By Zimele Mbanjwa, Sithembile Bopela
"When something is important enough, you do it even if the odds are not in your favour." - E. Musk
SpaceX is preparing for a landmark initial public offering (IPO) targeting proceeds of around $75 billion at an implied valuation of over ~$1.7 trillion, thus positioning it to become the largest IPO in history. The transaction will consist of low-voting Class A shares (one vote per share) for public investors, while founder and CEO, Elon Musk, and insiders will retain super-voting Class B shares (ten votes per share). Post-listing, Musk is expected to maintain effective control of the company (~85%), with the ability to determine board composition and shareholder outcomes. Ultimately, the IPO is expected to feature a very limited free float of less than 5% based on outstanding shares in its filing.
Founded in 2002, Space X designs, builds, launches, and operates rockets, satellites, and advanced software systems. The company combines engineering, manufacturing, and operations in-house to reduce costs and scale quickly. It operates a highly- integrated business model across three main areas: Space, Connectivity, and artificial intelligence (AI) through its xAI division.
Its integrated model enables cross-segment synergies such as leveraging launch capabilities to deploy satellites, satellites to distribute connectivity, and both to enable global AI infrastructure.
Space
With a focus on space transportation, the Space segment designs, manufactures, and launches reusable rockets and spacecraft (e.g., Falcon, Dragon, and the next-gen Starship), providing cost-efficient, high-cadence (launching rockets very frequently and consistently) access to orbit. The launch capabilities underpin its broader ecosystem, including Starlink Consumer Broadband and Starlink Mobile within the Connectivity segment, while also serving external customers. Launch services are provided to commercial, civil, international, and government clients using reusable Falcon 9 and Falcon Heavy rockets across satellite, cargo, and crew missions. SpaceX is also the primary launch provider for the United States (US) government, having completed 11 of 12 National Security Space Launch (NSSL) missions in 2025, as well as all five NASA crew and cargo missions to the International Space Station.
Needless to say, SpaceX has major dominance in this space. In 2025 specifically, SpaceX accounted for 81% of all large rocket launches and 85% of total mass lifted to orbit, underscoring its overwhelming market share. This leadership reflects both unparalleled launch cadence and superior payload capacity per mission.
Critically, the company's proven reusability drives a structural cost advantage that competitors have been unable to replicate at scale, reinforcing durable pricing power and long-term dominance in launch economics.
The global market average cost for traditional, non-reusable (expendable) rockets sits between $10 000 and $20 000 per kilogram. The Falcon 9 has driven that cost down to roughly $1 500 to $2 700 per kilogram depending on the mission profile- representing an approximate 80% to 85% discount compared to the historical market average. Starship is designed to drop these costs even further to under $200/kg. Starship features full reusability (both the booster and the upper spacecraft are recovered via mechanical launch-tower arms), which would decouple SpaceX from any mathematical comparison to the rest of the global aerospace industry.
The market remains effectively a SpaceX monopoly on volume, with competition concentrated in niche segments.
While the segment continues to scale strongly, with rising launches and payload capacity, profitability remains volatile. This is largely due to increased investment in Starship V3 development (highest low-earth orbit capacity of the group's entire offerings) and supporting infrastructure, alongside some softness in customer launch revenue. Thus, while reusability and high launch cadence continue to underpin long-term cost efficiency and support a diversified customer base, near-term earnings remain pressured.
Space is effectively best viewed as a strategic, capital-intensive business that underpins the broader ecosystem and offers long- term margin potential but is unlikely to be a consistent earnings driver in the near term.
Connectivity (Starlink)
The Connectivity segment focuses on global internet connectivity through the Starlink satellite network. It operates a global low- Earth orbit (LEO) satellite network delivering high-speed, low-latency broadband and satellite-to-mobile services to consumers, enterprises, and governments across over 160 countries, targeting underserved and remote regions. It is currently the primary revenue and profitability driver for the group underpinned by strong customer acquisition.
