In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Matt Frankel, and Jon Quast discuss:

• Starlink’s profitability.
• The profitability of the space launch business.
• The unbelievably large market estimates.
• Is SpaceX actually just an AI company?
• Can investors benefit from this corporate structure?
• The leap of faith that is the valuation.

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A full transcript is below.

This podcast was recorded on May 21, 2026.

Tyler Crowe: It’s SpaceX’s S-1 day on Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I’m your host, Tyler Crowe, and today I’m joined by longtime contributors Matt Frankel and Jon Quast. Guys, we picked one heck of a day to record here because I’m looking across the news. Walmart‘s down 7% on tepid guidance. Other consumer retailers are way down. Quantum computing companies are up like 20% on a deal with the government for equity deals and things like that. Nvidia had their earnings. But we’re not even going to talk about any of those things today because you know what? Earnings, they come and go. But an S-1, as big as SpaceX, only comes around once in a while, so we’re going to do a deep dive into SpaceX’s S-1 today, and we’re going to do the whole show on it. We’re going to start with what we liked about it in the first section. We’ll call it the good. In the second part, we’ll go to poke some holes into some of the things that we didn’t like.

Based on what we were talking about before the show, there’s a few things that we’re not big fans of, and then at the end we’re going to give our verdicts on whether or not we’re going to be buying this IPO, whether we may be waiting, or if any of us are just like, No, thank you. Obviously the job today was before we went on, it’s just basically comb through the S-1, see what you see, see what you like. Jon, I think we all came to the consensus. There’s plenty of things to like and not like, but what stood out to you most is like, hey, this is good. I really like this.

Jon Quast: There are multiple parts to SpaceX’s business, but the best-looking one to me was Starlink. Starlink is both profitable and it’s growing like crazy, so check this out. This is the satellite business that allows Internet connectivity around the world. Even in remote places, that’s the appeal of it. But in the first quarter, its subscriber count more than doubled. It now has more than 10 million subscribers to Starlink. Now, average revenue per user did drop in the first quarter, and it fell pretty significantly. That would ordinarily be troubling to me. But it’s added these lower price points. It’s expanded into international markets where the monetization isn’t as high. The net result has been this robust subscriber growth, and that is really important. More than that, it’s also been able to grow that revenue profitably even at the lower monetization rates.

Subscribers more than double, as I said, revenue up 32% year over year, that’s a really good growth rate. Then it delivered a segment operating margin. I’m just talking Starlink. We’re backing out the other parts of the business. The Starlink operating margin was 36%. Now, if this was a standalone business, you would look at that. You’d see subscribers more than doubling, revenue up more than 30%, operating margin approaching 40%, that would be a business that I’d be very interested in owning because that is great growth, great profitability, and fantastic adoption pointing to long-term trajectory. I would love that.

Tyler Crowe: I’m going to jump in with an anecdote here because the eyes may not know. I lived in Africa for like six years, and I did. I signed up to be a Starlink customer in 2019, and I think six months ago is when I actually got the email. It was, hey, we’re now available. Where are you living? I’ve moved since then, and I was like, not as much helpful today. But I feel like when I got that email like six months ago, I think my haunches should have been up like, man, if they’re emailing me about this, this must mean there’s like an IPO or something is coming because they want to grow.

Matt Frankel: Jon’s right that Starlink is the shining star of this business, at least so far. It’s actually the fastest-growing telecom company of its size and history. Starlink has 75% of all active maneuverable satellites on Earth. It’s a big competitive advantage. $4.4 billion in operating income last year, it’s a legit business. Beyond Starlink, you really need to read a little bit between the lines for some of the good points, at least when it comes to things that don’t have to do with things that the company’s going to do in ten years, 20 years, like building a colony on Mars. The space business has a massive market share. That’s one. 80% of the mass delivered to orbit globally comes from SpaceX. Capex actually seems reasonable to me, you guys might disagree. It’s at a roughly $40 billion annual run rate, and that includes AI spend, that includes the space spending, that includes Starlink infrastructure. That actually gives it the lowest capex rate of any trillion-dollar tech company in the world. We’ll discuss the company’s total addressable market claims when we’re not in the what’s good segment of this podcast. But just looking at Starlink, the Starlink has an estimated $1.6 trillion market opportunity, and that’s a market that already exists today. It could become a much larger business from here.

