The economics of SpaceX

At the end of June 2026, the share price of SpaceX was around USD 164 per share, and if you multiply that price by the total number of shares in the company, some 13.7 billion, you get a market capitalization of USD 2.163 trillion. Against a global population of 8.264 billion people, the share price of SpaceX is currently at a phenomenal USD $261 per head.

The average revenue per user (ARPU) for the Starlink business is around USD 66 per month, or USD 792 per year. That's down from the 2023 reported ARPU of USD 1,188 due to international pricing used in developing regions in the world, and a push to improve its market share from terrestrial markets. So, this company has a market valuation of USD 261 per head of population but has market penetration of 0.0121% (Figure 1).

Even if Starlink increases its user base to a completely unlikely number of 1 billion users, each user would need to account for around USD 2,000 of value to justify the share valuation. At the same time, the ARPU of the global mobile industry sits at between USD 72 and USD 120 per year, and it's steadily declining over time at a rate of around 1.3% per annum. So, in ARPU terms, Starlink is outperforming the global mobile industry by a factor of 8 or so.

But so far Starlink is not a direct competitor to terrestrial mobile networks. Starlink can only do limited-capacity services to mobiles and falls far short of the 200 - 500Mbps of the terrestrial 5G networks. If you want to increase the capacity of the services offered to mobile devices, you need to use far larger antennae on the spacecraft, and the only provider (so far) in that particular market sector, AST Space Mobile, has demonstrated capacity up to 100Mbps. In the mobile device space, Starlink looks like a triumph of exuberant hype over a more sobering reality.

The Starlink prospectus notes that: "Based on the total number of connected devices globally and the mobile ARPU, we estimate the Starlink Mobile market opportunity to be $740 billion."

However, current system designs offer only limited capacity to mobile devices, at around 4Mbps per user. This may be acceptable in remote areas, but it is not competitive more broadly. Achieving this projected market size at USD 100 annual ARPU would require over one billion users, placing Starlink in direct competition with terrestrial networks while offering an inferior service.

So perhaps this is all about the terrestrial broadband networks rather than mobile systems. The industry rate of broadband ARPU is approximately double the ARPU of mobiles, at around USD 240 per year.

Starlink has gathered 10M predominantly broadband users to date. SpaceX reported 2025 revenue of USD 18.67 billion. Connectivity services contributed USD 11.39 billion, or 61% of the total.

Here, Starlink's prospects appear healthier, with an ARPU of around USD 1,000 per year - roughly four times the industry benchmark for fixed broadband. However, Starlink has so far been positioned as a user-terminal-based service that generally delivers between 50 - 250Mbps downlink and 20 - 50Mbps uplink. Starlink V3 satellites are reported to provide a total of 1Tbps of downlink capacity and 160Gbps of uplink capacity, divided across 48 downlink beams and 16 uplink beams. If you happen to be the only active Starlink user within a cell, achieving a 1Gbps downlink may be possible.

On the other hand, if you live in an urban area served by fibre infrastructure, current market offerings are moving towards capacities four times higher. A 50G-PON deployment shares a common 50Gbps capacity across a split ratio of between 1:32 and 1:64, yet the market values these fixed broadband services at an ARPU of around USD 240 per year.

For fixed broadband, Starlink is offering a largely undifferentiated access service. Where broadband is already available, it must compete for market share largely on price. Starlink's competitive advantage lies in rural and remote areas, where it is far less expensive than deploying fixed fibre infrastructure. However, rural and remote markets are, by definition, a relatively small segment of the overall market. To grow its user base beyond this segment, Starlink must eventually compete in the more densely populated urban and suburban broadband markets.

This analysis suggests that, in densely populated urban markets, the ARPU for a Starlink broadband service offering up to 1Gbps of capacity would need to be around USD 200 per year or less. That is substantially below Starlink's current ARPU of approximately USD 792 per year for a service that delivers lower capacity.

Starlink's prospects depend heavily on deploying many more, and much more capable, satellites in the future. However, there are some challenges. In the broadband access market, Starlink uses radio spectrum that has traditionally been dedicated to satellite communications: Ku-band (10.7 - 12.7GHz downlink and 14.0-14.5GHz uplink) and Ka-band (17.8 - 20.2GHz downlink and 27.5 - 30.0GHz uplink). Additional capacity is expected to come from the use of V-band (37.5 - 42.5GHz downlink and 47.2 - 51.4GHz uplink) and E-band (71.0 - 76.0GHz downlink and 81.0 - 86.0GHz uplink).

