Space Exploration Technologies' (SPCX 5.41%) recent IPO was a massive success. However, serious questions remain about the company's outlook and its eventual ability to turn a profit. Much of that will depend on SpaceX's biggest growth driver, Starlink, which provides internet connectivity services through a constellation of Low Earth Orbit (LEO) satellites. But SpaceX could also make progress in its space segment, leading to much better margins and profits. And a potential milestone it could reach within 15 days will tell us more about whether SpaceX can meaningfully improve the economics of its space business.
Image source: The Motley Fool.
SpaceX's next-gen rocket
SpaceX has transformed the space travel industry thanks to its pioneering work with reusable rockets. But there remains plenty of work to be done. The company's next-gen rocket, Starship, is currently in the test flight phase. Starship is central to SpaceX's long-term ambitions. Unlike the company's already highly successful Falcon 9 rocket, Starship was developed to be fully reusable. It could help decrease launch costs by 95% compared to Falcon 9. Starship is also much taller and has a much larger payload capacity.
SpaceX has completed 12 Starship flight tests, with the latest one introducing the newest version, dubbed V3, of the rocket. Right before the company's IPO about three weeks ago, SpaceX's COO, Gwynne Shotwell, said the 13th Starship flight test would take place in about a month -- which puts us at roughly mid-July at the latest. Shotwell also said she expects regular monthly flights for the rocket thereafter.
NASDAQ: SPCX
Key Data Points
Is SpaceX stock a buy?
Another successful Starship flight test would bolster the bull case for SpaceX. However, there are reasons to remain skeptical about the company's future. Here are three of them. First, the company is not consistently profitable. In 2025, it posted a net loss of $4.9 billion, far worse than the $791 million in net income reported in 2024. Unprofitable companies can be attractive if their growth prospects look strong, which brings us to our second point: Average revenue per user (ARPU) within SpaceX's most important segment, Starlink, is declining. In the first quarter of 2026, Starlink's ARPU was $66, down from $86 in Q1 2025, and significantly lower than the $99 it recorded in 2023.
While Starlink subscribers continue to grow at a good clip, the declining ARPU may eventually lead to lower margins, especially as the company starts facing more competition and pricing pressure. One possible solution is for SpaceX to reduce the cost of launching LEO satellites. So the situation is by no means hopeless. Still, investors need to monitor Starlink's declining ARPU. Third, SpaceX might face significant regulatory headwinds over the long run, especially given that it relies on contracts from the U.S. federal government for 20% of its revenue.
So, what's the verdict? SpaceX could deliver life-changing returns if it can make significant progress with Starship and other initiatives, but the stock remains highly risky, especially at current levels. I'd wait for a major pullback before initiating a position.