Starlink currently commands an overwhelming share of the global LEO satellite broadband market, with over 10 million users and a constellation exceeding 10 000 satellites. The dominance is largely driven by its first-mover advantage, as well as rapid scale and execution in recent years. Amazon's Project Kuiper represents the most credible medium-term challenger, backed by significant capital and targeting a 3 236-satellite constellation in the medium term, but remains in early deployment with minimal current market share (100 satellites mid-2025). As such, Starlink is estimated to hold a ~90% market share of the LEO satellite user base.
Starlink has delivered exceptional growth over the years, scaling from just over one million subscribers in 2023 to more than 10 million by 1Q26 - a compounded annual growth rate (CAGR) of around 65% per annum (p.a.), which is one of the fastest adoption curves in broadband. This expansion has been supported by rapid hardware production, and has translated into strong financials, with 1Q26 revenue of $3.3 billion and accounting for 69% the group's revenue. At the same time, the average revenue per user (ARPU) has declined by ~33% since 2023 to ~$66 per month, reflecting a deliberate volume-over-price strategy driven by lower- cost plans and expansion into lower-income international markets. Despite this compression, overall profitability continues to scale (margins up 113-basis points (bps) in 1Q26 relative to FY25), highlighting strong operating leverage in the model.
While new entrants into the LEO internet market and regulatory or pricing pressures (e.g., fixed wireless in emerging markets) could shape the landscape over time, Starlink's substantial lead in constellation scale, manufacturing, distribution, and brand recognition creates a durable structural advantage that will be difficult for competitors to erode in the near term.
xAI
The AI segment (xAI) represents SpaceX's newest and most strategically ambitious business. The segment was established following SpaceX's February 2026 acquisition (via a related-party share exchange) of xAI which derived revenue from advertising, subscriptions, and data licensing generated from X (formerly Twitter). The business now focuses on building a fully vertically- integrated AI platform spanning compute infrastructure, proprietary models, and applications. It represents a high-investment, early-stage growth platform integrating AI capabilities (including the Grok model and the X platform) within SpaceX's broader ecosystem.
Capital intensity in this segment has increased sharply over time, with AI capex rising from $463 million in FY23 to $5.6 billion in FY24 and $12.7 billion in FY25 and further accelerating to $7.7 billion in 1Q26 (up $5.2 billion relative to 1Q25), driven primarily by the rapid expansion of Al data centres, including development, construction, and equipment of new facilities and supporting infrastructure. The investment cycle has supported a step-up in graphic processing unit (GPU) capacity to ~1 gigawatt (GW) in 1Q26 from zero in FY23 but has also resulted in substantial operating losses and cash burn.
Strategically, the segment's differentiation lies less in its current model scale - where Grok trails leading peers - and more in its ambition to build large-scale AI infrastructure, including future orbital data centres (i.e. in outer space) powered by solar energy to overcome real estate, power and cooling constraints of Earth-based infrastructure. While long-term optionality is significant, the business faces near-term execution risk given its early maturity, high capital intensity, and intense competition from well- capitalised incumbents.
Market opportunity
SpaceX is essentially positioning itself at the intersection of three potentially multi-trillion-dollar markets, with a company estimated total addressable market of ~$28.5 trillion. To capture share, ultimately, the company plans to ignite its four core value engines:
Engine 1: Launch Services
Falcon 9, Falcon Heavy, and Starship underpin global payload delivery with unmatched scale and cadence. Reusability drives a structural cost advantage, with next-gen (V3) Starship deployment expected to reduce cost to orbit by up to ~99%, enabling higher throughput and long-term industry dominance.
Engine 2: Starlink (Cash Cow)
A fast-scaling broadband platform generating profits at scalable margins. Expanding satellite capacity and vertically integrated terminals (~200k/week) drive adoption, positioning Starlink as the core earnings and cash flow engine for now.
Engine 3: AI Integration (xAI)
A rapidly scaling, vertically-integrated AI platform with compute capacity deployed at a rapid rate.
Engine 4: Government & Defence (Starshield)
A stable, high-visibility growth pillar anchored by multi-billion-dollar US government contracts. Deep integration into mission- critical applications creates a durable moat and supports broader enterprise and government adoption.