In the mobile market, Starlink uses S-band spectrum (around 1.9GHz and 2.0GHz). For mobile services, this direct-to-device satellite capability may still offer only around one hundredth of the capacity per square kilometre of a 5G network operating in a sparsely populated rural environment. However, Starlink is not saying that it will offer coverage only where there is no existing 5G service, but urban and suburban markets as well.

So how could a satellite-first, radio-based service become the preferred access service in the densely populated locales of suburbs and cities? The more mundane realities of utility economics and radio physics suggest that it can't.

In bidding SpaceX's share price up to USD 160 and beyond, investors are clearly not valuing the company on Starlink's current service profile as a connectivity utility. That valuation necessarily rests on a hazy vision of what SpaceX might become in the future.

Alongside Starlink, the SpaceX prospectus also highlights the company's prospects in X, Grok, payments, and Artificial Intelligence (AI). It estimates a USD 2.4 trillion market for AI infrastructure, a USD 760 billion market for consumer AI subscriptions, and a USD 600 billion digital advertising market, while pointing to a digital economy that is expected to reach USD 22.7 trillion within the next few years.

Connectivity is not the business plan. In the eyes of SpaceX, connectivity is the customer acquisition strategy, while the value lies in the other activities users perform on their Starlink-connected devices. The underlying assumption is that Starlink places SpaceX in a position to channel users towards its own services and capture a far larger share of revenue from those activities.

Starlink brings the customer on board. Mobile keeps them engaged. X captures attention. Grok becomes the AI assistant. X Money handles transactions. Enterprise AI tools generate recurring business revenue.

In that model, connectivity becomes less important as a profit centre and more important as a control point.

We've heard and seen all this before. In the telco world, the introduction of mobiles heralded the prospect of the platforms where connectivity captured the customer, and the apps on the mobile device captured the user's attention, payments, information tool and business device. The original, and very naive view on the part of the telcos, saw these apps as being managed by the mobile operator, and a small fraction of the revenues coming from this line of activity would fund a new golden age for the telcos. Obviously, this did not happen. Applications flourished, but outside of the overarching control of the connectivity provider.

We saw a similar play with Apple and the iPhone, and Google and the Android platform, where Apple and Google attempted to channel all mobile transactions through their respective stores so they could take their share of the action. The problem is that many regulatory regimes want this sector of the market exposed to open competition, and the cost of constantly defending an extractive, completely one-sided business model in every part of the world has created an environment where the only way Apple and Google can relieve even a small part of this pressure is by reducing their fees. This attrition won't relent until the entire capture model is destroyed.

So, the question behind this wild share valuation is - will Starlink fare any differently in trying to leverage device connectivity into a position where it is taxing the transactions that occur with those devices? Previous iterations from this exact same playbook say: Of course not!

What we are left with is a classic economic bubble.

Bubbles are fundamentally driven by speculative hype and exploit herd behaviour, contradicting financial commentary. Key drivers include:

• The greater fool theory: Investors buy overvalued assets, not because they believe in the asset's fundamentals, but because they plan to resell it to a 'greater fool' at an even higher price.

• Contagious enthusiasm: Fear of missing out and media hype cause a snowball effect, drawing more buyers into the market.

• Easy credit: Low interest rates or loose lending standards inject excess money into the market, fuelling speculation.

Economist J. K. Galbraith viewed economic bubbles not as rational market anomalies, but as products of mass psychology and 'financial euphoria'. He argued that speculative manias thrive on the illusion that there is 'something new in the world'. Bubbles are driven by a growing disparity between an asset's true economic value and its inflating price. Investors stop focusing on business fundamentals of markets, costs, profits, and dividends, and instead rely solely on the expectation that prices will climb forever, or at least long enough to make a substantial gain and sell the asset to a greater fool. Once a bubble bursts, it inevitably triggers intense periods of blame. Individuals who were widely regarded as financial geniuses during the boom are suddenly villainized. The rest of us switch to a position of sober sanctity, conveniently ignoring our own roles in the prior collective insanity.

So, it's time to strap in, as it's going to be a fun ride!

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