Starship’s approach to recycling looks good after SpaceX’s S-1

The recent flight of the IPO and the Starship rocket test delivered two big data points that offer a realistic view of the coming years – and one that may disappoint both the company’s promoters and its critics.

Hidden behind the amazing expectations of business profit of AI and the plans of the base of the Moon is a more grounded reality: An affordable Starship can keep SpaceX in business, but it does not reach the reduction of costs – or the business models of the border – Elon Musk is betting.

SpaceX is many businesses, but currently only one is generating significant revenue. Starlink, its satellite communications network, is the mainstay of the company’s public offering. The top line is pretty unbelievable; SpaceX’s communications business generated $11.4 billion in revenue last year, the majority of the company’s profits.

But underneath, you can see the treadmill of huge expenses that scared previous entrepreneurs into this model. SpaceX needs to replace about a fifth of its satellites every year just to maintain its current level of service. It has invested more in its satellite business ($11.4 billion) since early 2023 than in building Starship and its launch infrastructure ($8.4 billion).

SpaceX’s S-1 filing with the US Securities and Exchange Commission predicts that costs will continue to grow, but expects that its technology improvements will allow it to reduce as a percentage of revenue.

Musk said Starship is key to keeping Starlink costs under control, even though SpaceX could go bankrupt without the vehicle’s ability to replace those satellites cheaply. In that context, the note that stood out from SpaceX’s S-1 was the first acknowledgment that a full Starship reuse is not necessary to launch a new generation of Starlink satellites. But without full recycling, costs will rise, making business less attractive.

“If this reusability is not achieved then Starship launch costs may not be much lower than Falcon 9, even if the full 100-ton payload is achieved (which is by no means a foregone conclusion),” satellite market analyst Tim Farrar wrote in a note to clients last week. “The cost of each launch can reach $100M (ie $1000 per kilogram) while the tempo remains tied to the rate at which the second stages can be manufactured and the first stages can be repaired.”

Last week’s test flight of the third version of the Starship and its booster bore out those concerns. The first flight of the new rocket saw problems with a key reusability capability – re-igniting the Raptor rocket engines on both the booster and the Starship for a controlled return to Earth. However, Starship launched a set of dummy satellites and two probe vehicles into space.

That helps square SpaceX’s prediction that it will begin launching a new generation of high-performance Starlink satellites 60 at a time, a twenty-fold increase in capacity compared to a single Falcon 9 launch, later this year. At first glance at the classic example of Musk’s timelines, it might actually be expected that the first launch would use a Starship. If so, SpaceX may not be able to rely on as much free satellite revenue as expected, and its plans to launch space data centers won’t work until the rocket is reused.

Starlink’s growth is slow

At the same time, SpaceX’s S-1 shows that Starlink’s growth is slowing.

SpaceX’s total addressable market capitalization is based on its ability to provide service to all fixed broadband or handset subscribers in the world. That will not happen because Starlink does not compete on price with terrestrial fiber. All the text suggests that SpaceX continues to see the direct device as a complement to, rather than a replacement for, terrestrial mobile providers.

Starlink has more than 10 million subscribers, more than any other satellite communications network. But Farrar notes that the rate of user growth slowed during the first quarter of 2026. Quilty Space, a space consulting firm, predicted earlier this year that SpaceX would end the year with 16.8 million subscribers. That would require the company’s quarterly growth rate to nearly double from where it is now, which could be difficult after recent price increases.

Growth is important to SpaceX because its new Starlink users are paying less than before. Starlink’s average revenue per user fell from $99 in 2023 to $66 in the first half of 2026 – a change driven by its expansion into new international markets where it can charge as much as it does in advanced economies. Despite a rapidly growing user base, each new satellite launched makes less money.

Increased competition also threatens Starlink. Amazon’s Leo network is approaching the scale needed to put pressure on SpaceX, though it is waiting for the Federal Communications Commission to extend a deadline requiring it to launch 1,600 Internet satellites in July.

The data in SpaceX’s filing reveals a bleak growth forecast for the company and rivals such as Blue Origin. Farrar says that if SpaceX – far ahead of any other company – is seeing declining demand, that may indicate that the market for space broadband is smaller than the players expected.