Amazon Is Spending $11.6 Billion to Compete With SpaceX
Amazon Is Spending $11.6 Billion to Compete With SpaceX
Adam Levy, The Motley FoolSun, April 19, 2026 at 7:05 PM UTC
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Key Points -
SpaceX's Starlink has a massive head start over everyone, but Amazon has the cash to catch up.
Amazon needs to solve a significant bottleneck, giving SpaceX a clear advantage.
Spending could drag down Amazon's free cash flow for several years.
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SpaceX is set to be the biggest IPO in history, but it's not the only company building out the space economy. While most of SpaceX's competitors are relatively small, it could face its biggest rival in deep-pocketed Amazon (NASDAQ: AMZN).
Amazon launched its first low Earth orbit satellites into space last year for Amazon Leo, formerly Project Kuiper. The company planned to invest $10 billion in building its constellation in 2020, but it's about to more than double its budget for the project. Amazon agreed to acquire Globalstar (NASDAQ: GSAT) for approximately $11.6 billion. The move could accelerate Amazon Leo and spur Amazon to become a more meaningful competitor to SpaceX's Starlink.
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A satellite orbiting Earth.
Image source: Getty Images.
What's Amazon buying?
Globalstar operates 24 satellites and has agreements to acquire more than 50 additional satellites. It also owns key radio spectrum licenses, which are essential for transmitting data. On top of that, Globalstar has an existing relationship with Apple to provide satellite connectivity services for iPhone and Apple Watch emergency services. As part of the acquisition agreement, Amazon extended and expanded that deal.
Globalstar's two dozen satellites won't move Amazon much closer to its goal of deploying over 3,000 for its Leo constellation. Amazon is way behind schedule in that regard. Its 2020 FCC approval requires it to deploy half its satellites by July 30, 2026. As of its most recent launch, Amazon has just 241 satellites deployed. Amazon has asked the FCC for an extension.
SpaceX, meanwhile, has over 10,000 satellites in orbit. The bottleneck for Amazon is launch capacity. While SpaceX is able to launch its own rockets, Amazon is contracting with other companies. That's enabled SpaceX to place thousands of satellites into space every year.
Globalstar's spectrum licenses may prove to be the much more valuable part of the deal. Once Amazon builds out its constellation, the spectrum will enable it to provide faster speeds and direct-to-device service, competing directly with Starlink. The investment could signal that Amazon is about to accelerate its deployments.
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Expect more spending
For Amazon investors, this means more spending is on the horizon. Shareholders are already feeling the pressure of Amazon's planned $200 billion in capital expenditures for the year. That could put Amazon's free cash flow in negative territory for 2026. If Amazon Leo investments step up next year, it could continue to weigh on free cash flow.
Amazon's management is highly confident in its spending for its cloud computing and e-commerce businesses. It has historically shown very strong returns on invested capital, with free cash flow ultimately growing much bigger after a heavy investment cycle. The investment in Leo comes with much less certainty, even if Amazon already has deals with airlines and wireless carriers for service, as CEO Andy Jassy noted in his recent letter to shareholders.
As such, investors should consider the increased risk of investing in Amazon. That said, it still looks like a good opportunity at its current valuation.
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Adam Levy has positions in Amazon and Apple. The Motley Fool has positions in and recommends Amazon and Apple and is short shares of Apple. The Motley Fool has a disclosure policy.
Source: “AOL Money”
