The Contracts Are Real and They're Big

Since our last coverage, SpaceX picked up two significant new revenue wins.

The Space Force awarded SpaceX $2.29 billion on May 26 to build out what it calls the SDN Backbone — a proliferated low-Earth-orbit satellite constellation that functions as a military communications backbone, according to Breaking Defense. The contract requires SpaceX to deliver "a fully operational prototype capability by the end of 2027," per Space Systems Command.

To put that number in perspective: the Space Force's own FY2026 budget had allocated just $277 million for this program. The new award is more than eight times that. The Pentagon clearly decided to accelerate — hard.

The constellation is based on Starshield, the militarized variant of Starlink. Col. Ryan Frazier, acting Space Force portfolio acquisition executive, said the network will "ensure our sensors and shooters are connected continuously, globally and securely." That's the Pentagon betting SpaceX is its communications backbone for the next war.

On the commercial side, American Airlines announced it will install Starlink on more than 500 narrow-body Airbus aircraft beginning early next year, according to TechCrunch. The deal covers A321XLR and A320neo jets. Boeing aircraft are NOT included. American joins United, Southwest, Qatar Airways, Lufthansa Group, British Airways, and Alaska Airlines as Starlink inflight Wi-Fi customers — a list SpaceX's S-1 filing confirmed is already in the books.

The S-1 Fine Print

SpaceX's own IPO registration filing — released last week — contains a critical admission: full reusability of Starship is not required to launch the next generation of Starlink satellites.

Satellite market analyst Tim Farrar broke it down in a client note, reported by TechCrunch. Without full reusability, the cost per Starship launch could run as high as $100 million — or roughly $1,000 per kilogram. That's barely better than what's already flying.

Last week's Starship test flight didn't help. The vehicle had trouble relighting Raptor engines on both the booster and the Starship upper stage, which is the key capability needed to actually catch and reuse hardware. No engine relight, no reusability. No reusability, no cost revolution.

SpaceX has invested $11.4 billion in its Starlink satellite business since early 2023, versus $8.4 billion on Starship and launch infrastructure, according to the S-1. Starlink generated $11.4 billion in revenue last year — impressive, but it also needs to replace roughly one-fifth of its satellites every year just to maintain current service levels. That is an expensive treadmill.

Musk has said publicly that SpaceX could go bankrupt without Starship's ability to cheaply replace satellites. His own company's filing now acknowledges the cheap part isn't guaranteed. Mainstream coverage has largely glossed over it in favor of the IPO excitement narrative.

The Tesla Merger Story Just Got More Serious

CNBC reported on May 26 that Musk has discussed with colleagues the possibility of folding SpaceX and Tesla together, citing multiple people familiar with the talks who asked not to be named. A current Tesla employee told CNBC that workers have "long expected such a transaction" and that it's "openly discussed internally."

The rationale isn't crazy on its face. More than three-quarters of SpaceX's $10.1 billion in Q1 capital expenditures were tied to AI, per CNBC. Tesla said its own capex will triple this year, topping $25 billion. Both companies are burning cash on AI infrastructure and competing for the same engineering talent.

But a Tesla-SpaceX merger would be an absolute regulatory and governance nightmare. SpaceX currently has significant classified government contracts — including the $2.29 billion Space Force award just announced. Merging that with a publicly traded EV company creates conflicts that lawyers and national security officials will argue about for years.

SpaceX's current private market valuation sits at approximately $350 billion based on its most recent funding rounds. Tesla's market cap is around $1.6 trillion. Combining them would create a massive enterprise — if regulators allowed it. That's a massive if.

The Stock Rally Continues, But the Math Deserves Scrutiny

The VanEck Space ETF (WARP) is up 24% in just 5 days since our last report, per CNBC. Rocket Lab is up more than 78% in recent weeks.

Roth senior analyst Rohit Kulkarni wrote in a Tuesday note that SpaceX maintains "monopolistic" market share in orbital launch with "extreme vertical integration" driving cost advantages. Cantor Fitzgerald analysts labeled Intuitive Machines a "direct beneficiary" and called Rocket Lab "well positioned" to ride what they're calling the "SpaceX IPO premium."

That premium is real — but it's priced on assumptions. Reusable Starship at low cost is one of those assumptions. If Starship ends up being a $100M-per-launch expendable rocket, the entire cost model that justifies SpaceX's valuation gets a lot harder to defend.

The Space Force contract is locked in. The American Airlines deal is locked in. Those are real money.

But investors buying the space sector rally should know exactly what they're betting on: that SpaceX solves an engine relight problem it visibly struggled with last week. The difference between reusable and expendable Starship isn't an engineering footnote — it's the whole story.