low-earth-orbit (LEO) satellite network and extend cellular coverage to customers beyond the reach of terrestrial networks. Amazon also entered an agreement with Apple (AAPL) for Leo to power satellite services for certain iPhone and Apple Watch models. Examining Starlink's business model and growth plans is key to understanding the SpaceX story.
Add it all together, and it made SpaceX the most anticipated offering of all time, with its sheer size dwarfing all others. Its surge in its first day of trading already left the company as one of America's largest public companies. At its core, Starlink is a global broadband internet service delivered from space that reaches 10.3 million subscribers across residential, business, and government segments, with plans to expand even further, SpaceX said in its prospectus.
Currently, the service is "a low-latency, broadband internet system delivered via a constellation of thousands of LEO satellites" that "extends SpaceX's advantage by vertically integrating the full loop — design, manufacturing, and operation — at unprecedented scale," according to a recent report from PitchBook about the importance of SpaceX and Starlink. The result is a system unlike anything previously built: global, fast, and almost entirely controlled end to end by a single private company. Rather than relying on ground-based fiber or cell towers, Starlink uses a constellation of satellites in low Earth orbit — just 340 to 750 miles above the surface — to beam high-speed internet directly to small, self-installing dishes on the ground.
Because LEO satellites are much closer to Earth than traditional geostationary satellites, which orbit at 22,000 miles, Starlink says the signals travel far shorter distances, reducing latency to 25 milliseconds, comparable to many wired broadband connections. The scale of the Starlink satellite constellation is massive. SpaceX revealed its constellation comprises more than 9,600 operational satellites, accounting for about two-thirds of the 14,300 active payload satellites globally, per Pitchbook.
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