SpaceX just won a $2 billion contract to make satellites for the Space Force

By William Gavin

The deal represents nearly 20% of the Space Systems Command's space-acquisition budget

SpaceX, the rocket and satellite company, is pursuing what experts say will likely be the largest initial public offering in history.

The U.S. Space Force on Tuesday awarded SpaceX a new, pricy satellite contract, further tying the company to its biggest customer.

The rocket and satellite company won a $2.29 billion fixed-price deal to contribute to what the Space Force called its Space Data Network Backbone program. That's a proliferated low-Earth-orbit constellation made up of likely hundreds, or even thousands, of satellites designed to provide high-speed communications for the Pentagon.

SpaceX is required to provide the Space Force with a fully operational prototype by the end of next year. Its contract amounts to roughly 18% of the Space Systems Command's $15.6 billion space-acquisition budget.

"The SDN Backbone supports the broader SDN, which acts as a core communications layer for the USSF warfighting systems, ensuring our sensors and shooters are connected continuously, globally and securely," Space Force Col. Ryan Frazier, who is also an active acquisition executive for the military branch, said in a statement.

The award came just hours after the Pentagon called SpaceX a "strong and valued partner." That statement was in response to Reuters reporting that SpaceX had been at odds with Defense Department officials over what the Pentagon was paying to use its satellite-internet technology.

Read more: Starlink signs a new airline customer as it races to be the top in-flight internet provider

The disagreement stemmed from the use of Starlink for the LUCAS "suicide drones" used by the Pentagon, according to Reuters. SpaceX had argued that the drones were operating under conditions that more closely resembled a higher-tier subscription than what the Pentagon was paying for, the report said.

Reuters reported that the Pentagon eventually agreed to SpaceX's proposed price increase, nearly doubling the cost of each drone, which initially cost the U.S. some $30,000 per unit. However, a Pentagon spokesperson said in a statement on social media that the report's claims are "not based in reality."

The U.S. government is a major SpaceX customer, accounting for about 20% of the company's revenue in 2025. Federal agencies, such as NASA and the Defense Department, drive revenue to SpaceX across all three of its core businesses. Between fiscal years 2023 and 2025, SpaceX has been awarded 218 federal contracts, according to government data.

In a regulatory filing, SpaceX noted that its space-segment revenue primarily comes from fixed-price contracts and that it will be required to absorb any excess costs related to those contracts. SpaceX's connectivity business, which includes the Starlink satellite-internet business, also generates revenue from fixed-price contacts, the company said.

SpaceX last week officially filed paperwork for a massive, potentially record-setting initial public offering. The company is expected to pursue a listing as soon as next month.

See more: Space stocks are rocketing as SpaceX keeps making pre-IPO headlines with first Starship launch

-William Gavin

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-26-26 1742ET