For more than two years now -- ever since SpaceX COO Gwynne Shotwell said the event was "likely" to happen -- investors have waited impatiently for a Starlink IPO.

Now I'm wondering if Starlink is ever going to be able to IPO at all.

SpaceX Starlink satellite dish on a rooftop.

Image source: Getty Images.

Elon Musk's space dream

Anticipation for an IPO of Starlink -- SpaceX's pioneering effort to cover the Earth in satellite broadband internet -- began to appreciably build in October 2020, when SpaceX announced introductory "beta" pricing for Starlink internet service.

Interest in a Starlink IPO probably peaked last year, after Elon Musk tweeted support for his COO's prediction, saying he would "probably" IPO Starlink.

After all, most analysts agree that SpaceX's core space launch business is probably generating less than $2 billion in revenue annually. And with most of the company's launches being performed for its own benefit (i.e. launching Starlink satellites), that $2 billion figure isn't growing very fast. 

According to Musk, it's not space launch, but Starlink that will become the core service and primary revenue driver for SpaceX in the future, generating in excess of $30 billion in sales annually -- and potentially as much as $72 billion -- once all of the company's planned 12,000 satellites are in orbit. But as you can see up above, Musk put a caveat on his prediction of a Starlink IPO. To wit, Starlink will not IPO until its revenue growth has become both "smooth & predictable."

And right now, Starlink's revenue growth looks anything but smooth or predictable.

Starlink's space math

Here's how the math works: At last report (in June), Starlink had approximately 500,000 subscribers to its satellite internet service. SpaceX started out charging these customers $99 a month, but with inflation rising, SpaceX announced in March that it would raise its monthly subscription cost to $110. 

Now, $110 times 12 months a year times 500,000 customers amounts to $660 million in revenue a year. That's an impressive sum, but it still falls short of SpaceX's predicted $30 billion (much less $72 billion). Even with a few customers paying higher rates for "premium" service (i.e. more bandwidth), a few more "business" and "maritime" customers paying even more, and a bit of one-time revenue from sales of the hardware needed to run Starlink -- less than $300 million total -- it would appear that today, Starlink is still at best a $1 billion-a-year business.

The endgame for Starlink

Granted, last time we checked, Starlink was still growing, albeit in fits and starts. As long as growth continues, Musk's $30 billion dream remains a possibility. The problem is, Starlink may be starting to bump up against the natural limits of the bandwidth its satellites can support, hurting internet speeds obtainable through Starlink, diminishing the attractiveness of the service -- and potentially putting a cap on how big Starlink can grow.

As CNBC reported earlier this month, SpaceX has begun throttling download speeds for Starlink customers who exceed one terabyte of monthly Starlink usage during what it calls peak hours of use. "Premium" customers who breach that data cap may be asked to pay an extra $0.25 per gigabyte over the cap ($1 per gig for businesses), or be downgraded to slower "basic" service for the remainder of the month. 

On the one hand, every extra $0.25 (or $1) helps, and gets Starlink a little closer to its $30 billion goal. On the other hand, nickel-and-diming customers and throttling their download speeds probably isn't the best way to secure customer loyalty, or attract new Starlink subscribers. And Starlink's new policy highlights the limitations on its ability to support new users, which could further discourage new subscribers from signing up.

So what's the upshot for Starlink and SpaceX's plans to IPO it? I won't bore you with all the math (although you can read it here if you're interested). But the upshot is that even at full capacity -- 12,000 satellites in orbit -- it's unlikely SpaceX will be able to support more than 8 million global users or so, which translates to about $16 billion in annual revenue, or barely half the $30 billion target.

Worse, if Starlink ends up slowing its growth by throttling its customers, even $16 billion could be out of reach. And the less revenue Starlink can make, the less its IPO will be worth -- if an IPO even happens.