The Starlink Problem
Things don't quite look right.
SpaceX is going public in a matter of weeks, which means they have filed an S1, a document that lets us finally see some of the company’s murky financial machinations. There are a tonne of revelations to be found in here — that is, once you get past the painful levels of hollow hype that come across as desperation more than vision. One revelation is about Starlink, as this S1 paints it as the crown jewel of SpaceX, not just because it is the only profitable division of SpaceX, but because it seems to suggest Starlink will dominate the internet provider market. I have even talked to people who want to invest in SpaceX’s ludicrously overvalued IPO just to get a slice of the Starlink pie. But sadly, when you look at the numbers and their actual meaning, this narrative totally falls apart.
Let’s start with the 2026 Q1 figures for Starlink as laid out by this S1 filing. Starlink had a total of 10.3 million paying users, just over double the number they had this time last year, with each paying an average of $66 per month (a sharp fall from $99 a month in 2023), generating $3.26 billion in revenue and $1.19 billion in operational profit.
The fact that Starlink is profitable at all is utterly remarkable. For years, Starlink was wildly unprofitable, and thanks to the fact that its satellites only last a few years, it was set to never reach profitability. There are many experts and non-experts, like myself, who believed Starlink would never reach this point. You have to hand it to the engineers and sales team for pulling off this utter miracle (even though I have my suspicions about this figure). But we will get to that topic in a minute.
The Market
What was almost side-splittingly funny was seeing the projected addressable market, or how much of the internet provider market they believe they can secure for Starlink, which this IPO set at $870 billion. That equates to 67 times their current revenue! Now, the global internet service provider market size was estimated at just $598.70 billion in 2024 and is predicted to rise to $1125.10 billion by 2035. In other words, Musk predicts Starlink will dominate this market with roughly 80% market share!
This is the problem with Starlink, because that is simply not possible.
Let’s start with the fact that in order to take a majority share of the market, Starlink will need to offer better-than-average internet speeds and below-average cost.
The numbers in the S1 suggest that currently, Starlink’s operational cost per user is $50 per month ($2.07 billion in operational costs for 10.3 million users over a quarter). This broadly means that Starlink currently can’t offer its services for less than that per user without operating at a loss. This is a significant problem if Musk wants global market domination. You see, internet in the US is extremely expensive, averaging $68 per month, which makes Starlink a middle-ground option, whereas internet in Europe is significantly cheaper, at just $56.59 per month, making Starlink comparatively expensive. What’s more, the average internet speed in Europe and the US is noticeably faster than Starlink’s maximum speeds, and the average connection is more stable (with more on that in a minute).
In other words, Starlink’s current cost of operation per user prices it out of being a market dominator, because if it dropped its prices to become broadly competitive across the market, it would operate at a loss.
Here is where people will mention that the cost per user will go down, just as it seems to have done over the past few years, which is why Starlink is now profitable when it wasn’t before.
But hold your horses! There are two very significant reasons why that might not be the case: depreciation and the city problem.
