Starlink is falling short of promises made to investors eight years ago — by about $10.6 billion in annual revenue.

The satellite internet division of spacecraft manufacturer SpaceX is operating in a world that is more complex than what founder Elon Musk might have envisioned almost a decade ago.

According to internal documents reviewed by the WSJ, Starlink made $1.4 billion in revenue for 2022. Yet in 2015, a presentation used to attract investors to SpaceX said its satellite division would be making $12 billion in revenue and $7 billion in operating profit by the same year.

Space X is privately held, which makes its financial records difficult to access, as opposed to Elon Musk's publicly listed electric vehicle manufacturer Tesla. With a recent valuation of $150 billion, investors looking at sectors like telecommunications and space exploration are closely monitoring SpaceX with expectations of it going public. Musk said in 2021 that Starlink alone will IPO once cash flow becomes reasonably predictable.

Starlink’s Financial Picture: The company is still operating at a loss. In 2022 SpaceX lost $559 million against total revenue of $4.6 billion. It recently became known that Musk took a $1-billion loan from SpaceX to finance his purchase of Twitter, later rebranded to X.

Starlink had about 1 million active subscribers globally at the end of 2022. For context, AT&T (NYSE:T) had over 70 million postpaid mobile internet subscribers in the U.S alone during the first quarter of 2023.

While the reasons behind the lag in reaching expected margins are plentiful, most are related to difficulties finding a solid client base and issues maintaining steady sources of operating capital.

Starlink’s Worldwide Plans: he idea of providing "high-speed, low-latency broadband internet in remote and rural locations across the globe" can be very attractive as a sales pitch, but most internet users are not in need of the service.

Starlink internet is available in 60 countries, including all of North America, most of Europe, Australia and Japan and a handful of countries in South America, Africa and Asia. India is expected to come online soon.

The paradox that Starlink faces is that the majority of people living in those countries reside in urban areas where access to high speed internet always comes cheaper than the basic fee of $120 for the Starship Residential plan, or higher fees for corporate plans.

While Starlink has explored multiple client opportunities across remote-access industries, like off-shore oil rigs and international shipping, the company is still pursuing end consumers by striking deals with third-party distributors like T-Mobile (NASDAQ:TMUS) and offering its standard kit at chain retailers like Home Depot (NYSE:HD).

While the company's mission is to provide internet to the most remote areas of the world, that may not be as profitable as a business strategy. Musk was praised when the company made Starlink available in remote frontlines of war-torn Ukraine, though he later pulled back some of the aid provided. This week, Musk spoke about his services being used in war efforts.

Amazon (NASDAQ:AMZN) could soon become a competitor for Starlink. The internet and e-commerce giant is planning a network of 3,236 low-Earth satellites providing internet access via its Project Kuiper.

SpaceX is the major satellite launcher in the U.S., providing launch services through its rockets to companies competing with Starlink. Several competitors providing satellite constellations for internet access are publicly traded. These include Viasat Inc (NASDAQ:VSAT), Telesat (NASDAQ:TSAT), Geospace Technologies Corp (NASDAQ:GEOS) and Telstra Group Ltd (OTC:TLGPY).

Shutterstock image.

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