STREETWISE ECONOMICS · May 20, 2026 · Not investment advice
By Isaac Jonas | Economist, Streetwise Economics
Disclaimer: This article reflects the personal views of the author as an economist and is provided for educational and informational purposes only. This is NOT investment advice. Financial markets carry significant risk and you can lose money. Nothing in this article should be construed as a recommendation to buy or sell any financial instrument. Always conduct your own research and consult a qualified financial professional before making any investment decisions.
In April, I wrote that I would consider a small allocation to SpaceX at its targeted $1.75 trillion listing, subject to three explicit conditions: a final price not exceeding $2 trillion, credible Starship progress, and xAI monthly burn below $1.5 billion. The S-1 prospectus filed with the SEC on May 20, 2026 changes the picture in important ways. As a matter of intellectual honesty — and as readers of this column know I take that seriously — I owe you a revision.
The Top Line Was Bigger Than I Wrote
I wrote that 2025 revenue was $15.5 billion. The filing shows $18.67 billion — about 20% higher than my figure. Growth from 2024 was 33%, up from $14.0 billion. The Q1 2026 run-rate of $4.69 billion suggests a 2026 outcome closer to $22–25 billion remains plausible, but on a stronger base than I credited.
This matters for the multiple. At $1.75 trillion on $18.67 billion of 2025 revenue, the price-to-revenue ratio is approximately 94 times — still demanding, but meaningfully below the 113 times I cited. On a forward 2026 basis, the multiple compresses toward 75 times. The valuation is expensive. It is not as extreme as I framed it.
The Connectivity Segment Is Stronger Than I Knew
This is the most important upward revision. The S-1 discloses Starlink-led Connectivity segment revenue of $11.39 billion in 2025, up 49.8% year-over-year, with operating income of $4.42 billion — more than double the prior year. Segment Adjusted EBITDA of $7.17 billion grew 86%. Subscribers reached 10.3 million by March 31, 2026, up 105% from 5.0 million a year prior.
One important caveat I should flag honestly: ARPU is declining. From $91 monthly in 2024, to $81 in 2025, to $66 in Q1 2026 — a function of international expansion into lower-income markets. This is the correct trade-off strategically (more subscribers at lower prices unlocks the mass market), but it does mean the per-user economics are weakening even as the aggregate scales. Anyone underwriting the Starlink thesis must hold both facts at once.
The AI Segment Is Where the Bear Case Lives
The xAI consolidation is not theoretical anymore. The S-1 reports the AI segment generated $3.2 billion in revenue in 2025 against an operating loss of $6.36 billion. In Q1 2026 alone, AI capital expenditure was $7.72 billion — roughly $2.57 billion per month.
This is the line that materially changes my April analysis. My third condition was that xAI’s monthly burn should remain below $1.5 billion. The S-1 shows capex spending well above that threshold, and accelerating. The condition is breached.
This is not the same as saying the company is in financial distress. Consolidated Adjusted EBITDA was positive $6.58 billion in 2025 and positive $1.13 billion in Q1 2026. Cash and equivalents stood at $15.85 billion at quarter-end, with another $7.82 billion in short-term marketable securities and $1.5 billion of undrawn credit. The legacy business — launch and Starlink — is funding the AI ambition. But the accumulated deficit of $41.3 billion is a real number, and the company recorded a Q1 2026 net loss of $4.28 billion, up sharply from $528 million in the year-ago quarter.
A Condition I Did Not Set, But Should Have
The lockup structure is unusual and consequential. Standard public-market shareholders are locked up for 180 days. But Elon Musk and significant pre-IPO investors — including 100% of the founder’s shares — are locked for 366 days.
This reshapes my April thinking on the “post-lockup entry” strategy. The genuine insider supply event is approximately 12 months after the IPO, not six. A patient investor seeking better entry pricing should be looking at mid-2027, not late 2026, as the more meaningful window. The first-day pop is less likely to mean-revert in the conventional manner because the supply overhang is twice as far away.
The Mission Framing Has Shifted
The S-1 quantifies a total addressable market of $28.5 trillion. Of that, $26.5 trillion — roughly 93% — is attributed to AI: $22.7 trillion in enterprise applications, $2.4 trillion in AI infrastructure, $760 billion in consumer subscriptions, and $600 billion in digital advertising. Space-enabled solutions contribute $370 billion. Connectivity contributes $1.6 trillion.
Read that paragraph again. The company is framing itself as an AI business with a space chassis, not a space business with an AI arm. Whether the chassis subsidizes the AI ambition long-term, or whether the AI ambition vindicates the chassis, is the central unresolved question of this investment.
My Revised Position
Reconciling the conditions I set in April:
- Final price not exceeding $2 trillion — to be determined at pricing in June.
- Credible Starship progress — broadly met. The 12th flight test is scheduled, payload delivery to orbit is targeted for the second half of 2026, and Falcon 9 has now reflown a first-stage booster 34 times.
- xAI burn below $1.5 billion monthly — clearly breached on a capex basis at $2.57 billion per month in Q1 2026.
One of my three conditions is met, one is to be determined, and one is breached. The underlying Connectivity business is materially stronger than I modeled. The financial structure remains workable because consolidated Adjusted EBITDA is positive. But the AI capex trajectory is steeper than I anticipated, and the founder lockup pushes the supply-driven re-pricing window further out than I planned for.
My revised position is unchanged in direction but tightened in scale. I would still consider a small allocation at IPO if the final price prints under $2 trillion. I would now cap that allocation at 3–5% of what I would normally deploy in a single position, rather than the 5–10% I described in April. I would not buy on the first-day pop. And I would expect any meaningful insider supply event to occur near the 366-day mark, not the 180-day mark — which means patience, if you have it, is a more powerful tool than precision.
The thesis has not changed. The numbers have only made the ambition more explicit, and the cost of that ambition more visible. SpaceX remains one of the most consequential companies ever to file for a public listing. The question, as always, is whether you can afford to be wrong — and for how long.
Isaac Jonas is an economist and founder of Streetwise Economics. He holds dual Master’s degrees from the University of British Columbia. His weekly market analysis is published at www.streetwiseeconomics.com and on the Streetwise Economics YouTube channel. This article does not constitute financial advice.
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