Starlink may account for up to 40% of SpaceXs 2023 revenues

August 16, 2024

SpaceX has told investors that it expects to roughly double its revenues in 2023 to upwards of $8 billion (from $4 billion in 2022) as reported earlier in July by The Information.

If SpaceX succeeds in achieving this revenue forecast, Euroconsult estimates that upwards of 40% of these revenues, or $3.2 billion, could be attributable to the broadband connectivity services of Starlink, which are now available across nearly 60 countries and key maritime/ocean areas globally.

Diving deeper into the numbers, roughly 75% of Starlink’s projected 2023 revenues would likely be derived from the mix of service subscriptions across its residential, business and mobility segments, with the 25% balance being driven by hardware sales associated with gross subscriber additions.

In terms of active subscribers, Starlink’s base is expected to double from and estimated 1.1 million in January 2023 to ~2.2 million by the end of 2023, driven by a mix of factors including aggressive hardware price discounts, new distribution channels and a continued expansion of available capacity supply and the number of active countries. As an example of hardware price promotions, Starlink is actively offering its standard-grade user terminals for as low as $150 for residential subscribers in rural Canada.

Overall, the residential (consumer) segment is estimated to dominate Starlink’s subscriber mix, accounting for >85% of active subscriptions, including “roam” (formerly called “RV”) portability plans. The pace of subscriber additions, reported by SpaceX at as high as 3,500 new subscribers per day in the spring 2023 timeframe, is expected to moderate over the course of the year due to higher levels of addressable market penetration and continued capacity constraints in high demand areas such as the U.S.

While Starlink has yet to publicly disclose the number of subscribers for its higher revenue per user “business” plans, the segment could account for 10% to 15% of active subscribers given indicative take-up for civil government projects and corporate networks.

While more modest in terms of revenue contribution, Starlink has made impressive progress in maritime markets since introducing services in 2022. As of mid-2023, it is estimated that more than 4,000 vessels, many with multiple user terminals, had committed to Starlink with the majority set to activate service by the end of the year. Progress in the aero segment has been more limited, with expectations that <150 commercial and business aircraft will be active by year-end.

Supporting scale and service requirements through new distribution channels

To support the scale of its growth ambitions, Starlink has departed from its initial strategy of selling directly to customers through its online e-commerce platform to include new distribution channels such as big-box retailers and a variety of value-added service providers for customers with more “enterprise-grade” installation, support and network management needs.

As of mid-2023, Starlink has secured distribution deals with more than 15 “bricks & mortar” and e-commerce chains, spanning a physical retail footprint of no fewer than 4,000 electronics and home improvement stores across the U.S., Europe, Australia and New Zealand. Due in part to the regional nature of legacy satellite broadband services, no incumbent player has come close to securing this scale of distribution in terms of 3rd-party retail channel partners.

Starlink has also secured distribution partnerships with nearly all of the world’s largest maritime VSAT service providers, including Speedcast, Marlink, KVH, Anuvu, Navarino, Tototheo, Tampnet, Castor Marine and others. These players help address common criticisms of Starlink’s services in premium-tier markets such as the lack of bandwidth or up-time guarantees, packet losses and sub-par service support by offering optional ancillary value-added services such as access to dedicated customer service, installation, network management/integration with channel bonding of other connectivity paths (ex. SD-WAN). Often boasting a broad presence across regions and key ports, maritime reseller partner service providers are also leveraged for logistical distribution and on-going support across a global footprint.

Growing the pie vs. cannibalization of legacy demand

While Starlink has certainly taken subscribers away from incumbent satellite service providers in residential and mobility segments, it is important to note that its growth has contributed to as significant net expansion of active terminals in both segments as opposed to pure cannibalization of pre-existing market demand. In maritime markets for example, most vessels owners who have adopted Starlink, appear to have added it to their mix of connectivity solutions, retaining pre-existing VSAT and/or L-band services (at least for the time-being). Similarly, Starlink’s number of active residential subscribers is significantly higher than aggregate attrition observed across the customer bases of leading satellite consumer broadband providers such as Viasat, Hughes, NBN and others.

Looking forward beyond 2023

Based on the aforementioned 2023 revenue estimates, Starlink could reach an annual revenue run-rate of up to $4 billion by early 2024, however the pace of growth observed to date in 2023 will be challenging to sustain. Notably, residential subscriber growth will almost certainly slow in the absence of service price reductions and/or a meaningful increase in the pace of launches of its higher capacity Gen2 satellites, which is only expected to occur alongside the transition to operational flights for Starship. As such, hardware revenues may observe a declining path if gross additions slow or fall from 2023 levels.

For maritime and aero segments, an acceleration or continuation of growth observed in 2023 can be expected for 2024 as committed fleet backlogs continue to gradually convert to active installations. Lastly, revenues from Starlink’s planned direct-to-device segment remain an “up-side” wildcard in terms of both magnitude and timing, but could lead to a resurgence of growth depending on the quality of end-user applications supported and the number of additional deals signed with mobile network operators to help enhance their coverage footprints.

Brent Prokosh is a Senior Affiliate Consultant at Euroconsult, based out of its Montreal office.

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