Starlink Profits Are More Elusive Than Investors Think

SpaceX's prized Starlink satellite business is still burning through more cash than it brings in.

People familiar with the finances of one of the world's most valuable private companies say Starlink has - at times - lost hundreds of dollars on each of the millions of ground terminals it ships, casting doubt on claims by CEO Elon Musk and the company's top brass that the business is in "profitable territory".

Starlink, which provides space-based internet service to more than 2.6 million customers, often strips out the hefty cost of sending its satellites into space to make the non-public numbers look better to investors, these people said, asking not to be identified discussing private information. They describe the company's accounting as "more of an art than a science" and say it's not actually profitable based on an operational and ongoing basis.

Closely held companies don't have to publicly release their financials and often massage their numbers while fund-raising. Many operate for years by subsisting on financing while burning through cash. But people with knowledge of Starlink's balance sheet say money-making quarters have been less consistent than Musk suggested to investors when he celebrated having achieved "breakeven cash flow" in a post last year on his social media platform, X.

When pressed further about Musk's comments at a Washington conference last month, SpaceX chief financial officer Bret Johnsen said: "I don't know that I want to quantify those numbers, but we are in positive cash flow and profitable territory for our satellite business now."

Much as Musk's electric car manufacturer, Tesla, upended the global motoring industry, SpaceX is remaking the market for rockets and satellites. It has slashed rocket launch costs with its reusable boosters - largely made in-house. And with Starlink now accounting for a majority of all active satellites around the world, the company's global profile is rising.

To reach those customers, Starlink is building a larger network of powerful satellites that zip around Earth at relatively low altitudes to reduce latency, the time it takes for data to travel from satellites to terminals.

Right now, Starlink has 5 600 active satellites deployed, but plans to add tens of thousands more to reduce transmission times and boost its internet capabilities around the world. Once fully deployed, the network aims to rival telecommunications providers that use larger and higher orbit satellites that hover over one location.

Unlike with cell service providers, Starlink can't strategically pinpoint areas that need greater capacity by adding static towers. It has to keep adding more satellites to its system, said space researcher Caleb Henry of Quilty Analytics.

Too many people tapping into a satellite at one time can overwhelm the system and cause disruptions for people on the ground. The increase in users in urban and suburban locations has been "dragging down the performance", said Mark Giles, a lead analyst at Ookla, which tracks Starlink speeds and analyses internet performance.

Starlink speeds began to decrease in 2022, coinciding with an increase in users, Ookla found. Speeds have trended upward again, particularly in less-populated regions, as SpaceX started launching upgraded satellites aimed at boosting capacity.

The company says it hopes to ramp up even faster later this year when it starts commercial launches of Starship, a larger rocket than the Falcon 9 currently in use. The costly spacecraft is still undergoing testing and aims to allow SpaceX to launch larger satellites.

"Starlink should accelerate the deployment of its satellites per launch and focus on the reliability of its existing satellites and internet service," said Andrea Lamari, a managing partner at Cuatro Capital, and a transitioning general partner at Manhattan Venture Partners, a venture firm that has invested in SpaceX across multiple funds under their management.

"Starlink has always been able to prominently expand coverage where traditional internet options are limited or non-existent. They must also continue to increase bandwidth capacity and reduce latency at every chance possible," she said.

Capacity issues may be one reason why Starlink is struggling to woo some lucrative corporate contracts.

All the major airlines - Delta, Southwest Airlines, American and United - have spurned the Musk-led service in favour of sticking with established Wi-Fi providers like Viasat. Analysts say SpaceX doesn't provide the long-term contracts and exclusivity that corporate clients often want and that it's cost-prohibitive to rip out existing Wi-Fi for a service that doesn't yet stand out from competitors.

Viasat, for example, has a sales staff that