Space Satellite Market May Be Overheated

Space Satellites Draw Investor Attention

Space data companies BlackSky Technology (BKSY), Spire Global (SPIR), and Planet Labs are among the startups getting a lot of attention from investors. These investors, which include SPACs and venture capitalists, are betting demand will continue to grow for satellites that take pictures of the Earth and follow and record radio signals. Space satellite startups raised more than $5 billion last year and another $4 billion so far in 2021 compared to just $1.4 billion in 2015.

Dozens of companies have entered the market. The government is a big customer in the satellite market, but increasingly these startups are targeting commercial buyers. Despite strong demand, the market is getting crowded and it may be difficult for all of these satellite companies to survive.

Leaders to Emerge

As the space satellite industry progresses, a smaller number of companies are expected to emerge as market leaders in various parts of the satellite industry. As companies grow, they may use the capital they raise to make acquisitions and consolidate the industry.

Take the remote sensing market as one example. Last year it had $2.6 billion in sales, with over 800 remote sensing satellites orbiting the planet. Most of these satellites are controlled by companies, not the government. Maxar Technologies (MAXR) and Airbus (EADSY) have established businesses. Planet Labs is seeing business growth, with sales projected to hit $693 million by early 2026 compared to $113 million for this fiscal year which ends January 31.

Is Consolidation Coming?

Not all space satellite companies are enjoying strong growth like Planet Labs. BlackSky is forecasting revenue to come in at $34 million this year, which is down from its past forecast of $40 million. Meanwhile Spire Global lowered its revenue projection for the year to between $40 and $42 million from $54 million. BlackSky blamed supply-chain difficulties while Spire cited delays in closing deals.

The space satellite industry is raising a lot of capital but it is still heavily reliant on the government for its business. The commercial market is small and hasn’t proven it will take off in a big way, which means consolidation in the space satellite realm may be inevitable. The companies which can land government contracts, and simultaneously expand commercially, stand to survive.

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