Starship’s Path to Reusability in Doubt After SpaceX’s S-1 Event

SpaceX’s latest IPO and the recent test flight of the Starship rocket have yielded two crucial insights that offer a realistic outlook for the coming years—one that may not please either the company’s advocates or critics.

Beneath grand expectations surrounding AI-driven business profits and lunar base initiatives lies a more pragmatic reality: while an expendable Starship could support SpaceX’s operations, it does not meet the cost efficiencies—and innovative business strategies—that Elon Musk envisions.

At present, SpaceX runs several ventures, but only one is producing significant revenue. Starlink, its satellite communications network, stands as the foundation of the company’s public offering. The revenue statistics are striking; last year, SpaceX’s connectivity division generated $11.4 billion, making up the bulk of the company’s profits.

Nonetheless, there’s a concerning underlying challenge: SpaceX is grappling with capital expenditure issues that have dissuaded other entrepreneurs from adopting this model. To sustain its current service levels, SpaceX needs to replace about 20% of its satellites yearly. In 2023, the company has allocated more funds to its satellite operations ($11.4 billion) than to the development of Starship and its launch capabilities ($8.4 billion).

According to SpaceX’s S-1 filing with the U.S. Securities and Exchange Commission, expenses are anticipated to continue rising, although advancements in technology may facilitate a reduction in these costs relative to revenue.

Musk has claimed that Starship is essential to managing Starlink’s costs, even suggesting that without the rocket’s ability to economically replace satellites, SpaceX could face financial ruin. Notably, in the S-1, it’s pointed out that complete reusability of Starship is not crucial to launch the new generation of Starlink satellites. However, without full reusability, costs are likely to increase, making the business model less attractive.

“If reusability is not achieved, then the launch cost on Starship may not be significantly lower than Falcon 9, even if the full 100-ton capacity is attained (which is by no means guaranteed),” wrote satellite market analyst Tim Farrar in a recent client note. “The cost per launch could escalate to $100M (i.e., $1000 per kg) while frequency remains constrained by production rates of second-stage engines and refurbishment of first stages.”

The recent test flight of the third iteration of Starship and its booster highlighted these concerns. During its maiden flight, the new rocket faced issues with a critical element of reusability—relighting the Raptor rocket engines on both the booster and Starship for a controlled return to Earth. Nevertheless, Starship successfully deployed a set of dummy satellites and two test vehicles into space.

This aligns with SpaceX’s prediction that it will commence launching a new generation of higher-capacity Starlink satellites—60 at a time, which is a twenty-fold increase compared to a single Falcon 9 launch—later this year. At first glance, this seems like a classic example of Musk’s ambitious timelines, but it could suggest that initial launches may see the Starship as expendable. If so, SpaceX may not achieve the anticipated revenue from satellites, and its plans for launching space data centers may become impractical until the rocket reaches reusability.

Starlink Growth Slows

Concurrently, SpaceX’s S-1 indicates that the growth rate of Starlink is slowing.

The company’s total addressable market is assessed based on its potential to extend service to every fixed-broadband subscriber or mobile device worldwide. However, this ambition seems unlikely since Starlink does not compete on price with terrestrial fiber. The remainder of the document implies that SpaceX views direct-to-device service as a supplement rather than a substitute for traditional mobile providers.

Starlink currently claims over 10 million subscribers—more than any other satellite communications provider. However, Farrar notes that user growth has slowed throughout the first quarter of 2026. Quilty Space, a consulting firm, projected earlier this year that SpaceX would end the year with 16.8 million subscribers, necessitating a doubling of the company’s quarterly growth rate, which may be difficult following recent price increases.

Growth is imperative for SpaceX since its new Starlink users contribute less revenue than earlier customers. The average revenue per user has fallen from $99 in 2023 to $66 in the first quarter of 2026—a change driven by the company’s expansion into new international markets where it faces pricing hurdles compared to developed nations. Without a rapidly expanding user base, each additional satellite launched results in diminishing returns.

Increased competition also poses a threat to Starlink. Amazon’s Leo network is nearing the necessary scale to pose a challenge to SpaceX, although it is pending approval from the Federal Communications Commission to extend a deadline requiring the launch of 1,600 internet satellites by July.

Data from SpaceX’s filing presents a grim growth outlook for both the company and its competitors like Blue Origin. Farrar suggests that if even SpaceX—well ahead of its competitors—is witnessing a slowdown in demand, it might indicate that the market for space broadband is smaller than industry players had previously expected.