Tyler Crowe: Yes, $1.6 trillion market opportunity, I think globally spend on telecommunications was 1.5. Maybe I’m teasing what we’ll get into in the next section, but that does seem like a pretty ambitious target here, but I don’t actually won’t even talk about Starlink because we covered it a little bit here, and it wasn’t actually the thing that stood out to me the most. It’s a nice business as you said, it’s growing. I think competition’s coming. Amazon bought Globalstar. It’s been launching its own satellites. It’s trying to compete in this regard, as well, so that’s something to consider with Starlink. I’m actually more impressed with the launch business than I thought I would have. I know there’s been stories about the launch business on borderline profitability. They’ve been trying to get Starship off the ground, it’s heavy lift rocket, and I think it’s done like 11 tests. Wouldn’t you know, they’re actually scheduled for their 12th test flight, I think, later today. I’m sure that’s a little bit of a cherry on top for the S-1 to have a successful Starship launch, fingers crossed with all that.

Aside from this mammoth amount of money they’ve been putting into Starship in the past, I want to say a year, year and a half for development that business is pretty more or less profitable. You saw this very large ramp in R&D spending specifically to Starship in this most recent quarter, most recent year. Aside from that, just using Falcon Heavy Falcon nine launches, it does appear to be profitable from bringing in outside customers. It’s not like amazing margins, but it’s something, which goes a long way in the space industry because this was an industry that was dominated by one company, United Launch Alliance 15, 20 years ago, and now for fractions of the cost, we’re actually eking out alpha national profits on this. Now, that revenue has slowed down, and I’m not going to try to hand-wave that away, and I would like to see why in the coming quarters. I would like to know whether that was some pricing competition because Rocket Lab is starting to do launches, Ariane 6, which is the European Ariane Group. Their European Space Agency they’re launching for Amazon this year as well as starting to see some other companies going into Blue Origin, as well.

Maybe it’s pricing competition, maybe it was SpaceX deliberately putting more of their own satellites into orbit on its rockets that was a higher cost burden that brought down the profitability. There’s a little bit of balance here. I’d like to see where that goes, but overall, I was more impressed with the launch business than I thought I was going to be. I think we’re two out of three here because we’ve got launch, we’ve got satellite communications, and then we’ve got this great big AI box. I don’t think it’s a surprise that none of us have talked about that segment because I think when we get to the what we’re not huge fans of that’s going to come up next.

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Tyler Crowe: As we said, we’re going to go into the nitty-gritty of the SpaceX S-1 here and probably get to some of the stuff that when looking up and down the S-1, there’s gonna be some things that we love and some things that we don’t like. Clearly, there are some things in this that aren’t the best. I can’t say that every single part of this thing was a glowing recommendation as to why SpaceX was something people would want to buy at the beginning. With that in mind, let’s just go around the horn again. Jon, what was your ego? What was the thing you read there and let’s go that’s of gross.

Jon Quast: SpaceX is headquartered in Texas, and I will quote the great band, Alabama. If you’re going to play in Texas, you’ve got to have a fiddle in the band. SpaceX has two fiddles in its band, and space is playing second fiddle to AI now. You expect a company such as SpaceX to be 100% space. It is a small part of the vision of the company at this point, and I’m not just blowing smoke. I need to consider these numbers. Matt pointed out how reasonable the capex number was for this company. It’s extremely reasonable when you take out AI, 76% of first quarter capital expenditures was AI related, not space related. That’s not an insignificant number. The company has a deal in place with Anthropic now. This is hot off the press. Anthropic will be paying SpaceX $1.25 billion a month. That translates to $15 billion annually. Now, that’s great. I love revenue. But consider that if this deal had been in place last year, it would have accounted for 45% of the company’s revenue. This is a huge deal. It’s a huge part of the business moving forward for SpaceX.

You look at the total addressable market. SpaceX waving its hands in the air, saying, we’ve got the largest total addressable market in history. 80% of this $28.5 trillion market, 80% is enterprise AI. That is very interesting. The company is also looking to acquire Cursor for $60 billion. That acquisition could eat up all of the IPO proceeds, and the IPO proceeds are set to break all the records. You look on top of this. It wants to build out Terafab. That could be a $55 billion initial investment, so for some, this might not be gross. This might not be like undesirable. Maybe our listeners are actually celebrating this pivot, this emphasis, this vision that it has for AI. I wouldn’t necessarily disagree with that. It is very surprising, though, that a space company is focusing so hard, and I think that listeners need to understand if you’re investing for the rockets, if you’re investing for Starlink that is waning in significance in the eyes and vision of management from here.

