By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
Panelists agree that Starlink is the core profitable business, but disagree on its valuation and the risks posed by SpaceX's AI and Tesla-related expenses. The panel is bearish on the overall valuation and potential governance issues.
Risk: Ongoing capital leakage to Tesla and xAI, potential supply chain disruptions, and hidden drag on free cash flow.
Opportunity: Long-run upside hinges on scale, orbital data centers, and Starlink monetization.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
SpaceX is growing, but it’s racking up steep losses.
Its Starlink business is subsidizing its unprofitable space and AI segments.
It looks very expensive relative to its recent growth.
SpaceX, the aerospace and artificial intelligence (AI) company founded by Elon Musk, recently filed its S-1 prospectus ahead of its eagerly anticipated IPO. Let's review seven of the most important facts and figures from that filing -- and if they make SpaceX and IPO to embrace or avoid.
In 2025, SpaceX's revenue rose 33% to $18.67 billion. But in the first quarter of 2026, its revenue only grew 15% year over year to $4.69 billion.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
SpaceX generated a net profit of $791 million in 2025. Still, it posted a net loss of $4.94 billion in 2026 after it recast its financial results to reflect its acquisition of xAI -- which owns X (formerly known as Twitter) and the Grok AI platform -- this February.
SpaceX's connectivity business, which houses its Starlink satellite business, accounted for 61% of its 2025 revenue and 69% of its revenue in the first quarter of 2026. The segment's revenue rose 50% in 2025 and 57% year over year in the first quarter of 2026, but its average monthly revenue per user (ARPU) dropped from $81 at the end of 2025 to $66 in the first quarter.
On the bright side, Starlink's growing subscriber base, which reached 10.3 million in the first quarter -- along with a 59% reduction in the manufacturing costs of its terminals in 2025 -- kept the connectivity segment firmly profitable.
But that segment is still SpaceX's only profitable business: it generated an operating profit of $4.42 billion in 2025, but that was more than offset by the space segment's operating loss of $657 million and the AI segment's operating loss of $6.36 billion.
In the first quarter of 2026, the connectivity segment generated an operating profit of $1.19 billion -- but that was erased again by the space segment's operating loss of $619 million and the AI segment's operating loss of $2.47 billion. Therefore, investors should expect its satellite business to continue to subsidize its Falcon rocket launches and AI expansion for the foreseeable future.
SpaceX plans to keep ramping up its AI infrastructure spending. Meanwhile, X's higher-margin advertising revenue declined by $100 million year over year -- which puts more pressure on the social media subsidiary to expand its paid subscriptions. In other words, the AI business will likely remain a money pit and the company's weakest link.
In 2025, SpaceX spent $131 million on Tesla's (NASDAQ: TSLA) Cybertrucks. It also spent $697 million on Tesla's battery energy storage systems throughout 2024 and 2025.
Those deals raise a few eyebrows, since Musk controls both companies. The Cybertruck purchases also occurred right after a series of safety-related recalls hit the popular pickup.
SpaceX plans to put data centers in space as early as 2028. Those orbital data centers would initially be more expensive to build than terrestrial data centers, but they would be cheaper to operate because they use solar power. Those efforts will further squeeze its near-term margins, but they might eventually pay off as more companies start using orbital data centers.
SpaceX claims it has a total addressable market of $28.5 trillion -- including a $22.7 trillion enterprise applications market, a $2.4 trillion AI infrastructure market, an $870 billion market for Starlink's broadband business, a $740 billion market for Starlink's mobile business, a $600 billion digital advertising business, and other nascent markets.
SpaceX reportedly wants to raise about $75 billion and seek a valuation of up to $2 trillion, making it the largest IPO in history. But at that market cap, it would trade at 107 times its trailing sales. That's a meme stock valuation for a company with slowing sales growth, steep losses, and aggressive AI spending plans.
I expect Musk's involvement and the market hype to initially drive SpaceX's stock higher. Still, it will inevitably pull back when investors take a closer look at its wobbly business model. It's less of a space exploration company and more of a satellite communications company that is propping up a deeply unprofitable AI and social networking company. So while SpaceX's IPO will make Musk much richer, it could burn retail investors who chase its initial gains.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled down in 2009,you’d have $569,379!Apple:*if you invested $1,000 when we doubled down in 2008,you’d have $58,129!Netflix:if you invested $1,000 when we doubled down in 2004,you’d have $481,589!
Right now, we’re issuing “Double Down” alerts for three incredible companies, available when you join Stock Advisor, and there may not be another chance like this anytime soon.
**Stock Advisor returns as of May 22, 2026. *
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"A $2T valuation prices in flawless AI and orbital execution that the S-1 provides zero evidence will occur before 2028."
SpaceX's S-1 shows Starlink delivering 57% Q1 revenue growth and $1.19B operating profit, yet this is fully offset by $3.09B combined losses in space and AI. The 107x trailing sales valuation at a $2T target assumes Starlink can subsidize both segments indefinitely while ARPU falls from $81 to $66. Orbital data centers planned for 2028 add near-term capex without disclosed timelines or returns. Related-party purchases of $828M in Tesla products raise governance flags the filing does not address. Investors chasing the IPO will price in Musk hype first and margin reality second.
Starlink's subscriber base hit 10.3M with 59% terminal cost cuts; if ARPU rebounds and capture reaches even 3% of the claimed $870B broadband TAM, the current losses could compress rapidly enough to support a re-rating.
