By Adam Clark

Amazon finally has the first of its Project Kuiper satellites in space. Now it just needs to spend several years and billions of dollars launching thousands more as it seeks to catch up with Elon Musk's Starlink service.

Amazon CEO Andy Jassy said early Tuesday that the first 27 satellites were operating as expected in Earth's orbit after their launch the previous day. That's a significant milestone for satellite-internet business Project Kuiper, which was unveiled in 2019 with a pledged $10 billion commitment, but which has been hit by a series of delays to its launches.

The challenge for Amazon is to build up a credible contender to Starlink, the satellite-internet provider owned by Musk's SpaceX, which already has nearly 7,000 satellites in orbit, providing service to at least five million subscribers.

Amazon has permission from U.S. regulators to deploy more than 3,200 satellites over time with dozens more launches. Wall Street analysts have estimated the overall cost to get the network running at around $16 billion, with its first commercial services starting later this year.

"While capital-intensive to launch, we believe Kuiper will be a meaningful operating income and ROIC [return on invested capital] business for us," Jassy wrote in a letter to shareholders earlier this month.

The question is whether the returns will be worth the investment. One positive data point is SpaceX's valuation, reported by The Wall Street Journal to stand at $350 billion. However, it's not clear how much of that is due to satellite-internet services via Starlink and how much is due to its role as the dominant provider of rocket launches to space.

Project Kuiper is partially dependent on SpaceX for its satellite launches, as well as Amazon founder Jeff Bezos' Blue Origin. Monday's launch was carried out by United Launch Alliance, a joint venture between Boeing and Lockheed Martin, which will conduct seven more launches for the company over the next few years.

Amazon is expected to generate some satellite revenue from government and defense contracts but Project Kuiper is primarily expected to be a commercial service, initially for customers with terminals in their residences.

It hopes that its integration with its cloud-computing business, Amazon Web Services, will make it attractive to companies. Amazon has also told regulators it is exploring options for direct-to-cell services, where Starlink and smaller company AST SpaceMobile are already battling to establish coverage for wireless subscribers.

"We believe there may be an under-appreciation of a) the size of the Kuiper market opportunity -- e.g. Starlink has gone from $0 to almost $7B in revenue in 4 years, b) the relatively attractive economics of the satellite Internet segment -- 30%- 50% Ebitda [earnings before interest, taxes, depreciation, and amortization.] margins among current competitors, and c) the competitive advantages Amazon brings to this segment, based on its very strong consumer presence and its extensive AWS ground infrastructure," wrote Evercore analyst Mark Mahaney in a research note.

Write to Adam Clark at adam.clark@barrons.com

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April 29, 2025 06:43 ET (10:43 GMT)

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