SpaceX's Launch Business Wasn't Profitable Last Quarter, but Here's the Hidden Upside
Key Points
SpaceX's space segment posted a small operating loss in Q3, largely due to significant R&D costs.
The company frequently uses its rockets to launch Starlink satellites, building the network that supports its profitable connectivity segment.
Space Exploration Technologies (NASDAQ: SPCX) started as a space business and later added connectivity and AI segments. Somewhat ironically, as of the third quarter of 2026, the space segment was the only one that wasn't turning a profit.
The space segment generated $1.8 billion in revenue for the quarter, up 6% year over year. It also posted a $7 million operating loss, compared with $259 million in operating income a year ago. However, the loss doesn't tell the whole story.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Image source: Getty Images.
The main reason SpaceX lost money on space launches was its $1.2 billion in research and development (R&D) spending. This spending, and the other costs of its launches, don't just benefit the space segment. They also bolster connectivity, SpaceX's most profitable business.
SpaceX conducted 35 rocket launches in Q3: 12 for external customers and 23 internal launches -- missions to deploy SpaceX's own assets. All 23 internal launches last quarter carried Starlink satellites, although one, a Starship flight in late July, didn't add to the operational network. It was a payload-deployment test, and by design, the satellites that it deployed deorbited and burned up in Earth's atmosphere after a brief period of data collection.
Meanwhile, in Q3, the connectivity segment's revenue increased 69% year over year to $5.2 billion. Operating income for the segment did even better, growing 99% to $2.4 billion. That accounted for most of SpaceX's $2.8 billion in operating income for the quarter. Starlink also had 13.6 million consumer subscribers as of the end of Q3, up from 12 million at the end of Q2.
Even though SpaceX's segments are often evaluated separately, it makes more sense now to view space and connectivity as a package deal. Space isn't a big moneymaker on its own, but the rocket launch operation is central to the company's ability to maintain and grow the satellite network that connectivity depends on.
Its new launch vehicle, Starship, just shifted out of the cost-intensive testing phase. But once its commercial use ramps up to full capacity, a single Starship launch carrying Starlink's next-gen V3 satellites could add 20 times as much network download capacity as its current Falcon 9 launches. Company executives have already described plans for a rapid expansion of the Starlink network in 2027.
Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.