Space businesses are about to show their cards

What happened

A United Launch Alliance (ULA) rocket recently launched the first batch of Amazon's broadband constellation Kuiper. This launch comes as a major milestone, as the project was initiated in 2019 and faces strong competition from SpaceX's Starlink, which is already operational. Beyond Amazon, several other players are approaching the end of their development phase and getting ready for commercial activity, paving the way for exciting times ahead in the space sector. 

Impact on our Investment Case

The Space sector does not lack catalysts across its various subsegments. This article will focus on the ones we believe are the most promising in the mid-term. 

Broadband is a hot commodity

Amazon's Kuiper launch comes at a pivotal moment for satellite broadband connectivity, a sector that has recently drawn attention, albeit not necessarily for the right reasons. The U.S. threat of cutting access to Starlink in Ukraine, along with the E.U.'s scramble for alternatives, has demonstrated the strategic value of satellite-enabled high-speed connectivity. Those outages had deadly consequences, leading investors to realize the market potential.  Shares of potential alternatives soared: for instance, Eutelsat skyrocketed by over 500% at some point in March.

For Amazon, benefits go beyond potential lucrative government contracts. Expanding global connectivity would bolster both its retail and cloud businesses. However, the e-commerce giant has to accelerate its timeline. By July 2026, it needs at least half its planned 3,232-satellites fleet in orbit. Failure to meet this deadline could result in losing FCC authorization, although this is unlikely given the agency’s historical flexibility and the current administration’s support for a “market-friendly regulatory environment.” 

Still, the timeline looks ambitious. In addition to problems ramping up satellite production, launching them also represents a challenge. The company has booked launches with virtually every supplier available (Arianespace, ULA, and rival SpaceX) or soon to be (Blue Origin). However, maintaining the necessary launch pace will be a challenge for all but SpaceX. 

The latter is not immune to challenges either. Its Starlink constellation is a massive commercial success, but has begun to experience network saturation in many areas. Due to the laws of physics, the solution is bigger satellites, but this reduces the number of units that can be launched at once, complicating an already tough economic equation. Starship, a new heavy-lift rocket, is under development to address this constraint, though it has recently encountered setbacks (see below). 

Despite these challenges, both Amazon and SpaceX are likely to push through. The opportunity is simply too large to ignore. This race for supremacy will ultimately benefit the entire supply chain.

Direct-to-device is hiding in ambush

Beyond broadband, the other major development in telecommunication is direct-to-device, i.e., the ability for a standard smartphone to connect directly to a satellite. 

The service already exists for emergencies, notably on Apple's iPhones. It enables users to send text messages when they have a clear view of the sky, establishing a connection with a satellite. Initially powered by the Globalstar constellation, it can now also function with Starlink. However, the service remains constrained by the laws of physics: higher bandwidth requires either a powerful electromagnetic signal (which is not desirable for a device used near the brain) or larger antennas. These can either be located on the device (defeating the purpose of using a normal smartphone) or on the satellite, which then must be specially designed for this purpose. 

This is exactly what AST SpaceMobile wants to do. The company plans to launch up to 60 large-antennas satellites within the next two years, enough to provide full commercial service in the U.S. It already operates 5 “block 1” satellites, which boast the largest antenna ever deployed in a commercial spacecraft (64 square meters). Thanks to these antennas, the first-generation satellites have already achieved download speeds of 14 Mbps on unmodified smartphones.

Next up are the second-generation “Block 2” satellites. They feature a 220 square-meter antenna and target speeds of 120 Mbps. The first batch are scheduled to launch during summer 2025, with the following launches depending on the company’s ability to scale its manufacturing output - which is set to reach six satellites per month later this year. This would enable global coverage in priority markets (e.g., the northern hemisphere) by 2026, significantly improving visibility into the company’s path to profitability.

Earth Observation encounters headwinds

Commercial Earth observation companies are facing a challenging period, largely due to weak demand from private-sector customers. Data from public companies highlights the issue: either growth, but from very low numbers (less than $3mn for Blacksky out of total revenues of $102mn), or a significant decrease of commercial revenues (-12% for Planet Labs and a share in the revenue mix falling YoY to 23% from 29%).

Part of the explanation is the complexity that many customers face in integrating satellite imagery into their daily workflows. This is where advancements in data analytics and AI could make a difference. Even so, the segment will likely be forced to reevaluate its pricing strategies to better align with market realities.  

In the meantime, governments remain the primary source of business, both for civilian and military use cases. Demand from public institutions is growing, especially in intelligence and surveillance. Companies with differentiating technology stand to benefit, as shown by the recent $227mn contract signed by synthetic aperture radar (SAR) company Iceye with the Polish government.