Matt Frankel: Jon hit the nail on the head with all the different things you’re doing with AI, but the biggest concern is based on a $2 trillion valuation. You’re paying more than 100 times sales for a company that lost $5 billion last year. About 300 times trailing EBITA. Growth is impressive, but not to the point of justifying that type of valuation all by itself. The valuation is clearly based on things that Elon Musk thinks he can do over the long-term like space-based data centers, which is part of that $28.5 trillion figure Jon just mentioned. There’s also that risk mentioning Elon Musk that you’re betting on his future vision. He’s not only completely in control, he’s also in charge of Tesla. He’s also in charge of Neuralink. He’s also in charge of the Boeing company. That’s still a thing. There’s a lot of things that occupy his time and attention, and that is a risk, especially as this business gets bigger and focuses more on AI and all these other adjacent opportunities at the same time.

Tyler Crowe: To your point, for those who are keeping score at home the entire GDP of the United States is $32 trillion, so we have a total addressable market that’s 75, 80% of the U.S. GDP. That seems pretty ambitious. It seems like a very global idea that sometimes you start looking at those numbers and go. Wonder where they got that, similar to what I was saying with the Starlink number being roughly equivalent to more than all the revenue spent on telecommunications in 2025. Hey, but that’s the point of S-1 is we’re trying to be lofty. We’re trying to be ambitious here, and things like that I can poke holes into that pretty easy. But as an investor above anything else, this was the thing that got me the most. What I see is a corporate structure and an executive payment structure that and to be harsh here is completely agnostic. Or potentially even working against investor outcomes and shareholder returns outside of Elon Musk. The combination of like this dual class share that they have in a compensation structure that’s extremely dilutive to investors. I don’t think it really strikes me as a business that wants to work necessarily for its shareholders. I know I’m being pretty controversial here when I say this, but let’s start with this market cap goal that is put out there. I think it’s like 1 billion shares of Class B shares.

Raising market cap doesn’t always necessarily mean raising the share price to like we mentioned the cursor deal. That’s $60 billion. That’s probably going to be issued shares. Perhaps there’s some cash issued shares, but that’s going to raise market cap and could have zero impact on actual price of the stock. There could be other acquisitions that happen in the future that you pay for with stock that may not affect the price. There are lots of ways that you can increase the market cap of a company and have basically a flat share price, so keep that in mind when you hear market cap-based goals for the executive. At the same time we could say, but if we dilute the company with all these extra shares Elon Musk is going to be diluted, as well. Yes and no because so much of that package is tied to growing that market cap, and his interest would grow as well. At the same time, he has supermajority voting shares. For every share Class B he owns, it’s ten votes compared to the one. You could dilute the company by hundreds of billions, potentially even trillions of dollars in shares that would not even seed control of the company away from Musk.

You have things like that. You have the colony of 1 million people on Mars. It sounds cool on paper, but what tangible benefits does that give to shareholders in terms of returns? I know they are like we want to invest in the future. We want to invest in ambitious ideas, but we do want to make money on those ideas, and it’s not really clear that that’s a money making endeavor. Look, I have been saying things like this corporate structure, executive pay, and I bet a bunch of people will say, who cares? Because they believe in Elon Musk, and he’ll figure it out. But this structure completely divorces the success that Elon Musk could have with the company versus your success as an investor. Of all the things in the S-1, this one would concern me the most as an individual investor. Now went on a long tangent here. I think I revealed my cards as to what I’ll be saying about the verdict with this company. But after the break, we’re going to basically give our final conclusions on, do I want to buy this IP or not?

We laid out the bullish ideas, what’s good, what’s nice about the SpaceX S-1, some other things that we don’t like. But investing is all about balancing those goods and those bads to meet whether it’s worth it or not, so let’s after examining everything that we saw in this, what’s our verdict? Like I said, I probably showed my cards, but Jon, when you finished with the S-1, what did you say? By now, maybe wait and see later, or no, thanks. I’ll pass.

Jon Quast: There’s exactly a 0% chance that I’m going to buy SpaceX’s IPO, I’d say, even in 2026. Now, it might not be for the reasons that you might think. I just complained about the AI, but I’m actually keeping an open mind about that. I’m not saying that that’s a deal breaker. In fact, that could really unlock a lot of shareholder value if all of Musk’s plans regarding AI come to fruition, so that’s not really the issue for me. The issue for me is that IPOs are usually very over hyped, and this is one of the most hyped IPOs if not the most hyped IPO of all time. The chances of it being at a very high valuation, the chance of diminished returns over the medium term, I think they are quite elevated. Now, there are times where a hyped IPO does make a great long-term investment. I think you can look at Google. I think you can look at Facebook back when they were called Google and Facebook at IPO. Those were very hyped and wound up being great long term investment. But SpaceX, I’m just going to avoid it here in the beginning for sure, and I’m keeping an open mind about the AI component. I love space.