"Starlink's unit economics and growth trajectory are substantially healthier than the consolidated loss figures suggest, but xAI's $2.47B quarterly burn is unsustainable without a clear path to profitability or divestiture."
The article frames SpaceX as an overvalued satellite company subsidizing a money-losing AI venture, but misses a critical structural point: Starlink's 57% YoY growth at 10.3M subscribers with 59% terminal cost reduction suggests the connectivity business is still in early-stage margin expansion, not maturity. At $4.42B operating profit on $11.3B revenue (2025), Starlink alone justifies a $400-600B valuation. The xAI losses are real but represent optionality, not core business rot. The $2T valuation is aggressive, but the 107x sales multiple conflates a loss-making consolidated entity with a highly profitable core business being temporarily obscured by acquisition accounting.
If Starlink's ARPU decline ($81→$66 in one quarter) signals price competition or market saturation, and terminal cost savings don't translate to pricing power, the connectivity moat collapses faster than the article implies—and there's no backup engine.
"The company is pivoting from a high-growth aerospace utility into an over-leveraged, unprofitable AI conglomerate, making the $2 trillion valuation fundamentally detached from its underlying cash flow reality."
The S-1 filing reveals a structural transformation: SpaceX is no longer just an aerospace firm; it is a conglomerate effectively functioning as a venture capital vehicle for Elon Musk's AI and social media ambitions. The 107x trailing sales valuation is egregious, particularly as Starlink’s ARPU is compressing—a classic sign of market saturation or aggressive discounting to maintain subscriber growth. The integration of xAI and X creates significant governance risks and capital allocation concerns, especially given the questionable intercompany transactions with Tesla. Investors are essentially buying a high-risk, cash-burning AI startup disguised as a satellite utility. At a $2 trillion valuation, the margin for error is non-existent, and the 'space data center' narrative is pure speculative theater.
If SpaceX successfully achieves vertical integration of orbital compute and low-latency AI inference, it could render terrestrial cloud infrastructure obsolete, justifying a premium valuation that traditional metrics fail to capture.
"Starlink and space-based data services could generate durable cash flows that justify a premium, provided meaningful profitability milestones are achieved."
SpaceX’s S-1 paints a growth-by-burn narrative: revenue growth is slowing, and losses widen after the xAI tie-in, yet Starlink remains the backbone, contributing the majority of revenue and already showing profitability while subsidies fund rockets and AI push. The long-run upside hinges on scale: a 28.5 trillion total addressable market and orbital data centers could unlock durable cash flows if costs keep falling and adoption accelerates. The IPO price tag could be excessively rich, but a credible bull case rests on Starlink monetization and meaningful profitability from space-based data services materializing before investor enthusiasm wanes.
The strongest counter is that near-term profitability is fragile; if Starlink growth stalls further or AI monetization lags, the immense valuation collapses once losses persist and the orbital-data-center bet proves unproven and capital-intensive.
"Related-party outflows plus data-center capex could drain Starlink cash flow faster than cost savings restore it."
Claude's $400-600B Starlink valuation assumes terminal cost cuts will offset the sharp ARPU slide, yet the $828M Tesla-related purchases signal ongoing capital leakage that could accelerate if xAI's losses widen. This intercompany flow creates a hidden drag on free cash flow precisely when orbital data center capex ramps, a linkage the bullish margin case does not address.
"The Tesla transaction risk hinges on pricing transparency, not the transaction itself."
Grok flags the Tesla capex leakage, but the $828M figure needs context: is this incremental burn or normal supply chain? If SpaceX is buying Tesla batteries/components at market rates for Starlink terminals, that's not 'leakage'—it's vertical integration. The real question: does the S-1 disclose whether these are at-market or preferential pricing? If undisclosed sweetheart deals exist, that's a governance red flag. If not, Grok's hidden-drag thesis overstates the risk.
"Related-party transactions create a governance discount that institutional investors will inevitably bake into the IPO valuation regardless of supply chain efficiency."
Claude, you’re missing the governance reality: in a private-public transition, 'vertical integration' via related-party transactions is a massive valuation discount, not a neutral supply chain event. Whether at-market or not, these $828M flows create a conflict-of-interest overhang that institutional investors will price in as a governance premium. If these transactions are essential to Starlink's terminal production, the dependency on Tesla’s supply chain is a systemic risk that could paralyze SpaceX if Tesla faces its own liquidity crunch.
"Tesla-linked procurement creates supplier concentration risk that could derail Starlink and orbital-capex plans, making governance concerns subordinate to operational exposure."
Gemini, governance risk is valid, but the real hinge is supplier risk. Regardless of at-market pricing, the $828M Tesla-related purchases signal a tightly coupled supply chain. If Tesla’s liquidity or strategy shifts, SpaceX’s Starlink terminal production and even data-center capex could stall, worsening near-term cash burn and delaying returns on orbital assets. The S-1 should disclose contingency suppliers and pricing, or investors will discount SpaceX’s cash flow quality far more than governance flags.
Panelists agree that Starlink is the core profitable business, but disagree on its valuation and the risks posed by SpaceX's AI and Tesla-related expenses. The panel is bearish on the overall valuation and potential governance issues.
Long-run upside hinges on scale, orbital data centers, and Starlink monetization.
Ongoing capital leakage to Tesla and xAI, potential supply chain disruptions, and hidden drag on free cash flow.