SpaceX IPO Watch: Is Starlink’s Margin Story Too Good To Be True? Analyst Says Its Profitability May Be Overstated

• Starlink delivered $7.2 billion in adjusted EBITDA with a 63% margin, making it the company’s only major cash generator.
• GLJ Research analyst Gordon Johnson said Starlink’s margins may appear stronger on the back of internal launches' cost benefits.
• Starlink produced $3 billion in free cash flow, while the launch business burned $3 billion and the AI segment $14 billion.

SpaceX’s potential blockbuster IPO could hinge on investor confidence in Starlink’s profitability, but analysts say the satellite internet unit’s margins may look stronger than they actually are.

Starlink: SpaceX’s Only Cash Engine

SpaceX’s Starlink business generated $11.4 billion in revenue last year, accounting for 61% of total sales, and delivered roughly $7.2 billion in adjusted EBITDA, implying a 63% margin, according to a report by The Information

The satellite broadband unit was reportedly the company’s only major cash generator as its rocket-launch and AI operations continued consuming capital ahead of a potential listing that could become one of the largest IPOs ever.

On Stocktwits, retail sentiment for SpaceX was ‘bearish’ amid ‘extremely low’ message volume.

Internal Launch Pricing Raises Concerns On Starlink Profits

GLJ Research analyst Gordon Johnson said on X that Starlink’s profitability may partly reflect the advantage of launching satellites using SpaceX’s own rockets at prices well below what external customers typically pay.

The debate comes amid growing investor focus on SpaceX’s potential public debut in the near-term, which could become one of the largest IPOs ever and value the company at over $1 trillion.

Johnson compared the structure to “a big family that owns two businesses,” saying outside customers typically pay about $74 million for a Falcon 9 launch, while Starlink satellites may be launched internally at closer to $28 million per mission. Most of SpaceX’s over 160 launches last year carried its own Starlink satellite.

“This means the WiFi business looks really profitable, because it's not paying full price to get its satellites up there,” Johnson said. “Now that everyone gets to look at the books... the WiFi business (Starlink) is actually not at all profitable”

Meanwhile, Satellite communications expert Tim Farrar told The Information in an interview, “If Starlink was paying full price for its launches, then it would be making loss, even though it’s an amazing business.”

Rocket And AI Units Continue To Burn Cash

SpaceX’s launch-services revenue rose just 8% to $4.1 billion, while the company’s AI segment generated $3.2 billion and even trailed leading model developers such as OpenAI and Anthropic in scale and growth.

Starlink apparently produced $3 billion in free cash flow, while the launch business burned about $3 billion and the AI segment nearly $14 billion. Total capital expenditure also hit $20.7 billion, exceeding annual revenue.

On the other hand, rising infrastructure investment across SpaceX’s broader tech ecosystem is weighing on overall profitability. The company generated over $18.5 billion in revenue last year but reportedly recorded a net income loss approaching $5 billion as spending surged on chips and data centers for its AI strategy.

However, Deepwater Asset Management’s Gene Munster said the strategy is part of CEO Elon Musk’s effort to build a vertically integrated stack spanning launch infrastructure, satellite connectivity, compute capacity and AI models, giving the company a plausible path to controlling “every single layer” of the AI stack.

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