One stock that I have been looking at here, I’m going to provide listeners with an alternative. Hopefully, it’s a hidden alternative, and that is Voyager Technologies VOYG. This is a company that went public about a year ago. It has a lot of customers in the defense industry, and so you look at the rising geopolitical threats that emerge on the battlefield of space. This is why Space Force was created in recent times. A Voyager serves that market with missile detection and things such as that. But the thing that actually intrigues me the most is not the defense angle, but the space station angle. You look at the International Space Station. It’s been in operation now for I’m not sure how many years, but it is scheduled for decommissioning in 2030, and Voyager Technologies is looking at its Starlab Space Stations as a potential private alternative to the International Space Station, and so that’s a very long-term thesis. It’s a very speculative thesis as well. I am really curious about this company and what it is doing. There it is Voyager Technologies. The thing that really does intrigue me here is the backlog jumped 54% in the most recent quarter to 275 million. That’s a longer-term indicator. This is only a $2 billion market-cap company, so very small and very underfollowed on Wall Street. There’s your Hidden Gem for the day.

Tyler Crowe: As I was saying with the launch business, this is a industry that’s getting much more crowded by the day. I think it was an industry 15, 20 years ago where it was SpaceX was this up and comer that was trying to take on a monopoly with the Lockheed Martin – Boeing joint United Launch Alliance, and now we have seven or eight companies all entering the fray, and there could be a lot of promising ideas. Like Voyager is one of them. As far as the SpaceX IPO, I think I showed my cards earlier. I’m not that interested in this much at all. I would say this. Here’s my caveat. I actually think if Starlink was spun off as a separate entity, I think that’s actually the business I would be interested in owning, as it seems to be somewhat less related to everything else. It’s just wireless telecom companies, and I think number one, it drives a lot of value it has some growth internationally, and has shown it can generate returns. If that was possible, I think there’s some opportunity there.

Of course, all the caveats of corporate structure, executive compensation that I was talking about earlier would be included in that. But overall, to your point earlier, Jon, I’m not too interested in this isn’t I wouldn’t say this isn’t really SpaceX anymore to you. I’m not really interested in buying XAI, and really at this point SpaceX seems much more like XAI with a space launch and a satellite business stapled onto the side here. I don’t know if I’m going to be looking at AI investments, I can’t say that what SpaceX has on offer is the most appealing to me.

Matt Frankel: I would take claims about all those market opportunities, like the $28.5 trillion figure that we’ve heard a couple of times here, with a big grain of salt. To put it mildly, this is going to be a very expensive stock from the get-go. I would not be surprised if it was seriously volatile after the IPO. It’s forecast to be a very oversubscribed IPO. There’s a lot of hype surrounding it. There’s going to be a lot of shares moving all about, and retail investors are getting a big piece of it relative to other IPOs. Historically speaking, seven of the ten largest IPOs in U.S. history underperformed the S&P 500 in their first year, which goes along with what Jon was saying that these tend to be very hyped in a lot of cases, because they’re very hyped, they tend to be overvalued at first. I’m personally not a buyer, at least right away. I likely won’t own this in the foreseeable future unless the value comes down to something I would consider a little bit more palatable. But having said that, there are some things that could make me reassess. For example, if the Starship success creates a clearer path to profitability in the space business. Or if xAI started to be a serious competitor to OpenAI and Anthropic, which I don’t think it’s at that level today. This could cause me to take a little bit of a closer look. But even then not likely at a $2 trillion valuation.

Tyler Crowe: Considering the hype and considering, like you said, it is an oversubscribed IPO, which means that we’re probably going to see some pretty big fireworks when the IPO does happen in June. I would say based on the verdict here, it’s pretty lukewarm reception, at least from us. But then again, hey, everyone’s here to make their own decisions. If you have thoughts on what we thought about the SpaceX S-1, go ahead and email us [email protected]. That’s [email protected]. We’d love to hear what you think, and maybe we’ll do a little follow-up. But that is all the time we have for today. Matt, Jon, thanks for sharing your thoughts.

As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for our guests, so don’t buy or sell stocks based solely on here. All personal finance content follows Motley Fool Editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks for producer Bart Shannon and the rest of The Motley Fool team for Jon, Matt, myself, thanks for listening, and we’ll chat again soon.