Financial performance
The group performance over the past three years reflects a fragmented operational profile, with the revenue mix having shifted materially over time. Starlink, which barely existed as a revenue contributor three years ago, now dominates the top line and is moving through its cash-burn phase into an operational profile characterised by high conversion and organic margin expansion.
Group revenue increased 34% to $18.7 billion in FY25, reflecting strong growth across Connectivity (+48%) and AI (+22%). However, the group posted a net loss of $4.9 billion (FY24: $791 million net income), which was largely driven by the consolidation of xAI in February 2026 with an operating loss of $6.4 billion. Starlink generated >100% operating profit growth to $4.4 billion, making it the only sustainably profitable division and the primary anchor for the IPO valuation case. Group adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) remained positive at $6.6 billion (FY24: $5.3 billion), representing a 35.3% margin, highlighting strong underlying cash generation despite accounting losses.
In its 1Q26 results, revenue grew 15% year-on-year (y/y) to $4.7 billion with the Connectivity segment contributing $3.3 billion (69% of the total), followed by the AI segment at $818 million (17%), and the Space segment at $619 million (13%). Operating costs advanced 64% to $6.6 billion and the group posted a net loss of $4.3 billion (1Q25: $528 million).
The group's capital needs are escalating sharply as it reframes itself as an AI infrastructure company - offering terrestrial and potentially space-based computing capacity - a pivot that is massively increasing its financial requirements compared to its pre- AI identity. As such, capex spend for FY25 was significant at $20.7 billion (FY24: $11.2 billion), underscoring the capital intensity of expansion across AI compute, satellites, and launch infrastructure. Specifically, Starship development and continuous LEO satellite replacement cycles (approximate five-year hardware lifespan) require relentless allocations.
SpaceX carries ~$29.1 billion in debt (FY24: $22 billion including broader short-term consolidated facilities and interconnected liabilities before the pre-IPO refinancing). As an all-primary offering, the entire resulting float represents fresh liquidity flowing straight onto the balance sheet. This structurally changes SpaceX's capital position, giving it a massive $75 billion cash cushion to fund the capital-intensive Starship ramp-up and the orbital AI data centre rollout.
Investment case
Risks
Valuation and FNB SPM view
The IPO offers unique exposure to a vertically-integrated platform that spans launch services, satellite broadband, and AI infrastructure, although the valuation prices in a decade of hypergrowth across all three segments. The expected market cap of $1.77 trillion, places the group on a 94.5 times price-to-sales multiple and 270 times EV/EBITDA, which is a substantial premium over traditional mega-cap tech companies, notwithstanding that SpaceX has no true competitor given its vertically-integrated structure and unique focus.
While it remains loss-making, the risk embedded in this business is regarded as high. Investors are paying for future growth, not steady cash flows, with the longer-term sustainability of the business being highly dependent on commercialisation of Starship and higher launch cadence, improved margin development in Connectivity, monetisation of AI infrastructure and overall execution to scale and harness the synergies and cost-advantage moat of the quadruple-engine conglomerate model.
A free float of less than 5% is exceptionally low for a mega-cap public listing. Moreso, the company will allocate 30% ($22.5 billion) of the capital raise to retail investors (another unprecedented move), which alters the post-listing dynamics of the name. With a small proportion of the company's total equity available to the public, institutional demand (70% allocation or ~$52.5 billion) will vastly outstrip available shares, therefore the offer will likely be oversubscribed. Tight supply is therefore likely to cause significant upward price volatility immediately following the listing with uncertainty over whether this will reflect the current fundamentals of this business.
NB: While FNB is not participating in the capital raise, shareholders can gain access in the secondary market through the global trader platform once shares list on the Nasdaq stock market.
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If you do not have a Global/Local Trader account, you can open an account on the FNB App or via FNB Online Banking: FNB App: Navigate to 'Invest' tab > Select 'Add accounts' > Select 'Invest in Shares & Gold' > Select 'Local Trader' / 'Global Trader' > Select 'Apply now' > Complete the steps and accept the Ts and Cs.
