BREAKINGVIEWS-SpaceX’s nascent monopoly faces durability test

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Johnson

LONDON, Feb 26 (Reuters Breakingviews) - Investing in an Elon Musk company is less a bet on financial outperformance than a statement of faith in his vision for the future. SpaceX plans to launch one million satellites that will serve as distributed cloud servers in space. These orbital data centers will supposedly harness the power of the sun to process artificial-intelligence workloads. To make it happen, Musk thinks he may need a satellite factory on the moon. He’ll undoubtedly need plenty of cash – which is where a potential SpaceX initial public offering comes in.

At its core, SpaceX is today a profitable satellite communication and launch business with a major lead over would-be rivals. Reuters reported, citing two people familiar with the matter, that Musk's group generated some $8 billion in EBITDA last year on $15 billion to $16 billion of sales. Starlink, its satellite broadband unit, accounted for 50% to 80% of total revenue. The implied group margin of roughly 50% is impressive for what is in large part a broadband supplier with 10 million subscribers worldwide.

At a $1 trillion valuation, using SpaceX's price tag from its recent merger with Grok chatbot maker xAI, it might look like the company is preparing to capture a hefty share of the global telecom market in short order. But the reality is that satellite connectivity is a complement to conventional networks – not a replacement for them. Most consumers in developed markets will find that a fixed-line broadband connection meets their needs at home, while 4G and 5G are readily available on-the-go. Demand for satellite services comes from people and places that telecom companies otherwise struggle to reach.

This isn’t a tiny market, but it will get crowded. Amazon.com AMZN.O recently got the greenlight from the U.S. Federal Communications Commission to add around 4,500 more satellites to its planned constellation – taking the total to just under 8,000. Some 200 satellites have been launched so far, with the full fleet due to be in service by 2029. China, meanwhile, is developing two low-earth-orbit networks of its own: one for government and security uses and another aimed at international customers, with tens of thousands of planned satellites in total.

Though SpaceX will list with an effective monopoly in satellite communications, its deep-pocketed rivals have the ability and resources to drain Musk's moat. China’s space efforts are backed by various state-linked entities, which should bolster their chances of success. For its part, Amazon is designing its user terminals with low production costs in mind. If it passes these savings on, and thereby undercuts Starlink, it could gain a market foothold.

Musk’s recent political entanglements also appear to have put a theoretical cap on the size of Starlink’s government and defense business, at least outside its home market. In February 2025, Reuters reported that U.S. negotiators had used Starlink access as a bargaining chip when trying to broker a critical minerals deal with Ukraine. Though Musk denounced the claims on X, the episode clearly unsettled Ukraine’s European allies, who are seeking sovereign alternatives to the satellite service.

To this end, France invested $1.6 billion in Eutelsat Communications – the operator of the OneWeb constellation – ETL.PA last summer. The French state is now the largest shareholder in the group, which has some 600 satellites in low-earth orbit. Germany and Italy have also expressed an interest in building their own constellations for secure government and military communications. Were Musk and the U.S. still viewed as reliable partners, such measures may not even be on the table.

Threats to Starlink’s continued domination could also come from within. The recent merger of Musk’s xAI and the rockets-and-satellites group leaves SpaceX exposed to new regulatory and financial risks. According to documents seen by Bloomberg, xAI reported a net loss of $1.5 billion for the three months to the end of September 2025, while it burned through some $8 billion in cash in the first nine months of the year. This makes growing the top and bottom lines at Starlink look even more critical for the combined group. And there is regulatory risk, as multiple jurisdictions are investigating the Grok chatbot, which produced and circulated sexually explicit images on social network X.

All the noise around the company, and limited financial disclosures, make it tricky to value. Assume, for the sake of argument, that 70% of SpaceX's recent $1 trillion merger value is attributable to Starlink, roughly in line with its revenue contribution. That would imply a valuation of around $700 billion for the satellite unit.

Analysts at Quilty Space reckon Starlink could bring in roughly $16 billion in revenue and $11 billion in EBITDA this year. At an enterprise value of $700 billion, this would imply a forward sales multiple of 44 and an EBITDA multiple of 64. That's in the same ballpark as super-racy Palantir Technologies' PLTR.O equivalent valuations of 42 times 2026 revenue and 72 times 2026 EBITDA, using Visible Alpha data, and is therefore in a different stratosphere to the single-digit multiples of Eutelsat and telecom groups like T-Mobile US TMUS.O and Verizon Communications VZ.N.

Granted, the older communications groups are barely growing compared with Starlink, which arguably justifies a more Palantir-style multiple for Musk's business. Even then, however, it's hard to make the numbers work. Using analysts' long-term forecasts, to factor in growth expectations, Palantir trades at just under 18 times 2030 EBITDA. Applying that multiple to Starlink would imply that the satellite unit of SpaceX needs to produce $39 billion of EBITDA that year in order to justify a $700 billion enterprise value for the division.

Longtime SpaceX bulls Morgan Stanley, by comparison, think Starlink's revenue could reach almost $50 billion by 2030, which using a 50% margin would imply $25 billion of EBITDA. That's impressive, but well short of what's needed to buttress the valuation. And Morgan Stanley's forecasts look very much like a blue-sky scenario. Even if Musk pulls off a trillion-dollar stock market launch, that’s no guarantee of a smooth ride.

Follow Jennifer Johnson on Bluesky and LinkedIn.

(Editing by Rob Cyran; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))