According to leaked company information, SpaceX turned a profit of $55 million on $1.5 billion in expenses in Q1 2023. It had been operating at a loss, though it managed to start closing the gap in 2022.
Most startups will normally operate at a loss for years before finally posting profits. This phenomenon is called “runway,” or the amount of time a company can operate before it runs out of money if it does not raise more money from investors or a Kickstarter-like crowdfunding campaign. Many startups fail because they could not raise more money or start turning a profit before they ran out of runway.
One thing that makes SpaceX normal for a startup is that it has conducted several investment rounds. In fact, SpaceX has been on the brink of bankruptcy at least once and needed a successful launch to get past it. Now reports indicate that it has a $150 billion valuation as of a recent “insider shares” sale.
SpaceX’s posting of a quarterly profit for the first time may indicate that it is starting to move past the startup stage. In 2022, it cut its annual losses in half and doubled its revenue. Of course it did not hurt that it attracted more than half a million Starlink subscribers, cut deals with a few foreign and local governments to provide satellite Internet access for remote or low-income communities, and conducted 61 launches in 2022. 34 of those 61 launches were devoted to building out the Starlink constellation, which currently has thousands of operational satellites in low-Earth orbit.
It could start ramping up launch of larger payloads once Starship becomes operational. Potential Starship missions include rapidly sending humanitarian supplies from point to point on Earth, launching larger satellites like Starlink V2, and sending people and cargo to Mars. It currently has a contract to develop a Starship-derived lunar lander for NASA’s Artemis Program.
It lost the prototype only a few minutes into its first attempt at an orbital test but says it could try again as early as late August. Naturally, this depends on how fast the FAA can complete its review of the loss and approve future Starship-related testing.
SpaceX’s focus on growth instead of quarterly profits led to it being called “the last growth-focused unicorn.” Many venture capitalists like companies that can grow fast to dominate a sector, like AirBnB or Uber. However, the Federal Reserve can slow startup growth down by raising interest rates, which can spook investors.
SpaceX CEO Elon Musk has not blinked at either higher interest rates or spending on R&D, however. He can become impatient when slowed down by the regulatory approval process or a competitor files a challenge. (Like any good businessman, though, he can let a potential grudge drop when he has a chance to make a sale.) It took nearly two years for the FAA to approve the first attempt at an orbital test, and even then, environmentalists sued the FAA for being too hasty in approving it. The FAA’s latest requirements involved turning in a mishap investigation report.
That has not stopped SpaceX from making progress such as testing a new fire suppression system. Similar systems are often used to control the flames and noise for rocket launches at sites like Cape Canaveral in Florida.
One thing is for sure, rocket launches aren’t cheap at the best of times. SpaceX spent $3.1 billion on operating costs and an additional $1.3 billion on research and development. NASA’s Office of the Inspector General estimated that NASA spends $55 million per seat for each Crew Dragon launch to the International Space Station. Even then, it’s getting a bargain, considering it spent $90 million on one seat on the Russian Soyuz.
(Yes, Russia is probably mad that it no longer has the monopoly on crewed space launches that it had from the time the Space Shuttle was retired in 2011 until SpaceX launched the Demo-2 mission in May 2020.)
SpaceX’s posting of a profit for the first time ever is a good sign that it is starting to move past the startup stage. Now it just needs to get Starship up and running to really grow fast.