Analysts bullish on Starlink’s revenue levels but the company’s cash burn is still a mystery
Market research and consulting firm Quilty Space has forecast the LEOsat operator Starlink is on track to generate $6.6 billion in revenue for 2024, managing to outperform expectations despite initial scepticism. In a webinar on the operator [registration required], Quilty estimated Starlink had 2.7 million subscribers at the end of March 2024, up from two million in September 2023 when the operator last mast a statement.
In context, it means Starlink’s subscriber base has surpassed that of established players like ViaSat and Hughes Network Systems, which have been the dominant consumer GEO satellite internet market companies for more than two decades. The two GEO operators achieved a peak combined subscriber base of 2.2 million subscribers in the first quarter of 2020 when Starlink was just starting out. The LEOsat operator achieved that number of subscribers within 36 months.
ViaSat and Hughes’ subscriber totals decline by 30% since and Hughes’ owner Echostar is struggling with analysts predicting that filing for bankruptcy in the next four to six months is now “the most likely outcome” for the company, according to Via Satellite.
And with $6.6 billion in estimated revenue, Starlink brings in more revenue than the proposed combination of SES and Intelsat, according to co-founder Chris Quilty. “What Starlink has achieved in the past three years is nothing short of mind-blowing,” he said. “For 2024, we’re forecasting revenues of about $6.6 billion – that would be up 80% over 2023. If you want to put that in context, SES and Intelsat announced they’re going to combine — they’ll have combined revenues of about $4.1 billion.”
Quilty forecasts Starlink will reach $3.8 billion EBITDA in 2024 and estimates that the operator achieved EBITDA-capex breakeven during late 2023. The report expects that Starlink will post its first free cash flow positive year this year.
Connecting the relatively connected
Even with these numbers, it is difficult to gauge what sort of success Starlink has been to date. Early on in its life, Starlink was forecasting 20m users by 2022 but even passing one tenth of that has Quilty suggesting Starlink is heading from wide losses to profits during 2023 to 2024.
“By targeting consumers first, primarily via a direct-to-consumer sales model, Starlink was able to scale at an unprecedented pace for a satellite operator. Starlink is now evolving and expanding its strategy for enterprise, mobility, and government end markets,” the report said. However, the relative cost of the terminals and service means the biggest success is coming from richer nations that can afford it rather than the unconnected world.
Quilty reckons 95% of the 2.7 million global subscribers are consumers so there is space for Starlink to expand its enterprise focus – through telco partners in the main – and vertical sectors like aviation, maritime and first responders. Interestingly, the operator is seeing steady uptake in areas that aren’t regional or rural but on less well-connected urban fringes.
“For the most part, Starlink is servicing consumers and middle- and upper-income countries, as well as premium end markets. This is not connecting the unconnected and that’s a gap that Starlink will probably not be serving in a substantial sort of way anytime in the near future,” said Quilty analyst Justin Cadman.
Quilty also noted several large-population jurisdictions like India and Indonesia have banned Starlink so this could also boost subscriber numbers if said bans were dropped.
What about cash burn?
With Starlink, the numbers aren’t available so there is probably more guesswork going on when measuring the company’s health. However, it was well documented that when the operator launched, it was subsidising terminals to the tune of hundreds of dollars.
Last month, Bloomberg reported [subscription] Starlink was still burning through more cash than it brings in, citing people familiar with the finances, potentially still losing “hundreds of dollars on each of the millions of ground terminals it ships.” The same people suggested parent SpaceX “often strips out the hefty cost of sending its satellites into space to make the non-public numbers look better to investors”, adding Starlink was ” not actually profitable based on an operational and ongoing basis.”
Quilty is more comfortable with the terminal situation estimating that SpaceX is somewhere between breakeven and a modest gross margin when it comes to user terminals in the US and enterprise markets, but that is not the case for the rest of the world.
“They’re now in the enviable position where with free cash flow positive results, they can start to experiment with other means of accelerating revenue growth through programs like incentives, rentals, and other types of equipment programs,” said Cadman. “But key takeaway — terminal subsidies no longer appear to be an issue for Starlink.” except for the fact that Starlink is now growing faster outside the US than inside.