A Closer Look At SpaceX’s Finances & Starship Development
While Starship is expected to be one of the most affordable launch options in the future, its current development is far from cheap. Between thousands of employees, frequent testing, materials, massive infrastructure projects, etc., Starbase requires a constant stream of funding. This begs the question of how can SpaceX afford this and what does the company’s finances look like.
Not long ago reports came out showcasing SpaceX’s revenue and expenses over the last few years. This gives us a much better idea of the cost of Starship and how the company can keep innovating in Texas. It even revealed that for the first time in a few years, the company managed to turn a profit. This is all extremely relevant to SpaceX’s goal and the future of some of these different programs.
At the end of the day, companies can only burn so much money on certain projects before they need to see a return. On the other hand, SpaceX has been developing Starship at a fast pace and plans to have an operational launch vehicle in the not-too-distant future. Here I will go more in-depth into the costs of developing Starship, the greater finances of the company, SpaceX finally making money, and more.
Cost of Starship
In the first quarter of this year, SpaceX generated $55 million in profit off of $1.5 billion in revenue. This profitable quarter was the first in two years as Starship’s development in both 2021 and 2022 outweighed the company’s revenue. Since SpaceX is privately owned, they often keep most information, including finances to themselves. Thankfully, besides some recent reports revealing numbers, Elon Musk has been pretty transparent about the cost of Starship.
A few months ago Musk pointed out that the company was going to spend around $2 billion this year alone on Starship. He also made it clear that they didn’t expect to need any outside funding to support these costs. The recent data supports this with revenue finally exceeding expenses.
Taking an even closer look, before SpaceX’s small quarterly profit at the start of this year, the company reported about $5.2 billion in total expenses for 2022, up from $3.3 billion the year earlier, the documents show. Revenue doubled to $4.6 billion, helping the company reduce its loss last year to $559 million from $968 million. In terms of what these expenses exactly are, last year, SpaceX spent $3.1 billion on a group of costs that included employee salaries, materials, and spacecraft depreciation. That was up from $1.6 billion in 2021. The company reported $1.3 billion on research and development expenses for 2022, an increase of 11% year over year. A lot of this is simply work on Starship and Starbase.
This production and launch site combine to create some of the largest and most complex infrastructure projects within the space industry. In addition, Starbase directly employs more than 1,800 employees—making it the largest employer in the area. These 1,800 employees all need a salary that easily adds up. You then have the constant testing and destruction of Starship prototypes. This combined with other material costs and everything listed makes up the billions of dollars Starship is using up each year. Thankfully for SpaceX, they have managed to bring in enough revenue to offset these expenses.
As far as where this revenue is coming from, there are a few different sources. For one, capital from investors has helped the company stay private. In this case, it reported taking in around $2 billion in proceeds from issuing stock last year, up from $1.5 billion in 2021, according to the documents. Arguably even more valuable than this funding has been the Falcon 9. Specifically, Falcon rocket missions as well as delays from competitors have contributed to the busiest year in terms of launch cadence ever. Already this year more Falcon rockets have launched than the entirety of 2022.
Earlier this year, Bret Johnsen, chief financial officer at SpaceX commented that since a 2014 “record of decision” by the FAA, allowing SpaceX to develop launch facilities at Boca Chica, “SpaceX has invested more than $3 billion into developing the Boca Chica launch facility and Starship/Super Heavy launch system. This helps put in perspective the degree to which SpaceX is ramping up and increasing costs. In nearly a decade all of Starship’s development totaled $3 billion, and this year alone will be around $2 billion.
An Important Future
While Starship costs are continuing to rise, so does the likelihood of this rocket finally starting to make money. Before the end of this year, we can expect another Starship launch attempt with a lot of upgrades both to the rocket and the launch site. Assuming the launch goes well and they manage to successfully get through stage separation, this would put the company on track to reach orbit sometime next year in 2024. With the exception of large contracts such as the Starship lunar lander funding from NASA, Starship isn’t making any money, only using it. Once it can consistently reach orbit, however, things could change very fast.
One of the best financial prospects for SpaceX involves Starship launching Starlink satellites. Currently, SpaceX is launching 21 or 22 of its Starlink V2 mini satellites per launch on the Falcon 9. With around 37,000 more to go before the constellation is finished, the plan never was for Falcon 9 to launch each and every one. Falcon 9 is simply a good option to get this project started and off the ground until Starship is ready. Starship with its much larger size and lower cost, is expected to carry hundreds of Starlink satellites on a single launch. This would significantly increase the speed at which the constellation is filled and the quality of the service.
Euroconsult is a leading global strategy consulting and market intelligence firm specialized in the space sector and satellite enabled verticals. They recently estimated that upwards of 40% of SpaceX’s 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.
Starlink’s base is expected to double from an estimated 1.1 million in January 2023 to around 2.2 million by the end of 2023. This increase would be thanks to aggressive hardware price discounts, new distribution channels, and a continued expansion of available capacity supply and the number of active countries. The SpaceX CFO commented, SpaceX has invested billions into its Starlink satellite broadband constellation, and would be harmed if it cannot launch its larger “V2” satellites that require Starship. He said “hundreds of thousands of people” have placed deposits for service but are waiting until those larger satellites can be launched to have sufficient capacity to serve them.
All the way back in 2021, Musk warned SpaceX employees that unless Starship could begin regular flights in 2022 to launch new, larger Starlink satellites, the company might go bankrupt. While Elon’s timeline is often a bit ambitious, these comments and concerns shouldn’t be fully dismissed. Obviously, it’s 2023 and the company is far from bankrupt, but SpaceX does need to get Starship running and launching these satellites in the near future. This being said, developing a new rocket will always be an expensive process.
Looking at some other large launch vehicle programs within the industry puts this in perspective. The NASA Office of Inspector General commented on SLS that “As a result of the cost and schedule increases under these four contracts, we calculate NASA will spend $13.1 billion through 2031 on boosters and engines, which includes $8.6 billion in current expenditures and obligations and at least $4.6 billion in future contract obligations. Looking more broadly, the cost impact from these four contracts increases our projected cost of each SLS by $144 million through Artemis IV, increasing a single Artemis launch to at least $4.2 billion” they said.
With all things considered the upcoming launches and development of Starship really will determine what happens financially with this program and the company as a whole. On the bright side, a launch around late September to early October seems well within reach. This month will likely be even more busy than August as some of the final launch preparations are made. With a few exceptions, the second launch flight profile is practically the same as the first. The main goal will be getting through stage separation using the new hot staging approach. Even though the first launch used a different approach for stage separation, they still had a few issues during that process. Considering that this will be the first time they attempt that mission event, it would be a big deal if they do it first try. Something we can look forward to in the coming months.
Conclusion
SpaceX is spending billions and making billions of dollars each and every year. Reports and comments from Musk show an increase in Starship funding as they push to get the next-generation launch vehicle into orbit. Until then, Starship will be eating up much more money than its producing. We will have to wait and see how it progresses and the impact it has on the space industry.