What is up with Starlink, anyway? The customer count, that's what -- and it may be setting SpaceX Starlink up for a long-awaited IPO.
As recently as six months ago, the story with Starlink -- SpaceX's moonshot program to deliver broadband internet from space -- went something like this: After a quick start, amassing 10,000 subscribers in its first three months of operation, Starlink's growth rate seemed to plateau to a nice, steady rate of about 11,000 net additions per month.
Growth ground to a near-halt in the winter months, however, and Starlink gained a mere 5,000 new subscribers over December-January, closing out the latter month with just 145,000 souls signed up. Elon Musk's 2021 prediction -- that by the middle of 2022 Starlink would have half a million subscribers and be well on its way toward SpaceX's goal of making it the company's primary profits driver -- looked like it might never come to pass.
But then a miracle happened.
Image source: Getty Images.
Big numbers -- and bigger numbers
250,000 subscribers in March. 400,000 subscribers in May. 500,000 subscribers in June!
In quick succession, a series of sources have reported increasingly gigantic numbers for Starlink's subscribership -- numbers that indicate the company is doubling, tripling, and nearly quadrupling the performance of its first year of operation. All of a sudden Starlink is tearing up the track, and crashing through new growth records by the day.
Since SpaceX vice president of Starlink commercial sales Jonathan Hofeller first revealed Starlink's sudden resurgence in sales growth in March, the company advised in an SEC filing in May that it had hit 400,000 subscribers. One month later, Elon Musk himself tweeted that the number is already closer to 500,000.
Deck from SpaceX all-hands update talk I gave last week pic.twitter.com/ApsdPjjukh
-- Elon Musk (@elonmusk) June 5, 2022
Mission accomplished
That 500,000 number has special significance, by the way. One year ago, Musk predicted that Starlink would reach 500,000 subscribers by mid-2022 -- a boast that sounded pretty incredible, seeing as the service had fewer than 70,000 customers at the time. But now SpaceX and Starlink have gone ahead and proven Musk right.
In just five months' time, a Starlink service that looked stalled in January has added 350,000 new subscribers, is averaging 70,000 new subscribers per month, and -- judging from the move from 400,000 to 500,000 over just the past month -- may even be accelerating its rate of growth.
How'd they do that?
The upshift from 400,000 to 500,000 may be just the beginnings of Starlink's growth spurt. In its early days, Starlink faced an upper limit on subscriber growth -- that being the speed at which SpaceX was able to crank out Starlink terminal dishes. Last summer, Mashable reported that the space company was producing only 5,000 terminals per week. This was more than enough to support the company's then-growth rate of 11,000 new customers per month, but not much more.
But now CNBC reports that SpaceX has accelerated its rate of Starlink terminal production six-fold to 30,000 units per week, and SpaceX is reporting Starlink subscriber growth that suggests production is very close to what's needed to support its growth in subscribers. Indeed, if production rates keep accelerating, it shouldn't be long before Starlink could -- in theory at least -- have enough terminal production going to support a subscriber growth rate of 150,000 persons per month or more.
What it means for investors
Granted, SpaceX remains a long way away from the 22.7 million subscribers that (I calculate) it will need to generate the $30 billion in annual revenue it hopes to be collecting by 2025. At its current rate of subscriber growth, the company may not hit that target for another 12 or 13 years. But the faster subscriber growth accelerates, the closer the goal approaches.
The question now is whether growth rates will continue exploding higher fast enough, and keep doing so for long enough, to reach SpaceX's target on schedule -- or whether SpaceX will max out its potential market of customers, or the bandwidth of its available satellites, before reaching that goal. SpaceX says it's still waiting for "reasonable predictability" to emerge in the Starlink business before it will IPO the subsidiary -- and I wonder if it's questions about the sustainability of subscriber growth that are making management hesitate to put an IPO date on the calendar.
One thing's for sure, though: SpaceX has proven Musk right about his 500,000 subscribers-by-mid-2022 prediction, and -- crazy as it sounds -- this implies he might also be right about his prediction for $30 billion in revenue, and an IPO, by 2025.
Fingers crossed.