However, one issue in this area is that science budgets are under pressure. This is particularly true in the U.S., where the new administration seeks to slash costs and cut funding. On the more positive side, defense-related spending is experiencing a strong momentum, notably with the Ukrainian conflict. Leveraging commercial constellations provides appreciable strategic autonomy and redundancy compared to costly traditional spy satellites, as such services can rely on several dozen spacecrafts. The higher revisit time associated with this large number of devices also offsets their lower level of detail. 

Launch heating up

The launch segment is currently a bottleneck preventing the sector's full potential from being realized. This is about to change.

In January, Blue Origin finally put the "Below Orbit" jokes to rest with the successful launch of New Glenn. Although the booster failed to land (not an unexpected outcome for a maiden flight), the payload, a test bed for future Blue Origin spacecraft, safely reached orbit. Several more launches are expected later this year, and notably the first launch for the Kuiper constellation. Amazon has already booked several dozen launches with other providers (ArianeSpace, ULA). However, sister-company Blue Origin will likely support the bulk of the effort, if only thanks to New Glenn’s expected lower price per kg.

Meanwhile, SpaceX has received approval to accelerate the launch frequency of Starship (now up to 25 per year). However, the company faced a significant setback with its latest launch. The landing of the first stage was a success, but the second stage once again blew up before reaching orbit. This created a hazard for air traffic and prevented the company from acquiring more valuable data on in-orbit maneuvers and atmospheric reentry. Notably, both these launches used a redesigned and improved second stage, suggesting unexpected design flaws that now require correction. Much rests on Starship's shoulders: it is critical to launch larger Starlink satellites and is the cornerstone of Moon landing operations. Still, given the company's stellar track record when it comes to engineering, there is little doubt that current challenges will be overcome. This could happen as soon as the next launch, currently expected in late May or early June.

Last but not least, Rocket Lab is preparing for the debut of its next-generation rocket, Neutron, slated for 2H25. The company appears on track, although a delay to 1H26 would not be a surprise considering the technical challenges usually associated with the sector. The new rocket is designed to be reusable, which, combined with a larger payload, will drastically improve the company’s economics. Additionally, momentum is building: the U.S. Air Force just granted the company a contract for point-to-point cargo delivery, was selected for the National Security Space Launch competition, and signed contracts with both the U.S. and the U.K. militaries to help develop hypersonic devices by repurposing rockets to launch test beds. This indicates the company's technology is not a pipe dream, and at the very least shows its growing ability to capture government contracts. Most importantly, the emergence of another player mastering rocket reuse would bring additional competition to the current market, thus favoring the industry's economics and facilitating the development of a vibrant application ecosystem.

The Moon program at a turning point?

Recent developments have shaken the fundamentals of what was previously considered a structuring program: Artemis, i.e., returning humans to the Moon, and its associated ecosystem. Under the new U.S. administration, NASA is facing significant budget cuts, which could lead to a profound restructuring of its priorities.

Chief among the likely changes is the phasing out of the costly Space Launch System (SLS) after just two more missions. This program had long been criticized as a job program to preserve the former space shuttle supply chain in Republican states, and a more cost-conscious environment would finally provide an exit.  The Lunar Gateway, a station intended to orbit the Moon, would also be axed.

In return, this budget would favor “more cost-effective commercial systems that would support more ambitious subsequent lunar missions”, although those have not been detailed. A more cost-conscious NASA may mean a larger emphasis on robotic missions to prepare future landings, which would favor companies such as Intuitive Machines or ispace. More generally, this shift would mean a significant boost for the private space sector at the expense of traditional contractors. That said, Congressional resistance is likely, especially from representatives with vested interests in current NASA programs.

Finally, questions persist about the influence of SpaceX's founder, Elon Musk. The man is well-connected politically and has close links with the new NASA administrator, Jared Isaacman, who flew as a private astronaut aboard SpaceX vehicles. These ties could position SpaceX to secure an outsized share of upcoming lunar contracts, potentially sidelining competitors in the process. 

Our Takeaway

The space segment is entering a phase full of potential catalysts in the coming quarters. After a challenging period, we believe the sector is now well-positioned, both operationally and from a market perspective. With key technologies reaching the end of their development cycles, space companies are beginning to unlock strong commercial prospects, driven by demand from both public and private players. The combination of these structural drivers and short-term catalysts could lead to sharp rallies, similar to the “meltups” seen with AST SpaceMobile and Rocket Lab last year, which contributed meaningfully to our portfolio’s performance. We view these moves as just the beginning of what the sector can offer. That’s why our allocation remains focused on “New Space” players, who we believe are best positioned to benefit from the next wave of growth.