SpaceX Just Picked Qualcomm for Its Own 5G Network. I Still See the Stock as a Hold.

SpaceX, in other words, is still the one designing and rolling out the network.

“We’re excited to collaborate with Qualcomm Technologies and leverage their industry expertise and platform to accelerate our timeline to develop our base station end-to-end architecture,” said Michael Nicolls, Starlink’s senior vice president, in Qualcomm’s release.

The airwaves came first

SpaceX has spent over a year buying the airwaves this network needs. It agreed to pay about $19.6 billion, in shares and payments on EchoStar’s debt, for EchoStar licenses covering up to 65 MHz of spectrum, a deal it expects to close near the end of November 2027. And on Oct. 8, it agreed to buy a nationwide portfolio of 800 MHz airwaves, which SpaceX expects to own by the middle of next year.

On SpaceX’s Oct. 20 call about third-quarter results, President Gwynne Shotwell said S-band airwaves should handle most of the traffic, while the 800 MHz spectrum is there “to basically penetrate buildings.” But the carrier service is still a way off. Shotwell said SpaceX’s short-term priority is flying its Mobile V2 satellites through 2027 and integrating its spectrum purchases to start service in early 2028.

Does the network change what SpaceX stock is worth?

Starlink Mobile’s revenue shows up in SpaceX’s enterprise and government sales, according to its latest quarterly filing. That line climbed 91% year over year to $2.1 billion in the third quarter. But SpaceX doesn’t break out the mobile part, and the filing credits most of the line’s growth to more aircraft activations.

Of course, it’s all in the segment that already makes most of SpaceX’s profit. Connectivity revenue climbed 69% year over year to $5.2 billion in the third quarter, a bit faster than its 66% growth in the second quarter. The segment’s operating income almost doubled, up 99% to $2.4 billion. Its operating margin jumped to around 45%, up from about 38% in both the year-ago quarter and the second quarter. And connectivity made up about 85% of SpaceX’s total operating income of $2.8 billion. SpaceX’s artificial intelligence (AI) business, which it calls super intelligence, earned $431 million in operating income.

CEO Elon Musk said on the call that he sees “a clear path to several hundred billion dollars a year in connectivity revenue.” Connectivity is running at around $21 billion a year today, so that path would mean growing the segment many times over.

The cell sites also add to a big tab. Management expects fourth-quarter capital spending alone to land at $35 billion to $40 billion as more AI computing capacity comes online. And SpaceX hasn’t said what the ground network will cost.

SpaceX’s valuation is around $1.85 trillion now. Management sees $33 billion to $37 billion in revenue for the first quarter of 2027, and if the midpoint held for a full year, the stock would trade at around 13 times sales. I think that price already assumes years of fast growth — and a phone network that might not bring in much revenue before 2028 arguably adds little to the next couple of years of it.

In the end, the Qualcomm deal makes Starlink Mobile’s carrier plan more concrete. SpaceX now has deals for the airwaves, a supplier for its base stations, and a 2027 start date. It just doesn’t have revenue from any of it yet.

I still see SpaceX stock as a hold at about $136, and this deal doesn’t change that for me.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Qualcomm. The Motley Fool recommends Space Exploration Technologies. The Motley Fool has a disclosure policy.