SpaceX’s new numbers: Starlink becomes the sole profit driver, 2 trillion valuation IPO faces a big spending test

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SpaceX is about to launch a potentially record-breaking IPO, and its latest leaked financial data reveals a highly polarized set of fundamentals: the Starlink satellite internet business has become the company's only profit engine, while the rocket launch and artificial intelligence (AI) businesses are deeply mired in massive cash burn.

On April 13, technology media outlet The Information reported that unpublished financial data shows SpaceX’s total capital expenditure last year reached $20.7 billion, exceeding its total annual revenue, with a net loss nearing $5 billion. The approximately $3 billion in free cash flow generated by Starlink was far from enough to fill the roughly $17 billion cash deficit from the rocket and AI businesses combined.

Market analysts have pointed out that this unconventional IPO is essentially Elon Musk raising funds for his ambitions in space exploration and AI, and investors need to be fully aware of the potential financial risks before participating. Whether SpaceX’s current $2 trillion valuation will be accepted by the market will largely depend on whether investors are willing to pay a premium for Starlink’s rapid growth, as well as for the company’s long-term visions such as space data centers and AI competition.

Starlink: The Only Profit Engine, Strong Growth Momentum

SpaceX’s financials show significant internal divergence.

According to financial data disclosed by The Information, the Starlink business generated $11.4 billion in revenue last year, a year-over-year increase of 50%, accounting for 61% of the company’s total sales. This is the only segment within SpaceX that generates cash flow, with its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) reaching $7.2 billion, and profit margin jumping from 41% in 2023 to 63%.

Chris Quilty, a satellite and space analyst at Quilty Space, stated that Starlink is providing data capacity previously unimaginable, attracting a wide range of customers, including those in urban areas.

However, the cash generated by Starlink is still far from sufficient to sustain SpaceX’s other businesses. Data shows that SpaceX’s capital expenditures last year reached $20.7 billion, with an overall cash burn of about $14 billion.

Of this, the rocket launch business saw revenue increase by only 8% to $4.1 billion, generating roughly $3 billion in negative free cash flow; the AI business, which includes social media X and model developer xAI, had revenue of just $3.2 billion but nearly $14 billion in cash burn.

The report notes that despite Starlink’s outstanding performance, SpaceX as a whole remains a “money pit,” with soaring AI development costs making it the largest source of losses.

Doubts Surround the $2 Trillion IPO Valuation Logic

The report states that SpaceX’s listing will be a significant test of the public market’s ability to price extreme growth stories, as SpaceX’s current valuation logic requires investors to be extremely optimistic. The company’s most recent valuation was $1.25 trillion, equivalent to 266 times last year’s EBITDA.

This multiple is significantly higher than the 16-36x range of tech giants like Meta, Alphabet, and Nvidia, and even exceeds the 119x multiple of another Musk-owned company, Tesla.

In addition, according to The Information, some bankers are even hoping to assign SpaceX a $2 trillion valuation, which is already beyond the scope of traditional financial analysis.

To support this valuation, SpaceX is trying to present investors with a blueprint for the synergetic development of three major businesses, such as leveraging its advantages in rocket launches to send data centers into space and thus drive the AI business. But there is no denying that the cost of AI development is extremely high, and investments in rockets and data centers are continuously squeezing the company’s profit margins.

The Information’s analysis points out, this is not a conventional stock issuance, but rather Musk asking the public to fund his grand ambitions to compete in AI, build orbital data centers, and enable space travel. While these ambitions are grand, they may not be the cornerstone of building a profitable company.

For potential investors, the key is to remain clear-headed and realize that investing in SpaceX means taking on real risk of capital loss. The final investment decision will depend entirely on their risk appetite for the company’s future vision.

Risk Warning and DisclaimerThe market involves risks, and investment must be prudent. This article does not constitute individual investment advice, nor does it take into account the special investment goals, financial situation, or needs of any particular user. Users should consider whether any opinions, viewpoints, or conclusions in this article fit their own circumstances. Any investment based on this is at your own risk. ```