The Business Behind SpaceX and their IPO

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On June 12th, SpaceX officially went public on the New York Stock Exchange, becoming the largest IPO (initial public offering) in history and instantly placing it among the world’s top 10 most valuable companies (Yahoo Finance). Following the IPO, Elon Musk became the world's first trillionaire; his net worth now exceeds that of the next four richest people combined, as SpaceX was valued at $1.77 trillion (WSJ). Yet, there has been plenty of scrutiny surrounding this IPO, given its rushed timeline and a monster valuation relative to its relatively small revenue. Nonetheless, let's simply unpack how this company came to be and how a company that lost $4.9 billion last year ended up among the ten most valuable companies in the world (Yahoo Finance).

Behind SpaceX are three businesses stacked on top of one another: xAI, the rocket-and-satellite builder SpaceX, and Starlink. SpaceX’s total 2025 revenue was $18.7 billion, an increase of 33% from last year (Yahoo Finance). Starlink’s revenue, by far the most important part of the business, was $11.4 billion, accounting for 60% of the company’s total revenue and up an astonishing 50% from last year (Yahoo Finance). 

xAI is best known for owning the social media platform X (formerly Twitter), but there is much more to it. In March of 2025, Musk privately merged his AI company with X, valuing XAI at $80 billion and X at $33 billion (NYT). The idea was to merge a company that was losing value, X, with one that was gaining value. xAI was created in 2023 to rival OpenAI and Anthropic, and it has grown rapidly, commanding a staggering valuation given the vast capital expenditures required to run an AI company. To put things bluntly, xAI is a cash vacuum. Exact financial data is hard to come by since the company was private, but it’s estimated that xAI was burning through $1 billion a month by the summer of 2025 as it tried to catch up to its competitors (Bloomberg). This was obviously a ginormous problem for Musk, who, in order to give the company a lifeline, merged it with SpaceX in February 2026, a deal that valued SpaceX at $1 trillion and xAi at $250 billion (NYT). The key takeaway is this: xAI is the AI company Grok combined with the social media company X, and it’s the worst-performing part of SpaceX, absolutely burning through cash.

Now, on to the second part of SpaceX: the actual rocket-and-satellite portion of the company. This is what SpaceX is most known for: sending things into orbit. Its business model is straightforward: charge customers like the Pentagon and NASA to launch payloads into space. This segment generated around $4 billion in 2025, roughly a quarter of the company’s total revenue (Reuters). That may sound like a lot, but this portion of the company is actually cash-flow negative, given the large upfront research and development costs associated with developing cutting-edge rocket launch technology. In practice, the rockets and satellites are footing the technology bill for Starlink, the most promising part of the company and the factor driving SpaceX’s lofty IPO valuation. 

Starlink is the part of SpaceX most people don’t think about, but it’s actually the part of the company investors analyze most. It’s the fastest-growing satellite internet provider, with 10,000 satellites in space (Starlink). Starlink is a high-speed internet provider with a goal of reaching every corner of the globe, especially rural regions where traditional fiber cables are unavailable. There’s even a maritime, aviation, and military defense/classified government version of the service, truly reaching every corner and audience of the globe (Starlink). This is the cash engine of SpaceX, with a 10 million subscriber base, double what it was a year prior, generating 60% of SpaceX's total revenue (WSJ). Wall Street, though, is most excited about the margins and the efficiency behind that revenue. Starlink’s profit margin was 41% in 2023 and roughly 63% in 2025 (Yahoo Finance). A 20-point increase in profit margin in two years is astonishing, and it has Wall Street chomping at the bit. 

In summary, SpaceX is a rapidly growing satellite internet provider, an ok rocket business, and a cash-burning AI company, all molded into one. 

Taken all together, SpaceX lost $4.9 billion last year due to heavy research and development costs and capital expenditures on xAI’s data centers. So you’re probably still asking: how is a company losing roughly $5 billion valued at $1.77 trillion, making it one of the top ten companies in the world, worth more than the top ten companies on the London Stock Exchange combined? Well, it's puzzling at first, but remember that the stock price reflects the valuation of all future cash flows. The company may not be generating profit right now, but given its trajectory and growing capacity, especially Starlink’s high profit margin, SpaceX is projected to be heading toward profitability. 

To close out the article, I will give a SWOT analysis for SpaceX to evaluate the company’s position by identifying internal strengths and weaknesses alongside external opportunities and threats. 

Strengths 

1. Cutting Edge Rocket Technology 

2. Starlink’s Profit Margins

3. Integration of Technologies Across Business Models 

Weaknesses

1. NO PROFIT

2. xAI Burning Through Cash

3. Starship Development Delays

4. Reliance on Elon Musk

Opportunities

1. Rapid Expansion of Starlink 

2. IPO Ushered in New Cash

3. Growing Commercial Space Market Demand 

Threats 

1. Market Competition (Microsoft, Blue Origin, etc)

2. Regulatory and Government Risk

3. Cyber Security Concerns